I last wrote about leasing one year ago and, as it’s such an important issue, I decided that it’s time once again. Leasing should be something that every gym owner is aware of as an ownership alternative. In fact I want to make the claim that gym equipment leasing is part of something that I think is much bigger, even a mindset. It’s all part of creating your own options and being able to respond to changing situations with flexibility and agility.
Your overhead and capital outlays can really be tough to meet in any business. Gym specific items such as weights, fixed equipment and fitness machines can all be tremendously expensive to purchase. Not only can securing them through equipment leasing cut the upfront costs but also it can give you real flexibility when trends change.
An Antidote to Sticker Shock
When you’re just getting started in the fitness business you have to make smart choices on how you allocate your capital. You need to think carefully about how you get leverage on your resources. If you don’t have the capital to fund your new enterprise then you will have to resort to some form of credit. Whether it’s leasing or loans. Loans require interest payments or giving a share in the business. Getting into a partnership isn’t always appealing; after all, the point is to have your own business, without having someone looking over your shoulder, isn’t it?
Even if you have the funds in your savings account that doesn’t mean you want to use them. Cash is everything in business because when you’re out of cash you’re out of business. Loans mean you have the equipment permanently and pay for the privilege with interest. Leasing is an alternative that gives you the flexibility of using someone else’s money without being on the hook for loan repayment or having to split off part of your equity to a financial partner.
As I said in the previous article you do need to take a good hard look at the costs and decide what sort of leases you want to add into the mix. Your costs could be higher in the long run if you are overly dependent on leasing. Take a look at that article on this link to read it because it’s a worthwhile and in depth introduction to the topic.
Attitude of Optionality
When you own a small business that might be a little fragile and vulnerable to competition you need to think in terms of options. Leases do just that on several different levels. First they give you the tools and equipment you need at a low upfront cost. Second, they also can have options written into the contract explicitly. Leasing contracts are often structured to allow you to return equipment at a given point or upgrade, when new and more useful machines come onto the market.
On top of these there’s another level. It’s not formal in any way but just the mindset of being on the lookout for new opportunities that arise from fitness trends and the possibility of creating new partnerships through your network of contacts in the local community. Any small business owner needs to be ready to pivot on a dime and change direction. When a new opportunity is within reach you need to go for it.
I’ve also written at length about risk management for fitness facilities. It was more about liability and safety but the principle also applies here. As I stated in that article, you need to identify potential risks, evaluate the severity of the risks and develop strategies to mitigate them. Using leasing and the right sort of options you’ll do a lot minimize the risks and give yourself flexibility in the face of the adaptive challenge.
Not everyone is going to have the same needs and requirements, but if you can find a mix that suits your situation, it can be the difference between winning new membership or is your fitness center just sitting empty. The right combination of equipment leasing contracts and ownership allows you to upgrade at your convenience. That kind of entrepreneurial skill is like knowing financial kung fu.