26 Crucial Business Lessons from Building a Successful Gym Chain

Building a successful business from scratch is no easy feat. It requires grit, determination, and the ability to learn quickly from both successes and failures. One entrepreneur who exemplifies this journey is Alex Hormozi, who built a thriving chain of gyms in his early 20s before going on to even greater success as a business coach and investor. In this article, we'll explore the 26 crucial lessons Alex learned during his time building and scaling his gym business - lessons that can be applied to ventures across many industries.

The Early Days: Taking the Leap

Alex's journey into entrepreneurship began when he was just 24 years old. He had saved up $50,000 from his job and decided to take the plunge into starting his own gym. This was a risky move, especially considering the economic climate at the time wasn't particularly strong.

He spent $10,000 to join a gym owners' mastermind group (despite not actually owning a gym yet), then invested $34,000 to open his first location. This left him with just $6,000 in the bank - barely enough to cover one month's rent of $4,972.

Despite the precarious financial situation, Alex managed to bring in $4,972 in cash from memberships in the very first month - exactly matching his rent payment. While this may seem like an incredible stroke of luck, it was actually the result of Alex's hustle and willingness to try new marketing tactics like Facebook ads, which were relatively new at the time.

Lesson 1: When You're Poor, Barter

One of the first big lessons Alex learned was the power of bartering when cash is tight. He traded gym memberships in exchange for services he needed, like cleaning, computer repairs, and even food prep. This allowed him to access resources and talent that he otherwise couldn't have afforded.

For example, he got his first printer and scanner from an IT company owner in exchange for personal training sessions. He had another client do his laundry in exchange for gym access. By bartering creatively, Alex was able to conserve his limited cash and focus all his energy on growing the business.

Lesson 2: Be Creative and Check Your Ego

Alex emphasizes that being willing to ask for help and get creative with solutions was crucial in the early days. He notes that many aspiring entrepreneurs today try to project an image of success on social media before they've actually achieved it. This can backfire by making people less likely to offer assistance.

Instead, Alex recommends being honest about your situation and needs. People are often more willing to help someone who is open about trying to build something from scratch. Checking your ego and being willing to ask for favors can open many doors.

Learning the Ropes: Tactics and Strategy

As a young entrepreneur with no prior gym ownership experience, Alex had to learn quickly to avoid common pitfalls. Joining the gym owners' mastermind group proved invaluable, as it gave him access to the collective wisdom of more experienced operators.

Lesson 3: Seek Out Mentors and Learn from Others' Mistakes

Alex made it a point to ask the other gym owners in the group about every aspect of the business - from choosing locations to equipment purchases to operational best practices. This allowed him to avoid many of the costly mistakes that new gym owners typically make.

He also visited other gyms in the mastermind group on weekends, shadowing the owners and peppering them with questions about their processes and decision-making. While not all the advice worked perfectly, it gave Alex a huge head start compared to trying to figure everything out on his own.

Lesson 4: Focus on Pre-Sales

One of Alex's biggest early mistakes was rushing to open his gym as quickly as possible so he could start generating revenue. In hindsight, he realized a better approach is to focus on pre-sales and marketing before the physical location is ready.

For his later gym openings, Alex would market and sell memberships for 3 months before the actual opening date. This allowed him to build up cash reserves and a strong member base before taking on the costs of running the physical location.

Lesson 5: Test Markets Before Committing

As he looked to expand to new locations, Alex developed a clever system for evaluating potential markets. He would run small test ad campaigns in 5-10 different areas, spending $500-1000 in each. The markets with the lowest lead costs became the prime candidates for new gym locations.

This data-driven approach allowed Alex to dramatically reduce the risk of opening in a poor location. Even if he spent $5,000-10,000 on these test campaigns, it was far cheaper than signing a multi-year lease in the wrong area.

Refining the Model: Offers and Operations

As Alex gained experience, he continued to refine his business model and marketing approach. Several key insights helped drive rapid growth.

Lesson 6: Develop a Compelling Core Offer

Alex's gyms found great success with a "6-week challenge" offer that promised dramatic results in a short timeframe. Members would pay $500 upfront and get their money back if they lost 20 pounds in 6 weeks.

This offer was compelling for several reasons:

• The defined timeframe created urgency
• The money-back guarantee reduced risk for the customer
• The dramatic promised results were exciting and motivating
• The $500 upfront payment gave the gym much-needed cash flow

Compared to the low-cost trial offers most gyms were using, this high-ticket challenge allowed Alex's gyms to spend far more on marketing while still maintaining strong profitability.

Lesson 7: Use Powerful Guarantees

Alex found that strong guarantees were key to overcoming customer hesitation. He used two main types:

1. Service-based guarantee: If the customer didn't achieve the promised result, the gym would continue working with them until they did.

2. Unconditional guarantee: If at any point during the 6 weeks the customer felt they hadn't received $500 worth of value, they could get a full refund.

These guarantees made the offer nearly irresistible while also motivating the gym staff to deliver an exceptional experience.

Lesson 8: Focus on Accountability

Alex's early challenge programs had a relatively low success rate of only 15% of participants hitting their weight loss goals. However, by implementing stronger accountability measures, he was able to increase this to nearly 80% over time.

Key accountability tactics included:

• Regular weigh-ins
• Having members publicly document their progress
• Frequent check-ins and reminders from staff
• Simplifying meal plans and workouts to increase adherence

Lesson 9: Sell the Vacation, Not the Flight

When selling gym memberships or weight loss programs, Alex learned to focus on the end result rather than the process of getting there. He uses the analogy of selling a vacation - you want to paint a vivid picture of relaxing on the beach, not dwell on the hassles of air travel.

In practice, this meant emphasizing how great members would feel after losing weight and getting in shape, rather than fixating on the diet and exercise required to get there.

Lesson 10: Use Bonuses Instead of Discounts

When customers asked for discounts, Alex found it much more effective to offer additional bonuses or value-adds instead of lowering the price. This preserved the perceived value of the core offer while still giving the customer a "win."

For example, he created specialized meal plans, at-home workout guides, and other resources to overcome specific objections. This allowed him to close more sales without resorting to discounting.

Scaling Up: Lessons in Growth

As Alex's gym business expanded to multiple locations, he encountered new challenges around operations, marketing, and management.

Lesson 11: Don't Overspend on Unnecessary Upgrades

For his second gym location, Alex spent $250,000 on high-end equipment and fancy build-outs like glass walls and granite countertops. However, this location ended up performing no better than his first bare-bones gym.

He realized that customers cared far more about the quality of training, accountability, and community than they did about fancy amenities. This taught him to focus spending on the core elements that actually drove results and retention.

Lesson 12: Nail It Before You Scale It

Alex cautions against expanding too quickly before you've truly perfected your model. He recommends waiting until your first location can run without you for at least 6 months while continuing to grow before considering expansion.

Rushing to open new locations before the model is dialed in often leads to replicating inefficiencies and problems across multiple sites.

Lesson 13: Embrace "Unscalable" Tactics Early On

In the early days of a business, it often makes sense to do things that won't scale long-term. For example, Alex had one high-paying personal training client that allowed him to cover his personal expenses while reinvesting all the gym's revenue back into growth.

While this wasn't part of the long-term business model, it gave him the runway to build the gym business without taking on debt or outside investment.

Lesson 14: Teaching is Different Than Doing

As his business grew, Alex had to shift from being the star performer to teaching others how to excel in sales, training, and operations. This required developing a whole new skill set around simplifying complex topics and creating repeatable systems.

He found that breaking processes down into simple frameworks and checklists was key to successfully transferring knowledge to his growing team.

Lesson 15: Simple Scales, Fancy Fails

Building on the previous point, Alex emphasizes the importance of keeping systems and processes as simple as possible when trying to scale. Overly complex sales scripts or training protocols might work for a star performer, but they often fall apart when trying to replicate across a larger team.

He recommends continually looking for ways to simplify and streamline as you grow.

Lesson 16: Leverage Zero-Cost Upsells

Alex discovered that selling supplements and other retail products to gym members allowed him to recoup his marketing costs much faster. Since these products had high margins and required no additional labor to sell, they dramatically improved the unit economics of acquiring new customers.

This allowed him to spend more aggressively on marketing, fueling faster growth. He recommends all service businesses look for complementary product offerings that can serve as zero-cost upsells.

Lesson 17: Run Regular Internal Promotions

To combat member boredom and boost revenue, Alex would run specialized 6-week programs for existing members focused on specific goals like building glutes or abs. These internal promotions were highly profitable since they required minimal extra marketing spend.

He recommends service businesses aim to run some type of internal promotion or upsell campaign every quarter to maximize customer lifetime value.

Lesson 18: Focus on What Works, Not Why

Alex cautions against getting too caught up trying to understand exactly why certain marketing messages or business tactics work. Instead, he recommends building up a "toolkit" of strategies that have proven effective through testing, even if you can't fully explain the psychology behind them.

This pragmatic approach allows you to make faster progress instead of getting bogged down in theory and analysis.

Lesson 19: Don't Rely Solely on Third-Party Platforms

Many of the gyms in Alex's mastermind group relied heavily on Groupon to acquire new customers. When Groupon changed their policies, these gyms saw their lead flow dry up overnight.

This taught Alex the importance of developing multiple marketing channels and not becoming overly reliant on any single platform or partner that you don't control.

Managing People and Partnerships

As his business grew, Alex had to learn how to effectively manage employees and business partners. This area provided some of his most valuable (and sometimes painful) lessons.

Lesson 20: You Get What You Pay For With Talent

Alex found that paying above-market rates allowed him to attract better quality employees much faster. While it's possible to find great people at lower wages, it requires interviewing far more candidates and often involves more hands-on training.

He frames it as a choice between "grinding" (putting in more time and effort) or "paying" to level up your team more quickly.

Lesson 21: Use the Platinum Rule

The "golden rule" says to treat others as you want to be treated. The platinum rule takes this a step further: treat others as they want to be treated.

Alex learned this lesson when his star employee asked to step down from a management role and take a 50% pay cut to reduce stress, even though Alex assumed everyone was primarily motivated by money and advancement like he was.

This taught him to dig deeper to understand each team member's unique motivations and tailor his management approach accordingly.

Lesson 22: Maintain Professional Boundaries

In the early days, Alex was close friends with many of his employees. While this created a fun atmosphere, it made it difficult to have tough conversations or enforce standards.

He then swung to the opposite extreme of maintaining rigid professional distance. Over time, he found a middle ground where he could be friendly with employees while still maintaining clear boundaries and expectations.

One tactic he uses is explicitly stating when he's switching between "friend mode" and "boss mode" in conversations to create clarity.

Lesson 23: Align Incentives with Operators

As he expanded to multiple locations, Alex learned the importance of giving location managers a stake in the financial performance of their gym. He developed a profit-sharing model that allowed high-performing managers to earn well above their base salary.

This created alignment between the managers' incentives and the overall business goals while also providing a clear growth path for ambitious employees.

Lesson 24: Partner Wisely

Alex uses the acronym TEAM to evaluate potential business partners:

• Time: Do they have time you don't have?
• Expertise: Do they have skills or knowledge you lack?
• Assets: Do they bring valuable resources like an audience or distribution?
• Money: Are they providing needed capital?

He cautions against partnering just because you're friends with someone. The best partnerships bring complementary skills and resources to the table.

Lesson 25: Be Careful with Early Equity

Giving away equity in the early stages of a business is often necessary but can be very expensive in the long run. Alex recommends being as judicious as possible with early equity grants and ensuring they're tied to clear value creation.

He also notes that equity splits don't always need to be equal - they should be based on the relative risk and value each partner is bringing to the venture.

Lesson 26: Work Your Leads Aggressively

Alex found that personally following up with leads resulted in 3-4x higher conversion rates compared to when his staff handled lead nurturing. This showed him that improving lead follow-up processes often provided a bigger lever for growth than trying to acquire more leads.

He gives the example of a business owner who dedicates a full-time employee solely to calling new leads within 60 seconds of them coming in, resulting in a 55% lead-to-sale conversion rate.

Conclusion: Continuous Learning and Adaptation

These 26 lessons represent just a fraction of the insights Alex gained during his journey building a successful gym business from scratch. What stands out is his willingness to experiment, learn from both successes and failures, and continuously refine his approach.

While the specific tactics may not apply directly to every business, the overarching principles around marketing, operations, people management, and strategic growth are relevant across many industries. The key is to maintain a learning mindset and be willing to adapt as you encounter new challenges.

By sharing these hard-won lessons, Alex hopes to help other entrepreneurs avoid some of the pitfalls he encountered while accelerating their own path to success. Whether you're just starting out or looking to take your business to the next level, there are valuable insights here that can inform your strategy and decision-making.

Article created from: https://www.youtube.com/watch?v=unshZobTt6Q