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Gunkie
Trad climber
Valles Marineris
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Topic Author's Original Post - Jun 22, 2017 - 11:46am PT
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So I've been contemplating ownership in a climbing gym after regular job retirement; still quite a few years away. I certainly don't want any venture to be run at long term losses. I've never seen a real financial model for any of these places.
I'll assume that most gyms that have been around for a while turn some level of profit. My question is, what is the primary source of revenues for climbing gyms?
Before you say 'duh' think about this for a moment. Once the NRE costs have been feathered into the economic sunk cost category, is it (1) membership fees, (2) birthday parties, (3) events (e.g. comps, slideshows, etc.), or (4) retail sales that drive the business? Maybe a balanced combination of revenue sources? If one source of revenue is lost, which one has the biggest negative impact on the business? I also strongly suspect that cash flows experience considerable flux with the seasons, particularly in the northeast (US).
On the flip side, not considering the cost of the wall structure, what are the primary cost drivers going forward? Insurance? Rent? Employees?
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Ksolem
Trad climber
Monrovia, California
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Jun 22, 2017 - 01:11pm PT
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I'm no expert, but I just did some slideshows at two big gyms in the bay area so I'll share my impressions. They're not just climbing gyms. Your membership gets you access to a full scale workout gym, they have personal trainers. They have one or more nice Yoga studios. Showers. Retail. Shoe and harness rental. And of course very impressive climbing and bouldering areas.
They were packed, and the energy was redlined.
Look up Planet Granite in Sunnyvale (I had the pleasure of meeting the one and only Ed Hartouni there, he's not hard to miss in a crowd.) And of course Berkeley Ironworks. Also, the owners have other gyms, not just the one's I saw.
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10b4me
Mountain climber
Retired
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Jun 22, 2017 - 01:12pm PT
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Can't answer that, but what I've seen is that they make most of their income from families, i.e. kid's birthday parties.
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clinker
Trad climber
Santa Cruz, California
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Jun 22, 2017 - 01:45pm PT
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Guided buildering tours with a fast getaway car and police scanner is an idea.
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Jon Beck
Trad climber
Oceanside
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Jun 22, 2017 - 02:05pm PT
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I climb at a boulder only gym, it is the 4th and newest location they have opened, Vital is the name, Oceanside, Carlsbad, Temecula and Bellingham WA (WA go figure?)
As Kris mentioned, yoga is huge, and there is demand for weight training so a few personal trainers work there, not sure about the relationship, employee or subcontractor? I avoid the busy times (evenings and weekends) but i drive by and the place is packed. Since there are no ropes they can be open for 24 hour unsupervised access, we get a door code. Works very well, seems to be a good business model. Oceanside is kinda of a hipster town now, I am literally the only guy over 50 that climbs there, a few 40 somethings, the rest are 20 something.
Small for a gym so there is not much facility other than the climbing walls.
They dumped a load of money into this place, and it is the fourth location so it seems like they must be doing something right.
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ontheedgeandscaredtodeath
Social climber
SLO, Ca
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Jun 22, 2017 - 03:48pm PT
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Dunno about profitability but I can't think of a gym that's gone out of business. I even just now googled a gym I visited in Tallahassee, Fl., which must be hundreds of miles from any rock climbing.
That was like 20 years ago and it looks like it is still chugging along.
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blahblah
Gym climber
Boulder
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Jun 22, 2017 - 04:05pm PT
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Can't answer that, but what I've seen is that they make most of their income from families, i.e. kid's birthday parties.
With all due respect, that sounds like the typical old fart answer and stereotype from "the old days."
The new gyms in the Front Range (Colorado) are large-scale operations with large climbing (rope and bouldering) facilities and yoga and fitness classes and rooms. They may well have birthday parties, but I basically never see then (maybe I'm there at the wrong times), and I highly doubt those are "most of their income." (If so, they are running a crazy operation, where "most of their income" doesn't relate to the vast majority of the operation.)
Anyway, based on the number (and size) of new gyms opening here, there is clearly some sort of money being made, or we have the world's dumbest investors.
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The Alpine
climber
The Sea
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Jun 22, 2017 - 04:45pm PT
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Absolutely profitable, and the statistics would most likely blow your mind.
However, there's a large barrier to entry. Startup costs are not insignificant and are well into the millions. Which begs the question: if you have that kind of capital to spend, is your money best spent in a climbing gym?
Oh, you're gonna get a bank loan? Well even if you're projected budget is ONLY $2 million, AND you're able to finagle an SBA loan, you're still going to need at a minimum $200k in cash to fund the loan. And then there will be overages, so plan on another 6 - 10 minimum%.
If you can make those numbers work, then yes, a GOOD climbing gym is profitable. Your competition is the likes of Planet Fitness, La Fitness, etc...
Here's a stat from Rock Gym Pro, a climbing gym operations software company:
over 500 facilities in multiple industries are using RGP to run their entire operations – and Rock Gym Pro is processing over $1,000,000 in transactions each day for these gyms
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Ksolem
Trad climber
Monrovia, California
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Jun 22, 2017 - 05:41pm PT
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A bouldering gym seems like a better choice for a one-off, capital investment and space requirements are much lower. Finding existing industrial space with 30+ft clear spans is not as easy as you'd think, and if you want a 70' clear span, better plan on building from scratch.
I'm not sure if they have 70 ft., but Berkeley Ironworks, Planet Granite, and Stronghold in downtown L.A. have plenty of height and are in re-purposed buildings. Is there a climbing gym out there that was built from scratch? Just curious, that sounds like an over the top investment.
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Reilly
Mountain climber
The Other Monrovia- CA
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Jun 22, 2017 - 06:50pm PT
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Profitable? Well, maybe more so than renting toilet paper, but only just.
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blahblah
Gym climber
Boulder
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Jun 22, 2017 - 09:48pm PT
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KSolem--most of the gyms in the Front Range (Colorado), and I believe all of the major players, are built-from-scratch. That wasn't the case 20 years or so ago, but is has been for some time.
That's one reason why the "they make their money from birthday parties" line doesn't seem right to me--these are big, multi-million dollar operations, and the vast majority of the facilities clearly have nothing to do with parties. (I do think that may be one source of income.)
Edit--not sure what's going on in California--but in Colorado, there are many large, obviously expensive operations going in now. The investors may be making a mistake, but with the money that's involved, I have no doubt that they are doing at least some sort of normal business diligence that goes with multi-million dollar investments. Some of the comments seem to have different types of operations in mind.
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skcreidc
Social climber
SD, CA
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Jun 22, 2017 - 10:34pm PT
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Mesa Rim: the Mission Valley location is definitely built from scratch.
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Cole
Trad climber
los angeles
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Jun 22, 2017 - 11:40pm PT
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The new gym in Palm Springs was built from scratch. Made from some weird styrofoam cinder blocks too. Always seemed odd to me because the gym is in a industrial complex with seemingly many other big buildings. Also Palm Springs isn't LA with a premium on space so I would think there would be multiple existing sites that would be great for a gym rather than build one ground up. Not only that, but they built the building from scratch and its not even that good, like they purposely designed and built a B- gym, why the heck would you do that?!
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Ksolem
Trad climber
Monrovia, California
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Jun 22, 2017 - 11:44pm PT
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Mesa Rim: the Mission Valley location is definitely built from scratch.
I'll be seeing that place next week. Cool. From their webste it looks like they have a lot going on there. That co-working space looks like a great thing.
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Bruce Morris
Trad climber
Belmont, California
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Jun 23, 2017 - 12:41am PT
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The money in climbing gyms comes from kids. Regular membership provides a fluctuating if working base. Profit varies a lot even in large scale operations.
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Gunkie
Trad climber
Valles Marineris
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Topic Author's Reply - Jun 23, 2017 - 04:04am PT
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Great information here. Thanks to all. 'Climbing Business Journal'? Wow, the industry is far more mature than I envisioned, even visiting gyms all around the US while traveling (for my real business). I've been to Mesa Rim, great gym and I had a lot of fun. Plenty of interesting boulder problems that I could do and the crack routes are awesome. Loved the points about route setters. Yes, I have encountered the 16 y.o. local hotshot setting V0+ routes that have moves that I could only get with a full set of hooks and a Lovetron.
Sounds like economies of scale are the real path to long term profitability. And it sounds more like my real job than I'd like. Still pondering.
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Gary
Social climber
Desolation Basin, Calif.
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Jun 23, 2017 - 06:03am PT
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I know someone who had a big investment at what was a new gym. Kris and Reilly will know it, it's the gym on Santa Anita across from REI.
I don't know the particulars, but I do know he got burned big time.
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trailridge127
Trad climber
Loveland, CO
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Jun 23, 2017 - 07:21am PT
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Inner Strength in Fort Collins just closed. After a long run over 20 years?
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10b4me
Mountain climber
Retired
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Jun 23, 2017 - 07:33am PT
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I know someone who had a big investment at what was a new gym. Kris and Reilly will know it, it's the gym on Santa Anita across from REI.
I don't know the particulars, but I do know he got burned big time.
That gym is now up for sale.
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10b4me
Mountain climber
Retired
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Jun 23, 2017 - 08:58am PT
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I think to be a successful business owner you have to love actually being in business. Making payroll, picking a new insurance provider, getting your HR stuff right, financial planning, hiring, firing, counseling and training, stretching out accounts payable, tightening down accounts receivable, cash flow cash flow cash flow; accountants.
Doesn't matter what the business might be doing, all of the above apply.
My opinion: you gotta love it. Because if you don't? You'll hate it.
Think of all the startups that fail. A good number of them fail because well-intentioned folk decide to try to make a living doing what they love; restaurants, gyms, gear mfg, whatever; but are lacking in business skills and acumen. Most of them are doomed from the inception, sadly.
I'd hate owning a gym. I'd hate owning and having to run any business. Been there, done that, made money and sold out. I wanted my personal life back, and got it. I was much happier working for and selling to those who love doing it. I didn't.
I watched a friend first dream and then open his own climbing gym. It wasn't pretty. Getting your ass strapped to a losing proposition can have some serious repercussions in the rest of your life. Be careful what you wish for :)
I think it would be doubly hard in a niche industry.
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