FITNESS CLUBS REVISITED

RICHARD ELLIS, managing director of Chorley Fitness, winner of the Club Awards’ King of Clubs and Fitness Club of the Year 2007, discusses how to open or add a successful health facility to your club without breaking the bank.

Ten years ago, I set up an award-winning leisure facility in Chorley, Lancashire, on the back of around £40,000. We’re now completing a full restoration of our listed building, which we purchased five years ago, have tripled in size and added all new equipment and countless member services and benefits for a fraction of the cost suggested by the Fitness Industry Association (FIA) in one of last month’s Ask the Experts features in Club Mirror.

I have worked with 60 fitness and social clubs, analysing their business needs, creating viable and affordable solutions and helping them turn their fortunes around. In most cases, it’s a case of wiping the slate clean and rebranding. In others, simple changes and additions work wonders.

Social clubs that need extra revenue might not want to set up a gym and have all the responsibilities, staff and associated costs. However, they might have unused concert halls, lounges or any other good-sized room that can easily provide simple leisure-based services ranging from fitness and dance classes, martial arts and diet clubs.

There is currently an abundance of freelance instructors wanting space to run their classes. You can rent out your room for around £20 an hour or more, manage a full leisure programme and reap the rewards! Three hours of classes with an average of just 20 participants will create an income of between £240-£300 per night, less instructor costs of, say, £100. Not bad for three hours room hire.

I know of a Zumba class that attracts 60 regular participants every night; everyone pays £5 per session netting £300 per hour! The better the instructor, the more people attend so consider working out some profit share arrangement.

Offering just three hours of fitness and social services to your local community for three days can make your club in excess of £1,000 a week in profit with very little set up, advertising or equipment costs.

Freelance instructors usually provide public liability insurance and the relevant music licences. It is worth considering setting up non-sport related community clubs, including parent and toddler mornings and young-at-heart classes and making use of your rooms during the day.

Fitness equipment
Smaller, independent clubs tend to offer a less expensive and more personal service than the larger PLC or councilrun operations. Most of the clubs I have worked with start with just 2,000 - 5,000 sq ft (including all changing and reception areas) and they charge competitive membership prices ranging from £10 - £30 per month.

Just 400 members will increase your turnover by £96,000 per year, based on a membership of £20 per month.

The more facilities and services you offer, the better; so consider a complete and unique package such as sauna, steam room, private showers and vanity areas. Add toning tables (£2,000-3,000 for a reconditioned set), spinning bikes, fitness classes and martial arts. By throwing in complimentary refreshments and incentives to reward regular usage you will find you attract new members and won’t have trouble retaining them either.

Tips on how to get started
• Don’t cut corners by installing semi-commercial/home gym equipment as you’ll end up with tired kit very quickly and poor member retention. Brand new commercial fitness equipment isn’t cheap, so start with nearly new or reconditioned equipment.

• Never buy from a gym equipment supplier. They’re taking a big cut so shop round for some great deals. Try contacting your local auctioneers, administrators and leasing companies as they are always removing new and nearly new ex-finance equipment from large chains and failed clubs. Online auction sites provide the odd bargain too.

• Most PLC leisure chains and local councils lease their equipment from new and replace every 18-36 months. We bought our first installation of equipment from a leasing company that financed equipment to a JJB health club. The equipment was 18 months old and in mint condition.

• If possible, buy more than you need! You’ll get a better deal and can sell the surplus on at a profit to other health clubs, hotels and schools. Our first full installation of equipment cost £5,000 for around £80,000 worth of equipment.

• Don’t buy with cash! If the equipment is under 24 months old, you should find it easy to lease the equipment, therefore gaining several tax benefits. You may also be able to raise extra finance to aid cash flow to pay for other set-up costs like reception furniture, lockers, and saunas.

• Ask your local council for free funding and grants. There’s a load currently available including EU energy saving grants and re-generation grants. We’ve just taken advantage of a £10,000 free grant to upgrade our facilities.

• Get a Carbon Trust interest free business loan. The amount loaned is calculated on the reduction of carbon emissions your replacement equipment will provide. This includes equipment such as windows, air conditioning units, lighting, heating and insulation. The new works will improve the look of any business, reassure your customers with investment and lower your energy bills in the process. In our case, the loan granted was more than our equipment, so we were able to use the excess funds to finance extra work.

• Get Business Link to fund training for your staff and managers for free. Grants up to £2,000 are currently available per employee and will ensure a better service for your customers. Job Centre apprenticeships and new deal incentive schemes are also in place for employers to take on new staff and college graduates; in some cases they will fund 50 per cent of an employee’s salary for six months.

• If you’re already a club, and you’re VAT registered, find out about the Flat Rate Scheme for small businesses. You still charge VAT at a rate of 17.5 per cent, but only pay seven per cent to HMRC. You can’t reclaim VAT on purchases or rent (unless they’re capital purchases over £2,000) but this scheme does save small health clubs loads of time and money!

• If you’re setting up from scratch, consider setting up as a charitable trust registered with the UK Charities Commission. As you’ll provide an essential community service, there’s a rule reserved for not-for-profit leisure centres where you’ll benefit from an 80 per cent reduction in business rates and be VAT exempt. Of course, you can’t draw any profits, but you can still take a reasonable salary.

It is quite feasible to open a new facility for less than £50,000 complete with all equipment, furniture, fixtures and fittings. You don’t even have to find the money upfront either! If you spread the payments on a lease or an interest-free loan, all set-up costs could be covered with just 40-50 paying members.

Opening a health club is not about getting a few rooms, shoving in some equipment and opening for business. The hard bit involves providing a consistent and quality service to members. You’ll need well-managed, trained and qualified staff willing to work unsociable hours, do everything from cleaning to consultations, reception, sales and general maintenance duties.

Strict emphasis must be placed on strategic sales techniques, marketing and promotion planning, member referral campaigns, member management and retention tools, membership collection and enforcement, community and social interaction – but perhaps we’ll leave that for another issue!