As the economy and trends change in the fitness industry, a business owner should keep one ear on the ground, listen and quickly adapt to the shift of the market’s interest and how quickly you can react to consumer preference. There are different business models to choose from before opening a gym.
State of the fitness industry
You can find the world’s largest health and wellness market in the United States of America, with 41,370 clubs and an annual growth rate of 4.5% (pre-Covid). The overall fitness industry revenue is approximately $35 billion and continuously growing at a slightly higher rate of 8.4%.
Among the 41,360 health clubs in the United States, there is a total of 64.19 million people who religiously follow a fit and healthy lifestyle and visits the gym regularly.
Now that you know starting a gym business is a profitable venture, below are the following successful gym business models that will help you choose better before opening a gym.
Successful gym business model types
Membership-Based is one of the popular ways to make money as owners get a consistent income. It provides a fixed monthly membership price to use your facilities, which are more likely to visit your gym. The downside of this business model is there is pressure to sell gym memberships. Members feel that they are paying for their membership, yet they don’t maximize its benefits. Business owners will need to sell gym memberships constantly and keeping members engaged even when they don’t visit your gym.
Franchise Business is one way to grow a business without investing your own money to looking more locations and adding services. You can sell your franchise licenses to franchisees. Franchisees have the right to operate the business using your brand. This business model is also a safe way to start a business that has already established its reputation.
Hybrid Fitness Business. The global pandemic gave birth to a hybrid business model where owners can operate both their business’s digital and in-person arms. It works well because digital fitness compliments your in-person services. Additionally, you have a focus target market which is digital-only members. You have a more significant reach since your audience is not dependent on your location.
Digital Subscription. During the global pandemic, more and more gym members turned to home fitness to continue their fitness regimen. Setting up a virtual fitness club can save you a lot of money versus operating a brick-and-mortar health club.
Group Fitness Business. With the ease of restrictions, group fitness classes can resume their regular programming. The sense of community motivates members to attend the classes. You can also combine this alongside your digital fitness subscribers as it offers the flexibility and convenience your members need.
Pay-as-You-Go. Your clients can just come and go whenever they need your services. This business model can work for using your gym facilities or attending live-streaming fitness classes. The downside of this type of model is the unpredictable flow of your revenue.
Once you have identified the type of structure for your business to generate profits, your gym business model can help you get money more efficiently. With bills and salaries to pay, your fitness center needs to make enough revenue to pay your expenses, and you should know how to keep your business afloat.
Business owners must also consider if they need to get an LLC for their gym. It is recommended to the fitness club owners form an LLC even though each business may be different from one another.
What is an LLC?
LLC is a US business structure that stands for limited liability company (LLC). An LLC provides a corporation’s liability protection with the pass-through taxation of a partnership or a sole proprietorship.
Business owners should consider LLC as the best option to protect their assets, profitability, gain credibility and consumer trust.
Why form an LCC?
Getting an LLC for your business allows you to:
- Protect your savings and personal assets
- Get privacy protection
- Have peace of mind
- Increase credibility
- Increase revenue
- Accelerated business growth
When to form an LLC?
Growing your business and protecting your assets comes after your company becoming an LLC. Most of the fitness centers form an LLC for the following reasons:
- Presence of risk of liability
- Scale your business
- A need to increase your business credibility
About risk and limited liability
Chances are fitness centers face the risk of accidents, financial data breaches, and sometimes product liability.
A good example is one of your clients who gets injured while using gym equipment with improper labels. Your client can file for damages and demand you pay a settlement that covers their medical fees.
This is where the limited liability protection comes in. Any business that has risk involved needs to be legally separated from its owner.
In cases that the business is sued and results in client settlement, the LLC protects a business owner’s personal assets (e.g., car, house, and savings) or defaults on a debt.
Advantages of Forming an LLC
- LLCs provide personal liability protection, which means your personal assets (such as house, car, bank account) are protected if your business is sued or if it defaults on a debt.
- LLCs have options to customize their tax structure, allowing companies to use the best tax strategy to their advantage.
- There is an increase in profitability and risk because LLC provides personal liability protection and tax benefits.
- Companies with LLC earn more trust from banks and consumers, which can help a business’s ability to get loans.
Based on the gym business models discussed, the safest route to take is to combine a few different elements to cover all your bases. If offering one or two types can reach your target audience, why not? Gym enthusiasts and fitness buffs always look at their convenience, flexibility of their schedule, and a great fitness experience. Choose a suitable business model that can help drive value to your members.