The Five Forces of Competition
The fitness business offers plenty of opportunities for entrepreneurs and trainers to found startup gym businesses. Your gym can compete against established studios and big box fitness corporations; you just have to be savvy about it. The same factors that define competition within the industry will also show where you can make your entrance and your strategy that will grow the business.
Any business situation has potential competitive threats. The gym business is no exception. Michael Porter of Harvard University first laid out a catalog of the Five Forces, which every company faces in one way or another. Porter’s Five Forces Analysis provides a useful yardstick for determining your strengths, weaknesses, threats and opportunities.
As the little guy or gal in the local fitness marketplace, you have some advantages and vulnerabilities. If you know what those might be and the strengths and weaknesses of the competition, you can design your business plan to rock the local gym scene.
These are Porter’s Five Forces: The Threats From A Startup Gym Ownership Perspective
Direct competitors – Your direct competitors are all of the other gyms that compete with you to sign up the same population of consumers as members. As it happens, you are the direct competitor of the big box gyms and franchises in your local shopping center.
Lesson: How can you deal with them? Walk in and take their tours to find out; you will learn everything you need to know. Go back to your startup fitness club and make it the best gym in your community.
In short, a well thought out plan and dedication will help you get into business and stand up to the established fitness centers around you.
Vendors – All of the firms that support you have an impact on your success. The list of your vendors includes your landlord, insurers, equipment leasing company, and consumables suppliers; any business that supplies you with goods or services and impact your operation and overhead costs.
Lesson: Don’t rely on suppliers or vendors to provide the complete package unless you have a franchising agreement that protects your interest. Otherwise, the value that you provide must be something unique, like a personal following or your special brand of training. The value you create is your protection from being cut out of the loop.
Lesson: It is always a good thing to have a healthy relationship with your vendors. If the companies that support you realize that your interest is their interest they will take care of you; if they don’t seem to care, find their competitors who do.
Customers – Your clients can make or break your business. Anyone who has experienced the bureaucratic lackluster of a big company understands that you can beat them. You do this with consistently high standards of service and a personal connection that only an independent owner like you can give.
Lesson: Startups can get a foothold in a market by being fresh, innovative, and smart. Bring a new take to an old fitness concept the way CrossFit has done for weight training and Soul Cycle for group activities.
Lesson: Again, it’s all about delivering the best possible experience for your membership. Small businesses have more opportunities to connect with customers and respond to needs and desires. The big box gym brands may have corporate support, but it comes with the burden of soulless bureaucracy, be confident that you offer a better alternative.
Substitutes – Other things that fill the need. For example, you can substitute monthly cloud-based subscription services for expensive computer hardware and an even more costly IT manager. A substitute product or service is something that is more attractive when change hits the economy.
Lesson: Be the substitute! You can provide the innovation that bootstraps the refreshing alternative to big box crustiness.
Threats from new entrants – That’s you. The fitness business requires some knowledge, certifications, licenses, and cash to start a new enterprise, but not so much that it keeps new entrants out. A good idea, disciplined delivery, and persistence help make new gyms successful.
Lesson: As a new entrant and a small business you may not have the resources of a national marketing department or other expensive professional functions. However, you don’t carry the cost and legacy of outdated policies and commitments. You can jump the entry barriers and take a share of the fitness market and build up incrementally from there.
Barriers To Entry For Startup Gym Businesses
The barriers to entry are limitations, which may can be high capital costs, government regulations and licensing, or professional knowledge. If you want to buy your way into the industry, it will be the price of a very nice house. You can avoid that cost by your way into the business.
If you provide a group training service, renting space by the hour or use one of many other strategies you can prove your concept inexpensively. Promising small businesses with smart plans and an understanding of the competition can find financial help. The first stop should be the Small Business Administration for business plan guidance and introductions to funders.
With a detailed understanding of how competitors, vendors, customers, and substitutes, you can be the new entrant who shakes up the neighborhood. If you have the professional knowledge, either personally or collaboratively as a team, you have everything you need to take the fight to the competition.
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Rapid BI. Porter’s Five Forces For Competitor Analysis & Advantage. September 7, 2012. https://rapidbi.com/porterfiveforces/ (accessed January 22, 2017).