What business model is right for your fitness business?
February 1, 2020
Owning your own fitness business is equal parts exciting and terrifying. As the boss, you get to decide the rules…but only within the walls of your fitness center. You must abide by legal and environmental standards and taxation, plus make dozens of other choices about legal entities, liability insurance, to rent or own the facility, lease or own equipment, and so much more!
Your business must obviously make enough revenue to cover the bills, salaries, and to (hopefully!) turn a profit. But, if you think there’s only one best business model, think again! The world of fitness centers is evolving, and a successful fitness business stays with trending patterns.
We’re here to explore the changing practices of business models so you can decide the best for your business. And with dozens of automated services, in-depth reports, and personalized software to fit your needs, Exercise.com’s All-In-One Business Platform supports the success of your business no matter which model you choose! Book a demo today to learn more!
Start at the Beginning
When you’re passionate about fitness, it’s easy to get swept up in the dream of owning your own fitness center and skip creating a concrete business plan. But a lot goes into starting or owning your business! Watch this video to learn more:
It’s crucial to start at the very beginning: have a thorough understanding of businesses, do lots of research, and ask tough questions before embarking on an ownership journey, such as:
- Who is your target market?
- What sets your gym apart from others?
- What is your niche?
- Where is the best location to engage your target clientele?
- What business structure is best?
Discussing these and other business structures and strategies are beyond the scope of this article, but must be taken seriously and understood thoroughly. For the purpose of this article, we will be looking at the different and trending ways to generate revenue as a fitness center or studio. This is often referred to as a business model and is an expanded part of your business plan.
Successful Business Commonalities
IHRSA reports that 81% of studios close or fail within their first year. They remark that in order to run a successful business, owners must be equally passionate about business management as well as fitness.
This may seem like an intimidating statistic, but it simply means that business owners must understand why certain businesses fail to learn from those mistakes and generate their own successful business.
There are many reasons that fitness businesses fail, here are a few elements that successful businesses possess:
The Business Is Rooted in an Abundant, Profitable Market
Although it’s a trendy idea to cater to a very specific niche, this doesn’t always work for a fitness center or studio. A too-narrow clientele base can box you in with a lack of demand and cut your dream short. Even though it’s important to define your target audience, there needs to be enough diversity that your business has a timeless appeal. This video gives ideas on how to narrow your business focus:
To avoid this pitfall, utilize in-depth research to help uncover the sweet spot between excelling in your niche and potentially eliminating a profitable sphere of your fitness audience. Additionally, research the best location and price point for your niche. If you’re not conveniently located or too expensive for your target audience, your business won’t survive, even with a golden idea.
The Business Has a Well-Defined Vision
Based on your research, determine your target audience, the specific services you wish to provide, and what sets your business apart. Determining a clear business identity will help make other decisions easier by simply asking: does this fulfill or support the vision of my business? In the end, this helps customers know your brand and aids in retention.
The Business Has a Clear, Simple Business Model That Is Refined as the Business Grows
We will discuss business models in more detail below, but it’s crucial to have a clear business model that is flexible to the changing trends of fitness. Just as humans mature, adapt, and change over time, your business needs wiggle room to grow. A too-rigid business model will not only limit your growth but potentially deter customers as newer fitness centers and models come along.
Optimize All Business Functions to Stay in Front of the Pack
Administration, accounting and finance, sales, marketing, services management, and the rest of your owner and managerial duties will fluctuate year-to-year. Don’t get comfortable with the way your business is run! Keep your nose in the research to find the upcoming ways to further engage current or potential customers.
This video gives a helpful summary of what to research and write during the business planning phase:
Choose Your Business Model
Put simply, a business model is how your fitness business makes money. But there are more factors than just how to earn cash. Your business model will determine:
- How much investment you attract for startup costs
- Manager and staff motivational strategies
- The experience level of trainers and instructors you attract
- Marketing strategies
- Revenue projections
- Overall expenses
As stated above, careful research and analysis are crucial to the success of your business! Research must be specific to your location and target audience. A business model might be intriguing but not feasible for your gym’s location, or a price point may be out of reach for your target audience.
If your business isn’t as profitable as you hoped, change your business model! Experiment and try something new or try a combination of business models; but make sure to track and analyze your profit under different models to find which fits your needs best.
This flexibility can be intimidating for many business owners, but with Exercise.com’s comprehensive business platform, you can have the confidence to try new things!
Exercise.com is a completely customizable business management software. Not only do we create and personalize a website and app that’s specific to your brand, but we also offer a host of management tools like marketing integration, memberships, and reports to track which classes and trainers are filling slots (and which aren’t).
Because our platform is personalized to fit your business, it can work with any business model! And if you decide to try a different business model, we can modify the software to your needs so your business doesn’t skip a beat.
These are just a few of the exciting ways in which Exercise.com’s platform can not only manage your business but also help it grow! Keep reading to learn how our platform flawlessly integrates with business models, or book a demo today!
Grow and manage your fitness business better with Exercise.com
Fitness Center Business Models
After you’ve written a solid business plan for a targeted audience, it’s time to find the best business model to achieve your goals!
Membership fees are the most traditional business model for fitness centers. Members pay a monthly or annual fee and have access to the fitness center and its equipment. Generally, trainer or instructor assistance and group classes require an additional fee for participation.
The membership model is the most straightforward model and the easiest for customers and staff alike to understand, but it doesn’t have to be cut-and-dry. Many fitness centers allow perks, like bringing a non-member friend, the first month of membership for free, regular promotions, or payment plans. This model can be customized to your needs or given a twist to set you apart!
Some advantages of the membership model include:
- A consistent stream of revenue that is easily tracked.
- Signing a contract promotes commitment.
- The convenience of all-access membership and financial accountability may encourage customers to regularly check-in.
- Avoids revenue fluctuations of a pay-per-service model.
Among others, some common disadvantages to the membership model include:
- Customers may avoid signing a contract if the investment feels too risky or binding.
- Customers drop their membership quickly once they perceive their investment doesn’t match their commitment.
- The staff must constantly push memberships, both to gain new members and to retain current members.
- Highly competitive with other fitness centers
Even though it’s an older model, the membership model remains the most common model because it’s a consistent, predictable form of revenue with little risk to the owner.
This model is perhaps the least used out of fitness business models, but it could be an up-and-coming trend and appeal to the millennial generation who have an aversion to contractual commitments.
Pay-as-you-play lowers the reluctance to a locked-in commitment by only charging customers for what they use, or per visit. Perhaps some members only want access to the gym floor, while others want group classes. Some members don’t want to pay for the spa or massage amenities. Others who can only make it to the gym once or twice a month might prefer to pay for each check-in. There are nearly endless ways to customize pay-as-you-play!
Some perks to the pay-as-you-play model are:
Some risks involved with the pay-as-you-play model include:
- Revenue is less predictable, as revenue depends upon seasonal trends and the lifestyle patterns of the customer.
- Marketing the various pay-as-you-play packages can be time-consuming and confusing to customers.
- Members might initially sign up for per-visit fees only to be deterred or less committed by per-visit charges, further lowering your revenue.
Pay-as-you-play might be a rocky start as you and your staff figure out what packages work best for your customers. But in the end, many customers are pleased with this model.
The integrated model takes the best of the membership and pay-as-you-play models and combines them. Customers can choose between an all-access membership, a personalized membership, a per-visit fee, or an all-access membership with added customizable services.
This model requires greater managerial skills because it is challenging to promote and oversee multiple models at once. The staff must be able to clearly explain the various memberships offered to avoid customer confusion and frustration. However, when executed correctly, it can develop significantly profitable layers of revenue.
The traditional memberships bring in predictable revenue while the pay-as-you-play premiums give a substantial revenue boost! With the integrated model, there’s more financial security between slow and busy seasons. There’s also less pressure to meet membership goals because you can temporarily rely on other modes of revenue.
The advantages and disadvantages of this model are similar to those for membership or pay-as-you-play models. The ambition of greater profit must be weighed with the risk of poorly executing the model. Considering this model will depend on the capabilities and experience of your staff.
This startup from New York has gained steam and has become a largely popular fitness business model. ClassPass is a hybrid of a search engine and reservation system. ClassPass users pay a monthly subscription fee so they can book any class offered by various gyms and studios in the ClassPass network. Watch this video to learn more about ClassPass:
ClassPass is helpful for customers to explore their gym options before committing to a contract. Being in the ClassPass network sets your business up for more customers by first getting more class bookings, and then winning them over with exceptional customer service so your gym makes the top of their gym list.
Participating in ClassPass offers some unique advantages:
- ClassPass does most of your class marketing for you, saving you the time and effort!
- Instant exposure to thousands of users who might otherwise not find your facility.
- ClassPass users are prompted to leave a review of your class, improving your ratings inside ClassPass (which leads to higher rankings, more bookings, and more members).
Though these sound exciting, they must be weighed with these uncertainties:
- This shouldn’t be a primary or only source of revenue due to booking fluctuations
- ClassPass customers often try a variety of classes in different studios, so there’s no guarantee they will return to your gym
- Classes are listed by the highest ratings; it may take a long time to boost your rating high enough to be seen among top competitors.
- Bookings could be sporadic or non-existent if your location is competitive.
Depending on your location and competition, ClassPass can offer great exposure to your business — and it just so happens that Exercise.com’s software integrates with ClassPass!
Learn more about the benefits of combining ClassPass with your All-In-One Fitness Business Management Software here.
Class Package or Pay-As-You-Go Model
The class package model is similar to the pay-as-you-play model, but with a slight twist. Customers can purchase a package of classes without a gym membership, such as 5 yoga classes for $80. This appeals to customers who want to try your gym with little commitment, are infrequent gym-goers, or might attend another gym but like one of your classes.
Class packages are an excellent way to bring customers into your gym who might balk otherwise. As they explore your gym, meet the staff, and become incorporated into your positive gym culture, you can win them over so they’re inclined to become a long-term member.
Class packages offer a nice addition to your revenue but are generally unpredictable. They are largely dependent upon the lifestyle of the customer. For this reason, class packages should only be a supplementary source of income. Marketing class packages can also take extra time, effort, and expenses that might not pay off. However, the potential to win over customers is usually beneficial to a business.
Dynamic Pricing Model
Every gym has a dead time of day where class bookings are sparse, and then a busy period where classes are busting at the seams. Both extremes can create customer dissatisfaction and discourage participation, further lowering revenue.
Dynamic pricing aims to regulate classes by incentivizing less popular classes with price cuts. For instance, offering $10 off a poorly-attended 1 PM dance class encourages participants of the popular 6 PM dance class to take a late lunch break and save some cash. You earn extra money to warrant hiring an instructor and providing the class, and participants are pleased with having more space for their workout! This video further explains dynamic pricing:
General gym access also experiences dull and busy periods. Most customers don’t have all day to spend at the gym; they have a certain block of time they allot to working out, and customers get frustrated if they can’t complete their whole workout due to equipment wait time. This is especially problematic for smaller studios, as frustrated and discouraged customers might seek out a larger gym where they perceive wait time is less.
While a bit more challenging to execute, the dynamic pricing model can also be applied to general gym access. Similar to airlines offering a premium or cheaper price depending on the demand for the flight time, you can charge a premium for gym use during busier hours and a discounted price during slower hours. This spreads out when members attend, allowing there to be enough room and equipment for everyone (and it can add to your revenue!).
Another way to leverage dynamic pricing is by layering your business models and by offering dynamically-priced classes through ClassPass or a class package. This takes organization skills and adds more marketing to your plate, but if done effectively, it can add revenue and boost your gym’s exposure!
Dynamic pricing can benefit your business by:
- Encouraging participants and gym floor users to attend the gym at slower times, thus creating a better gym experience for everyone.
- Boosting revenue.
- Helping retain customers by having enough equipment and space for everyone.
- It can be incorporated with ClassPass or class packages for added business exposure and revenue.
Dynamic pricing involves the following challenges:
- It builds upon an existing business model (usually membership or pay-as-you-play) and shouldn’t be the primary source of income.
- It can be challenging for staff to track the premium versus discounted prices.
- It might confuse or frustrate customers who don’t understand the premium hours.
- It might deter customers who can only come to the gym during peak business hours and don’t want to pay the premium price.
- There’s no projection of how the premium versus discounted prices will alter the traffic patterns of your facility; the slow hours may become the new busy hours!
There are definite pros and cons to dynamic pricing, but as technology advances and other customer services offer dynamic pricing, this will be a popular business model in the future. It’s worth considering how you can incorporate dynamic pricing into your business model so that you can stay in front of the fitness business pack!
Exercise.com Supports Every Fitness Business Model
It’s great to have business model options to experiment and find what works best for your business! But the freedom to switch between business models depends largely on your business software. Many scheduling and booking systems will not support these business models. In fact, most of them are only effective with the standard membership model.
Is your management software limiting your business growth? Let’s take a look at how Exercise.com supports every business model so your business can achieve its maximum potential!
Benefits of Exercise.com’s Software
Exercise.com highlights your brand by creating a completely customized website and app for your business! Instead of customers downloading another brand’s booking or workout app, they download one custom-made for yours, which keeps your business front and center.
Our extensive scheduling and booking capabilities allow one or multiple models to run at once while avoiding scheduling confusion. Accept payments securely and easily through Stripe, either in-person, online, or via your app.
Increase your business’s efficiency and effectiveness by tracking and analyzing your business from all angles, such as tax and payroll reports, e-commerce commission reports, trainer, class, and member insights, revenue analysis, transaction tracking, and more!
Boost your revenue by tracking expiring memberships to encourage renewal, increase member engagement with dozens of automated reminders and promotions, and advertise to new customers with unlimited marketing integrations!
These are just a few ways in which Exercise.com not only manages but grows your business. And there’s so much more to our comprehensive software, like workout and nutrition planning, a customized exercise library, endless e-commerce possibilities, performance assessments, exclusive groups, and more!
Primary Income Sources
Research indicates that predictable revenue sources are membership, pay-as-you-play, and integrated models. These would be primary sources of income you can build your business on.
Though the membership model is fairly easy to track, pay-as-you-play and the integrated model are more complicated because each customer has different privileges and payment plans. But Exercise.com’s system can effectively manage any of these models and take the brunt of managerial duties through automatic services and reminders.
Exercise.com is especially beneficial for the integrated model, which takes extra managerial skills to effectively execute. Our software does many mundane tasks automatically and gives easy access to admin duties so you can focus on quality customer service and engagement. This helps build your revenue without added stress!
With our in-depth reporting features, you can examine and track revenue so you can monitor revenue fluctuations and make appropriate predictions for the future. And our endless marketing integrations make advertising to the millennial generation effortless and effective!
Secondary Income Sources
Less predictable sources of income include class packages, ClassPass, and dynamic pricing models. Although it’s unwise to make these the foundational revenue for your business, they are still profitable and worth incorporating if possible.
As technology advances, more and more fitness customers expect to have a personalized fitness experience. This can be a headache to track manually or simply not be possible with a standard booking software. But with Exercise.com, we offer personalization for your brand and for your customers! Watch this video to learn why personalized customer experience should be a top business priority:
Not many management software can handle coordinating with an outside reservation service, but Exercise.com can! We integrate with ClassPass so your fitness center can be publicized in multiple marketing platforms. Class packages can be easily promoted and tracked.
Exercise.com also supports your creativity in the dynamic pricing model. Since we customize to meet your business, we can specially design tracking and check-in services to fit your managerial and customer needs!
Frequently Asked Questions (FAQ)
What are the different fitness business models?
Primary sources of income include membership, pay-as-you-play, and integrated models. Secondary or supplementary sources of income include class packages (or pay-as-you-go), ClassPass, and dynamic pricing models.
What business model is right for your business?
Before choosing your pricing model, it’s crucial to set business goals and write a business plan and vision. As these are made concrete, the most effective business model often emerges. To further boost your revenue, consider layering several business models.
What makes a fitness business successful?
The business must be rooted in an abundant market, have a well-defined vision and business plan, and optimize all business functions. It also has the best management software that has features to grow the business, like Exercise.com’s All-In-One Business Platform!
And there’s our comprehensive comparison of standard and trending business models! Don’t forget to check out how Exercise.com can support and grow your business no matter what business model you choose! Book a demo today to learn more!