As we sit down with MMA fighters to discuss their plans for transitioning from an athletic career into their post professional lives, inevitably the idea of owning and operating a gym comes up. Most fighters believe that they'll be able to trade off the notoriety they've made for themselves in the cage and attract enough students that they'll be able to operate a successful gym. For those that have this idea in mind, we want to see you succeed so we present some vital information you'll need when deciding if this type of venture is right for you.
“Key factors [to success] are having the right people around you that you trust,” says Bader.
There's no doubt that a former UFC veteran’s expertise in mixed martial arts is enough to teach others, but are your business skills where they need to be to run your gym? Ryan Bader is a graduate of Arizona State University where he majored in Justice and minored in Business. A solid footing for any entrepreneur, but many fighters, while well educated by sports standards don’t necessarily have the business education that Ryan does.
If you don't have the background in operations management, accounting, and finance then there are two ways to get it. You can return to business school or you can hire the help you need. Obviously hiring someone to manage the business of your gym requires trust and capital investment. It's a good idea to find people that not only shown business acumen but who have experience managing health clubs. These people understand the special challenges of the industry and the varied revenue streams available to you as an owner. They need to be familiar with all aspects from membership sales to product placement. If you decide to go back to school, the education won't stop at graduation. You'll be continuing to learn from your mistakes over the next several years, so you'll need to be prepared to overcome them.
Many people choose to structure their new gym as a partnership. Be very careful of who you choose as a partner. I recommend running both a criminal and credit background check on anyone you might think of partnering with, even if you've known the person well for a very long time. The best way to build trust between people is to have so much transparency in your dealing that you never have to rely on trusting them. Create a partnership agreement that clearly defines the duties each person is to perform, their compensation and ownership stake of the company, and ability to enter into new contracts. Be sure that each partner hires their own attorney to review the agreements before signing.
The number one reason a new business fails is lack of capitalization. Create a business plan and learn everything you need to know about your projected costs before you spend your first dollar. Research and write a pro forma statement of cash flows. A pro forma statement is a "what if" report. You'll want to have enough of a capital investment to overcome your start up costs and provide operating capital for at least one year. Be sure to include your salary into these costs. If you'll be using your own money for the initial capital investment, be sure that you're not risking more than 20% of your liquid net worth so you'll be able to rebuild and don't over commit. Remember that only one of twenty new businesses succeeds. There is no shame in failing to produce a profit. If you limit your risk to the downside you'll be able to rebuild in time and possibly try again.
"I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed." - Michael Jordan
One of the crucial parts of your business plan will be researching your competition. With the increase in popularity of mixed martial arts, not only do you have a larger interest from consumers, but you'll be met with an increase in businesses built by other MMA professionals who may have started well before you. They are established and have what is known as "first mover advantages." You'll need to find a way to differentiate your gym from their's in a way that resonates with consumers. This research will help you decide where to put your gym. Your convenience is not important. The first law of real estate is "location, location, location." Your location will be a result of where your competition is placed and where your ideal consumer lives and works. Take into consideration things like parking, freeway access, foot traffic, and accessibility to your business, and of course cost of the space.
For most, the entire idea of opening your own gym is to provide you with a lifetime income while staying close to the sport you know and love. For Urijah Faber, it started as a way to minimize his travel between trainers and bring his MMA family under one roof. Since then, Ultimate Fitness has become so much more.
With over 8,000 square feet of space, Dave Rowen, the operations manager of Ultimate Fitness, wishes he had a larger facility to accommodate more family. The gym shares its member space directly with Team Alpha Male. So while the members train, they rub elbows with the likes of Chad Mendes, Joseph Benavidez, Danny Castillo, current UFC Bantamweight Champion TJ Dillawhaw, and of course, MMA pioneer and living legend, Urijah Faber.
The ranks of this gym have been swelled by the success of the team. With over 400 gym members and 40 pro members from Team Alpha Male, the gym’s success has come with the burden of limited space. Scalability would be ideal in this situation. If you have the ability to occupy a smaller section of a 20,000 square foot facility for example, make sure that you have some provisions written into your lease agreement which allow you the first right of refusal to expand your operation into other areas of the building as they become available. This is one of those places where working with a realtor can really pay off. In California, the property owner is responsible to pay the realtor commission in a rental, so there’s no reason not to seek out professional help when you’re looking for your space.
It’s easy to assume that the names are the big draw of working out at Ultimate Fitness, but Rowen feels it’s more about family.
“It carries over from Faber. In the gym, he’s very humble and the people we bring in are like-minded. [It’s] an easy, relaxed attitude.”
What Faber and his compatriots have built is a relaxed atmosphere where everyone is equal and nobody feels alienated or left out. Both pros and joes mix it up at UF.
Ryan Bader agrees. “In our business it's a little different than a regular fitness gym in the fact that we interact more with our members. Seeing a lot of the high level mma fighters in the gym and watching them train is a big reason why a lot of members sign up at that particular gym.”
At Power MMA & Fitness, while high level MMA may be the draw, it’s the experience that keeps people coming back.
Ryan insists that the experience is about "..making your members feel like they are a part of something and treating them like people and not dollar signs."
Anytime you offer something that speaks to a person’s basic human needs, you’ll find a business that has value beyond the obvious service. One of the biggest hardships with running gyms is high membership turnover. The lesson here might be that building a place which becomes the core of someone’s social involvement can reduce turnover and lead to more sustainable profitability.
Even with a decade of success under their belts, Rowen warns start ups that “There’s a huge learning curve. It’s harder than it looks.”
Sometimes, knowing when to submit is just as important to fighting. Like everything you do, you'll have put 100% of yourself into the creation of your gym. You'll feel responsible to your students, to those you employ, and in your true fighter spirit you'll never want to give up, but before you get started you and your partners should agree when to call it quits so you can live to fight another day. Create a tap out provision in your partnership and make a commitment to yourself to fold the business if capital losses reach a predetermined point.
Your gym will become an asset, but it shouldn't be the only one. Make sure your personal financial plan continues to include saving and investing so you don't put all your eggs into one basket. Diversify your personal portfolio and protect yourself from downside risks. You never know how outside influences can affect your business. If your partner passes away, you could find yourself in business with the spouse. You could lose a manger to a new job opportunity, your gym to a fire, or your profits to a downturn in the economy. The best way to protect your assets against any casualty is creating a well thought out plan. Don't be shy about engaging professionals to help you. A CPA, attorney, and financial planner will be key components to your success. Be sure that those you decide to work with have the expertise and experience. Finding professionals that works with athletes and understand your unique challenges will help you immensely.
A new gym can be a great source of revenue and an intuitive place to start your new career after you've retired from pro competition. Be sure that your business value revolves around making your members feel good about themselves and you’ll greatly increase your chances for success.