You know whenever I hang with Sam, we talk more shit than anything else. Most of it is rated R and can’t be shared on this blog, or Sam’s career as the top fitness guru in Chino Hills would be over. The dudes got tons of stories, from the times he’s hung with Mike Tyson and Money Mayweather, from his “natural” Bodybuilding days (lol), and the reasons why he’s afraid to go to Amsterdam. Believe it or not, I value chopping it up with him about life and other stuff more than anything having to do with the fitness business.
But every once in a while we talk about things having to do with business. When it comes to the fitness business, I defer to his wisdom for the most part. A few of the tips he’s given me have been absolutely vital to getting where I am.
But the last time I really got to hang with him, at the I LOVE MARKETING event, there was one issue me and him disagreed on.
It was whether a light industrial or retail space was better for running an indoor bootcamp business.
Sam is on the side of going with light industrial. He’s killing it with these types of locations with his bootcamps across the country (and of course doing millions out of his gym and bootcamp in Chino, which are located in a light industrial sector).
In my neck of the woods, I’m doing really well with retail. My current space is pumping at a 400K yearly pace (if you pro-rate the gross contract figures for the past three months over a year). And my new spot is twice as big, so I won’t be happy with anything short of twice the numbers. I’m a BIG believe with going with retail space – I can’t imagine running my business any other way.
This is a very important subject with big dollar figures at stake, and me and Sam fall on opposite sides of the spectrum. That’s why I wanted to do the topic justice and explore it in a blog post here.
The conversation me and Sam had on this is still very fresh on my mind so I’m going to go into each of the points we talked about. If you’re looking to open your own place (or go a different route on your second location), this will help you out.
I’ve broken this post down into two parts. Half are the pro-light industrial points Sam made, and the other half are my feelings on retail. Consider this an online virtual debate, and Sam, you’re of course free to voice your rebuttal in the comments section.
BENEFITS OF LIGHT INDUSTRIAL
Internet Marketing – The way Sam says it, is that no one drives down a busy street, sees a bootcamp, and decides they want to lose fat that day. Usually the decision is made privately, and they then take the web to find the best solution to the problem. In that case, being in a retail setting isn’t important. What’s more important is that you’re ranking high in the search engines and that you have the right content there once they find you (ie get your internet marketing and online persuasion game down pat).
Space – When it comes to the square footage of a bootcamp, I’ll admit that it’s MUCH more convenient and fun when you have a lot of space to run a bootcamp. One of my locations is 1300 square feet; the other is 2500. Although we get serious work done out of the smaller space and have more than 200 raving fan members, the bigger place delivers a better experience, hands down. When you go with light industrial you have the benefit of being able to get a lot of space on a shoestring budget, usually with high ceilings too. You and your clients will be able to feel the fun and benefits of this with every workout.
Rent – If you decide to go retail, rent can be double, triple, or more than it is in light industrial. Besides payroll, rent is the most hated check I right each month. Why don’t my employees and landlord see I am delivering a valuable service to the public, and let me ride for free?
Felix Dennis says that in business, you have to multiply any raw cost times THREE to understand how much it’s costing you in gross sales to make up for it. So if the same amount of space you’re paying $2,000 for in light industrial is costing you $6,000 in retail, it sure as hell must be bringing you $12,000 in additional business (not $4,000) to justify it.
Net Profit – In peeking into Sam and Boss Lady’s Bootcamp on my most recent visit to Cali last month, I could tell they run the place very lean and very mean. Sam noted that they put a few grand into equipment up front, and haven’t had to do much since. It’s apparent to me that the entire positioning of your business can be low-key when you’re located in light industrial. With my locations, I compete with the McDonald’s, Starbucks, and the other long-established private retail businesses of the world. It takes a lot of swagger and cash to play at this level.
Start-Up Cost – Most people will not have the money to open a retail space when they start out. They will then have to do weird and risky shit like take on loans or business partners, all of which I’ll tell you can become HIGHLY problematic. I’ve had the skills to get out of and handle these types of situations while leaving all parties satisfied, in order to get established and fully independent. I’m not sure if everyone does.
BENEFITS OF RETAIL
Rent – When it comes to rent, or any cost in business, I’m going to paraphrase the late Gary Halbert, who I consider the most influential person on my business career (even though he’s been dead for over five years and I never met him while he was alive). Gary says that it doesn’t matter one f’in bit what something costs. All that matters is ROI.
So is the additional money I pay for retail bringing me the ROI to justify it? Let’s see. My typical sale is about $900 in the first year, on average. One of these sales will result in at least two referrals, which again is about $900 per person, on average. In case you haven’t noticed, these are big customer value numbers.
So back to the question, is the retail space bringing me enough business to justify the additional money (which remember, we have to multiply times three), to pay for it?
In my opinion it is. My location ALONE is the biggest source of leads for both of my locations. Again, this takes some level of style, swagger, and direct marketing and persuasion skills to pull off. But I’ve carefully analyzed the the ROI on this, and it’s a definite no-brainer.
I look at retail space like having a billboard on a busy street. I use my store fronts to make a direct response message. I make a promise and have a response vehicle. I agree with Sam that no one decides they want to lose weight because they saw a bootcamp. But if they do decide, I’m the first place that comes to mind.
Credibility – There’s something to be said for the credibility of having a business in a busy district. Again, going back to my mentor Gary Halbert, a sale is much easier when you have the credibility of a centrally located retail space backing you up. Gary used to advise online and mail order marketers to get an office on main street in order to increase the response of their ads. What do you think that means to an ACTUAL brick-and-mortar business? I think it means an even more powerful increase in credibility and response. To borrow a phrase from Jay Abraham, I look at it as a “force-multiplier”. It makes my ads more effective, and enhances the live experience. Although there’s no direct way to split test this, I can feel it.
Marketing – Related to what Sam said about being prominent on the web when your prospects are searching for a trainer, I have a confession to make: my web game sucks. I am not on facebook in any way, the gohardfitness.com site you see in the right column of this blog is almost seven years old, and my other two sites for each of the individual studios is far from complete (plus I’ve been paying Sam’s guy Neil for the past four months without doing a damn thing with him). My retail locations have allowed me to grow my business despite being so weak on the web. I have instead worked on optimizing my real world presence, not my online presence.
That being said, online marketing is a passion of mine and am finding more and more time to devote to it. Once I get it dialed in, watch out!
Convenience – When you’re in the retail district, it’s real easy to find you. People are frequently already shopping where you are. And when they need you, they know exactly where to go.
Top of Mind Awareness – Somewhere in Sam’s 99 part series on the laws of marketing (or something like that), he talked about the importance of having mind-share in the mind of the consumer. Once you have that, it becomes hard for competitors to steal your spot, even if they’re better. I feel the retail space does that for me. It puts me in everyone’s face every day, and keeps my competitors out of their heads.
Barrier to Entry – MJ DeMarco, author of the underground business classic THE MILLIONAIRE FAST LANE, talks about how appearing big and highly established often scares away potential competitors. I agree. I’m sure being on front street makes potential competitors think twice about directly moving into my territory. This saves me untold costs in battling them in print and online, and in customer attrition.
Ego-Gratification – I have a big ego. Having prominent retail locations gratifies it. Nuff said.
So there you have it. I tried to make that as thorough as possible, so I hope everyone benefited. I don’t see many bootcamps located in retail settings, and the ones I have seen in my opinion suck. To each their own.
When in doubt go by whatever 7-Figure Sam tells you. But in my case, I’ve found I formula that works, and I’m working hard to keep it that way. Time will tell if I’m on the right track.
Kaiser “Super” Serajuddin
Original Super Trainer
For all the reasons you stated about retail, Kaiser… defend Sam’s argument. Unless you live in Florida, Nevada, Louisiana, Arizona and a couple of other states that have slipped my mind… I would never go any where near retail. Bootcamps are usually a web based business model (even back when I was holding classes of 150 people) and should be a referral business anyway. I’ve seen my clients in light industrial and industrial do much better at .45 – .80 cents a square foot then their counterparts at 1.50 – 2.50 a square foot. Although Felix Dennis says 3 Times “raw” costs… that number is a lie. It actually needs to be 4 times “raw” (and you haven’t defined what raw means) If you are including Payroll into the raw data I may agree with you… but we may just be splitting hairs with the definition of raw. I don’t understand the logic of retail anyway… if your goal is to put more bodies in one place because that’s how your revenue is generated than why wouldn’t you want “twice” the space at “half” the price… and “no one” sees anything anymore while they are driving (because of cellphones) I have done focus groups on this specific subject. Actually, Kaiser I think you argument sucks.
Debating the arguments are pointless – like I said, time and the hard numbers will tell all.
That’s EXACTLY what I mean when I say that I created this blog to be a NO BS, no hype blog that is self serving.
This shows you that there are many ways to success.
Not one is better than the other.
In other fitness marketing blogs I used to disagree with some of the things posted but the comment got erased faster then a snow flake in Arizona desert.
There is nothing wrong with having a debate and disagreeing on issues.
What’s wrong is censorship and presenting your side while erasing ay evidence that’s against you.
Great job Kaiser and Rocco. Two very successful business man disagreeing on an issue.
Kaiser, I really enjoyed this article and it really boils down to this statement… “All that matters is ROI.”
I love posts like these. Getting into the real numbers and mechanical parts of offline fitness businesses. I’ve debated with myself on this subject for awhile as well…
I was in a 1,440 sf retail space for my first facility. Now I am in a 3,600 sf light industrial space one street over but definitely in a less “birds eye view” spot..
So here are my thoughts:
First, you cannot deny the numbers. If I can fit more members per time slot because I have a bigger space that equals more revenue.
Second, I am paying .80 per sf versus 1.50-2.50 sf for retail which equals more profit as well.
So either way, even if I have the same amount of clients, light industrial wins because I am pocketing a minimum of $2,600/month from just the savings of rent alone.. not to mention I enjoy the extra space while training clients. But if I also can fit an extra 5 clients per time slot x 7 sessions per day that can be upwards of 5k/month extra as well. (assuming your time slots are actually sold out)
BUT, I believe Kaiser also makes a very good point about his location being it’s own billboard advertising. A billboard costs upward of 3k/month. (Im sure a whole lot more in bigger cities) and if he is in a high traffic area with businesses that may even compliment his bootcamp.. that could be potentially thousands of dollars per month in revenue and saved offline advertising.
So no doubt the answer is circumstantial depending on the area and population.
Where I am, light industrial would be hard to beat because everything is spread out and the population is not very dense. So super high traffic areas don’t really exist.
LA or NYC, you could be on such a busy street you don’t even need to advertise.
But as you’ve already said.. All that matter is ROI.
Kaiser didn’t most of your leads happen through foot traffic? I have retail space, too. Though a lot of the foot traffic I get is “can you let me know where I can so and so street” or “where is the martial arts studio?” etc.
Greg, that’s my point exactly. If the location results in leads and an increase in effectiveness (which can’t really be measured) to justify the expense, it’s technically “free”.
John, you make some excellent points. I’ll need to assess what my online leads and leads through other channels are like as I get my online game dialed in. Depending on how it looks, I could see myself changing my tune. But until now, my success has been ENTIRELY dependent on my location. I got moving very fast in this business, and I credit it all to going retail.
No Eirith don’t get much of that. One location doesn’t get much foot traffic, so the few walkins we get are very serious leads. At the other, we get a lot of walk by traffic, some not as serious, but more than made up for by the serious folks.
The way I look at it is that unless you are Bally’s, 24 hour fitness, LA fitness or a world wide brand like FitBody (ok last one was a joke ;) no one drives by and says wow here is a gym I never heard of l can’t wait to check it out.
When most people are looking for a personal trainer they are not driving around. They are online searching.
In my opinion it’s much better saving money on the rent and spend some of the money saved on Gorilla Marketing.
I like the peace of mind of low overhead ;)
So here is my formula. I call it the Bakhtiar strategies (TM :)
Low Overhead + Great Marketing + Great Service = A Full facility with peace of mind
Sam, there is a bit of truth to “branding” because some leads I’ve gotten have said they want to join because it’s got the Fit Body logo. It’s basically a lay down. They walk in and say “I wanna join, sign me up” and no actual sale has to be made, just order taking.
I get those clients because the other Fit Body closed down, however…
Sam, I cannot argue at all with that logic.
@Eirith: You’re a fool. You had me on the floor for that one.
You my friend are very intelligent and make some very logical points.
I’m with Sam on this one, I’m located in Vancouver bc where property rates are going off the roof i.e $24 sq ft- 19 sq ft it’s killing down here and not easy to afford retail when you’re just starting out. I’m just starting out and can’t even find a spot to run my boot camp at eve Luckily i found a spot to rent for an hour. I’m training 10 human billboards for free. You know how they say in order to make money you need to spend money so in return they have to refer 2 clients and i give them free boot camp. I also got sales rep with me so they are going to bring some people in. I’ll be going for retail but not for long term cus like sam said who needs a headache its all about a brand once you set a mark people will come to you no matter where you are. The reason I’m going to rent out retail within 2 months is just to get a buzz and a solid base. After that people will refer people n no need for expensive retail. It’s all in the name look at louis vutton it’s nothing just a name look at bmw n then look at honda you will understand its all about a name a brand not retail.
Sam my brother you won this hands down, if shit hits the fan you wont be blown away.
Enjoyed the article as well! When it comes to giving advice on this subject to other bootcamp trainers I am with Sam on this one:)
It seems to me that the key to this debate is location (where either the retail or light industrial space is located) rather than just simply what type of location it is, as the where factor does impact such considerations as mindshare, cost per square foot, and, therefore, not only the volume of business but also the overall cost of said volume. I guess one’s preference boils down to how hard one wants to work (more volume = more work) versus how much revenue one want to keep (less cost = more take home revenue). But I digress. When it comes to key success factors in the fitness business as purported by industry reports location is ranked fairly high and convenience is either just a bit higher or just a bit lower, but you never see “internet marketing”. But rather some general area of marketing. However one’s location on the web is just as important as one’s brick and mortar location – they both must be visible and easy to find and this ties in with convenience. Sam’s #1-3 listing on google (which is a very convenient way to find stuff) gimes him the best online location when a potential client is looking for a bootcamp or personal trainer online; Kaiser’s has a great brick and mortar location as well, although passers by may not be specifically interested in a bootcamp at the time and are, therefore, less likely to park for a quick session or to sign up on their way to work. But the Kaiser’s location and branding is prominent enough to be more likely mentally noted by thousands more passers by per hour, per day, etc. And that’s mind share so that when one of those individuals consider a boot camp, Kaiser would have already had some positioning (Al Ries & Jack Trout, The 22 Immutiable laws of Marketing) How many people stuble into a bootcamp location on a daily basis. Not many. If you found one its because you was looking for one or something related. Another fact about the industry is that word of mouth drives sales more than anuthing else and word of mouth is direcly related to results. Sam I recently sent you a real before and after pic of one of my clients who since then has gotten me about 10 client, either through referals or be me showing the pic to a walking when the discussion becomes results oriented. The good news is that you both have a model that works, but both models can be tweaked even further: Sam wouldn’t it be possible to do even more busines if you found a industrial site that was much better located (near a busy retail area with great parking – there is always a gem out there like that); Kaiser, if only you was to establish a prominent web presence to compliment your retail location, I’m sure this would result in more business for you as well). As for for operating cost and ensuring a respectable ROI for all the hard work, if you’re satisfied raise your prices, overdeliver, convince clients that the money their spending on their health (not just fitness) should be viewed as an investment and not an expense, which too has a return with lots of emotional connections (sexual companionship, longevity, more energy and endurance to play with the kids, better quality of life during retirement, etc) Its that simple. But you guys knew that right. It works for me. I’m a newcomer to this game with just one residential location on the edge (accross the street) of a commecial strip, no signage yet and allready I’m grossing 9k after only 20 days from opening and I charge more than double what you guys charge. The point is people will buy it if you package it right. So increase your prices if you want retail but only if your packaging is irresitable.
Great debate, thanks for sharing open & honest information that will help everyone build a better business no matter what side you agree with.
I run my Boot Camp with a light industrial setting we have been open less than a year and already have 200 clients paying around $99 a month in a small suburb of Des Moines IA, and just got a second location. If we had a commercial spot down town our rent would probably chase away a big portion of profits. Its not what you make its what you spend. So I gotta go with the industrial.
I actually see a benefit to both sides of this argument.
I feel it is actually MORE important to develop your real world presence over the internet FIRST and foremost…and my reason for saying that is this is how most other business is done. No one really goes to the internet to get marketed to. They go to find information and that’s about it. In fact, people that don’t know you like you and trust you DON”T want your emails in their inbox are will quickly hit delete.
So if you have your real world business dialed in and you are earning the respect and admiration of your local area, getting referrals from real people and have built up a good relationship with the neighboring business you are in fact a very strong business. But the internet changes every day and with things like SOPA threatening information freedom I would also have to argue that you better have a bad ass back up plan.
If real world business and relationships were not important then there also would not be so many networking events and organizations that focus on this….and people pay a TON of money to go to these things too.
Now I am not taking sides….I’m saying both are very important. Real World and Internet, but I will point out that one of the biggest rules of Business is LOCATION, LOCATION, LOCATION!
and last but not least, my preferred location would be in a pocket neighborhood filled with wealthy people and really far from any gym or similar service… Weather it be a retail space or industrial space would not matter to me….only that the people who come can actually afford my service.
I just got a retail spot in downtown Fullerton, Orange County, CA.
High traffic area… both foot traffic and drive by.
It’s personally the best thing I’ve ever done. People are buzzing about the place all over town. Business is exploding.
I’m happy with the decision. It’s fun for me to be in the heart of everything. So, I may have a bit of the ego-gratification thing going on. :-)
So, it may also be about energy. I’m more confident in this place than my previous spot.I think people/clients are attracted to confidence.
Note: I searched for a long time for this location. And, got an awesome agent on my side who negotiated the hell out of the leasing agreement.
Great post Kaiser and great discussion everyone. I see the benefit of both retail and light industrial. In order to maybe assess which one you truly value might be to ask yourself which you’d prefer if cost were not an issue and why? If retail space were just as affordable (if not more) than light industrial, and if you could get as much space, which would you seek out. I would lean toward the retail space due to the increased visibility and potential for strategic partnerships with neighboring and complementary businesses. I’ve found that the economy has helped in terms of finding retail space that is as affordable as light industrial. I recently secured a 3,000 sf retail facility for 60 cents per sf. My search process revealed that wholesale space was generally more affordable than retail but some considerations were not just rent but the cost of Air Conditioning in the hot Georgia summers when outside Options are not an option. Not to mention the cost of heating
the facility in the winter. Utilities in Light industrial space (especially large facilities can be expensive and must be considered. If I had the option of either with all things being equal ( which in my case they were) I would choose retail. The benefits seem to outweigh those of light industrial. Thanks everybody.
The great debate, a bit like Nike or Adidas.
I have been doing the retail thing for 12 months this Feb. Unfortunately for me, I have had to work extra hard with my marketing efforts as not only is rent super high $4000/month but also the fact that I have no street exposure. The Melbourne City Council does not allow for billboards or signs out on the street and to make things worse, we are tucked in an office building that has ‘no foot traffic’. My business solely relies on inhouse referrals and an online presence (yet to be established). I have managed to create some presence with some of the local business and this has helped as I am starting to recieve some enquiries from their customers. Cutting things short, retail is tough with the large outgoings and although things are improving I feel that things are way less stressful with the industrial model especially when starting up. A very important point to make is that personal training is periodic, meaning that you can only fit so many people in before work, lunch and after; so if this is the case, why don’t we all searrch for a larger space that fits more bodies without the expensive overheads and that way add a higher ROI. I really believe that the more people at a smaller margin will always yield a higher number of referrals and therefore profits too. All things equal, full small premises or full large premises, large premises win. Go INDUSTRIAL if you can fill it up.. Keep punchin’. Zoran :-)
I don’t disagree one bit that you will get more foot traffic in a retail space……….which is the exact reason why I would never want a retail space. I HATE FOOT TRAFFIC! There are always 1 of 3 three things happening in my facility.
1. a live session i progress
2. I am doing an assessment
3. I am hard working ON my business.
The last thing I want happening during any of those times is someone just walking into my facility without being scheduled to come in.
Walk ins = time vampires
walk ins = distractions
walk ins = interruptions
and since that is literally the only benefit to having retail over industrial I don’t see it as a benefit at all but rather a detriment to my productivity.
You also said that retail shows credibility. No it doesn’t. Retail shows that you can afford retail.
results show credibility.
I don’t think your doing well because of your retail space i think your doing well in spite of it.
That is definitely a HUGE truth. I HATE HATE HATE HATE HATE HATE HATE HATE HATE HATE HATE HATE HATE walk-ins.
Walk-ins are totally huge mojo killers and make it so that you have to hire a fucking front desk girl and waste $2000 a month on someone to tell people to visit a website because we don’t do pricing sheet displays. Whenever someone comes by and says “can I get pricing” i quickly tell them fuck off.
Ok I don’t but you get the point. Walk-ins in my opinion act all high and mighty like they can come in and tell me how to run my business or demand my time. This isn’t a gym, lady. My clients HATE walk-ins too because they feel like someone is judging them while they work out.
Walk-ins=huge problem for a business like ours. it may be a bootcamp but people still feel it is PERSONAL.
I run a bootcamp just outside of Boston and I am having an extremely difficult time finding a space, retail or Industrial, BTW, what is Light industrial compared to Industrial? Our rates for renting space here are through the roof but lucky for us, right now we get to be on the beach for the next five months! I just got an agent and will find a place soon. This was a great article with great comments as well.. Keep up the great work. Thanks guys.