If you are passionate about fitness, health, and people, then owning a gym can be a hugely rewarding business venture. But to build a successful gym, like any business, there are several legal, regulatory, operational, and marketing factors to consider.
If you’re interested in opening a gym, here are some steps to help you get started.
Write your business plan
To ensure your gym is a success, you need a business plan. A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your enterprise.
Don’t skip this step. A business plan can also help you better understand your market, the costs of getting started, how you’ll differentiate your gym from others, and if there’s a niche (such as the senior market or class-based activity) that will help you stand out.
Here’s a suggested outline for your gym’s business plan:
- Executive summary: A brief overview of your business and why it will be successful
- Company description: Provides detailed information about your business and explains your competitive advantages.
- Organization and management: How your company will be structured and who will run it. Who will be responsible for day-to-day management?
- Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against?
- Financial plan: A description of your funding requirements, your detailed financial statements, and a financial statement analysis.
- Marketing strategy: How to promote your company to attract and engage customers.
Get trained and accredited
Because your clients are putting their trust in you to help them achieve their health and wellness goals — in a safe environment — it’s important to get the proper training and accreditations. Personal training qualifications come in many forms, but you and your staff can also achieve specialist qualifications such as Pilates, yoga, personal trainer, and indoor cycling certifications.
Understand the startup costs involved in owning a gym
The startup costs of opening a gym will vary significantly depending on location, size, type, and choice of equipment. These costs can range between $10,000 to $100,000 but can go much higher. It all depends on what your plan, market, and goals are.
Assess the ongoing expenses to run a gym
Don’t forget to factor in monthly gym ownership expenses such as utilities, rent, advertising, insurance, and equipment repair and maintenance costs. If you have employees, you’ll need to pay workers’ compensation, salaries, and benefits.
Determine the potential profit in owning a gym
Profit is important because that’s when you start recouping your costs and can pay yourself a salary. This breakeven point occurs when your revenues exceed your expenses.
There are several ways that gym owners can boost their profits, such as introducing new revenue streams like one-on-one personal training, group classes, and selling products — although each requires an initial investment.
Increasing your gym’s membership will also drive-up profits. If your basic membership is $300 a year plus a monthly fee of $50 — that’s $900 per person, per year. Adding just one new member each week will grow your revenues by $46,800.
Raising your rates is another option. Even a small 5% increase can make a difference. However, as a new business, it’s a good idea to focus on growing and retaining your member base before increasing your prices.
Cutting your running costs will also help increase profits. Payroll will be your biggest expense. Examine your staffing needs in relation to your membership base. Busier times of year like January and February could be covered by temporary staffing at a lower cost than hiring full-time employees. Also, be sure to regularly review your health insurance premiums and work with an insurance broker you can trust to represent your best interests. Your fixed assets also add up. Think about your gym equipment. Is there anything that’s obsolete or under-used? Could you save costs by leasing equipment rather than purchasing it?
Come up with a gym pricing strategy
How you price your services requires careful consideration and should consider factors such as your competition, how often your clients use your gym (useful for establishing price points for limited vs. unlimited access memberships), and the cost per client each time they visit.
Pick a business structure
Your choice of business structure — whether it’s a limited liability company (LLC), corporation, or partnership – will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a business structure that balances legal protections and benefits.
The four most common are:
- Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
- General partnership: A general partnership is the simplest variety of partnerships and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
- Limited liability company (LLC): This is one of the most popular forms of business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.
For more information on business entity structures, read Comparing company types.
Choose a business name
Naming your business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.
For more information on naming rules for different entity types, read Naming your startup business.
Register your business
Depending on the location and business structure of your gym, you may need to register your new business with your state and/or local government.
To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the secretary of state or business agency where they conduct business.
Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments a process known as filing a “doing business as” (DBA) name.
Get federal and state tax IDs
Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)
An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.
You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.
Open a business bank account and credit card
A business bank account and credit card keep your personal and business transactions separate and afford certain legal protections. For example, if you operate an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.
A bank account and credit card also help build business credit — something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.
Find a location for your gym
Once you know the type of gym you want to run, you’ll need to determine the size of your facility. This decision will be informed by the number of clients you want to serve and the services you offer – this can then help guide your choice of location. Also consider if you need parking, street access, or need to be near public transportation. Location is everything, so you may want to pay a premium to get your business noticed.
Get licenses and permits for your gym
Most small businesses need some form of business license or permit to operate. These vary by business type, location, and regulations.
State and local governments typically regulate gym businesses. As a rule, you may require the following:
- Basic business operation license: This is a license from the city in which your business will operate, or from the local county (if the business will be operated outside of the city's legal boundaries).
- Zoning and land use permits: Local government zoning laws may prohibit certain business activity in designated areas.
- Building permit: If you plan on remodeling or building a commercial space, you'll need to get a building permit.
Given the nature of the health club industry, you may also need specialized licenses and permits, including:
- Health club license: States typically issue health club licenses or registrations, but some local health departments may also require a license. These license applications may also require a surety bond to secure advanced payments made by members.
- Sales tax permit: This license/permit has many names, and those names vary by state, but it is required for the selling of almost all products and services.
- Food license
- Music license
Visit your state and local websites to determine which licenses and permits you need. And be sure to manage your licenses over time, keeping track of when you’ll need to renew them.
Insurance for a gym
Accidents and injuries are commonplace in gym environments, so it’s critical that you protect your business from liability should something go wrong. Here are the types of insurance you’ll most likely need:
- General liability insurance: This protects you if your employees or equipment are found responsible for an injury or accident to a person on-premises.
- Commercial property insurance: Covers any damage to business-owned property.
- Professional liability insurance: Covers a staff member if they have found to have committed errors or omissions that have led to an injury or accident. (For example, if a personal trainer ignores a client’s request to “go easy” due to a previous injury or health concern and causes further injury.)
- Worker’s compensation insurance: Covers your business if a staff member files a claim for a work-related injury.
- Equipment breakdown coverage: Protects against expenses incurred if equipment breaks down.
Financing your gym business
Starting a gym business involves a degree of upfront investment and may require you to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.
Your business will also need funds to accommodate ongoing and unexpected expenses, such as equipment maintenance and repair. A business line of credit is a potential option to cover these costs. This form of financing allows you to draw on funds only when you need them.
Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.
Market your gym business like crazy
Think about how you will get the word out about your gym business. Here are some tips:
- Launch a website: Create a website that lists your services, experience, and is visually interesting. Make sure your site is optimized for search engines. This will ensure your business ranks high when someone searches for a local gym or health club. Use key search words and phrases in your body copy, headers, and metadata. Finally, be sure your website is designed with desktop and mobile users in mind and make it easy to navigate your menu of services or schedule a class. For more information, read Top 3 tips for building a company website.
- Create social media and review site profiles: Set up business pages and accounts on Facebook, Yelp, Google My Business, and Instagram. Ask customers to tag you in their pictures and post reviews. And regularly post updates, news, and specials.
- Foster customer loyalty: Use email newsletters and offers to keep in touch with customers. Include incentives for membership renewals, class sign-ups, or create a reward program that offers clients a free personal training session after their tenth visit, for example. And don’t forget the basics. Make sure your gym is a comfortable, clean, and pleasurable place to visit.
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