What if helping people work out got your own bottom line into better shape? Running your own gym can be a solid small business opportunity, but it’s important to know that nearly half of new gyms and fitness centers aren’t expected to last five years. From figuring out your gym business model to understanding your market, knowing the right steps to open a gym is key.
With over 201,000 gyms and fitness centers worldwide in 2019, the fitness industry is competitive. Opening a gym, fitness center, or boutique exercise studio has its risks. But with the right business plan, you can start your path to being a gym owner.
From large chains and franchises to small operations, the global health club market has been growing since 2008. It topped $96 billion in 2019, and $35 billion came from the U.S. alone. Fitness-minded Americans made over 6 billion visits to 41,370 gym and fitness facilities, up 4.5% from 2018.
Profit opportunities are there, too. One in five Americans is a member of at least one gym or fitness center, and on average a membership is worth $517 per year.
How has the 2020 pandemic affected gyms, health clubs, and the fitness industry?
The 2020 COVID-19 pandemic has been painful for gyms large and small, and major fitness chains like 24 Hour Fitness and Gold’s Gym have filed for Chapter 11 bankruptcy. However, from following CDC gym guidelines and other COVID-focused fitness industry best practices, fitness centers can push through the pandemic.
There’s good news too. Despite lockdown closures, gyms are seeing signs of recovery. Customers say they miss going to the gym, and by March 2021, group exercise studios alone are expected to have recovered to their 2019 levels. The upshot? The more your customers trust your safety practices, the better the chances your gym may emerge from the pandemic in good shape.
Opening your first gym location is going to take some time, effort, and a little fieldwork. From understanding your market’s demographics to working your time management skills, you can have what it takes to open your own gym and lead your fitness business on a path to profitability. Follow the checklist below to help you set your gym business startup routine:
Checklist for How to Open a Gym
- Create a Gym Business Plan
- Choose a Business Structure for Your Gym
- Determine Your Fitness Business Costs
- Think of a Catchy Gym Business Name
- Register Your Fitness Business and Open Financial Accounts
- Purchase Equipment for Your Gym Business
- Market Your Gym
Just like crafting a workout, fitness goals, and wellness plan for a client, your gym needs a business plan that guides your journey as an exercise entrepreneur. Consider the following as you create your gym business plan:
- Which niche or unmet need does your gym fill in the local market?
- Where will you have locations, and what federal, state, and local laws apply? How will your gym incorporate online fitness or remote options?
- What scale are you aiming for? Whether one location or many, being part of a franchise or having your own brand, know how big or small you want your gym business to be.
- How will your fitness business set SMART goals? Setting down business objectives that are SMART — Specific, Measurable, Attainable, Realistic/Relevant, and Timely — keeps you focused on the twisty path of startup, operations, and growth.
- What potential problems may threaten your business? Fitness trends change. An economic downturn tightens purse strings. A competitor undercuts your business model. A new state health regulation is costly to implement. Troubleshooting now can help you save your business later.
- Who is in your market? Understanding your ideal customer is key to attracting and retaining members.
A foundational part of your fitness business is choosing the right business structure. Technically speaking, a sole proprietorship could be the easiest way to start. However, the capital needs, liability concerns, and potential higher taxation can make a sole prop the wrong choice for your gym business.
Instead, consider starting an LLC, or limited liability company, along with an operating agreement (especially if you are starting your gym with fellow business owners). Establishing an LLC helps you divide shares, structure buyouts, shield personal assets from liability, and can even lower your business taxes.
The average startup costs for a basic gym range $10,000 to $50,000. However, your actual costs may be higher, depending on factors such as:
- Facilities costs: Rent by square footage, renovation expenses, utilities, security, sanitation, etc.
- Government and legal fees: Licenses, permits, legal paperwork and filings, registration fees, business insurance, etc.
- Fitness equipment
- Don’t forget your technical equipment and services either, such as gym membership management software and computers. You’ll also need to get the word out, so budget marketing and advertising spends for things like trade shows, website development and hosting, and any print, broadcast, and online ads.
How do you fund your gym startup costs?
Managing cash flow is key to keeping up with your gym’s costs as a new business. Here are a few ideas to fund your gym:
- Government available resources: Federal business loans through the Small Business Administration can be accessible to many startups, but the process can be long and not everyone qualifies.
- Leasing: Financing-to-own agreements can help you finance gym equipment, usually with a 2–5 year term. You may have to pay a higher interest rate, but approval can be easier than bank loans.
- Bank loans: A commercial bank loan may help you open your doors, but it’s a good idea to polish your gym’s business plan first. Also consider whether you can offer collateral, and if you’re able to offer 3–5 years of financial projections.
Anytime Fitness. Crossfit Zone. Oxygen Gym. Sound familiar? They should, which is why naming your gym is a crucial decision. There’s no one way to name a fitness business. A good rule of thumb to follow is to try to make your gym’s name reflect your brand, its values, and resonate with your market.
As part of figuring out how to name your LLC, check that your gym’s business name is available for everything from government registrations, to domain names and social media accounts.
Figured out your gym’s name? Great! Now it’s time to:
- Register your business with the appropriate state and local authorities
- Request an EIN (employer identification number) from the IRS for your gym’s business taxes
- Open business financial accounts, such as a checking account or business credit card
- Apply for relevant business licenses, zoning permits, etc.
- Get the correct business insurance, liability insurance, and other insurance
What type of gym equipment you need depends in part on the services you’ll offer. From Pilates to cycling, every type of workout or fitness regimen has its own equipment needs.
Nowadays, fitness equipment can also be things like computer servers. In addition to on-site offerings, a growing number of fitness centers are broadening their offerings with digital and off-site options like virtual classes and fitness apps.
Outline the types of equipment you’ll need for your fitness services, including any cardio equipment, free weights, and the like. Also, develop a digital plan for fulfilling the online options members will also be able to use. From there, you can develop your procurement plan to get the equipment you need in order to open your doors.
There’s more to success than simply opening your fitness center. From postcards to online reviews and more, you’ve also got to spread the word.
Set up a gym website that outlines who you are, what members can do at your gym, how you help them meet their wellness goals, what membership options are available, and how to get in touch.
Challenges, videos, a free personal training session, fitness and workout content, intro packages, limited-time free passes, and product giveaways are other ways you can leverage social media and word of mouth to generate interest in your gym. As people respond, you can then work on getting them to become — and stay — members.
The global market growth in health club memberships means that fitness entrepreneurs can build a solid customer base for broad or niche gym businesses. Here are a few ideas for services to consider:
- General fitness
- Personal trainers
- Boxing gym or martial arts-based fitness programs
- Crossfit gym
- Yoga gym
- Pilates gym
- Boutique fitness
- Mobile fitness or home fitness programs
- Workplace fitness
Planning your gym is the first step to opening what could be a successful gym business. Now you know what it takes to create your gym’s business model, write your business plan, secure your startup funds, and get your equipment. Before you know it, you could be working your way toward a profitable fitness business.
1 All prices and services presented above were reviewed and verified as of 11/2/19.
2 The Starter plan is $49/year the first year and increases to $119/year after that
3 This chart does not include state fees because those will vary in each state.
How to Open a Gym FAQs
Is membership the only way my gym can make money?
You may also be able to augment your core membership programs with other paid fitness classes, supplements, clothing, food and beverage services, and more.
Is the fitness industry still growing?
Nationally, 71.5 million customers have used some sort of health club service, and global health club membership is expected to top 230 million people by 2030.
What is a gym’s profit margin?
Your gym’s profit margins are going to vary by many factors, such as square footage, services offered, and what other products and services you offer in addition to your core services. The key to figuring out your profit margin is to know which metrics to track, such as:
- Net profit
- Gross new members
- Members lost
- Cost of acquisition
One important consideration is that ancillary revenue sources can make all the difference in your gym’s revenue, net profit, and sustainability. Clubs with less than 20% “other” revenues tend to be least likely to survive long-term.
Do gyms qualify for tax breaks?
Just as your business will have startup costs and ongoing overhead, you may be able to offset some of those expenses with tax credits and deductions. Staying up to date on legal tax savings available to your gym can make a big difference on your bottom line.