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Key Takeaways
- Gym operations require a substantial fixed overhead starting at $56,184 monthly, driven primarily by facility lease and base payroll expenses.
- To manage the initial burn rate and cover $605,000 in CAPEX, the gym needs a minimum operational cash buffer exceeding $286,000 before reaching its projected six-month breakeven point.
- While the commercial lease is the largest single non-payroll cost at $15,000, base payroll expenses of $32,084 are a major fixed outlay that scales quickly with staffing needs.
- Achieving the projected 21-month payback period is entirely dependent on maintaining an extremely high initial Trial-to-Paid Conversion Rate of 400% as outlined in the financial model.
Running Cost 1 : Commercial Lease
Rent Commitment
Your facility rent is a fixed $15,000 per month commitment. This cost is the single largest operational drain outside of payroll expenses, which start at $32,084 monthly. You must ensure revenue covers this base rent before factoring in marketing or utilities.
Fixed Space Cost
This $15,000 covers the physical space for all equipment and classes. You need the signed lease term and the negotiated rate per square foot to confirm this number. It’s the foundation of your fixed overhead, dwarfing utility costs of $3,500.
- Lease term length dictates commitment.
- Fixed monthly payment is non-negotiable.
- Excludes tenant improvement allowances.
Managing Occupancy Risk
Since the lease is fixed, management means driving utilization fast. If membership conversion lags, this high fixed cost quickly pushes you underwater. Avoid signing a long-term agreement, say five years, until you validate demand in the target metropolitan area. Defintely secure a favorable exit clause.
- Push for shorter initial lease terms.
- Negotiate rent abatement periods.
- Ensure operating expense caps are set.
Fixed Cost Leverage
With $15,000 rent and $32,084 in base payroll, you have nearly $47,000 in unavoidable fixed costs before utilities or marketing. Every new member must generate enough contribution margin to chip away at this high base before you see true operating profit.
Running Cost 2 : Base Payroll Wages
Payroll Baseline
Base payroll costs hit about $32,084 monthly in 2026. This covers 80 full-time equivalents (FTEs) spread across six distinct job roles needed to run the facility. This is your primary personnel expense before adding variable commissions.
Staffing Cost Detail
This $32,084 estimate represents the fixed salary component for your initial operational team size. You need confirmed salary bands for those 80 FTEs across the six defined positions to lock this number down. This cost is critical because it anchors your minimum monthly burn rate starting in 2026.
- Confirm salary assumptions for all 6 roles.
- Base calculation relies on 80 FTEs.
- This cost excludes variable sales commissions.
Payroll Control Tactics
Managing base payroll means controlling headcount growth relative to membership targets. Avoid hiring ahead of demand, especially for non-revenue generating roles. If onboarding takes longer than planned, you defintely risk paying salaries without corresponding revenue flow.
- Stagger hiring to match membership ramp.
- Cross-train staff to cover multiple roles.
- Benchmark salaries against local metro averages.
Payroll vs. Lease
Personnel costs dwarf other fixed overheads in this model. At $32,084, base payroll is over twice the $15,000 monthly commercial lease. This ratio shows personnel is the main driver of your structural fixed costs, demanding tight management of the 80 FTEs ratio against membership volume.
Running Cost 3 : Utilities and Energy
Fixed Utility Hit
Your utility budget, covering electricity, water, and gas, is set at a stiff $3,500 fixed rate monthly. This high baseline is driven by running premium fitness equipment and supporting heavy member shower traffic. This cost is non-negotiable unless usage patterns change significantly.
Budgeting Utility Load
This $3,500 estimate covers all operational energy and water needs, unlike variable marketing spend. You must confirm this figure using quotes based on expected square footage and anticipated peak load from cardio machines and HVAC systems. Since it's fixed, it sits above the $32,084 payroll and below the $15,000 lease payment in the fixed cost stack.
- Confirm peak HVAC load.
- Estimate water use per shower.
- Factor in equipment run-time hours.
Cutting Utility Drain
Managing this fixed utility expense requires infrastructure changes, not just behavior shifts, given the heavy equipment load. Focus on energy-efficient HVAC systems and low-flow showerheads to see real savings. Avoid the common mistake of underestimating peak demand charges from large equipment startups; you should defintely model that worst-case scenario.
- Negotiate fixed rate contracts.
- Install smart metering now.
- Audit equipment energy ratings.
Fixed Cost Leverage
Because utilities are a $3,500 fixed cost, every new member added increases your contribution margin significantly. Unlike variable costs, this expense doesn't scale with membership count, making membership growth highly accretive once you cover overhead.
Running Cost 4 : Digital Marketing Spend
Marketing Burn Rate
Digital Marketing Spend starts high, pegged at 50% of revenue because customer acquisition costs (CAC) are expensive early on. You must have a clear path to drive this percentage down to 30% by 2030 as your membership base matures and organic growth improves. That reduction is non-negotiable for long-term margin health.
Cost Inputs
This variable cost covers digital efforts to bring in new members for your tiered subscriptions. Estimate it by taking your target CAC and multiplying it by the number of new members you need to sign up monthly. If you need 150 new members at a $150 CAC, the required spend is $22,500 that month. Honestly, this number will fluctuate wildly at first.
- Target CAC per new member.
- Required monthly member volume.
- Revenue scaling rate.
Efficiency Levers
Reducing this cost means improving member lifetime value (LTV). If members stay longer, the effective CAC drops significantly because you amortize the initial spend over more months. Focus on reducing early churn; a defintely better approach is maximizing word-of-mouth referrals from happy members. Target a 10% lift in organic sign-ups annually.
- Boost member retention rates.
- Increase organic sign-ups.
- Optimize ad creative performance.
Margin Impact
If marketing stays locked at 50% past 2028, your gross margin gets squeezed hard. Remember, instructor fees are already 15% of revenue, plus consumables at 10%. Missing the 30% marketing target means your total variable costs stay above 95% of revenue, leaving almost nothing to cover your $15,000 lease and $32,084 payroll.
Running Cost 5 : Maintenance and Cleaning
Maintenance Costs
Your facility needs $3,000 monthly for upkeep to keep members happy and machines running. This covers $1,000 for general maintenance and $2,000 for cleaning services. Neglecting this fixed cost directly impacts member retention rates.
Cost Breakdown
This $3,000 monthly spend is fixed, meaning it doesn't change with membership volume. The $1,000 maintenance budget handles preventative checks on cardio and strength equipment. The $2,000 cleaning budget ensures the gym meets hygiene expectations for your 25-55 target market.
- Maintenance: ~$1,000/month
- Cleaning: ~$2,000/month
- Total Fixed: $3,000/month
Keeping Costs Down
You can't skimp on cleaning; dirty locker rooms drive churn defintely fast. For maintenance, prioritize preventative care over emergency repairs, which are always more expensive. Negotiate annual contracts with vendors instead of paying month-to-month rates.
- Preventative maintenance saves money.
- Negotiate annual service contracts.
- Hygiene directly affects retention.
Retention Link
Think of this $3,000 as insurance against member churn. If your facility feels dated or unclean, members leave, spiking your acquisition costs. This expense is non-negotiable for maintaining the premium feel your model promises.
Running Cost 6 : Consumables and Instructor Fees
COGS: Instructor Fees and Amenities
Instructor Fees and Consumables together form 25% of your total revenue, making them the primary variable component of your Cost of Goods Sold (COGS). Managing these two inputs—the 15% paid to instructors and the 10% for amenities—is crucial for hitting gross margin targets immediately after membership sales close.
Cost Breakdown
Instructor Fees are set at 15% of revenue, directly tied to class volume and membership tiers. Consumables, covering things like towels and cleaning supplies for member amenities, are budgeted at 10% of revenue. To model this accurately, you need projected revenue streams by membership tier to apply these percentages correctly. This is defintely a variable cost structure.
Optimization Levers
Controlling the 15% instructor fee means optimizing class scheduling to maximize attendance per session. For consumables, focus on bulk purchasing agreements for amenities to drive that 10% down closer to 8% or 9%. Avoid overstocking supplies, which just ties up cash.
Margin Impact
Since fixed costs like the $15,000 lease and $32,084 payroll are high, every point saved on this 25% variable COGS directly flows to the bottom line. Focus on instructor efficiency and smart inventory management for supplies to improve near-term profitability.
Running Cost 7 : Software and Security
Fixed Tech Overhead
Software subscriptions and security systems combine for a fixed $1,400 monthly cost, which is non-negotiable for managing bookings and physical access control. This $1,400 must be covered before you earn your first dollar of membership revenue.
Mandatory Cost Breakdown
Software subscriptions are $800 monthly, handling your flexible booking engine and member data. Security systems add $600 for facility access control, ensuring only paying members get in. These two line items are fixed overhead, just like your lease. Honestly, you can't run a modern gym without them.
- Software covers booking and CRM.
- Security covers facility access.
- Total fixed cost: $1,400 monthly.
Controlling Tech Spend
Your main lever here is vendor negotiation and usage discipline. Audit software seats quarterly to ensure you aren't paying for inactive users, which can save defintely 10% of the $800 fee. Look for bundled pricing across your booking platform and security monitoring services to reduce the total spend.
- Bundle vendor services for discounts.
- Audit software seats quarterly.
- Avoid paying for unused features.
Prioritize This Payment
If the $1,400 payment lapses, you halt revenue generation because the booking platform stops working, and you lose facility security control. Treat this expense as mission-critical, right behind payroll and rent.
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Frequently Asked Questions
Fixed operating expenses, including rent and base payroll, start near $56,184 per month in 2026 Variable costs add to this, but the model shows a strong EBITDA of $199,000 in the first year, achieving breakeven in six months (June 2026);