The Process of Opening a Studio
Owning your own studio can be extremely rewarding and have many benefits if done properly. The start up and maintenance costs are significantly lower than opening a health club. Your initial investment would likely be between $10,000 and $100,000, versus close to a million dollars for a health club. However, as this is still a significant amount of money, failure could be financially devastating. Having a solid business plan will increase your chances of success. Creating a business plan will be discussed in detail in Chapter 10. In addition, you must be willing to commit to a great deal of hard work both before and after opening. You'll need to do extensive research and market analysis in order to find the proper location, which takes a good deal of time and effort. Finally, once you do open, you'll be working long days to get the business off the ground. Determination, dedication, and drive are a must if you want to be successful.
Ways to Fund Your Business
Initially, your primary consideration will be start-up costs. You must first figure out how much money you'll need to purchase equipment, lease a space, and pay your bills for the first six months. There are several common ways to obtain financing. You may choose to finance the project yourself. This may be accomplished using personal savings, refinancing or selling property, or using credit cards. The benefit is that you are in complete control of your business. All of the equipment belongs to you, and you are able to make all business-related decisions without answering to anyone. You also won't need to pay interest if you use personal savings. The downside is, that if you use credit cards, you may end up paying large interest rates, and if your business is not successful, you could find yourself in dire financial straits.
The use of credit cards to help finance your studio should only be considered as a last resort. Credit card companies charge high interest rates that make it more difficult to pay down your debt. If you do have to go this route, consider your interest part of your overhead when you do your budget.
Another option is procuring funds from friends and family. You may do this in exchange for equity in the company, interest on the loan, or simply loan repayment. The benefits to borrowing from people you know are that there is less red tape, and repayment is less costly and more flexible. However, you risk putting the people you care for in a difficult situation if your business fails. If you do go this route, you need to be sure they understand the risks so you don't run the risk of ruining your relationship or their financial security. It is also very important to have a business lawyer draw up a contract to make the agreement legal and protect your lender.
Private investors can be a favorable option if you can find them. These are typically established business people with some disposable income. If your business isn't successful, they may be able to write off their loss for tax purposes, and you won't personally lose a great deal of money. Before you choose this option, you must discuss with your investors what role they wish to play in your business. Will they simply mentor you, or do they want to have a say in the daily activities there? You must also decide on repayment. Some investors are only looking for a return on their investment, while others want to profit share. With the right investor, this can be a great situation for both parties. The main problem is in locating people willing and able to make this type of investment.
A significant amount of grants are available to small businesses. However, you must be amenable to doing the work to find and apply for them. Grants are an option for everyone, but are easier to obtain for women, minorities, veterans, and people catering to special interests. The Internet is a great resource in locating grant money. This endeavor is time-consuming and difficult, but can be well worth the effort, as you never have to repay the money.
If none of these options are available to you, you may consider applying for a loan from a small-business lender. This can be difficult, as small-business lenders typically loan money to businesses that have been in existence for at least two years. In addition, the process is long and the interest rates may be high. You'll need to provide a great deal of information, including: a written description of your business, personal financial statements, loan repayment plan, copy of your proposed lease, articles of incorporation, letters of reference, letters of intent, contracts, plans and specifications, and possibly more. You must also have collateral in the event you default on the loan. Lenders require the business owner to invest a certain amount (usually 15–25 percent) of their own money in the business. This demonstrates your belief in your undertaking. The personal risks of obtaining a small business loan are quite high. If you default, you can lose your collateral (your home perhaps), as well as ruin your credit.
Hiring Support Staff
A good support team is essential in running a successful business. You will require the services of an accountant in order to become incorporated. An accountant will also help you understand financial considerations such as taxes, budgeting, and planning your future. If you do choose to hire full-time staff, you'll also need to consider and understand payroll, workman's compensation, Social Security, and health benefits.
Hiring a business lawyer on an as-needed basis is also advisable. This person will examine your lease agreement, as well as any other contracts you may negotiate. You will have them as a resource if any issues arise with employees, taxes, insurance, lawsuits, etc. This is a key way to protect yourself and your business.
You will need to purchase many different types of insurance for your business, so it will be important for you to find a good insurance agent who specializes in small businesses. This person will help you determine what types of insurance you need, as well as how large your policies should be. You'll likely need liability and property insurance. You may also want to look into disability, health, and workman's compensation insurance. Insurance is not an area where you can afford to be lax. Do your homework and find a reliable, trustworthy, knowledgeable agent.
Some organizations that certify personal trainers also offer liability and health insurance to their members. There are also insurance companies that specialize in insuring health and fitness professionals.
Depending on the size of your facility, you may want to consider hiring maintenance and/or janitorial personnel. You won't have the time or energy to clean after working a ten- to fifteen-hour day. While you or the other trainers can pick up and do some light cleaning throughout the day, you'll need someone to sanitize the bathrooms and floors and wash down the equipment on a regular basis. You could hire a cleaning service or an individual. The most important thing is to make sure they are bonded and insured.
Working with Other Trainers
In the beginning, you may not be able to afford to hire trainers as your employees. If you do hire employees, you must know that there are laws governing insurance, Social Security, etc. for the people you employ that may make running your business complicated and expensive. An alternative is taking on independent contractors. The issue is finding trainers willing to work in your facility. These people must be skilled, professional, and trustworthy because your reputation is at stake. The good news is that if you're opening your own facility, you've probably been in the business for some time and know other trainers. There are also many online resources for finding trainers (see Appendix C). Just be sure to check their background, education, certifications, and references.
Costs of Operation
Operating costs will vary greatly depending on the size and location of your facility, as well as the services you offer. It would be impossible to give an actual figure, but there are some factors common to all businesses to consider. The first cost to consider is rent. This will be your biggest expense each month. There are also utilities, equipment maintenance, insurance, support staff fees, and taxes. Depending on how you funded your facility, you may also have loans or credit card debt to repay. Finally, you'll need to make enough money to pay your own personal bills. You must calculate these costs as accurately as possible ahead of time and have enough business to support your expenses before you open. It may take six months to reach the point where you're making a profit. It is critically important to prepare for this by borrowing or having enough money prior to opening.
Location, Location, Location
In order to be successful, your studio must be in a community that can afford and will utilize your services. You will need to do some research in order to make an educated decision. Examine the demographics of each community within a fifteen-minute driving radius from where you'd like to be located. Look at population, median household income, schools, and businesses in the area. If you already have an established clientele, you'll want to remain nearby so you don't lose them. People are too busy to drive long distances for a workout.
Once you decide on a city or town, you must find a space to rent or purchase. It is ideal to be in a place where people can see your business from the road and there is adequate parking. Other considerations are the locations of your competition. You don't want to open a place that's too close to another studio.
Equipment to Suit all Clients
There are many considerations when purchasing equipment for your studio. Obviously, space and budget are the biggest issues. Another issue is variety. You and your clients will be working in a relatively small space day in and day out. The last thing you want is for them to be bored or to be bored yourself. Functional training tools such as bands, medicine balls, and balance pads are a great and relatively inexpensive way to keep things fresh and interesting.