It started with a passion. You had been training clients on the side at a globo gym. You sub-leased a few hundred square feet of space, but quickly out-grew it. You find an old auto shop that hasn’t been occupied in years and devote countless hours to perfecting the space, raising awareness in the local community, developing a team of trainers and growing your membership base. Everything is going so great that soon you’ve outgrown that space and need a new one.
Sound familiar? It should. About 15 years ago, Coach Glassman laid the foundation of the CrossFit Affiliate community under a very similar set of circumstances and this growth pattern has been widely prevalent among CrossFit Affiliates since. But, why have so many Boxes followed this same pattern of growth?
The short answer: money. It takes money to start and grow a business. The CrossFit Affiliate model has a beautifully simple means for addressing this issue initially: minimize the up-front capital requirement and barriers to entry for a new Affiliate. This creates an unprecedented opportunity for someone to own his or her own gym. Did you know that the total investment to open a Planet Fitness franchise generally ranges from $1-4 million, and owners are required to have a $1.5 million net worth with $500,000 of cash available? That’s a pretty big difference from the $4,000 minimum investment required to open a CrossFit Affiliate. Of course, the total cost of opening a new Box will exceed $4,000, but the nature of the Affiliate model allows for a much lower up-front investment than a traditional gym.
As membership grows, so does your need for additional equipment, Coaches and space. In many cases, membership may reach capacity long before the owner is able to afford the cost of relocating or expanding their equipment using savings alone. The prudent use of financing, however, can help you reach your goals faster while allowing you to maintain a cash reserve.
As a funding solution for small businesses, lease financing offers a number of benefits. In fact, 80 percent of businesses in the U.S. lease some or all of their equipment. Let’s take a closer look at the advantages of lease financing:
Conserve Working Capital and Manage Cash Flow. It can take months or years to save enough to cover the cost of an equipment purchase. Instead, convert large capital investments into a manageable stream of payments over time. Typically, a lease offers 100 percent financing for the cost of the equipment.
Improve the Quality of Your Facility. Ever-increasing competition in the marketplace may require you to invest more in appearance, quality and amenities offered. We agree that coaching and programming are the precursors for success, but someone walking into a Box for the first time probably doesn’t appreciate that nuance.
Maintain Ownership of Your Business. It’s common to see founders give up a percentage of their ownership in the business to investors in exchange for funding. This is often viewed as a “cheaper” source of money, since you are not necessarily required to pay interest. Of course, giving up ownership means giving up a share of the profits, and that can add up quick.
Establish Business Credit. It’s never too early to start establishing a credit history for your business. Just like your personal credit, your business credit profile can impact your future borrowing ability and terms.
As with anything, financing is not without risk. Generally speaking, it is beneficial to work with someone who understands your industry and market. Spend time evaluating your options to find a partner that understands your vision and can offer guidance and transparency throughout the financing process. Despite the many benefits that financing can offer, reckless borrowing and/or egregious funding terms can quickly erase them.
Founder and CEO of Rigquipment Finance, LLC