January 7, 2022 by Agata Kaczmarek
You’ve decided to start a gym, but the thought left you with more questions than answers. The best first step toward making the project a success is to visualize the end product. With this in mind, there will be a purpose behind the planning, which should start with finding the right concept. There are 4 different styles of gyms to choose from in the industry, each with its own pros and cons:
- Membership Gyms
- 24-hour Access Gyms
- Group Fitness Gyms
- Personal Training Gyms
The median profit margin for gyms is a slim 16.5%, making your first decision the most important one. This blog post will help outline building a revenue projection model for each gym style to show the similarities and differences and help with that crucial step toward success.
Membership Based Gym Financial Projection Model
A membership gym is labeled as a higher-end gym where the whole point is to sign up for at least six months to a year upfront. These gyms come with all the amenities aside from standard workout equipment. Individuals using this gym will have access to a pool, courts for different sports like squash or basketball, and a shower room. Some come with even more options like saunas and towel service.
Higher-end gyms, such as Life Time Fitness, come with a higher price tag. The average monthly cost is $77 a month for a one-person membership. Start financial projects by taking this average monthly price -- for the purpose of this example, we’ll say $75 a month -- and estimate the capacity. A membership gym such as this will have a larger membership base of up to 10,000 individuals. With over half of Americans paying for a gym, let’s say the town the gym is built in has enough individuals to get 10,000 memberships.
Of those who pay for an active membership, around 50% actually use the gym at least twice a week. For membership-based gyms, this is very important since the building will have a smaller capacity than members signed up. The average square footage for a high-end membership gym like the one described here will be around 100,000. 90% of that will be taken up by various gym-related activities, with the other 10% dedicated toward other uses such as office space.
Understanding this limitation is part of the key to success when it comes to membership-based gyms. So let’s take a look at the math a little further. For a gym with 90,000 square feet of space, around 30% will be used for group exercise training, with its own set capacity depending on the program and classroom space. This leaves 54,000 square feet for individual usage.
When calculating capacity, Minnesota uses 50 gross square feet of space as a good rule of thumb. So above, we estimated there would be roughly 63,000 square feet of space for training purposes, which equates to 1,260 people, aside from those enrolled in classes and using those classrooms. With only around 50% of members using the gym that will total the membership to 2,520.
Most Life Time fitness centers have over 100,000 square feet of fitness space, such as 198,000 in Oak Brook, IL. They aim to have a membership base of 7,500 to 10,000 individuals at one time since not all will use the gym simultaneously. Using Life Time as a role-model in the industry, there are some hard goals to work toward.
Here we’ll look at the steps toward potential revenue based on the information we’ve determined above.
Total Potential Gym Memberships
- Square Footage of the Building = 100,000 square feet
- Square Footage assigned for Training = (100,000 x 90% = 90,000) x 70% = 63,000
- Building Capacity = 63,000 / 50 = 1,260
- Total Potential Memberships = 1,260 x 2 = 2,520
Total Revenue Projection for a Member Based gym
- Average Monthly Membership Cost = $75
- Total Potential Memberships = 2,520
- Estimated Monthly Revenue = 2,520 x $75 = $189,000
- Estimated Yearly Revenue = $2,268,000
The revenue above is an estimate based on some preset assumptions such as the square footage of the workout area, as well as the monthly price. Some membership gyms will charge different prices for different offered tires of memberships, making this projection a little more flexible.
Opening a gym of this magnitude can come with some enormous startup costs. Before heading down the route to a potential $2 million in yearly revenue, these costs have to be fully understood.
Startup Costs for a Member gym
Minimum startup cost = $5 million
Maximum startup cost = $40 million
Average startup costs = $20 million
Startup Cost Categories for a Gym
- Gym Equipment
- Licenses and Permits
- Legal Fees
- Business Insurance
- Employee Salaries
- Management Software and Hardware
- Advertising and Marketing
Choosing to open a full-scale membership health club comes with a set of expenses and challenges. Before jumping toward the potential $2 million a year in revenue, take the time to explore further gym options.
24-Access Gym Financial Projection Model
24-hour gyms keep things simple and relatively affordable. These gyms are frill-free places, offering basic weight training equipment without extra amenities such as pools or saunas, though they might have extra budget gyms won’t.
The average monthly price for these types of gyms is roughly $41. Unlike their high-end counterparts, these gyms are smaller in size, since they don’t have a need for extra equipment or training space. As an example, the average 24 Hour Fitness is approximately 37,000 square feet, run by around 150 or more employees. The smaller square footage means that overall, these gyms will have fewer members, though they are expected to have fewer expenses as well. On average, Planet Fitness will have approximately 7,500 members.
Calculating the potential patronage and revenue of a given gym will require some assumptions based on the current data. Let’s assume the facility will be located in a more urban area with a higher potential membership rate making it easier to reach the overall goals of the business. With a facility of 40,000 square feet, and a necessary 12 square feet per member, around 3,300 individuals could use the gym at the same time.
The assumption of those attending the gym daily, or even weekly, won’t change drastically enough to warrant a change in calculations. Only 50% of members are expected to show up any given day, which means this type of facility can have 6,600 members.
These 6,600 assumed members all pay the monthly membership fee or an upfront cost of a year’s worth of subscription to the gym. Since the average is $41 a month, we’ll use a rounded-up of $45 a month for the purposes of this calculation. The total revenue breaks down to $297,00 a month or $3.56 million a year.
Let’s take a further look at some of the membership and revenue calculations for a 24-hour access gym.
Total Potential Memberships for a 24 Hour Gym
- Square Footage of the Building = 40,000
- Building Capacity = 40,000 / 12 = 3,300
- Total Potential Memberships = 3,300 x 2 = 6,600
Total Revenue Projection for a 24 Hour Gym
- Average Monthly Membership Cost = $45
- Total Potential Memberships = 6,600
- Estimated Monthly Revenue = 6,600 x $45 = $297,000
- Estimated Yearly Revenue = $3.56 million
Startup Costs for a 24 Hour Gym
Minimum startup cost = $50,000
Maximum startup cost = $1,000,000
Average startup costs = $200,000
Startup costs for a 24-hour facility will fall into the same categories as any other gym. There is, however, a slight difference in the types of insurance. Purchasing insurance coverage for a business that operates 24 hours falls into a special category when it comes to insurance, and could prove to be a more costly recurring expense. Only a couple of insurance companies will take on such a liability, which makes it all that more important to do your research before starting the business.
Group (Class) Fitness Gym Financial Projection Model
Boutique fitness studios, as they are also called, have become a large movement unto themselves. These small gyms offer group exercise which is focused on one or two areas of fitness. The most common studios are:
- Physical Therapy
- Spin class
- HIT (High Interval Training)
Fitness studios provide a more intimate setting with a more structured feel as each class is coached and motivated by a skilled trainer.
Two factors have played a huge role in how popular these types of gyms have become: community feel and atmosphere. This structured gym experience provides every member with a high-energy atmosphere, making going to the gym more appealing. The camaraderie that boutique fitness studios provide to their members isn’t something they can replicate anywhere else, especially not at a big box gym.
The success of a boutique gym hinges on a couple of things such as going into the right nice, successful advertising and marketing as well as pre-sales. As we explore the potential revenue that a boutique such as this could bring, we’ll say it’s been a successful launch of a new business that sees members walking in the door.
The average monthly membership for a boutique fitness studio runs as high as $182. This price is much higher due to the size difference of the gym and the specialization it provides. Though only a minimum of 1,000 square feet is necessary for a studio, the average, according to the Association of Fitness Studios, is around 3,800 square feet. The good news is, most of the time this space is found on the rental market, without needing to build a full facility from the ground up.
The biggest question you might ask is how much space is necessary for the type of classes the boutique fitness studio will offer. Studios focusing on weightlifting will need more space, but it can expect only 10% of all members to show up on any given day. On the other hand, yoga and group fitness can hold up to 20 students in a 20x20 foot room, which means it requires less room for the same number of members.
For our calculations today, we’ll move forward with an average space of 4,000 square feet. On average, 20% of the space is allocated toward office space and locker rooms, which leaves you with 3,200 square feet of space to put toward the exercise area. Estimating that each person needs roughly 10 square feet of space in these types of gyms, that’ll bring us to a total of 320 members capacity.
Of course, 320 is not the number of members the gym needs to remain sustainable, but rather just the capacity of the space. Estimating that only 10% of members actually show on any given day, brings you to a membership base of 3,200.
Total Potential Memberships for a Class Based Gym
- Square Footage of the Building = 4,000
- Building Capacity = (4,000 x 80% = 3,200) / 10 = 320
- Total Potential Memberships = 320 / 10% = 3,200
Total Revenue Projection for Group Fitness Gym
- Average Monthly Membership Cost = $180
- Total Potential Memberships = 3,200
- Estimated Monthly Revenue = $576,000
- Estimated Yearly Revenue = $6,912,000
The potential for revenue is high with a boutique gym, though of course it’ll fluctuate based on many factors. Choosing a favorable area will provide the key to unlocking the above revenue since these types of gyms are not popular in every city.
Startup Costs for a Group (Class) Fitness Gym
Minimum startup cost = $10,000
Maximum startup cost = $100,000
Average startup costs = $50,000
Boutique group fitness gyms tend to have a smaller startup cost than a full-sized gym, mainly because of their size, but also due to different equipment. Depending on the type you’re starting, such as weightlifting or yoga, there might not be as much equipment necessary.
The facility might cost less, but this type of gym will need more specialized trainers hired to maintain enough classes to accommodate the maximum amount of members. Salaries might end up costing less, along with any training you as the owner take upon yourself.
Personal Training Gym Financial Projection Model
Unlike the other gym models, a personal training gym will not focus so much on memberships, but rather on sessions. Costs to start up this type of business will be similar to a boutique gym since it’s likely not going to be a full-sized gym with all amenities. Rather, as a personal training gym, the focus will be on one or two areas of training.
Also, unlike the other gyms, starting a personal training business is easier so long as you as the owners are a personal trainer. The business can then really start with one person and expand from there as space and funds allow.
However, for the purpose of this financial model, we’ll project out with at least five salaried personal trainers and the space to accommodate them and their clients. As we start the projections, we’ll review some of the market averages. Currently, a personal training session can run around $50 per one lesson, for any type of one-on-one training. Of course, the more specialized the training, the more a trainer can charge.
On average, a personal trainer can book around 30 sessions a week, which will bring the total revenue to around $6,000 a month. If there are five personal trainers on hand, this can bring the total potential revenue to $30,000. Market research is important in this case to ensure the gym is open in an area with high potential, though the industry has grown 2.4% per year between 2015 and 2020.
There is plenty of potential, so long as it’s harnessed in the correct manner.
Total Potential Sessions
- Personal Trainers = 5
- Potential Weekly Sessions Booked = 30 x 5 = 150
- Potential Monthly Sessions Booked = 150 x 4 = 600
Total Revenue Projection for a Personal Training Gym
- Average Session Cost = $50
- Total Potential Sessions = 600
- Estimated Monthly Revenue = $30,000
- Estimated Yearly Revenue = $360,000
The estimates above range on the lower side of a small business and can grow the more trainers are available. Below, we’ll look at the numbers if there are more trainers hired.
Total Potential Sessions
- Personal Trainers = 20
- Potential Weekly Sessions Booked = 30 x 20 = 600
- Potential Monthly Sessions Booked = 600 x 4 = 2,400
Total Revenue Projection
- Average Session Cost = $50
- Total Potential Sessions = 2,400
- Estimated Monthly Revenue = $120,000
- Estimated Yearly Revenue = $1,440,000
As shown above, the range in revenue is wide in a personal training gym, especially since you can start as a single trainer and work your way up.
Startup costs for this type of gym will be like those of a boutique group fitness gym. The cost to secure a facility and equipment is also much lower than for a gym with all amenities on-site, since the area for training doesn’t need to be as large, and it doesn’t require all of the equipment.
Potential revenue from these four projection models varies greatly; just as much as the startup costs. Of course, the higher the startup costs, the higher the potential revenue, but each gym comes with a set of pros and cons.