Just as Sanctuary Fitness had begun to grow, the coronavirus forced the gym to shut down. Nationwide, abrupt quarantine orders threw many small businesses into crisis mode, and with no idea of when they could reopen, Sanctuary Fitness hustled hard to quickly pivot their business model.
Located in Los Angeles with a full array of equipment ranging from rowing machines and medicine balls to large tires and resistance bands, Sanctuary Fitness offers high intensity interval training (HIIT) workouts that are customized by trainers, as well as cycling, yoga and boxing classes. Despite only opening its doors in 2017, Sanctuary Fitness has already amassed a substantial following of dedicated members and was planning to open a third studio in Los Angeles.
“I named my gym Sanctuary Fitness, because during the hardest times of my life, the gym was my sanctuary,” says Zach Golden, founder and CEO. “In the case of Sanctuary Fitness, it’s defined as a place to belong, to recharge, and a place to find peace through perspiration.” Golden, who was laid off as a supply chain manager after 2008 recession, has seen today’s scenario before. He shares some of the biggest business lessons he learned and the strategies he used to start, grow and pivot his business.
Traditionally, the fitness industry and larger gyms have a high membership turnover rate. According to the Association of Fitness Studios, however, Gen Z and Millennials are flocking to smaller, more boutique fitness studios that have quality workout programs and a strong sense of community. A report found that from 2012 to 2015, while memberships in traditional fitness clubs grew by only 5 percent, smaller specialty studio memberships skyrocketed to more than 74 percent.
“The gym industry is interesting, because you’re trying to get people to pay you to do something that they don’t want to do,” says Golden. “Let’s put it this way: People are much more likely to find a reason not to go to a gym than they are not to go out to dinner.”
Becoming your own market researcher and being an astute observer is simply part of the process in starting your own gym or business. “I spent two years doing all the research on fitness studios,” he says. “I went to every possible fitness studio that I could join, and I’d show up early, 20 minutes before class, just to watch and see how many people were on staff, how many people showed up to class and what those demographics looked like. I’d also go during different class times to see what the demand was like. I literally did back-of-the-napkin calculations.”
Golden coupled his market research with public information on property costs around the area to gain a better understanding of how much a lease would cost, how much operational costs might be, and estimate how profitable the business could be.
“I also went to trade shows,” says Golden. “Go and just ask questions. I was able to just learn a lot from the people in the industry that serviced the industry.”
From there, Golden would take home all the answers and information collected, then plot out the hypothetical expenses and operation costs. “It takes a lot of time and effort, but if you’re willing to do all that, you can come out ahead with a really solid understanding of your fixed cost variables before you even open your doors,” he notes.
“It takes a lot of time and effort, but if you’re willing to do all that, you can come out ahead with a really solid understanding of your fixed cost variables before you even open your doors.”
With money constantly going in and out of a gym, from equipment costs to membership charges, staying on top of a steady cash flow can be challenging. “My MBA education, coupled with a background in financial forecasting and supply chain management, definitely came in handy,” says Golden. “It’s helped me create a general road map of where things should be a few months and years down the road.”
Having a solid grasp on your business’s fixed costs and anticipating variable costs are crucial. “Be mindful of those variable expenses, since it’ll be a major key to your financial success,” warns Golden. “Whether it’s product development, inventory expansion or longer hours, I would try to find a way to step into it, rather than jumping in all at once. You have to make sure you’re not going to create debt capital, especially if you’re an inventory-based business.”
While the fitness industry is notorious for its high customer turnover rate, the gym itself is a fixed-cost business. “At the end of the day, our rent is our rent, our equipment costs are our equipment costs, and our staffing costs are our staffing costs,” says Golden. “So, we really have to be mindful about customer retention. We encourage like-minded individuals to join our gym and create a strong community. And, in our opinion, if we’re delivering great workouts with a high quality of customer experience and a sense of belonging within our community, then people are naturally going to want to come back.”
To add to their roster of gym accomplishments, Sanctuary Fitness is also finding new streams of revenue by licensing their fitness programs. “We have a variety of activities, from boxing to cycling, and we’re exploring ways to license these programs beyond our brand and looking at ways to grow,” says Golden.
“We have a variety of activities from boxing to cycling and we’re exploring ways to license these programs beyond our brand and looking at ways to grow.”
This understanding of money movement became crucial to keeping the business alive in the face of the sudden arrival of the COVID-19 pandemic.
Facing mandatory closures for nonessential businesses, Sanctuary Fitness, like many startups and small businesses, was thrown into crisis mode. “We spent 48 hours as a management team to try and understand legally what we could and couldn’t do,” says Golden. “How do we make moves to ensure that the business survives and doesn’t go insolvent over the next two or three weeks when we’ve got obligations, liabilities and expenses that we still have to pay?”
The team quickly came up with a strategy to stream their fitness classes and promote it heavily on their social media platforms. The gym recorded two weeks’ worth of fitness content in a matter of hours with various instructors, just in case they couldn’t go back to the gym. “The videos we recorded were high quality and offered members a variety of workouts that they could repeat and follow along,” says Golden.
As they pivoted quickly, they faced many hurdles, from music licensing rights to figuring out the technical details of making their videos exclusive for members. To get around music licensing rights, the team ultimately decided to skip playing music in their videos altogether. Members were encouraged to find and play their own music during workout sessions. When it came to exclusive video content, “we had to figure out how to do this on the fly without much of a budget—I mean, none of us even knew how to edit videos,” says Golden. “Our team came together, and we knocked out 14 videos in 24 hours, then offered it on YouTube with exclusive access from our member site.” Knowing that they have a loyal member community, the staff decided to take a chance and see if people would still be willing to pay for their video products. Their pivot worked.
Sanctuary Fitness has been closed now for more than two weeks. The team has since switched strategies to providing live streams on Zoom multiple times a day, every day, with different instructors. As a bonus, Golden sees the videos as an investment and added value for the gym’s digital future.
“The whole goal behind this was to find a way to get our staff paid instead of doing layoffs, which is what probably 80 or 90 percent of the businesses out there had done immediately,” says Golden. “At some point, businesses will have to reopen, and when they do, they’re going to have such a backlog of expenses and missed sales opportunities that they won’t be able to get back.”