Beating the odds: 10 lessons from 10 years in business

On January 24th, 2014 we celebrated the 10-year anniversary of NorCal Strength and Conditioning (formerly CrossFit NorCal, the fourth CrossFit affiliate). I must say making it to the 10 year mark feels pretty damn good. I vividly remember our first trip to the local Small Business Association for some guidance and assistance with QuickBooks. The counselor we met shared the ever-uplifting fact that most small businesses fail within the first year. And something like 90% of those that make it through year one fail by year five. Not only has NorCal officially beaten the small business odds, but we’ve grown a well-respected business (named one of the Top 30 gyms in America by Men’s Health), provide a wonderful service to many in our community, and provide a way for our very talented coaching staff to do what they love on a daily basis, with health insurance, and retirement to boot.

Has it been easy? Absolutely not.

We bootstrapped our gym into existence at a time when terms like strength and conditioning, functional fitness, and CrossFit were virtually unknown. The early years were comprised of a lot of educating people about what we did, why they should try it (lift weights? climb ropes? flip tires?), and why they should pay more than $40/month (the price of their current gym membership) when we weren’t open 24 hours, didn’t have a pool, sauna, or locker rooms.

We’ve come a long way since we opened our doors in 2004, originally leasing 350 square feet in the back of a martial arts studio, to our current 6000-square-foot facility (with two other locations in between). We made a ton of mistakes, struggled, took risks, made adjustments, and have worked tirelessly to build NorCal into what it is today—a phenomenal community and a successful business.

Here are 10 lessons, gleaned from what we’ve learned, often the hard way, that contributed to our hitting the ten-year mark.

1. Implement, evaluate, scrap what’s not working, repeat!

There’s a good chance that your business model on day one won’t be your model on day 365, or year four for that matter. Same goes with your staff compensation model, your program offerings, and so on. Don’t be afraid to try new things. Experiment to see what works and what doesn’t, and adapt accordingly. If you recognize something’s not working, don’t drag your feet—give it some careful thought, and then make a change!

In late 2005 we decided to completely change our business model. We moved from a group-class fitness model and became a strictly private training business. Ten years ago before micro gyms were commonplace, the primary pricing framework for fitness was the standard gym. What we were offering was significantly different: coaching in a group environment. Yet we still struggled with comparisons to the $40-per-month gym membership. We ended up pricing ourselves well below our value in an attempt to come close to what the market viewed as our comparable and, as a result, were barely able to cover our overhead.

Making the decision to move to a private training-only facility meant letting our 60-some-odd members (at the time) know that we would no longer be offering group classes. In hindsight, we could have opted to dramatically reduce the class offerings to three sessions a week and retain some fraction of our existing base (and the associated revenue). But instead we essentially fired them. All 60.

While a bit scary at the time, it was a great move. Prospective clients looking for private training understood the costs—they could pay $50/hour at the big box gym or $50/hour with us. We still taught the deadlift, tire flips, and rope climbs, but in a one-on-one session instead of the group environment. People loved the movements, loved the results, and word of mouth grew quickly.

Within the first month our private training revenue eclipsed the monthly revenue we had previously collected on our 60 underpriced group memberships. For the first time in two years we were able to pay ourselves. This was a huge milestone!

2. Be creative and resourceful with marketing—but don’t get discouraged by the results

Building a business on a limited budget requires creativity—especially in the marketing department. Most if not all of our early guerilla efforts didn’t provide nearly the return we had hoped, and while discouraging at the time they now provide some funny stories.

A couple of stories about failed guerilla marketing tactics

• Chalk it up to experience
  One fine Saturday back in 2005, our early partner Greg Everett and I walked about four miles from Chico State University to our gym, each with a backpack filled with sidewalk chalk. We took turns squatting down to write crossfitnorcal.com every 15ft the entire length of the bike path, doing about 500 squats apiece! End result: 0 clients, sore legs, and a report from a few of our cycling clients that the cyclists in town were irritated that we graffitied “their” bike path. Fortunately, it didn’t rain for almost a month afterward so our graffiti earned us a lot more goodwill!

• Grab, pitch, and run
  Also in 2005, Robb, Greg, and I volunteered as finish-line crew for a local 5K as well as to purchase the water for folks crossing the finish line—a great marketing opportunity that got our creative juices flowing. We purchased several flats of Kirkland bottled water at Costco. Greg designed some cool labels with action pics of clients working out and an offer of “train free for a week!” that we printed in color on regular 8.5x11 paper and cut into strips. We spent almost an entire day spraying the backs of these labels with spray adhesive and affixing them over the Kirkland labels on the water bottles. (By the way, I’m not sure if this is legal, so please don’t attempt this!) We put the bottles in an enormous ice chest at the finish line of the race. As the runners crossed the line, they grabbed a bottle, downed it in one gulp, and immediately pitched it to the side! Not a single runner even looked at the label! End result: 0 clients and lots of wasted time. Our brilliant idea was a bust.

3. Networking and word of mouth are your trump cards

In the beginning you may find yourself flailing as you work to get the word out that your business exists. Networking was, by far, our most measurable return on investment. LeTip, BNI, and other networking organizations let you connect with local professionals who each are connected to people who may be interested in and benefit from your services. The referrals from my early days in LeTip had a dramatic effect on our business. Some of our most long-term personal training clients originated as LeTip referrals.

4. Choose a brand that reflects you, and then make it your own

Your business name should authentically reflect who you are and what it is that you do, so choose it carefully. If you’re affiliated with a larger organization, it may be necessary to brand yourself apart from the parent organization in order to distinguish yourself (provided you aren’t part of a formal franchise agreement). You’re building a reputation and pouring your heart and soul into a business that is or will soon become your livelihood, and it’s important that you have control over what that brand represents. If you’re an affiliate, consider dual branding, using both your legal name and your affiliate name. We opened as CrossFit NorCal, moved to NorCal Strength and Conditioning as our legal name with CrossFit NorCal as the DBA, and ultimately rested on NorCal Strength and Conditioning.

5. Create a client path that supports conversion and retention

As I mentioned earlier, when we first opened we had a come-one, come-all, group-class model. New clients were invited to try a few classes for free before we even broached the subject of membership. A large number of clients brought friends and family, but our conversion rates were poor. We didn’t have a method to introduce these new folks to our movements or our community, and consequently many were intimidated and slipped through the cracks or felt that our program wasn’t a good fit. We were failing in how we introduced people to our program, and as a result our numbers suffered.

After operating as a private training-only business for 18 months, we decided to add group classes back into the mix in late 2007. We knew what hadn’t worked the first time around so we made some key changes. We wanted all new clients to be exposed to our movement base in a more controlled manner. Initially, we required 12 sessions of private training as a prerequisite to group classes but quickly discovered that the price point of those 12 sessions was cost-prohibitive to many who would otherwise be great group-class candidates.

I created the On Ramp program as a way to introduce new clients to our methodology in an non intimidating beginner’s-only group environment with a friendlier price point. It was a hit. We now had a fixed entry point and could measure new signups and conversions into longer term memberships. New clients loved that they were being safely prepared to succeed in our group classes, and our program started to really take off.

As an aside, it makes me smile when I see CrossFit affiliates across the country implementing variations of our original NorCal On Ramp. Not only did the program help transform our gym, it’s now helping other businesses and their clients as well.

6. Don’t let setbacks set you back

In 2004, we moved from the shared space in the martial arts studio and rented 1000 square feet of a 10,000-square-foot warehouse owned by a woman with a furniture import business, the Red Egg building. The remaining 9000 feet were filled with tables, chairs, armoires, and so on. It was affordable, in a reasonably accessible part of town, and, despite its many flaws, we loved the space. Shortly after moving in and immediately after paying $3500 to have our 15-foot-tall pull-up/rope-climb structure built (this was many years before Rogue made outfitting a gym incredibly easy), we received notice from the landlord that she had decided to liquidate her furniture business and rent the remaining 9000 square feet to a local welding company. Our fitness business was soon to be inundated by flying sparks and welding fumes. Robb was out of the country working with a client and I literally cried on the phone telling him that after finally getting settled we needed to find another space and move AGAIN.

Of course we rallied, found another space (which, coincidently, was much nicer), and kept moving forward.

7. Listen to your gut

Any decisions you make have to feel “right.” Even if it makes sense on paper and the numbers look good, if it doesn’t feel right in your gut, don’t do it. This applies to everything from signing your first lease, expanding, bringing on a partner, and hiring and firing staff.

Be particularly sensitive to your gut when making staffing decisions, as they can be quite impactful to your client base. In a service business and particularly a fitness business, your staff interact with your clients multiple times a week, if not daily. They bond and build relationships. For this reason any changes in staff can be wildly unpopular (and your clients will always have input whether you welcome it or not). If you have the sense that someone isn’t working out, let them go sooner as opposed to later. The longer you avoid that confrontation, the more exposure that person has to your client base and your other staff, and the greater the potential disruption when you ultimately let them go.

8. Seek out a mentor

One of the great things about offering private training is that many clients who can afford to consistently pay private training rates are accomplished, financially successful individuals, and that makes for some great conversations and opportunities to learn. I had a highly successful local businessman start private training with me in early 2008. He loved what we were offering, loved the community, was keenly interested in helping us succeed, and proceeded to mentor me. I remember him directly asking me after one of our evening sessions, “Do you have projections?” Of course I knew how many clients I was hoping to gain that year, but I had nothing formal. I had a number in my head and no path to get there. He proceeded to help me build a projection spreadsheet that factored in conversion rates and general attrition and revenue from our various program offerings. He showed me how many clients needed to come through the door each month, how many needed to convert in order to hit my targets, and how to evaluate staff compensation. That one spreadsheet and our many conversations had a huge impact on our business’s success. I can’t emphasize enough the importance of a knowledgeable mentor.

9. Find and promote good leadership

NorCal is a family-owned business. My sister, Chrissy Gower, started training for us in 2009, and her husband Shawn, shortly thereafter. In 2011 we brought them on as part owners. I had long been wanting to leave Chico (great little city but not my long term residence of choice), and the timing was right. Robb and I both felt strongly that a microgym requires an owner presence to truly thrive and didn’t feel comfortable leaving without entrusting the day-to-day operations to people who cared about the business as much as we did—people with an owner mindset.

There is a saying that what it takes to get from point A to point B may not be what it is that takes you from point B to point C, and we have certainly found this to be true. Shawn and Chrissy have been incredible stewards of NorCal, and I couldn’t be more proud of the way they are nurturing both the community and the business. While Robb and I started NorCal, built the foundation, and stoked the fire, their leadership has been instrumental in taking it to the next level.

10. Celebrate and strengthen your community

Building and supporting a solid team of coaches should be a continual focus. The enthusiasm and knowledge your instructors bring to each session are a large part of why clients are attracted to and remain at your business. That and the relationships they form with other clients. And while the daily client-client and client-staff interactions provide the foundation, you can strengthen your community by offering additional events and challenges that bring people together in a different way. Potlucks, fitness and nutrition challenges, and competitions can all help to foster community. Shawn and our NorCal team have done a tremendous job with several in-house challenges over the last few years. While some are opened up to other gyms in the area, others are strictly for our NorCal clients—and you don’t have to be a top-level competitor to participate.

I’m convinced that the relationships that your clients form at your business, both with your staff and with other clients, are what ultimately lead to your business’s success. Of course you need to provide a great service and deliver on results, but fostering a supportive, encouraging, and drama-free community is paramount to going the distance.

Here are a few photos: