Bigger Isn’t Better: A Tale of Two Microgyms – and a Lesson in Finance

Here’s a story about two microgyms we work with.

 

We’ll call the first one Multigym LLC.

 

Multigym LLC is in a major U.S. city. At the time of writing, the two owners had four locations earning more than $1 million in revenue.

 

The second gym we’ll call Singlegym LLC.

 

Singlegym LLC is in a small market. It has one location and one owner. Total revenue is $548,000.

 

Which gym would you prefer to own? Bigger is better, right?

 

Based on that philosophy, everyone would prefer to be Multigym, enjoying the $1 million in revenue.

 

Obviously, this is a setup.

 

Is revenue the most important goal for gyms—or any business? Is bigger always better? No and no.

 

In order for a microgym to be relevant and sustainable, the cash left from revenue after paying expenses (your profit) is the most important.

 

Multigym LLC had a net income of just over $90,000. That is just over 8 percent of its $1 million revenue.

 

Singlegym LLC, with its $548,000 in revenue, had a net income of just under $90,000. That’s 16 percent of total revenue.

 

With that additional info, which gym would you prefer to own? Manage four locations or just one to get the same result?

 

Less work for the same pay seems like the winner to me.

 

Revenue vs Profit

 

Focusing on the size of the top-line or number of locations is like asking how much money individuals need to be happy. What we need to do is focus on how much money we require for our own specific personal needs—because that is what we can control.

 

Some have argued that Multigym is serving more people and changing more lives than Singlegym, which fits the noble purpose of a microgym owner.

 

The owners should be willing to work harder for the same pay as someone who works less because they are changing more lives. But how long can that last?

 

If nothing changes and Multigym and Singlegym continue on their current paths, the owners of Multigym are much more likely to close shop and experience burnout. Singlegym could be around for decades.

 

The reality is that Singlegym had been working with us for a longer period of time, which means it has been focused on profitability longer than Multigym.

 

After a year of working with us and focusing on Profit First, Multigym was able to add a fifth location and purchase investment properties while increasing net income to 16 percent in three locations and 10 percent in the others.

 

I know an 8 percent jump doesn’t always sound sexy, but on a million dollars, that is an $80,000 increase.

 

Focusing on profitability is a better indicator of how healthy your business is rather than focusing on the total revenue. It’s also a better indicator of the probability the gym will be around to change the health of humanity.

 

A healthy business will always be of better service to your members and to you than a business that’s just “big.”

 

We want to help you stay in business as long as possible to serve your community to the fullest.

 

Schedule a free planning session today

 

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