How Much Do Gym Owners Make Anyway?

The joys of business ownership are only matched by the anxieties of, well...business ownership. While, yes, it is an intensely gratifying feeling when you say that you own a business, people often don’t fully grasp what that entails. Sure, I “make my own schedule” and I have an unlimited potential for the amount of money I can make. I am also at the whim of my customers and have likely put up a fair amount of personal financial risk in order to get my business off the ground. So when people would finally work up the courage to ask a question even close to, “How much can you make running a gym?” I often found myself struggling to answer. Besides the fact that it’s not exactly fun party talk, it depends on a wide range of variables. I would propose that a better question is, “How much does my gym need to make?”

Every gym operates differently and every gym owner has different wants, needs, and desires. Pulling on the thread of asking better questions, here are the two guiding questions for determining how much your gym needs to make:

1. How much money do you, as the gym owner, need or want to pay yourself to live the life that you want to live?
2. Does your business model set you up to match or exceed that number?

The order of these questions is arguably more important than the actual questions themselves. You need to have a clear goal of what you want your life to look like in order to reverse engineer a business model that will create a lifestyle that you enjoy. Start with what success looks like and then create a plan to get there, rather than trying to define success after building something for 3 years and realizing it is never going to fulfill your image of an enjoyable life.

We are going to keep it short and sweet going over question #1. I’m not going to tell you how to build a budget, what kind of car to drive, what percentage of your income should go toward a house note, or not to buy your Starbucks every morning. What I would tell you to do is make sure you understand how all of those lifestyle factors (luxury vs. economy brand car, do you want to have kids, how much college tuition is going to be, vacation spending, etc) fit into your vision of how you want your life to look. If you value the finer things, you might have a higher monthly cost of life than someone who is comfortable with a smaller cost of living. If you are a budget wizard who drools at the sight of a spreadsheet littered with your monthly spending, then, by all means, plan that sucker out. How you get to your end goal lifestyle and the cost associated with it is less important than understanding what that lifestyle looks like and the financial requirements to fund it.

Now we’re going to get our hands dirty. Our second question is a much meatier and more in-depth look at the revenue and operating expenses of your intended business model. For all the spreadsheet haters out there, this is where you will need to fire up your Google Sheets account and work up some projections. The key word here is projections and not predictions.

Here is an example of one that I worked with back in the gym owner days. Important disclaimer: I was never anywhere near these total profit projections, but this was a valuable exercise for me to see a clear path to building a business that would fund my desired lifestyle with lots to grow on. I don’t want to highlight everything in here, but there are a couple key considerations I want to highlight:

• Capacity vs. Price: these are your two levers you can pull to affect revenue and are arguably the most important metric to have dialed in. If you can’t accommodate enough members to make your price structure work, you either need to raise prices or adjust your model to fit more members (more sessions, higher session capacity, etc.)
• Profit Margin: how much are you making after expenses? Ideally, this is above 20%, but higher is almost always better
• OPEX: goal here is to keep your OPEX below 50% of your revenue
• Payroll: how much you pay your employees is your decision, but the goal for payroll is no more than 30% of your revenue. Payroll does not include any owner pay, that will come from profit margin.

More often than not, gyms are created when someone possesses a combination of a passion for helping people and enjoying the rewards of physical training. Where I live, 90% of gyms are born out of a passion project that turned into a business. The only issue with passion projects is there is rarely a lot of forecasting included. It’s typically a “Build it and they will come” mentality with little work done on the front end to make sure it’s not “Build it and it bankrupts me.” The GymStudio Business Model Calculator aims to help you elevate the back-of-napkin math that may have encouraged you to create a business and turn it into a proper business that feeds your family, provides careers for your trainers, and enhances the lives of your clients along the way.

The thing I want to highlight more than anything is that it is never too late to pivot. Looking at your numbers after going through this exercise might cause you to have dizzy spells, but I promise you it is never too late to take action on any issues born out of this exercise. At the end of the day, it’s your business and, more importantly, your life that will benefit. Reach out to other professionals who have gone through this before, create a plan, start small, and hope for a little bit of luck.