In continuing on the subject of the Business Plan by discussing your competitive advantage, or in other words, what makes your gym better than the competition. Your ability to clearly and concisely express your competitive advantage is an important capability that you’ll want to develop early on, and one that will will help you through the developmental stages, into the start-up phase, and throughout the management and growth phases.
Competitive Advantage is an advantage that one company or person has over its competitors, allowing it to generate greater sales, enjoy higher margins, and retain greater customer loyalty over the competition. While this exercise may seem like the equivalent of doing bicep curls in front of a mirror, if taken seriously it can prove to be as valuable as developing proper form for deadlifts. This is where you have to sit down and determine what you have that will set you apart from every other box in town, and how you will implement these talents to crush the competition to dust.
Rule #1 in start-up business competition - don’t compete on price. Exception #1 to Rule #1 - compete on price only in the beginning lay the foundation for a solid member base. Here’s the deal with price competition: it sucks for everyone - even potential members. Let’s say you decide to open a box in the same market area as existing and relatively successful affiliate, and you decide to be the bargain box, offering “the same service” at a much lower price. Aside from quickly creating an enemy, you’ve now pigeonholed yourself into a low-profit potential situation that may end up limiting your ability to grow, add staff, properly pay coaches, and replace equipment as needed. Those members who left their old box for your lower price may quickly be left with an inferior program and lower quality experience, and when they turn tail and go back to their old box, they’ll be taking everyone with them without looking back.
That’s not to say that you can’t compete on price; you just have to be creative and fair about it. When we opened our locations, we offered new member discounts during pre-sales and in the short period after opening. We were very transparent about our pricing. We let prospective members, and in turn the competition, know that what our anticipated real pricing was going to be. We also let prospective customers know that these special rates were only good until certain dates or until we reached a certain number of members, after which prices would go up. We had developed pricing tiers that we would raise our prices to once we reached goal thresholds, and we held firm to the models. In our first location, we pissed off our nearest competitor after we opened and significantly undercut his pricing. This lead to some bad feelings - until we met up for lunch and explained our model to him. While he wasn’t happy, he did understand that the pain we were putting him in was temporary and would end at some point. After this, our business relationship improved, and we consistently referred potential members to one another if we thought they might be a good fit for the others’ box.
Fitness service is a good place to look at in determining your potential advantage. Some affiliates only do one workout - maybe because that’s all they have room for or that’s all their coaches know how to do. If you’re coming from a fitness background, you may consider adding other programming to your menu to broaden your potential market share. We suggest adding programs that don’t require much, if any, additional equipment (kind of dumb advice from a equipment seller). We had 5,000 square feet of space that we built out into a large workout floor, and a smaller back room that we kept pretty open. We had some wall-mounted heavy bags that allowed us to have a good Muay Thai kickboxing program, and we would take down the bags for SpeedX classes. After a few months, we started having a yoga instructor come in to teach yoga. These programs allowed us to market to a much wider audience, provide a variety of classes to act both as feeders to the main program and to keep members entertained when they got bored (yes, it happens). The programs also significantly improved our retention.
Customer service is an obvious place to look at for competitive advantage. While the traditional garage-style affiliate is what most expect, some people may want a different experience - and you may be able to provide that difference for a minimal expense. We found that, for an investment of under $500 every quarter, we could provide new, clean luxury towel service to all of our members. This included buying both gym and shower towels in bulk and renting a commercial washer and dryer, and it only cost $0.33 per member each month! This simple and cheap service gave the appearance that members were part of an exclusive and high-end club. It had the added side-benefit of keeping our club clean, and making it easier for us to maintain a sanitary environment.
Programming and coaching are probably the most important differentiator between affiliates. After all, no one wants to work out under a coach that can’t motivate or teach, and even less people want to work out under someone with a bad attitude. We focused a lot of time and effort on programming, doing almost all of it in house, brainstorming among coaches to come up with ideas, and keeping the programming in a format that took into account the previous day’s and week’s WODs so members would not over exert muscle groups and body parts and get injured. We attracted countless members from other boxes as word of our programming got out and people who found themselves spending more time in recovery were able to come to us and work out much more with less injury.
While you’re thinking about how to do things better, some things you may want to reconsider in your business plan are non-essential items like flat screen monitors for WOD tracking, juice and shake stations, large pro-shops, excessive build-out and decor. They are all cool to look at, and some members may appreciate them, but they will usually not lead to more money or greater retention. There’s something powerful about handing a member a marker and having them write their own name and time on a board and in a journal - much more appealing than typing it into a computer. Juice bars and pro-shops will only take your eyes off the ball. After all, you are opening a affiliate that, with proper management, should reward you with a +30% profit margin. Why would you want to dedicate valuable training space and spend huge bucks building out a juice bar or stocking up a pro-shop that will require additional (and usually useless) manpower to operate and manage, and possibly return a 10% profit.
There are many places to develop your competitive advantage over the competition. The sooner you study and outline this, and the more time you spend honing these skills. This will make everything better when talking to the bank for an SBA loan, talking to potential landlords for a space, determining your equipment order, marketing in pre-sales, and having a clear focus for the future growth of your business. Next week we will review doing some financial homework for your business plan.