One of the biggest challenges of my career was when I was in my mid-twenties and took over a run-down independent club, believing I could turn it around quickly. Already running three clubs, I thought it was going to be a walk in the park, but it almost broke me. I was expecting to break even at around three months, but it took 15 to 18 months and cost as much as opening a greenfield site from scratch.
I came from a boutique background – already owning three franchises for Australian brand EFM – so when I took over the independent club I maintained a price point which was about 20 to 30 per cent higher than other local gyms. I’d made some improvements and believed it was the best gym in the area and worth the price, but I’d underestimated the fact that the club had been run down by the previous owner and had a bad reputation.
I’d given myself a problem – dropping the price would have annoyed members who were paying the higher price and I believed that once the club broke even it would be a high-yielding business. So I decided to stick it out. It took a very long time to break even and was a massive drain on my other three clubs.
A further gamble
The gym had just under 300 members when I took over and the break-even point was about 600. I rebranded as The Urban Fitness Club and made improvements, but initially didn’t market them well so the club’s former reputation lingered on. However, the gym was making slow net gains of 15 to 20 members each month, so I pushed on thinking that once I got past break-even, every new member would be more valuable than if I dropped to a lower price point.
The turning point came when taking the club 24/7. It was a gamble, as it represented further investment of around AUS$40,000 for the access system.
As the club was still loss-making I wasn't sure if it was the right thing to do, however I doubled-down on the efforts to communicate our improvements to the community. I launched significant guerilla marketing tactics and got out into the community to build relationships with other local business owners, sponsoring local sporting clubs and being a part of the community outside of the gym. In the summer we would go to the local train station with branded bottles of water for people coming off the trains.
Because the location had been tainted for many years, I had to work hard for people to trust the new ownership and changes that had been made.
I put a lot of focus on our online reviews, spending a huge amount of time trying to change our profile and build the brand’s presence digitally.
Although it was a lot more work than I had anticipated, from that point I started attracting 30 to 40 new members a month and hit break-even in another four months.
Don’t jump in too fast
The experience has helped me in thinking through the decisions and investments that I've made since, both as an entrepreneur and with Lift Brands, where I've got investors and a corporate entity to look after.
I learned you've got to spend ample time on the planning phase and not just jump in. Take your time, understand all the different scenarios that could happen, model those scenarios out and spend some time going through financial analysis to understand the worst case scenarios, not just the best case. Even with good planning there will be challenges and things you didn't foresee.
Ultimately, it doesn't matter how much experience you've got, there are always things that will pop up and you've just got to deal with them - that's business.
There are always things outside our control that are bigger than us, however, if you focus on what you can control, typically things will go in the right direction.
Sometimes you just have to be patient as well. Don't change the strategy too early. If you truly believe in it and are seeing some movement in the right direction, stick it out.
Finally, the critical learning for me was to make sure you have enough cash in reserve to get you through if things don’t go according to plan. This situation was hard, but fortunately I was saved by the cashflow from our other clubs and some additional cash reserves I’d built up.
