Add It Up Before Investing: 8 Gym Startup Costs

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Small Health Club

Getting and staying fit is no longer a luxury for many Americans. Thus, the fitness industry has grown over the years and there is substantial money to be made by owning a successful gym. If you are interested in starting your own fitness business, there are some things to consider before plunking down the money.

To franchise or not?

There are numerous opportunities for entrepreneurs looking to start a fitness business. Finding a brand that is already successful and buying into the franchise gives you a jump-start because of the name recognition, but you will need to pay for it.

With most gym franchise opportunities, the financial model that is set up is often very expensive. For example, an established franchise such as Gold’s Gym requires a total initial investment, excluding real estate costs, of $1 million to $3.9 million. Don’t have that much? Less than $500,000 can get you an Anytime Fitness franchise. That’s still a lot up front, and franchises often provide limited marketing material for you. Additionally, these offers can sometimes have a lot of hidden fees. Always take the time to do your homework and understand where every penny will go before deciding to franchise. Also understand what the franchise doesn’t provide that you will need.

Independent ownership

By going it on your own, you decide how much to invest in various parts of your business. There are, however, basic startup costs that you can’t get around. Create a solid business plan and do your homework. Whether you franchise or go on your own, make sure your gym startup costs covered in all applicable areas:

Certification

You can call yourself a personal trainer, but without accreditation, you are not considered one. Loan officers will take note of your experience and qualifications. Becoming certified requires an investment of time and money.

The American Council on Exercise (ACE) is just one of the many organizations that offer accreditation.

Cost: $249-499 and time

Legalities

When deciding to start your own business, you will need to get an Employer Identification Number (EIN). These are issued by the Internal Revenue Service for the purpose of tax administration. Cost: $0

Once you decide on the name of your business, you will want to register the name. State requirements vary on the need to register the “Doing Business As” (DBA) name. Filing fees are often attached to this process and will vary depending on what your state requires.

Cost: $20-$105

Fitness gyms do not typically require a federal license or permit to operate. Individual states, however, do require such documentation. The type and cost of these business licenses varies from state to state. Gym owners will likely need a professional license and a sales tax license or permit. If you plan to have a staff, you will probably be required to register to make unemployment insurance contributions.

Cost: $50-$2,000

Many small business owners do not believe they need an attorney to help them with legal matters. When it comes to crossing the T’s and dotting the I’s in business dealings, having someone in your corner who knows the legalese of business can be well worth the money.

Cost: $1,000-6,000

Insurance

Liability insurance for fitness centers is a must. Whenever you mix the general public with fitness, anything from a twisted ankle to a heart attack can happen on your premises. One bad accident can lead to a lawsuit that could put you out of business. The type of insurance you need will vary on the state where the gym is located, and the type of activity your policy will be covering. Get a quote for your business.

Cost: starts around $450 per year

Location

Location is one of the most important pieces of the puzzle. You want to be where clients want you to be, usually conveniently located on the way to or from work, and/or close to home. You also have to keep your bottom line in mind before settling on a space.

Vacancy rates in many parts of the U.S. are just over 13 percent. That does not immediately mean commercial landlords will be willing to lease out the space to a gym. There can be a lot of drawbacks for them. To be on the safe side, expect that most landlords will seek a healthy security deposit.

Cost: Approximately $1 per square foot per month, or $5000-10,000 per month

Purchasing a property is another way to go. Prime locations can be cost prohibitive. Commercial property search sites such as LoopNet, CityFeet and CommercialSearch provides information on properties in your area. Depending on your credit, these loans may be easier to get than loans for residential property of lesser value.

Cost: At least $800,000

Construction

Unless you are buying a franchise or previous gym facility, your gym startup costs will likely need to include a professional contractor to prepare the building. This will be especially true if you will have heavy equipment, climbing wall, pool or other specialty. Rates for general contractors can start at $14 per hour. Many professionals can charge as much as $50 per hour. Multiply that by hundreds of hours and add in the cost of equipment and building supplies and you can easily get into thousands of dollars for construction.

Cost: $50,000+

Staffing

Unless you plan to go it alone, you will need help running your gym. Even if you keep the staff small, the average annual salary for fitness instructors is $40,000. Personal trainers average a salary of $56,000 a year. Janitors to clean the facility make about $20,000 a year. You’ll also need someone who can fix and maintain machines. Remember, employees will want to get paid on time. Thus, consider accounting software such as ADP or other payroll service.

Cost: $400,000-900,000 a year

Equipment

When you know the types of services your gym will provide, you can determine the required fitness equipment needed. To cut costs, consider leasing options.

Cost: $100,000+

First year cost of owning a gym

In addition to the capital necessary to open the doors, you must consider the cost of owning a gym during the first year. ProjectionHub, a company that provides financial projections for business plans, loan applications, and investors, suggests the following operational expenses:

  • Accounting = $100/month
  • Advertising = $250/month
  • Office Supplies = $100/month
  • Telephone = $100/month
  • Utilities = $300/month
  • Website = $25/month
  • Owner Draw = $1,000/month in the first year

Making your dream of owning your own gym can become a reality with the right capital. Depending on how much you are willing to invest, the overall cost can be $500,000 or more. The U.S. Small Business Administration provides some aspects of help with the process, including financing options and small business loans.

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