Data provided here comes from our team of experts who have been working on the business plan for a gym. Furthermore, an industry specialist has reviewed and approved the final article.
Running a successful gym involves more than just providing fitness facilities and services.
It requires a thorough understanding of revenue streams, customer segments, pricing strategies, and profitability metrics.
In this article, we delve into profitability metrics, expenses, breakeven points, and potential earnings for different types of gyms.
All these things start with a good business plan for your gym.
Whether you're a gym owner or aspiring entrepreneur, this article provides valuable insights to navigate the realm of gym revenue and maximize profitability.
The revenue metrics of a gym
How a gym is making revenue?
A gym makes revenue by offering memberships or pay-per-use options for individuals to access their facilities and services.
What do gyms usually sell?
Gyms usually sell memberships, offering individuals access to their facilities, equipment, and group fitness classes.
They may also sell additional services such as personal training sessions or specialized programs.
Some gyms also have retail sections where they sell fitness apparel, supplements, and related merchandise.
For which price?
On average, a gym membership typically ranges from $30 to $80 per month, and the prices can vary depending on factors such as the gym's location, amenities offered, facility size, included services, and additional perks available to members.
Customers are often willing to pay a higher price for a gym subscription when they can access excellent facilities and equipment, ensuring an exceptional workout experience.
Furthermore, personalized training programs and attentive, experienced trainers can justify the increased cost.
Additional amenities like spa services, group fitness classes, or exclusive member benefits can also make the higher subscription price more appealing to customers.
| Membership Type | Average price per Month (USD) |
|---|---|
| Basic Membership | $50 |
| Premium Membership | $100 |
| Student Discount | $35 |
| Senior Discount | $35 |
| Personal Training Add-on | $100 (per session) |
Gyms may also sell other products, here is a breakdown.
| Product Category | Average Price (USD) |
|---|---|
| Fitness Apparel | $30-$50 (t-shirts, leggings, etc.) |
| Supplements | $20-$40 (protein powder, pre-workout, etc.) |
| Fitness Accessories | $10-$30 (water bottles, resistance bands, etc.) |
| Workout Equipment | $50-$200 (dumbbells, exercise mats, etc.) |
| Recovery Tools | $20-$60 (foam rollers, massage balls, etc.) |
What other products or services can a gym offer?
Apart from traditional offerings like memberships and merchandise, gyms can explore unique avenues for generating additional revenue, such as:
- hosting specialized fitness workshops or seminars
- providing space for physical therapy or rehabilitation services
- offering nutrition counseling or meal planning services
- organizing fitness challenges or competitions
- renting out space for private events or filming
- collaborating with local businesses for exclusive discounts or partnerships
- implementing virtual training programs for remote clients
Who are the customers of a gym?
The typical customers of a gym are individuals who are interested in improving their physical fitness, including adults of different ages, fitness enthusiasts, athletes, and those looking to maintain a healthy lifestyle.
Which segments?
A gym caters to various groups of customers with different needs and preferences.
| Customer Segment | Description | Preferences | Commonality |
|---|---|---|---|
| Fitness Enthusiasts | Passionate about fitness and exercise, frequent gym-goers | Diverse workout options, advanced equipment | Very common |
| Busy Professionals | Working individuals with limited time for workouts | Efficient and time-saving workouts | Very common |
| Weight Loss Seekers | Individuals aiming to lose weight and improve health | Effective weight loss programs, guidance | Common |
| Older Adults | Seniors seeking fitness and wellness activities | Gentle exercises, joint mobility | Common |
| Athletes | Competitive athletes training for specific sports | Sports-specific training, performance | Less common |
| Families | Parents and children seeking fitness and recreational activities | Family-friendly classes, facilities | Less common |
How much they spend?
Based on the business plan we have been working on, customers typically spend between $30 to $60 per month at the gym. The actual amount varies depending on the type of membership and additional services they opt for.
Studies show that the average duration of a gym membership typically ranges from 3 to 12 months, with some individuals opting for shorter-term memberships while others commit to longer-term contracts.
The estimated lifetime value of an average customer of the gym would be from $90 (3x30) to 720$ (12x60).
Then, it's comfortable to say that the average customer would bring around 400$ in revenue to a gym.
(Disclaimer: the numbers provided above are averages and may not accurately represent your specific business situation.)
Which type(s) of customer(s) to target?
The most profitable customers for a gym are those who commit to long-term memberships and consistently utilize the gym facilities.
These customers provide a steady stream of revenue and are more likely to invest in additional services or products. Additionally, they are less likely to cancel their memberships, reducing churn and ensuring consistent income.
To effectively target these customers, the gym can offer attractive incentives for signing up for long-term memberships, such as discounted rates or free personal training sessions.
The gym can also create personalized fitness plans and provide ongoing support and motivation to keep these customers engaged and committed.
In short, regular communication, tailored promotions, and excellent customer service are key to maintaining their loyalty and maximizing profitability.
What is the average revenue of a gym?
The average monthly revenue for a gym is almost always between $3,000 and $10,000. We will break it down for you.
You can also estimate your own revenue, using different assumptions, with our financial plan for a gym.
Case 1: a small and rusty gym in a remote area
Average monthly revenue: $3,000
This type of a gym is likely to offer affordable subscriptions and has a limited capacity to accommodate no more than 100 members per month.
Furthermore, such gyms typically do not provide extra services or products like personal training, supplements, or private space rental.
Considering an estimated subscription fee of around $30 per member and a total of 100 subscribed members, the monthly revenue of a this gym would amount to $3,000.
Case 2: a decent gym, in the city center, with a moderate surface
Average monthly revenue: $30,000
This type of gym is located in the bustling city center and offers a pleasant environment for fitness enthusiasts. It has a moderate surface area, providing ample space for various exercise equipment and activities.
In contrast to the small and rusty gym in a remote area, this gym offers a higher quality experience. It may have a higher subscription fee due to its convenient location and better facilities, attracting a larger clientele.
Apart from the gym area, this establishment may also provide additional services and products to enhance the fitness journey of its members. These can include personal training sessions, nutritional supplements, and the option to rent private workout spaces for dedicated training or classes.
With a reasonable estimate of a $60 monthly subscription fee and a capacity to accommodate up to 500 members, this gym can generate a monthly revenue of $30,000 if it reaches its maximum capacity.
Case 3: a very innovative gym with first-class equipments
Average monthly revenue: $100,000
In this scenario, we have a cutting-edge gym that prides itself on being at the forefront of fitness innovation.
Most probably, this gym is equipped with state-of-the-art exercise machines, advanced technology, and a wide range of amenities to cater to the needs of fitness enthusiasts.
This gym distinguishes itself by offering a premium experience to its members. It aims to provide the latest fitness trends, unique workout programs, and access to high-quality equipment that is not commonly found in traditional gyms.
Along with the top-notch equipment, this innovative gym may also offer additional services to enhance the overall fitness journey of its members.
These services can include personalized training programs, access to fitness tracking apps, nutrition counseling, and recovery facilities like saunas or cryotherapy.
Considering the exceptional quality and unique offerings, the subscription fees for this gym are likely to be higher than average. With an estimated monthly fee of $100 per member and a capacity to accommodate 1,000 members, this gym can generate a substantial monthly revenue of $100,000.
The profitability metrics of a gym
What are the expenses of a gym establishment?
The expenses of a gym establishment typically include rent or mortgage payments for the facility, equipment costs, utility bills, employee salaries, insurance, marketing expenses, and maintenance fees.
| Category | Examples of Expenses | Average Monthly Cost (Range) | Tips to Reduce Expenses |
|---|---|---|---|
| Rent/Lease | Facility rental/lease | $3,000 - $10,000 | Negotiate longer lease terms for reduced monthly rent |
| Utilities | Electricity, water, gas | $500 - $1,500 | Install energy-efficient lighting and equipment |
| Insurance | General liability insurance | $200 - $500 | Shop around for competitive insurance rates |
| Equipment | Cardio machines, weights, etc. | $1,000 - $5,000 per item | Consider buying used equipment or leasing instead of buying |
| Maintenance | Equipment repairs, servicing | $500 - $1,500 | Conduct regular equipment maintenance to prevent major repairs |
| Staffing | Salaries, wages, benefits | $2,500-$4,500 per employee | Optimize staff scheduling and consider part-time employees |
| Marketing/Advertising | Online ads, flyers, promotions | $500 - $2,000 | Focus on targeted marketing campaigns and social media |
| Cleaning | Cleaning supplies, janitorial | $300 - $800 | Train staff for effective cleaning, consider DIY cleaning |
| Administrative | Software, licenses, office supplies | $200 - $500 | Opt for affordable software and bulk purchase office supplies |
| Miscellaneous | Membership management software | $100 - $300 | Consolidate software tools and eliminate unnecessary ones |
When is a gym profitable?
The breakeven point
A gym becomes profitable when its total revenue exceeds its total fixed costs.
In simpler terms, it starts making a profit when the money it earns from memberships, classes, and other sources becomes greater than the expenses it incurs for rent, equipment, salaries, and other operating costs.
This means that the gym has reached a point where it covers all its fixed expenses and starts generating income, we call it the breakeven point.
If we look at the table above, and try to come up with the total monthly fixed costs of an average gym, we would be close to $20,000.
A rough estimate for the breakeven point of a gym, would then be around $20,000 (since it's the total fixed cost to cover), or between 200 and 500 members paying a subscription ranging from 40$ to 100$.
You have to know that this indicator vary widely depending on factors such as location, size, membership fees, operational costs, and competition. A big gym would obviously have a higher breakeven point that a small gym that does not need much revenue to cover their expenses.
Curious about the profitability of your gym? Try out our user-friendly financial plan crafted for gyms. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
Here are the biggest threats to profitability for a gym:
- Increasing competition from other gyms in the area
- Declining membership rates or high member turnover
- Unsatisfactory customer experiences leading to negative reviews and word-of-mouth publicity
- Inability to attract and retain qualified trainers or staff
- Rising operational costs, including rent, utilities, and maintenance
- Inadequate marketing and promotion efforts resulting in low brand visibility
- Lack of differentiation or unique selling points compared to competitors
- Technological advancements that disrupt traditional gym models (e.g., home workout apps, virtual fitness classes)
- Inefficient management of resources and poor financial planning
- Changing consumer preferences and trends in fitness and wellness
These threats are often included in the SWOT analysis for a gym establishment.
What are the margins of a gym?
Gross margins and net margins are financial terms used to measure the profitability of a gym business.
Gross margin refers to the difference between the revenue generated from gym memberships, services, and products, and the direct costs associated with providing those offerings.
Basically, it's the profit left after deducting the costs directly related to delivering the gym services, such as equipment maintenance, staff salaries, and utility bills.
Net margin, on the other hand, takes into account all the expenses incurred by the gym, including indirect costs like administrative expenses, marketing, rent, and taxes.
Net margin provides a broader picture of the gym's profitability, taking into consideration both direct and indirect costs.
Gross margins
Gyms typically have an average gross margin ranging from 40% to 60%.
This means that if your gym is making $10,000 per month, your gross profit will be approximately 50% x $10,000 = $5,000.
Let's clarify this with an example.
Imagine a gym with 10 members, each paying $100 for their subscription. The total revenue would be $1,000.
However, the gym incurs costs such as equipment maintenance, utilities, and staff salaries.
Assuming these costs amount to $550, the gym's gross profit would be $1,000 - $550 = $450.
In this case, the gross margin for the gym would be $450 / $1,000 = 45%.
Net margins
Gyms typically have an average net margin ranging from 10% to 30%.
To put it simply, if your gym makes $10,000 per month, your net profit will be around $2,000, which is 20% of the total.
We keep the same example, for the sake of clarity.
Suppose our gym has 10 members, each paying $100 for their subscription. The total revenue would be $1,000.
The direct costs, as mentioned earlier, would amount to $550.
Additionally, the gym incurs various indirect costs like marketing expenses, insurance, accountant fees, taxes, and rent. Let's assume these indirect costs total $250.
After subtracting the direct and indirect costs, the gym's net profit would be $1,000 - $550 - $250 = $200.
In this case, the net margin for the gym would be $200 divided by $1,000, which equals 20%.
As a business owner, you should know that the net margin is a more accurate measure of the gym's profitability as it takes into account all the expenses.
At the end, how much can you make as a gym owner?
Now you understand that the net margin is the indicator to look at to know whether your gym is profitable. Basically it tells you how much is left after you have paid for all the expenses.
How much you will make will, of course, depends on how well you execute.
Bad gym owner
Makes $1,000 per month
If you start a small gym and make choices such as buying cheap equipment, having limited opening hours, procrastinating on important tasks, and not diversifying your revenue sources, it's unlikely that you'll earn more than $5,000 in total revenue.
Moreover, if you don't manage your expenses effectively, there's little chance that your net margin (profitability) will go above 20%.
In simpler terms, this means that your monthly earnings would be limited to a maximum of $1,000 (20% of $5,000).
So, as a gym owner, this is the worst-case scenario for your income.
Average gym owner
Makes $5,000 per month
Suppose you decide to open a standard gym with average equipment. Your gym operates daily, and you offer coaching classes, protein shakes, and premium memberships.
You're making some efforts. Your total revenue can reach up to $30,000.
By effectively managing your expenses, you can aim for a reasonable net margin, possibly exceeding 25%.
In this situation, your monthly earnings would be approximately $5,000 (25% of $20,000).
Excellent gym owner
Makes $40,000 per month
You consistently go above and beyond to provide exceptional services, ensuring customer satisfaction and fostering a thriving fitness community.
You recognize the significance of investing in top-notch equipment, hiring qualified trainers, and offering a wide range of amenities and classes to accommodate diverse fitness needs.
With such a high-quality gym, the total revenue could reach $100,000 or more.
Additionally, you implement effective expense management strategies and negotiate favorable contracts with suppliers, resulting in better cost control. This leads to a net margin of 40%.
In this scenario, the monthly earnings for the outstanding gym owner would amount to approximately $40,000 (40% of $100,000).
We hope this becomes your reality! If you aspire to be an exceptional gym owner, it all begins with a well-crafted business plan for your gym.