BeChange, you’re an accountant. You are aware you provided no info to properly guide you?
- Square footage?
- Projected annual membership fees (as comp’ed to other gyms in the area)?
- Projected intake of new clients first year, second year, etc.?
- How much upfront capital for buildout, equipment, utility and rent deposits? Working capital/reserves?
Quick Projection:
Monthly Overhead
- Location: 5000 sq. ft @ $35 a square foot (In NY, this would be a rural area, not city). Annual rent $175,000; Average $15,000 monthly.
- Employees: Minimum two at $2,000 monthly each including employer taxes. Total $4,000 monthly.
- Utilities monthly in 5000 sq. ft: Electricity $600, Gas $300 (averaged); Water $500 (landlord will pass this expense to you as a gym eats much water by showers). Total average $1,400 monthly.
- Marketing (TBD)
- Cleaning: Have your employees clean. Merchandise, foods, shakes not included. Minimal expenses for corp., accounting, licensing.
Total approx. monthly expense: $20,000.
Start-Up Cost
- Build out: $75,000 for approx. 5000 sq. ft minimum. Build out front, kitchen area, the gym, locker areas for men & women, shower areas for men &women.
- Equipment: $75,000. Weight and cardio machines, free weights, lockers, professional appliances.
- Rent deposits: $45,000. One or two months security deposit and first month’s rent.
- Utility deposits: $2,000 - $3,000.
Total: $200,000
Start-up cost: $200,000
12 months of operating expenses (see above): $240,000
Initial 12-month expense: $440,000
If we were to charge annual fees of $1,000 per client, it would take 440 clients to break even. It is unlikely you will attain 440 clients your first year, outside of efficient and costly (which will increase your expenses further) marketing. If you could accomplish half that, 220 new clients per year, you would be out-of-pocket $220,000 at year one; break-even at year two (start-up paid back); $420,000 profitable at year three (edited), capping at maximum capacity within 5000 sq. ft. at year 4-6.
So back to your question: Is it worth it? Do you have $300k+ that you can invest for three years before you see a return? If so, then maybe depending on your time commitment (because you WILL invest time), and the efficacy of your marketing (perhaps you can turn a profit sooner in an area where demand is high). You could begin with a smaller gym, lower out-of-pocket, but your max capacity would be reached relatively quick and you would have to secure a new location after several years, thus losing the old and incurring a new build-out expense).
Don't forget the many IFs: Efficacy of marketing? Of location? Of demand in location? Of management? Of continued partner cooperation? Of length of lease (ensure no personal guarantee)?
Inter alia.
Espi, had a good idea. Get professionally licensed, and charge per hour per client. Once you secure 100+ or so clients, you can look toward space.
