Worried about Business Pricing

NotSoBrite

Hey all!

I hope you are all fine and financially dandy after the holidays

I had a question about raising my prices/stating my worth as a business owner. I own a small CrossFit gym. Was the first in my area, and in the past 2 years two others have opened up, one 800m away, and the other only 400m. 

Lately, it's seemed like it's been a bit of a "race to the bottom" with all of us doing a bit of "I'll give you whatever deal they're giving you," going on. While I feel like my prices are reasonable, I'd much rather be in the situation where I'm charging anywhere from 1.5 to 2x what the other guys are. I have a smaller place, and I can't fill my group classes quite as big, but I also would rather have more cash flow. Right now things are just scraping by. 

What's the best way that you've found to distinguish yourself from your competitors? Is it an initial meeting? A better web presence? ANy ideas to show how I'm worth the extra $$ for people what are essentially used to grabbing a Groupon?

Just need some people who are in the 6 figure range to help me get to where they are I'm in the $50,000 area right now, an honestly, I'd love to be at 2-5x that. Wow....that feels good to type out.

I think that the last few things that I'm working through as far as Alpha/MAP stuff has to do with finances, and honestly, many months. There just ain't enough.

Thanks ahead of time.

NSB 

frillyfun

You have to have a unique selling proposition, and give them something your competitors can't in order to justify the price.   You have to be worth the extra money  

Can you offer a steam room, towel service, child care, nutritional counseling- something like that? Or you could offer some sort of upsell like a juice bar?

What can you do to get an extra few thousand a month?  Is there an alternative use of the space in off hours that can bring you more cash flow?

HildaCorners

^^^ This.

You need to become "the upscale, luxury gym" in order for people to justify the price difference.

I'm not familiar with Crossfit, but imagine what extras you might provide. @frillyfun‌ mentioned some, even something like an interesting paint job on the walls or colored shower curtains might help. [Hmm ... hire an interior decorator to make the gym look like it's in a cave?]

Put together a short list of upgrades you could afford (one-time changes might be more cost effective than ongoing services) and put together a survey for your current clients. Chances are if they like an idea, new clients will too.

HildaCorners

The other thing that can help is being kind and generous, but from an alpha frame.

Don't "nickle and dime" people. Don't include hidden charges, extra fees, etc. There are plenty of people who would rather pay $125 a month for everything than $80 a month plus $15 for a locker, plus $10 for towels, especially if they didn't know about the locker and towel fees when they signed up.

And have integrity ... if an employee told someone your new customer rate was good for a year but it's only good for 6 months, tell that customer that your staff made a mistake, they new rate should have been quoted for 6 months, but since they said a year ... that one customer gets the rate for a year. You make up in goodwill what you lose in money. [I've had that happen in my web design business ... my underestimate led to a referral for a new client.]

Never take part in a race to the bottom.

frillyfun

The basic rule with race to the bottom stuff is every time your competitor drops prices you add value.  You're all offering the same basic thing- you have to do something over and above.

What's your facility like?  Do you have showers, locker room, or anything like that?  Can you rent a little space to say a massage therapist?  Check Craigslist- you might be able to pick up an affordable infrared sauna or something like that.

Other than that I'd need specifics- rent, square footage, pricing structure, number of classes you offer.  

I'm also a big fan of a gift with purchase if you can swing it.  These cooling towels are pretty affordable:
http://www.aliexpress.com/item/3-Colors-80-17CM-ICE-COOL-TOWEL-SPORTS-COOLING-TOWEL-100-pcs-free-shipping/2038329286.html

PhilosophicEntrepren

I own multiple business; price competition is a factor in every one of them. I have also mentored other small business owners for many years.

First, congratulations on getting to $50K/year. Most  small businesses don't even accomplish that.

Second, though, the market is very blunt. Friends, relatives, customers, will all want to be encouraging, and tend to tell you what you want to hear. The market tells you whether there's really a market for your services. Far too many people try to keep going long after the market is telling them they can't hit their goals, with the result that they burn through all their cash and are left looking for plan B later, rather than sooner, but with no savings.

Can you identify a real competitive advantage for your business? How many clients do you need to hit your goals? (Remember to calculate the increase in variable costs per clients, plus any fixed cost increases you'd need to hit that volume.)

Frankly, I'm skeptical of a crossfit gym being a standout with two others within a block. The luxury approach mentioned above might work (I myself dumped 24 Hr Fitness ad pay more at a gym that provides towels - that's a value to me), but seems a little at odds with the stark nature of the crossfit gyms I've been in - isn't starkness part of the appeal? Your staff could be better, but will they be THAT much better to justify a price increase? Many of us really only care about the bottom dollar.

And (sorry) continuing my "negative nancy" theme, I'm actually skeptical of long-term success of a crossfit gym in general. Fitness has fads. Crossfit is one of them. It seems to me that it's already on the wane, and will continue to do so. Remember 12-15 years ago when Curves was new and women flocked to it? Then within 8 years, there was a Curves, Butterfly Life, Lady of America, or some other chicks-only gym every other block. Where are they now? And where are the savings of all the owners who invested in that? We saw that trend with TCBY in the 90s, wing restaurants in the 2000s, and we're about to see it with vapor shops right now. A market grows up, loads of competitors crowd in, it's nearly impossible to differentiate yourself, the market wanes, 70-80% of owners go out of business, only a very few remain, usually the ones who had the most cash reserves to ride out the decline and figured out how to successfully be a niche business.  I honestly think it's very possible that, instead of your $50K becoming $100K, it could end up being $30, or even $20 within a few years. I could be wrong - but you need to be sure you've considered this and have a real plan for it. Hope is not a strategy, as they say.

In your position, I'd be asking myself some really blunt questions. What are my goals? Am I a Crossfit owner, or a business owner? What's the 5-year strategy for my business? Am I going multi-locations? Focusing on personal training or other services? Going to be the gym for the bored-housewife crowd, so we're always the one offering the latest fitness fad? What's my strategy? Or should I, honestly, sock away as much savings as I can from the business while maybe having someone else run it so I can focus on something more long-term? Only you can answer these questions, but the market will tell you whether you answered them right.

Good luck. It's incredibly difficult to build a business that will live for the long term. I wish you all the best.

Blackwulf

I think it boils down to differentiation/branding.  Are you running a gym that you aren't running/working in yourself or are you actively involved?  If you are actively involved then I would advise to look at what you are offering is more than just the gym like Chief_TC advises.  If you are working in it then, what you are ultimately selling is yourself.  It really isn't no different than a professional service firm. You are selling your reputation and should offer services that others can't because they don't have the investment of such a high level person.  

Essentially, figure out how you are competing with others, if you play the game of "cross fit gym" only with others you will lose, because it will ultimately be based on price.  

I work in a CPA firm, we don't directly compete with H&R Block/Turbo tax.  We do get work from people who use those services and then come to find out their taxes were more complicated than that.  But that is just to get people in the door, we will turn people away if they aren't in our client demographic, business owners. 

Think of other services you can offer at a premium, or reasons your business is different to warrant a higher fee.  

Crashaxe

My understanding of the situation is that you find yourself selling a commodity product, and commodity sales are almost always a matter of who sells the product for the least amount of money.

You need to either find a way to reduce your overhead expenses so that you can sell profitably at low cost and do volume while finding a way to try to build loyalty, or you need to find a way to "uncommoditize" your gym. I wouldn't be in a hurry to make more of an investment that will add to your ongoing overhead costs under the circumstances you are in.

Loyalty ideas that immediately come to mind for me are monthly automatic checking account draws so you lessen sticker shock for people, annual membership renewals right after the New Year's resolutions, prize drawings for ALL members, not just those who show up, etc. My understanding of gyms is that the less a member shows up, the more profitable that member is.

I have a business line that started out as a niche, became extremely popular, and then matured into a commodity product. It was profitable as hell during the salad days, but isn't profitable anymore and just contributes to overhead now. I have been working to find alternative niche products that can be made with the production equipment. One day's production of our new niche products makes us more money than the whole year's production of the original product.

I have no experience with crossfit gyms, but from what little I do know of them, I also question the medium to long-term viability of a crossfit only gym.

The barriers to entry  with crossfit seem to be so low that it seems to me that there is little to keep yet more people who have stars in their eyes and think they will make millions and then retire in 5 years from opening yet another box.

JellyBean

I am getting set to join a bare-bones gym for $19/month. No sauna. No pool. No juice bar. No towel service. No tanning. No child care. It has free weights and a squat rack and opens at 4:30am. That's all I need. At other times in my life a great child-care center or spa-like atmosphere would have been worth more to me. 

It it all depends on your local demographics. 

nyobna

Some great feedback. One other idea to consider (a little crude but powerful i think), hire really hot chicks to work there or become trainers. I've seen this strategy work from structured derivatives sales to mens fashion and especially at gyms. Men AND Women would rather work out next to someone beautiful. 

NotSoBrite

You all are awesome....some really great stuff here....sorry I haven't been back, the holidays took me overseas, then the beginning of the year has been busy with new members and the like. I'm gonna try my best to honor all of your responses...here goes....

NotSoBrite

frillyfun said:

What can you do to get an extra few thousand a month?  Is there an alternative use of the space in off hours that can bring you more cash flow?

Thought of this and have tried a few things already...Also thinking of opening it up to more personal training in the off hours. We're really quite empty in the early afternoons. For the right person it could be a good fit. 

NotSoBrite

HildaCorners said:

^^^ This.

You need to become "the upscale, luxury gym" in order for people to justify the price difference.

I'm not familiar with Crossfit, but imagine what extras you might provide. @frillyfun‌ mentioned some, even something like an interesting paint job on the walls or colored shower curtains might help. [Hmm ... hire an interior decorator to make the gym look like it's in a cave?]

Funny enough, I just refinished an entire wall of the gym, and it REALLY makes the space feel and look different. I'm about to do the opposite wall with something cool as well. I think just people seeing work being done, even if it's by me, gives them a feeling of progress. Good stuff.

NotSoBrite

@HildaCorners‌ @Chief_TC‌ note taken on the race to the bottom....I haven't lowered my prices in a while, and funny enough. I'm not sure if it's my frame lately or what, but I've been getting a better response than usual. 

Also @Chief_TC‌ ... if I had to do it all over again, I would, for sure, be a gym that offers CrossFit, instead of a CrossFit gym. 

@PhilosophicEntrepren‌ ... True, CrossFit gyms are known for their more barebones type of decor and training. I've got a decent handle on the nutritional side of things. So I'm thinking of making that a difference that I can show for people to gain value. Actually in the works for doing a nutrition seminar this coming weekend. I've done some before, with really great reception. Also...thanks for all the advice, I became a business owner out of passion, looking back, a few more thoughtful nights & organzed planning may have been a good choice to add to it.

@generalzod ... I see Groupon as advertising that I get paid for. I'm in the gym anyway, so it doesn't cost me anything in time. Instead of paying $$ everymonth for advertising. I get to use the Groupon list, and people come in my door, and money goes in my pocket. Lately, I've been dong much better about keeping those people once their Groupon expires. That took a little doing to figure out, but it's much, much better. And YES, I'm still trying to figure out if it's possible to attract people from "up on the hill" who are in a higher tax bracket, or if my focus should remain within a 1-2 mile radius, where the people are more working class. 

@Crashaxe‌ funny enough, we've started working in more traditional bodybuilding type stuff into our workouts (their usually focused more on "functional" movement instead of bodybuilding) because we saw a need/want from our clients. We're all a little vain after all right? So the viability of our place is to be able to keep adjusting constantly as we go along, and hopefully stay on the leading edge of the curve, instead of behind it. 

@JellyBean‌ nice! Even though I own a CrossFit gym, I've been seriously considering joining a big, inexpensive globo gym, just because they have some equipment that I simply don't have the space for, and most people don't need. Use that squat rack!

@nyobna ... maybe going the "Pain & Gain" route and giving strippers free memberships? Time to head out for some recruiting!

Thanks all for these great responses. Lately, it seems that things are coming together a little better, and money isn't as tight. Sure we're not eating caviar, but we can invest in a few upgrades to make the place feel better nad more awesome. That helps motivate ME and make the workouts better, and the clients happier.

You all rock!  

NotSoBrite

@Kiche‌ ... funny you mention this...I have a buddy who's big in the corporate world, he said corporate would be where it's at as well. Make it into a fitness/teambuilding thing. 

There are a couple CrossFits that do this, I'll look into it.