Common Mistakes Fitness Owners Make in Business

“This isn’t just a business, it’s a passion project”…..maybe but passion doesn’t pay the bills.

Fitness is one of those markets where owners are not just investors, but individuals that are truly passionate about what they do.  And why not – providing a state-of-the-art environment where clients can improve the quality of their life by engaging in a consistent fitness regimen is a noble endeavor.  It is something to be passionate about.  But passion doesn’t pay the bills. Regardless of how purposeful your fitness business is, you need a sound business plan to make sure that you remain solvent and able to reach as many clients as possible.  That sound business plan should include access to enough capital to sustain the business and allow for all the amenities and equipment that discerning customers expect.  It should also include working with a knowledgeable equipment finance partner, like Macrolease Corporation , that can share the benefit of their years of experience to help you put the best plan together to insure long term success.  Yes, it is important to be passionate about your business but it is also important to be financially solid.

“If I build it they will come” …….maybe but likely not all at once:

Rarely do fitness centers open with enough revenue to cover their operating  expenses.  Even in the most established franchises, there is usually a meaningful ramp-up period.  This ramp-up period can be weeks, months or even years long.  It is therefore critical to build this ramp period into your business plan and have sufficient cash reserves to cover you while the business is growing.  This is a mistake that many business owners make.  They have a plan for all their day one opening costs, including the equipment, but have not fully planned for that extended period once they open and until the revenue catches up.  Cash will always be king.  This is why it is important that your business plan include a certain amount of borrowed capital.  Entering into an equipment finance transaction with an expert in fitness equipment, like Macrolease, is a critical element in preserving your precious capital and setting your business up for long term success.

“I got this”…..I’m sure you do but a little help wouldn’t hurt either:

In a report published by the International Health, Racquet and Sportsclub Association (“IHRSA”) in November, 2022, around 20% of health and fitness businesses fail in their first year of operation.  This is approximately the same for the broader market of all small businesses in the US.  Of greater concern, according to ABC Fitness, less than 50% of new gyms and fitness centers are expected to survive beyond the first five years of operation.  Opening a new business – or even a new location of an existing business – is no small task and success, as the numbers bear, is far from guaranteed. You can use all the help you can get. Macrolease has been in the business of financing new and existing fitness clubs since 1969.  We bring a wealth of experience and knowledge to the table; knowledge that can help business owners make the right financial decisions, so that they don’t become part of the negative statistics for the industry.  We custom tailor financial solutions to the particular needs of the business, matching expenses with revenue.  More than that, we often advise our customers that now may not be the time to expand.  Even though this might mean less new business for us, we save our customers from making what might be a bad decision given the environment.  Our decades of investment in the fitness industry makes Macrolease uniquely qualified to help business owners make sound, well-though out financial decisions so that they can succeed far beyond the initial term of any equipment fitness transaction.

“Neither a borrower nor a lender be”…… a good Shakespearean quote but a bad business strategy:

Finding the right balance between debt and equity is an important component in building a sound financial plan for your new fitness center.  While taking on too much debt and overburdening the company with a heavy monthly debt service payment is not the best idea, using precious capital to purchase capital assets might be an equally troublesome decision.  It is therefore recommended that businesses utilize their cash balances for daily operating expenses and borrow money to purchase capital assets.  Assets that benefit the business and generate revenue over a continuum of time should be paid for over that same continuum.  This way the business can match the expense of owning the equipment with the revenue generated from the use of that equipment in your fitness center.  Save your cash for the day to day operation of the business, for advertising and customer acquisition costs.  Borrow to acquire the capital assets needed for the business. Macrolease has been in the business of financing critical fitness equipment for over fifty-five years and can help fitness owners strike the appropriate balance between debt and equity.  We can structure a solution that walks this fine balance to keep your business on the right track for the long term

“I can’t worry about next year” ……. except when next year is this year:

What looks like a good deal today, may not seem like it four years from now.  Some fitness club owners make the mistake of going for the lowest cost financing today without thinking about the impact down the road.  They believe that the agreed upon price today is the only thing that matters.  And while it is clearly important to have an affordable monthly payment when you finance your fitness equipment, it is also important to retain your flexibility down the road.  Too often we see fitness club owners that have locked themselves into long term deals for equipment financing that makes the end of term process painfully expensive and deeply restrictive.  It’s a “pay me later”, bait and switch game that once entered into is almost impossible to get out of.  Oftentimes these restrictions are detailed in the “fine print” of a contract and buried behind what seems like an attractive teaser rate.  That’s why it is so important to work with an equipment finance company, like Macrolease, that has built a reputation of dealing in an open, honest and transparent manner with their customers.  Since its inception in 1969, Macrolease has maintained a culture of dealing fairly and truthfully with their customers.  That’s why we have so many repeat customers; some for over thirty years. Our goal is not to “win” the deal.  Our goal is to have a customer for life.

“All lenders are the same”…….except when they’re not:

Some fitness center owners make the mistake of thinking that every provider of equipment financing is the same.  Some believe that at the end of the day, it’s just a loan or lease and price (rate) is the only thing that matters.  Financing your essential fitness equipment is not a small decision and like any major decision there are a number of factors that should be considered before signing on the dotted line.  You want to make sure that you are working directly with an experienced lender and not through a broker.  Brokers just put two parties together, earn a fee and walk away.  The same can be said for the “Johnny come lately” lenders that have decided for a variety of reasons, that they want to dabble in the fitness market.  The “let’s try this out because it sounds cool” lenders, who have decided to diversify into a new market but are not really fully committed to it.  Or worse, those lenders that exited during COVID and have now decided to return.  Macrolease is a direct lender to the fitness market with a deep, committed and long standing stake in the industry.  We make loans to finance essential use fitness equipment with customers that we are prepared to partner with for years to come.  We build and maintain long-lasting relationships with our customers, not just for this deal, but for everything that might happen down the road.  For fifty-five years, Macrolease has been an active and full-fledged participant in the fitness market.  We have seen all the cycles (including COVID) that could disrupt a business.  We have been there through the ups and downs and we are standing here, ready and willing to continue lending.  Our commitment to the fitness market is a critical component to choosing us as your lender, because when things don’t go as planned, we will be there to help you through. When COVID hit, Macrolease was able to quickly and efficiently offer payment deferrals that saved businesses from closing.  Brokers were unable to do anything.  Their fee was already earned.  New market participants, panicked and ran away.  We stayed.  As you look to grow your fitness business, you want to work with a financial partner that has been there and done that and will continue to do so.

Paul Vecker

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