Thomas Plummer - The Business of Fitness: Understanding the Financial Side of Owning a Fitness Business

Copyright 2003 Thomas Plummer. All rights reserved. Printed in the USA.

No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Healthy Learning.

Throughout this book, the masculine shall be deemed to include the feminine and vice versa.

ISBN: 978-1-58518-853-6

Library of Congress Control Number: 2003102384

Book layout and diagrams: Jennifer Bokelmann

Cover design: Kerry Hartjen

Healthy Learning

P.O. Box 1828

Monterey, CA 93942

www.healthylearning.com

This book is dedicated to all my clients, friends, and students. By instilling their faith and trust in me, they allowed me to help them grow in their businesses and to grow personally, which has resulted in an unusual but very fulfilling life. To all those who have let me share some part of their life and business, I thank you.

No one ever runs alone.

I have had an amazing run in the fitness industry for over 25 years and it just gets better every day. But as the line above says, no one ever runs alone. I have been extremely blessed with people around me who have always supported what I wanted to do with my life no matter where it led, or if indeed it would even work enough to pay the bills. Id like to say thank you to a few friends and family who have made this particular effort possible.

My mother and father, Delores and Joe Richeson, still hang my articles on the refrigerator and stack my books on the coffee table. At various times over the years theyve let me stay at home, loaned me money, washed my clothes, picked me up at far too many airports, and have never asked for a thing in return. Thank you.

My partner Lloyd Collins reinvented our company and has grown it to the point that we are in front of over 4,000 people a year, just in seminars. His faith and enthusiasm have given me many more years to look forward to in this business at a time when I thought it might be better to move on to other things. Thank you.

There have also been a slew of industry people who have helped me during the last several years of my career. These people have opened doors that have greatly enhanced my career and my opportunities in the business. Thank you to Norm Cates, John McCarthy; Will, Norm, and Crystal Dabish; Mike Uretz; Jim Bottin and Paul Schaller; the Plummer Company team including Lori Miller, Terry Van Der Mark, Dennis Holcum, Victoria Pegler, and Shannon Haik; and all of our alliance partners and their representatives who have supported our efforts.

And a special note to my family-support team: thank you with all my love to Susan, Jill, CJ, and my typing and filing assistant Honey.

This book is a compilation of 26 years in the fitness business and reflects my system and how I feel a club should be run. To get the most out of this book, you need to read it very carefully and look for the hidden surprises. There are many tidbits of information, formulas, and the use of numbers that Ive stuck in places you may not think they belong, but where I felt they best fit at the time.

Also be aware that these are my working numbers and formulas that Ive created during my years as a consultant. What this means is that youre not likely to find much of this information anywhere else and that this book will probably start many an interesting conversation with your accountant.

And by the nature of being a writer, it was impossible not to intertwine some of the material from my first book, Making Money in the Fitness Business, which is currently published by Healthy Learning. This is especially true in the section on building a receivable base. I took the core material from the first book and expanded it to give more numbers support and background in this attempt. Youll also find a few key Plummerisms, as our staff likes to call them, which have made it into this book from the first.

This book was not designed to read like a novel, where you start at the front and work your way through a story. Gym and fitness facility owners, as are all small-business owners, are notoriously short of time and working through a long drawn out text just to find a few ideas that might help their business wouldnt be appealing. Thats why I wrote this book in a format where each chapter can stand alone. Key points are discussed in several different chapters of the book because the assumption was, as a reader, you might read one chapter and then come back to the book weeks later and begin another one.

I think youll find there are plenty of fresh ideas and concepts to keep you busy growing your business and making more money in the fitness industry. I also hope that this book can in some way keep the passion and enthusiasm you had for the business when you first started alive and thriving. The world of small business can be a tough and lonely place, but perhaps this book can help you realize the dreams that set you on the path to opening a fitness business.

Use the material in this book at your own risk. Much of what is written here is based on my own opinions and assumptions and is provided for you to use as an information resource.

In all cases, and especially valuing a business, you are always advised to seek the advice of qualified business professionals that support your business locally such as accountants, attorneys, and other business professionals that may know your business on a more intimate level.

Neither the author, publisher, nor any party related to the information and development of this book assumes any responsibility or liability for the consequences, whether good or bad, of your application of this material.

The numbers that affect a fitness business can be classified into several distinct areas, each with its own unique formulas and ratios. What these numbers mean and how they affect the business change depending on the age and maturity of the business itself. The four distinct analysis areas for a fitness business are:

The foundational numbers or numbers that allow an owner to build the business properly from the inception. These could also be called the conceptual numbers because many of these need to be considered and worked through before the business is actually opened. An example is the impact of the rent factor.

A fitness business owner should gain an understanding of the foundational numbers and concepts that drive a business. Examples in this area of the business are a receivable-base analysis and understanding how to develop and control the yield from a member payment.

Building a successful fitness business based on the numbers also includes the operational numbers. These are the numbers that affect the day-to-day operations of the business, such as sales analysis, basic budgeting and budget controls, and developing an effective pricing system.