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How to Start a Gym

How to Start a Gym

Are you someone who always has to fit a trip to the gym into their schedule? Gyms are active, fun environments where you can set and meet personal fitness goals, and it’s easy to see why gyms are appealing to anyone looking to lose weight, get active, or just maintain their health. If you’re familiar with the gym atmosphere and have a passion for fitness, opening a gym of your own could be a promising and rewarding business opportunity.

Business Overview

Gyms offer fitness services to the public, and most operate on a monthly or yearly membership basis. Many people use gyms because of their ability to access equipment that they can’t afford to purchase for their homes, and gyms also offer a social factor that can make working out less isolating. Gyms frequently offer specialized classes and events to keep members motivated and to draw in new members. With other perks designed to reduce excuses for not working out, like childcare and personal trainers’ availability, it’s easy to see why gyms have become so popular.

Industry Summary

The gym, health, and fitness club industry is a $36 billion industry, states IBIS World. The industry has grown by approximately 3.5 percent each year from 2014 to 2019, and that growth is expected to continue. In 2019, the industry should bring in 36 billion in revenue.

With the increased demand for gyms, health clubs, and fitness clubs, the number of businesses has also grown to 111,055. Industry employment increased to 808,932. The typical gym has also evolved over this time, with more gyms offering low-cost memberships and extended hours to fulfill customer demand for affordable, accessible fitness options.

Industry Trends

Currently, the health and fitness industry is booming in the United States, according to Forbes. About 20 percent of American adults have memberships to fitness clubs, and there’s potential for that number to increase.

A number of factors are driving this industry’s growth. Health insurers have begun to incentivize healthy lifestyles by paying for gym memberships for people on certain plans. The insured have to prove that they use the plans for the insurance company to continue covering costs.

Societal shifts have also resulted in an increased focus on fitness. The use of wearable health devices, like FitBits and the Apple Watch, allows people to focus on and track their daily physical activity. Increased awareness of healthy eating can drive people to seek out exercise opportunities and head to the gym.

Budget-friendly gyms are making gym memberships accessible to people who couldn’t previously afford them. The popularity of mud runs and obstacle races also incentivizes people who weren’t previously runners to take up the sport. This all means increased opportunity for gyms.

Starting a successful gym is a serious undertaking, but it may be a rewarding business if you’re passionate and knowledgeable about fitness. Because the health and fitness industry is thriving, new gyms continue to open, meaning there’s competition in the market. For a gym to survive, it needs to differentiate itself from the competition. From the atmosphere to the course offerings to other membership incentives, finding a hole in the market and designing a gym to fill it can contribute to the business’ success.

Target Market

While most gyms appeal to adults wishing to improve or maintain their fitness, different types of gyms are designed to appeal to different audiences. A niche gym with specialized classes, workout options, and a unique environment will appeal to a different audience than a more general gym focusing on strength training will. Factors such as price point, the types of classes, marketing methods, location, and more will all affect a gym’s target market.

 

Checklist for Starting a Gym

Starting a gym can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off right.

Step 1: Write a Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 2: Name the Business

Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips and ideas for naming a gym

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a gym, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Select your Location

Leasing space for a gym can be a significant expense because of the size of the space needed; a large commercial gym will require between 3,000 and 4,000 square feet of space. A property in a popular retail location can help increase gym attendance and memberships since many people seek the convenience of going to the gym on the way home from work or running errands. These high-traffic areas can cost more to lease, but that additional expense may pay off in increased business.

There is a trend for smaller, boutique studios like Crossfit, high-intensity training, etc., which may allow for a lower cost in rent.

Regardless of your facility’s size, it’s imperative that it’s convenient for the customer to get to, whether that means close to home or on their way to or from work, and offers easy parking.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Each state has different requirements regarding licensing for a gym. Most commonly, there are specific requirements for what can be included in a membership contract. There are additional state requirements if your gym offers personal trainers to be aware of as well.

At the local level, some cities will need to obtain special permits and follow certain requirements.

Last, there are some general business licenses needed such as a local business license, sales tax number, and Employer Identification Number.

Related: What licenses do gyms need?

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a gym is another.  Funding to start a gym can be difficult as the costs for renovations and equipment can be quite expensive.  In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Get your Marketing Plan in Place

Gyms depend on marketing to bring in new members, and marketing can get expensive. Many gyms use marketing methods such as paid advertising, social media marketing through Facebook, Instagram, and Pinterest, direct mail pieces, flyers, email marketing, and even radio ads. A gym owner may oversee much of the marketing or choose to hire a marketing professional or firm to take on the job.  There is no shortage of competitors from large mega-centers, boutique gyms, and city-funded facilities in most markets. A gym owner will spend a significant amount of their time marketing to new customers and keeping the existing ones coming back.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.

Step 8: Open a Business Bank Account

Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 9: Get Business Insurance

There are several types of insurance to consider when opening a gym. A few include:
– Commercial liability insurance protects the gym if a member is hurt while working out or on the property.
– Commercial property insurance helps cover the cost of a gym’s equipment, inventory, and the building itself if an event like a fire ever damages the business.
– Worker’s compensation insurance is required to help cover employees if an employee is injured while on the job. This insurance can cover the cost of their lost wages and medical bills.

The cost of insuring a gym will vary based on factors like the value of a gym’s equipment, the number of employees, and even the gym’s location. Contact multiple insurance companies to request quotes to better understand the typical policy costs. When comparing the different policies, be sure to consider the premiums, deductibles, and overall quality of the coverage that each policy offers.

Related: What types of insurance does a gym need?

Step 10: Hire Employees

Gyms require plenty of staff to keep them running, and are the biggest operational expense. According to PayScale, the average gym manager’s salary is $34,328 per year, while personal trainers earn an average salary of $39,498. Group fitness instructors earn about $22 per hour, while front desk receptionists earn about $32,919 per year. These salaries can all vary by location, and an employee’s experience will also affect the salary they can expect to earn.

In addition to budgeting for employee salaries, a gym’s budget needs to include expenses like workman’s comp insurance, paid time off, and unemployment insurance contributions.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your gym is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a gym?

The cost of starting a gym can vary significantly depending on the gym’s size, the amount and type of equipment it contains, its location, and the overall type of the gym. Plan to spend between $20,000 and $50,000 for a very basic facility, and as much as $100,000 to $200,000 for a more upscale fitness center with comprehensive quality gym equipment.

Some common startup costs for opening a gym include:
– Lease and facility renovation expenses
– Gym equipment such as free weights, squat racks, isolation machines, mats, bikes, treadmills, rowing machine, etc.
– Locker rooms, showers, and benches
– Supplies like towels, chairs, TVs, and sound systems
– Gym management software
– Signage

Related – 10 Essential Pieces of Equipment Needed To Start A Gym

How much can a gym owner make?

The profits of a gym vary wildly and are affected by the gym’s size, membership fee, marketing strategy, and more. RDX Sports gathered data from a number of gym owners, all of whom are making over $100,000 per year. The owners interviewed had relatively new gyms, and the salaries averaged out to $143,000.

Remember that the success and profitability of a gym depend on whether it fills a need in the community. Finding a way to offer something that other gyms don’t need, like specialized programming or programs for children, can help drive business to a gym. Your profitability and salary will also be affected by any debt you may need to take when starting the gym.

With the intense pressure from competitors aggressively lowering prices on gym memberships, it’s critical to add services such as personal training, massage, sauna, or specialty classes in order to keep revenues sustainable.

Are there grants to start a gym?

It’s extremely rare to find a grant to start a gym. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

What skills are needed to run a gym?

There’s no requirement to have a business degree to start a fitness center, but the process will be easier and smoother if you have certain skills and experiences.

Experience working in or managing a gym. Nothing replaces the value of having been a personal trainer or worked in or managed a gym. This type of experience gives a new gym owner a unique understanding of the challenges of keeping a gym running smoothly.

Athletic and fitness industry knowledge. A background in or knowledge of the athletic and fitness industry can help a gym owner identify market needs and create a gym that meets those demands.

Employee training and management experience. Gyms require multiple staff, and an owner who knows how to train and manage employees can ensure the gym is well-staffed with quality employees. Experience in interviewing and hiring employees will also be valuable.

Customer service skills. Working with customers is a daily aspect of owning a gym. Previous customer experience can be valuable, and a gym owner who is skilled in customer service can teach employees these same methods.

Marketing skills. Any gym requires marketing. An owner who understands their target audience and who can take on or guide some of the marketing efforts can save the business money while improving the effectiveness of the marketing.

What is the NAICS code for a gym?

The NAICS code for a gym is 713940, which is classified under Fitness and Recreational Sports Centers.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Franchising a gym

If the challenge of finding the perfect location, branding and developing your gym, sourcing quality equipment at affordable prices, and coming up with a marketing plan sounds overwhelming, you may want to consider franchising a gym. National chains offer franchise opportunities that take some of the legwork out of starting a new business. There will still be plenty of challenges to overcome, and you’ll have less control over some aspects of the business, but this may be an appealing way for you to start your new business.

Resources:
Athletic Business
Club Fitness
Fitness Business Association

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