How To Smartly Expand Your Business

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Expansion
By: Tino Fiumara

Almost anyone who has started a climbing gym has dreamed of expanding, but what it takes for an organization to exist in multiple locations means something different for everyone, as they all face their own unique challenges. Since the journey is different, the amount of time needed to be ready will also be different. What is certain is that a gym needs to have its systems as ironed out as possible before it endeavors to double its fun.

There are a majority of climbing gym owners that would agree that the early years are the down payment on future success. Lary Norin, co-owner of Rock Spot Climbing, an organization that is in the process of opening its fourth location, recounts that, “We went from paper and pencil to the technology that makes everything so easy now. A lot of the initial years were dedicated to developing how to operate.” Just because that ‘know-how’ is more accessible these days, it doesn’t make the task any less challenging.

Some gyms take the path of growing ’til they are ready, while others are more opportunistic about expansion. Lance Brock and Drew Sloss, the duo that started Climb Nashville, were amidst planning their first gym when the opportunity to buy the existing competition arose. They took the opportunity, stayed on course with their planning and were partners on two gyms within 13 months of having met; motivation can go a long way. Whichever way a gym chooses to expand they will all face the same challenges.

Capitalizing on a Plan

The resources most strained in an expansion are financial and human capital. Not only do you need your new project to come to fruition quickly and without issue, your current operation needs to operate flawlessly so as to not jeopardize cash flow and brand value while in such an exposed position. It takes an inordinate amount of planning to make sure an expansion to a new location does not negatively impact your operations.

From design through construction and implementation, being able to account for all elements that can lead to possible time delays and budget changes is critical. Opening late can mean overrunning the budget and also cause the market-entry to be mistimed, delaying the chronology from a preferred grand opening.

Great planning will also help secure the financing that will make an expansion possible. Raising the capital for a new location should not be as hard as the doing it the first time since the organization has an established track record, and likely has a relationship with a commercial banking institution. If a corporation can show a high enough Debt Service Coverage Ratio (DSCR), the relationship between a firm’s net operating income and the costs of servicing the debt required to expand, then it most likely can get a loan. In other words, with what is currently being earned before predicted future revenues, all of the costs of carrying debt can be covered.

However, the arguably greater challenge is in regards to human capital, in managing a team of people that are being asked to grow with the organization and to take on more responsibility. Not only will they be asked to train new staff in the culture, policies and practices of the organization, a few of them will be asked to be geographically flexible to ensure that the new facility rolls out under the ease of well-practiced hands.

“The hard part is never the money, it’s always about the people. You’re dealing with the expectations of customers and employee … I wasn’t prepared for that to be such a big part of the job,” explained Lance Brock of Climb Nashville. There is increased need for your staff to be at their best in dealing with not only the minutia of running a commercial recreational facility, but also the big picture of the organization.

Before heading out of town to open their new bouldering focused gym in South Boston, Lary Norin and Nadav Minkin, the owners of Rock Spot Climbing, took the time to speak about growing pains. They identified a key moment in their operational evolution right before the opening of their second facility. “We realized that we couldn’t be in two places at once … and that we needed people.” Not just any people, but reliable individuals who could pay consistent attention to the staff, programming, events & marketing, and to develop good policies and procedures.

Opportunity

Op·por·tu·ni·ty: noun. A set of circumstances that makes it possible to do something.

As beneficial as it is to identify new opportunities for the expansion of indoor climbing, it is equally important to go toward the future only after having maximized the current opportunity. If the in situ model hasn’t reached a point near saturation, then continue to refine it before doubling down.

In speaking about capturing the maximum business opportunity, Joel Graybeal of Triangle Rock Club offers that if you’re not already at 100% capacity, you should look at your business trends to determine when you will be. He impressed the importance of small business owners to see to it that they are operating at capacity and getting the most return out of their primary site before reaching for a second. Graybeal should know, he has helped Triangle Rock Club earn multiple awards for growth, profitability and small business stewardship.

Akin to capturing the opportunity, an organization should make sure it is fulfilling its vision. Using resources to support a capital good that doesn’t help realize the mission of the organization is counter productive and a drag on earnings. Though it wasn’t in their business plan, Climb Nashville smartly divested itself of an older facility before expanding because it did not fulfill the fitness component that they identify as being important to their brand.

The Power of Brand Value

Inherent in maximized opportunity is brand value. Brand is a result of the customer’s belief in the quality or the value of the product. The burden in indoor climbing is that a gym doesn’t sell a tangible good in the traditional sense; the product is the experience. It is difficult to divert resources without affecting the product, so it really does pay to be efficient.

Part of the marketing for a new location is already performed and paid for by brand value. If people associate the brand with a good experience, either from personal experience, through user-reviews, or via social media, then any new extensions of the brand will immediately benefit.

This value takes time to create and requires continual upkeep. It is the dedication to vision, planning, and maximized opportunity that forges brand success. The resources spent in the gradual development of a brand help make sure that the experience remains premium. Maintaining continuity in experience is exponentially more important as an organization endeavors to add locations.

There are some interesting things that a gym can do to create an instantly leverage-able asset as an element of brand marketing. Climb Nashville serendipitously choreographed the opening of their second location with their 10th anniversary and harnessed some unique marketing by working with a local brewer to create a special Hoppy Anniversary beer with 10 hops, one to celebrate every year Climb Nashville has been in business. These are the quirky initiatives that build a following around a brand.

Stepping Forward

Opportunities exist for new gyms all across the US, but the specialized nature of our industry’s product requires a lot of attention and care to ensure the best delivery; the progression of the industry relies on it. It is essential to understand a gym model’s full potential before enlarging its footprint. This makes sure the best product is being delivered, building the brand’s identity and keeping the bar high in an industry that needs to self-regulate the quality of the product.

Reaching toward new markets and taking the financial and logistical risks of expansion may not be for every organization. If a gym finds itself meeting the business practices outlined above then it may already have what it takes to expand, because it already knows what it means to be ready.