I Sold The Gym...

Hey guys, uh, I sold my gym and I wanted to talk to you about it because the first thing I want to mention, um, I've spoken to gym owners who tell everyone that they sold their gym and being involved on the numbers side, I know that the way they're portraying them selling the gym definitely seemed like it was a much awesomer experience than what the financial outcome really was. So, I want to be completely transparent with you. The gym is sold, but it was not a great financial transaction for us. So, I wanted to talk about what led up to us selling our gym and some of the lessons that I've learned over the course of these 3+ years being a gym owner. First one, well, I guess let me get into it. We were never profitable as a gym. Me and my business owner partner, we always had to fund every single month, we were funding expenses. And we knew that at some point, we had to draw a line and make a decision if this was something that we're gonna do, like going forward, if we're gonna— how long we were going to attempt to become profitable. Now, I don't know if it's unique, but me and my business partner both own separate accounting firms. Which are our primary mean, like, source of support for our lifestyle. Neither one of us actually needed the gym to survive in order to, uh, you know, put food on the table and things like that. And, um, as a side takeaway, I think that is something to take away. We weren't ever fully vested in the need for it to be profitable. We were happy to provide the community a place to work out. But I mean, at the end of the day, just from a financial standpoint, it's your money. You have to decide. If you're not profitable, give yourself a deadline. So we were approaching it. We had a lease that we were locked into. So the idea was, well, I mean, we have to pay the lease regardless. So We might as well keep trying until we have— as long as we have this lease. Well, the lease had an extension option for us to exercise last December if we wanted to, and we could continue at the same rates. We decided, based on the unknown of COVID and things like that, that we were going to wait out. We weren't going to extend, but if we were able to pick back up some momentum that we had lost during the pandemic, We would see if we could extend in the same space. Well, we ended up picking up some momentum. We replaced the members that, like, the net loss that we had in membership over the course of COVID We were starting to surpass it. We had 2 months in a row of good net increase in membership numbers. And then we reached out to the landlord and he basically said, I don't really want a gym in this space. Since you lost your option to extend, I'm not going to extend to you. Which now would require us, 2 owners who have another primary focus that isn't the gym, we'd have to, you know, bury— or we'd have to take the burden of the cost of moving the gym. And we decided we did not want to do that. So we were left with 2 options. We felt like either sell the assets and just close the gym completely, completely, or find another buyer. We had been trying to convince our GM to buy the space for a while, but quite frankly, I don't blame him. Look, if your gym isn't profitable, it's not super appealing. And that was the scenario that we ran into. Now, If there was an owner who coached all the classes, and it's— I mean, it's like 7, 6 to 7 classes a day, they would be profitable and they would just on that would have been able to make a couple thousand dollars. But the reason we weren't profitable is because we needed a GM there to kind of be involved in the day-to-day, knowing that Jason and I weren't able to do that. So anyways, that is what led up to us selling the gym. Um, we had someone in a group, a Facebook group that we're a part of, reach out to us, and he saw that we were trying to sell the gym, and he has some gyms in the area. He's like, I'm actually trying to open up my 3rd location, uh, but if you have an existing place, maybe I'd rather do that instead of starting one from scratch. We ended up selling to him, and I'll talk more about him in a second, um, because it's a really cool story in my mind. Uh, so there's that. Now here's some lessons that I've learned, because honestly, look, there's a part of me that I'm embarrassed by the fact that I understand the financial side of a gym, but I couldn't make the gym successful that I was a part owner in. And I, I think there are some factors that I can admit as to why that didn't work out. And so, I am slightly nervous sharing this story with the world because now there is the potential that someone could come and say like, well, you're kind of a fraud then. You wrote this book on this system to make gyms profitable and you couldn't even do it for yourself. And that's a fair statement if someone wants to come at me with that. Here's some things that I learned. Chris Cooper, in his book, Founder, Farmer, Tinker, Thief, I really love the way he laid out the 4 stages of gym ownership and the natural progression. The first stage being founder. And when your gym is in founder stage, which typically isn't profitable— in fact, I think it's always not profitable. Cooper, if you ever watch this, you can plug in your book in the comments and, and respond to this. I think in order to get out of the founder stage, you need to be at least breakeven and paying yourself, maybe, maybe that. But so founder stage, the owner does a lot. The gym wasn't profitable. So the gym lived in a founder stage, but because Jason and I had full-time jobs, we were actually operating like tinkers because we came in once a week, we had weekly meetings, but we really relied on the GM to be the one coaching the staff, doing all the great standard operating procedures that a lot of mentors talk about. And, um, we just, we never got complete buy-in from GMs to do all the things that an owner would do. And again, they're not invested like the owner is, so no fault of their own. We had great GMs. Um, they did great things, but There's a different level if the owner's involved in some of those things, I think. So one of my things that I've learned is the owner needs to be what the gym needs you to be based on its current stage. And I think if you're not profitable yet, the owner really needs to be involved in a whole lot of aspects of it. Not to mention, from the Profit First standpoint, if you're not profitable, you are doing a lot of the work, you are wearing a lot of the hats. And again, Jason and I chose to invest money to do that, knowing that we were running at a loss, hoping that, you know, some of these things would pan out. The other reason it didn't work, um, I don't know if you guys are familiar with Fix This Next by Mike Michalowicz. He introduces the business hierarchy of needs. I want you to just pay attention to that bottom foundational part of the pyramid. It says sales. Look, from a tax firm standpoint and the way we've created this digital real estate where if people are searching on Google and other things, common phrases and terms that we provide solutions for, we have a ton of content out there. And so we have an awesome marketing engine for our tax firm. We never had anyone who was willing to put in the time and effort to create that content for our gym, to create that type of marketing engine. And so because of it, for the entire 3+ years that I was an owner, we sucked at sales. Um, I think our conversion rates were pretty decent, but man, getting in fresh leads— we tried a whole bunch of stuff. And a lot of the stuff that we tried, I personally felt was slightly inauthentic to who we were. And I think that's why it didn't work out. I'm not a fan of the hypey advertisement stuff. I would have rather put out a bunch of content and taken the long game of just like good content that people are gonna find with lead magnets that eventually creates this recurring interest in people. There's a lot of great things out there. A lot of people focus on marketing. It's, it's sexy. So there's, you know, I'm sure you're aware of whatever stuff that is. We were just never good at it. And guess what? If you're trying to grow a gym and you are as lean as possible, which we were, because I did follow the Profit First method, we did cut back on all the expenses that we needed to. Outside of paying rent and coaches, man, our other expenses each month were less than $1,000. I mean, we were super duper lean. Um, if you're not profitable at that point, being as lean as you possibly can, you have a revenue problem. And we weren't ever able to solve that, ever. And that's another reason why I think having an owner there in the day-to-day— like, I think about why did GSL, our gym, suck at bringing leads when with Insight Tax, I would say that we're an industry leader for accounting firms as far as how we market and bring in leads. Time and attention is the main thing. With Insight Tax, I could review every single day. We could tweak, we could see what was working, what wasn't working. I'm having a weekly meeting with GSL. I didn't have the time or bandwidth to spend doing all that stuff. And as much as my team here at Insight Tax tried to help with GSL, it was always not a priority. So, um, definitely having a steady flow of leads in a gym is super important, and we did not have that because you do have a higher turnover in clients than other type of service businesses just by nature. People move, people want variety. I do think there's lots of things you could do to keep people interested for sure. I'm not saying you can't, but just by nature, it— you have higher churn and turnover than say like an accounting firm does. So again, we sucked at that. And as you saw, sales was the base of the pyramid. So which means it's the first thing you need to focus on. If you're not having a steady flow of leads coming in, in theory, in order to move up to the next tiers, you really need that coming in. I've always been a fan of making sure you have looked at your operating procedures, that you're not like, as the people come in, that you're losing them at the same pace, because that's also bad. And I think you could potentially focus on both. You can fix the retention problem and still bring in leads at the same time if you're working in it full time, which I wasn't, so we didn't. The other thing, because we got to the point where we found out from the landlord We were hoping he wasn't contacting us to let us know, like, hey, your lease is coming up, because he was also nervous. You know, COVID happened. There's a lot of commercial spaces that are open. There's like a lot of inventory. Well, apparently in our area, warehousing is not a problem. In fact, the type of space that we were in is super hot on the market. And so He had already in January, 5 months prior to us approaching him and saying, hey, our lease is coming up, we'd like to maybe extend a few months. He already knew in January, he had already made a soft commitment to somebody else saying, yeah, these guys are going to be out at the end of July and here's the new rate. So he would be able to rent it out for a few thousand dollars more a month than what we were already paying. Which would have even more crippled the gym. Uh, so, uh, uh, yeah, in hindsight, it would have been just super nice of him to tell us back in January that he wasn't planning to extend. We would have made different decisions, but it is what it is. So because of the short timeframe that we needed and this one gym owner, Tyler, approaching us to buy it, we had one buyer. When you're selling your gym, one buyer equals no buyer. Now, I've talked to Tyler about this. Our gym was a sweet deal for him. Uh, look, we sold the gym for the same price that I bought in at, um, but it's a great deal for Tyler, and that's fine. It was an opportunity and he's taken advantage of it, which every gym owner should. If you come across something like that and the owner has to sell and you have the cash to do it, man, sell it, do it, or buy it, sorry, because again, great opportunity. But here's where I love the story. So Tyler admitted to me that he's read my book quite a few times and that he credits it for saving the profitability of his gyms. He mentioned to me that he'd read Profit First He didn't quite— it just wasn't clicking for the way he wanted to do it in the gym. And he struggled with trying to take the generic concepts and apply it to the gym. And he got to the point where with their 2 locations, he potentially was like, you know what, maybe this— I don't want to do this. He read Profit First for Microgyms. And with the way that I've tweaked the general concepts, he was able to make his 2 locations profitable to the extent where he was in a financially healthy position that he was comfortable purchasing a 3rd location. And to me, it kind of makes the story full circle. I bought into a gym as a CPA accountant so that I could understand gym owners better. For sure, oh my gosh, how awesome would it have been if we could have proven that even accountants can have a gym and it can be profitable as non-gym people with zero fitness knowledge. But instead, what we see here is the work that I do as an accountant and a CPA, my passion of serving gym owners so that you can serve your community worked out. And if it weren't for the book, I probably wouldn't have had a buyer and our gym community would had to have disbanded and they all would have went their separate ways, and that would have been super sad. So I— thanks for bearing with me on my journey down memory lane of the things that I've learned. I will probably be making more content in the future as I continue to unravel the things that I have learned from being a gym owner, but I'm certainly grateful for all the mentors that I've had and all the great people in the industry that put out information. I love that gym owners are much more open to share with each other than other owners. I love the hard work ethic that everybody has, and we're super happy to continue to serve the gym industry. Um, but at this time, I'm just going to do it as a CPA and as an accountant, no longer as a gym owner myself. All right, remember, profitability is a choice. Have the courage and wisdom to choose it.