lancebrock
Sep 5, 2008, 2:09 PM
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Registered: Jan 16, 2003
Posts: 156
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Since so many people ask for advice on here about starting up a gym, I thought I would be pro-active and post something. This is not all encompassing but is true of my experience.
I had been interested in opening a gym for a long time. When I first inquired about buying the local gym (I heard it was for sale) the owner was skeptical and wanted to know “if I could turn the big nut.” I thought that was a little presumptuous but I guess he had many people interested and no one with the financial ability to make the deal happen. I also thought I would get a business plan together, go to a bank, present it and with a little luck I would get some money.
That is not reality. Especially in the current credit market but still true in a normal economy. In general, banks will give you as much money as they can get back should you go out of business. Remember everything you put into a gym will be worthless to the bank. Based on my experience, here are the some options on how to “turn the big nut”:
- Personal guarantee at a bank – you have personal assets that you use as collateral to guarantee a loan. You default and they take those assets to get their money back.
- Friend/family guarantee at a bank – your friend or family has personal assets that you use as collateral to guarantee a loan. You default and they take those assets to get their money back.
- Angel investors – you have someone who believes in you enough to give/loan you money without the restrictions of a bank or a normal investor. They may still require payback but this is usually much more lenient than normal.
- Investors – investors, especially venture capitalists, will require a return for their investment. They will probably also require an exit strategy, which may mean the sale of the business. This scenario has the potential for you to wind up out if they buy you out or whatever. You can lose control.
Now I was not able to do any of these at that time but when I was able I decided to start my own gym. In the process we (I have one business partner) bought the other and kept it for a while and ran two gyms. We eventually sold the gym we bought and kept the one we built.
My advice to anyone who wants to open a gym is to have an idea of where your money is coming from BEFORE you do much. You can guess anywhere from $250k on the low end to $2-3M on the high end. My personal belief is to go big or go home so we tried to build a gym that would serve our market well enough that it would be expensive to come compete. You may want to build something smaller or build in a smaller market but think about what you want to get out of it.
I hope this helps. I consult on climbing gyms as a side business (I have an architecture background) if you want more advice. There are others out there that do the same. Rockwerx has a great business plan consulting package if you need help there. If you can scrape together a few thousand you may be able to get a good plan to present to investors but if you have no idea where your money is coming from at the beginning, you have a tough row to hoe. Strangely enough, when people call me to talk about opening a climbing gym one of the first things I ask them before we spend too much time talking is “can you turn the big nut?”
Best of luck.
Lance Brock
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