Minimizing Key Man Risk while Scaling Your Business

There are very few options for industry-specific continuing education when you are a fitness facility owner with a business school background.  In 2009 I attended an Alwyn Cosgrove fitness business event organized by Perform Better and it was quickly apparent that the material was not geared toward attendees with MBA's.  While the content was universally useful and applicable to a facility owner, I had already processed concepts such as profit & loss statements and other basic accounting principles.  The networking opportunities were fantastic, but the take-aways were already well within my skill-set.

Fast forward several years, and I've yet to stumble across a single business-specific fitness event which would qualify as anything other than Business School 101.  That, however, is completely understandable.  It would be unreasonable for me to expect such a service to exist, as facility owners with my academic and professional background aren't exactly in abundance. 

When applying the basic rules of supply and demand, it is pretty clear that:

SUPPLY = 0   when   DEMAND = me

The good news is that my pursuit of continuing education and inspiration requires that I step outside of our tight-knit fitness community, and into everything else.  I recently wrapped my presentation at the Fitness Summit in Kansas City by challenging the audience to contact someone from outside of the fitness industry to pick their brain and allow the conversation to travel wherever it may.  It was truly gratifying to receive multiple messages from attendees in the weeks to follow mentioning the valuable insight they'd taken away from the conversations. 

Practicing What I Preach

I have a long-time friend and client named Sahil who has recently emerged as one of the more thought provoking conversationalists within my network.  When you combine his understanding of our business model (longest tenured CSP client) and a background in private equity, you've got a guy who knows how to ask the right questions and challenge my assertions about the future of our company.

Sahil and I recently dove into a discussion of the challenges that come with scaling a model such as CSP from a single location to two or more, and the implications of having put Eric Cressey's name on our business.  He was quick to mention that no matter how effectively we scale our model, it would likely be difficult to sell the business due to what he called high "Key Man Risk".  In essence, unless it is our intention to package up Eric Cressey and sell him along with CSP some day, we are unlikely to command top dollar. 

* I should probably stop to mention that Eric and I have no intention of selling this business.  These are simply the kinds of things that guys like Sahil enjoy discussing, so it isn't surprising that we eventually had the conversation. 

The more I processed the concept of Key Man Risk, the more I realized its impact on the assumption that CSP-Mass would somehow falter in the wake of Eric's departure for Florida this past fall.  The same mentality which might have scared off a private equity professional from acquiring my business had actually fueled speculation of our impending demise as we opened CSP-Florida.   Thankfully, we were successful in proving this assumption wrong by stringing together the most profitable six month span of operation in the history of CSP-Mass. 

In reflecting upon the factors contributing to our performance this past winter, it has become clear that a combination of culture, market positioning, and existing systems were the keys to our success in all but eliminating Key Man Risk.  Here is a closer look at how each of these three factors allowed for us to thrive.

1. Culture

One of the biggest lessons I've learned in building our business is that great coaches are everywhere, but truly unique gym cultures are not.  I spent the early years of our operations focusing on promoting the accolades which Eric and Tony were piling up by publishing content in well-known magazines and traveling the globe on their speaking circuits.  In recent years, my game-plan has shifted dramatically, as I now allocate my energy toward introducing the fitness and baseball worlds to the concept of the "CSP-Family".

While Eric's departure would obviously have some impact on the look and feel of our business, we came to learn that our unique baseball clubhouse culture is actually the sum of many parts.  Including Eric, there are ten of us "regulars" who have a hand in creating the day-to-day experience our clients have at CSP.  When you count on multiple personalities to make up the identity of your culture, you effectively reduce Key Man Risk.  

In hindsight, it shouldn't come as a surprise that we maintained the same great training environment and culture when just 10% of the staff was transitioning away for a few months.  As it turns out, the real lesson learned was just how difficult it is to recreate such a unique experience in another state with another staff.  Eric was tasked with doing so in Jupiter and he quickly learned that it wasn't as simple as throwing a CSP logo on the wall, installing some pretty equipment, and turning the lights on. 

2. Market Positioning


To this day, there is no greater decision we've made than to fiercely pursue and claim ownership of the baseball-specific strength & conditioning niche.  By identifying an under-served population and solving their unique set of problems, we have captured our own specific piece of the fitness industry.  Though our services are not entirely limited to just baseball players, it is fair to say that roughly 85% of the clients through our door would fall within that category.

In selecting and pursuing your niche, the end goal should always be to be so good that a substitute does not exist.  I like to think that we've done just that, as the perception of the general public is that training at CSP-Mass, with or without Eric Cressey, is going to be as good an option as any baseball player in New England is going to find.

Had I continued to focus on publicizing individual staff members' accolades at the expense of our brand as a whole, CSP-Mass would have been a whole lot more vulnerable with Eric leaving.  Instead, we'd positioned our brand as "the baseball-specific strength & conditioning facility", as opposed to "a gym with a baseball guy on staff".

3. Existing Systems

The importance of having efficient systems in place cannot be overstated.  In this case, employing efficient systems means having standardized just about every component of the training experience here at CSP in a way that guarantees consistency from one client session to the next. All too often, I see new fitness facility owners putting the cart before the horse by worrying about brand development before they've even created a consistent and predictable training experience.  How can your clients explain to a friend what is great about your facility if every member on your team has a dramatically different coaching style and training philosophy?  You need to fine-tune your customer's training experiences before you can spend time worrying about designing a cool t-shirt or posting the wittiest Instagram post of all time.

Here at CSP, the staff has regular programming meetings and works off of assessment and program templates used by the entire team.  By standardizing these systems, we can guarantee that any coach on staff can pull up an assessment findings sheet prepared by another coach and do a great job of designing training materials based upon the notes.  When a client requests a program on short notice and the coach who initially assessed them is off for the day, we barely miss a beat. 

System standardization isn't just limited to assessment and program design.  Of equal importance is the front and back end of our business.  The training experience is actually the filler of a customer service sandwich which starts with checking in at the front desk and ends with even more interaction with our Office Manager Stacie at the conclusion of a training session.  Stacie is the gatekeeper here at CSP.  She makes sure that sessions get scheduled, programs are prepared and printed on time, and ample coaching is available based on anticipated foot traffic.  She has streamlined and systemized every component of the complex front desk operation so effectively that even I can step in and handle the job on Saturday mornings as she enjoys a day off.

The thing to take away from each of these systems is the fact that Eric's presence has zero effect on our ability to implement them.  With the appropriate structure in place, we've been able to make our clients feel like he never left.

Why Should You Worry About Key Man Risk?

Well, mostly because you work in an industry with an insane amount of employee turnover.  Not every fitness facility has an Eric Cressey to lose, but they all have a "best coach" on staff.  Is your business or team equipped to survive such a departure at this time?  Or, do you stand to lose clients immediately? 

It might come as a surprise to hear, but we've never had an employee sign a non-compete agreement here at CSP.  The way we see it, if we're creating a culture which is the sum of many parts, a brand which has captured a specific niche, and a training experience which is consistent from one visit to the next, how is a single employee going to walk away and entice more than a client or two?

I welcome your thoughts, questions and recommendations in the comment section!