Will the Approaching Recession Bury Your Fitness Business?

So how do you see a looming recession impacting the fitness industry, I asked.

I was sitting across the table from a longtime friend who is currently a vice president at a private equity firm that holds the third most franchises of one of the largest commercial gym businesses on the planet. His operation has a proverbial “seat at the table” in an operation that, like it or not, has the power to make a measurable impact on the fitness industry as a whole. 

Between his inner knowledge of the workings of the typical commercial gym, and his reasonably complete understanding of the Cressey Sports Performance model (he’s been a client since day one), my guy knows his shit as it relates to fitness business.

His response punched me right in the gut.

I’d be terrified to exist in the $45 per session model, that’s for sure.

My business exists in the space he is referring to, and I’m not out of touch with the fact that strategic adjustments are going to need to be made if a gym like mine wants to continue to thrive if and when we see the economy take a dip.

He wasn’t bashing my operation, though. Instead, he was helping me understand the reality that as times get tight for the typical fitness consumer, and concessions need to be made as it relates to this type of ancillary spending, it is the guys in the middle of the pricing table who are going to be skipped over entirely during the cost-cutting process.

This may begin to look more appealing to your current clients.

This may begin to look more appealing to your current clients.

There are effectively three types of spending categories in the broadest sense of gym memberships: 

  1. There are the premium amenities and price point guys, such as the Equinox and Lifetime Athletics of the world (think $200+/month commercial gym membership). 

  2. There are the $20 to $80 per session service providers who live in the group fitness and semi-private space (think CSP or your local $199/month bootcamp operation). 

  3. And, lastly, there are the $10/month Planet Fitnesses of the world that own the rock-bottom pricing strategy approach.

Here’s how I imagine things will play out when the time comes for fitness consumers to evaluate their spending habits...

The Equinox members will either be too wealthy to feel the sting of a monthly premium gym membership and continue to let that monthly EFT train roll on, or find themselves too attached to their gym amenities to even entertain the idea of spending with your bare bones operation when they do decide to downsize their fitness spend. As a result, they stay put, or drop all the way to the bottom of the pricing pool so that at the very least, they have some form of gym access.

The clients currently in your gym will be more aware than ever of the $1 dollar down and just $10/month option down the road. That competing gym can quickly drop a “no contracts” offer the moment they see blood in the water for private sector operations such as ours, making you especially vulnerable to a defection.

Lastly, as much as cost-cutting will be a necessity for their members, the Planet Fitness clients are likely to conclude that the $10/month draw on their bank account is too little to justify putting the time and energy into cancelling. As a result, most choose to let it ride.

So, who is the big loser here? Yup. It’s us.

How do we insulate ourselves from this market correction?

If you are of the belief that our sitting president will do everything in his power to maintain our economy’s current performance on up until the pending election in November of 2020 (I am), this means that you’ve got 15+ months to make leaving your business a difficult decision when we finally hit a cliff.

With this in mind, here are three things you need to focus on during the coming year:

1. Differentiate yourself.

I want you to separate your business from the pack on more than just customer service, cleanliness, and basic programming strategy. 

I’m talking about having an area of expertise in a space that is effectively recession-proof. In our case, that meant thriving in ‘07 and ‘08 because we catered to youth athletes. More specifically, we came to learn that when times get tight, parents cut off their own spending before they eliminate valued services relating to their children.

I get it...my son Collin will continue to play youth soccer with his friends while my wife and I stop enjoying meals out and paying the babysitter if and when that decision ever needs to be made.

This isn’t limited purely to operating in a performance niche. For example, you could focus on being the best at helping people bounce back from a specific common injury. You think people are going to stop tearing ACL’s simply because the market is in the can? I think not. Position yourself as “the guy” to bring you back from a knee reconstruction, and you’ll be standing on the other end of an economic downturn.

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2. Make your business stickier.

By sticky, I mean that you should look to deliver more than just an exceptional training session in your gym. When my clients come to CSP, many of them arrive with the intention of training, getting a massage, buying their supplements, and banging out a pitching lesson. Deciding to cut out one of these services might make sense for a client, but eliminating them all simultaneously is somewhat unlikely.

There are probably plenty of ways for you to make your operation a little more sticky as well. Maybe you explore keeping a freezer in your space to allow for an on-site food delivery service to cater to your clients. Maybe you bring in an established physical therapist to function as an independent contractor. You could add a smoothie bar...offer childcare...whatever. Just make your business more difficult to walk away from than it currently is.

3. Identify operational inefficiencies.

You’re probably not running an operation that is as efficient as you think. Are you a little overstaffed? Are you cranking the air conditioning 24/7 at 66 degrees when 70 would suffice? Are you paying for a mastermind that you haven’t bothered to log-in to or attend for the last six months? 

You’re spending carelessly somewhere, and cleaning those habits up now, while cashflow is fine and the team isn’t stressed about the performance of the operation, will be far less exhausting than doing it all at once in a reactionary format when things get a little grim.

not trying to be Johnny Raincloud…

I just want to see as many gyms as possible with their doors continuing to be open on the day that our country comes out of its next recession. Today is the day to begin taking a proactive approach to preparing for a correction that is an absolute certainty according to history.

Did this one resonate with you?

My business partner Eric and I are going to spend Monday, September 23rd digging deep into everything from lead generation, to pricing strategy, gym design, and everything in between. If you’re interested in learning exactly how we’ve attacked building and maintaining the model we’ve had in action since 2007, this packed day of information is for you.

*** Take note that this registration includes complimentary attendance to the CSP Fall Seminar which is set to take place during the two days before our mentorship event. This one will be a good bang for your buck continuing education opportunity.

Check out all of the details HERE, and make sure to shoot me an email (pdgymsolutions@gmail.com) if you have follow-up questions.