Are Gyms Profitable? Insights from Real Gym Owners

Are gyms profitable?

Some have to be, otherwise the fitness industry wouldn’t exist. But as a potential gym owner or investor, how likely is it that your business will turn a profit?

It’s a tricky question to answer. But as a gym owner myself, I’ve spent a lot of time thinking about and working out what makes a gym profitable.

To paint a clearer picture of potential profitability, we first need to gain an understanding of what makes a gym profitable, and then apply this knowledge to your gym.

Understanding Gym Profitability

First, the good news: the gym business is booming.

In 2019, annual global fitness industry revenues sat at around US$96.7 billion. And despite taking a significant hit during COVID, that number has grown to an estimated $124.7 billion in 2024, and is expected to reach a whopping $302 billion by 2034.

In short, there’s plenty of money to be made. Gym owners and investors just need to maximize their slice of the revenue pie, and do so in a profitable way – though this is far easier said than done.

Some of the key factors that influence gym profitability include:

Location and convenience

Your ability to secure new business can be largely determined by how convenient your location and class times are for your target customers. The best locations to open a gym include high-traffic urban areas or affluent neighborhoods, which usually see higher membership rates and better profitability.

Size and space utilization

Larger gyms can offer a larger variety of equipment and classes to attract more members, but they come with higher operational costs. Consider profit per square foot/meter to understand the ideal size for your gym, and how best to utilize your space.

Capital expenditure

Gyms can be capital-intensive businesses, so your initial investments need to be made strategically, to maximize long-term profitability.

Operational costs

You need to implement systems, processes and technologies to streamline operations and effectively manage costs like staff wages, utility bills and gym maintenance.

Pricing strategy

Your pricing needs to strike a balance between being low enough to attract members through value, but high enough to ensure profitability.

Member acquisition and retention

You need to invest in marketing and sales to create a pipeline of new members, and invest in retention strategies that help you keep members for longer.

Niche and target market

Both general gyms and boutique/specialist gyms can be a very profitable businesses, provided you have a clear understanding of who you’re targeting.

Product offerings

Your membership tiers, equipment, classes and training options need to resonate with your target audience.

Upselling and cross-selling

Profitable gyms tend to maximize the value of each member through clever sales strategies.

Key Performance Indicators (KPIs)

How can you tell whether your gym is on a path to profitability? A few KPIs can paint a picture:

• Membership growth: Membership growth hints at the overall appeal of your gym and the effectiveness of your marketing efforts.
• Retention rates: It’s at least 5x more cost-effective to retain current customers than to acquire new ones. A high member retention rate is a solid sign that you’re offering a quality gym experience.
• Utilization rates: Utilization rate measures how much your members are using their memberships, and by extension indicates how satisfied and engaged they are.

With the help of the right tech, you can access data to generate insights on things like peak times, popular classes and untapped opportunities, and light the path to profitability for your gym.

Revenue Streams for Gyms

It’s business 101: Profit = Revenue - Costs. Let’s focus on the first half of that equation: bringing more money in. Valuable revenue streams for your gym can include:

1. Membership fees: Memberships are the primary source of revenue for most gyms. Offer different tiers and plans to cater to a more diverse range of customers.
2. Classes: Use group fitness classes – yoga, pilates, HIIT spin – to attract members with a variety of interests and fitness goals.
3. Personal training: PT sessions can be a high margin offering for gyms, as members can be willing to pay a premium for the personalized experience.
4. Complementary services: Consider offering add-on services like nutrition advice, massage and physiotherapy.
5. Fitness products: Sell supplements, fitness equipment and branded merch at your front desk to generate extra revenue.
6. Online classes: Online classes and virtual training sessions aren’t limited by the capacity of your gym, so they can have incredible revenue generation potential.
7. Renting space: Offer your gym as a venue for events, workshops or for freelance fitness professionals to use for their own clients.

Cost Management

Along with maximizing revenue, you also need to minimize costs. Expenses can be split into two main groups:

• Fixed costs: These regular costs stay more or less the same from week to week, month to month. Think rent, utilities, staff salaries and wages, insurance, loan repayments and equipment financing.
• Variable costs: These costs can be ad hoc or can change every week or month. Think maintenance and repairs, consumables (cleaning supplies, toiletries, towels), casual and contract staff, sales commissions, event costs, products and merchandise.

Once you’ve got a handle on all your costs, you should aim to minimize them – without compromising the member experience or staff morale. You can do that by:

1. Switching to energy-efficient lighting and HVAC systems with smart usage features.
2. Regularly maintaining equipment to ensure it lasts.
3. Negotiating better rates with key suppliers and service providers.
4. Implementing technology to automate time-consuming admin, to do more with less.
5. Aim to reduce waste and reuse supplies wherever possible.

Strategies to Increase Gym Profitability

Now that we have a handle on the basics of increasing revenue and decreasing costs at your gym, let’s look at some key ways to make your gym more profitable.

Leverage digital marketing

When you make strategic investments in digital marketing, the internet can grant you unmatched access to your target market:

• Social media: Gyms are gold mines of social media content. Establish a presence on platforms used by your target audience – Facebook, Instagram, TikTok – then post regularly, interact with your community, and consider investing in ads.
• Search engine optimization (SEO): Make your gym website more ‘Google-friendly’ to earn more organic traffic from the search engine.
• Email marketing: Regularly send emails with gym updates, promotions and personalized fitness tips.
• Influencer marketing: Partner with fitness influencers to gain access to their audience. Tag people with large followings in your social media content.

Host events and workshops

The primary challenge for gyms is to simply get potential customers through the door, so that they can then test out and become more familiar with your gym. Events and workshops do just that:

• Open days: Organize open days events where non-members can tour and test your gym, meet the trainers and current members, and try out classes for free.
• Workshops: Host educational events that cover topics like nutrition, weight loss and specialized workouts.
• Member challenges: Run fitness challenges that encourage people to join and use your gym, and that create a sense of community.

Referral programs

No form of marketing is more powerful than word of mouth, so happy members can be your very best salespeople – if you provide the right incentives.

You can encourage members to spread the good news about your gym through referral programs. Offer discounts or free perks to members who encourage friends and family to join. Alternatively you could partner with complementary local businesses – health food stores, dieticians, sports clubs – to create mutual referral programs.

Enhance the member experience

When you provide an excellent member experience, your gym sells itself. Here are some ways to enhance your offering:

• Personalize your service: Encourage staff to build relationships with members. Provide personalized training plans that drive members toward their goals.
• Adopt new trends and tech: Keep your equipment and training offerings fresh. Implement the latest tech, like workout tracking and 24/7 member access, to help your customers gain maximum value from their membership.
• Build a community: Use group classes, challenges and social events to encourage your members to get to know each other, and to foster a sense of community.

Offer flexible membership options

The more membership options you offer, the more likely a potential member will find something that suits them – but you don’t want to offer too many options, because that can just make things confusing. Consider:

• Short-term memberships: Such as a membership that covers a 12-week challenge
• Tiered memberships: Offer a higher level of membership that includes classes, personal training, a personalized fitness plan, etc.
• Flexible and lock-in memberships: Offer a discount to members who are willing to lock their membership in for a year or more, versus renewing month to month.
• Family/group discounts: Offer a better rate to groups who join together.
• Corporate memberships: Offer discounted rates to corporate clients, who can choose to either pass this discounted rate onto the staff, or offer gym access as a free employment perk.

So, Are Gyms Profitable?

Yes, gyms can be profitable – when they’re run well.

Profitability demands careful consideration of your gym’s location, size, pricing and service offerings. You need to develop marketing and membership acquisition strategies. You need to implement systems, processes and clever tech to minimize operational costs. You need to be ready to adapt to changing trends and customer needs.

That might seem like an intimidating to-do list, but far from impossible.

FAQs: Common Questions About Gym Profitability

What are the most important KPIs to track for gym profitability?

Membership growth, retention rates and utilization rates are metrics that get to the heart of member satisfaction and the ongoing financial health of your gym.

How can I reduce operational costs at my gym?

You can reduce your gym’s operational costs by lowering energy usage, properly maintaining equipment, negotiating better rates with suppliers and leveraging technology to automate administrative tasks.

What are some effective marketing strategies to attract new members to my gym?

Gyms are very human, community-focused businesses, which makes social media and word of mouth two of the most effective gym marketing strategies.

How can I use technology to improve my gym’s profitability?

Use gym management software to streamline operations, enhance the member experience, increase engagement and gain a deeper understanding of your members so that you can better cater to their needs and preferences.

What additional services can I offer to diversify my gym’s revenue streams?

Consider offering additional services like personal training, nutrition counseling, massage therapy, wellness coaching, fitness product sales, online programs, facility rental and corporate wellness programs.