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Key Takeaways
- The financial model targets achieving operational breakeven within the first six months of launch, specifically by June 2026.
- Securing the initial $605,000 capital expenditure requires careful management to meet the minimum working capital need of $286,000 by the breakeven month.
- Success hinges on validating the premium $90/month tier by ensuring the Class Access membership mix grows to at least 45% of the total base.
- Managing the substantial $56,183 monthly fixed overhead, driven primarily by the 60-person initial staff, is critical to achieving the projected $199,000 Year 1 EBITDA.
Step 1 : Define Target Member & Offering
Pricing Architecture
Defining your membership architecture sets your blended revenue rate immediately. This mix is cruical because it dictates your Average Revenue Per User (ARPU), which is the key driver for covering fixed costs. If the initial sales mix is off, your revenue targets become unattainable, regardless of how many people you sign up. You need this foundation solid.
Mix Calibration
Based on competitive review, we project an initial split favoring the entry tier. The $40 Basic tier takes 45% of signups, $65 Class gets 35%, and the $90 All-Inclusive captures 20%. Here’s the quick math: the blended ARPU starts at $58.75 monthly ($18.00 + $22.75 + $18.00).
Step 2 : Detail Facility & Equipment Needs
CapEx Lock-In
This initial capital expenditure defines your physical footprint and quality promise for the membership base. You are committing $605,000 upfront to build the space and acquire the necessary gear. If you underspend on the facility now, you risk compromising the premium experience members expect from a modern health club. This spend is non-negotiable for launch quality.
The largest allocation is $250,000 dedicated to the facility build-out itself. Separately, $220,000 is set aside specifically for cardio and strength equipment purchases. We must have these assets fully operational and deployed by Q1 2026 to support the planned membership ramp. Delays here push back revenue realization, defintely.
Managing Asset Spend
To protect that $605,000 budget, lock down fixed-price construction bids immediately, even if the physical build starts later. Ensure equipment orders are placed with long lead times factored in, as supply chain issues still affect specialized fitness gear. The build-out cost is the primary area where scope creep happens fast.
Focus intensely on the $220,000 equipment line item. This directly dictates member satisfaction and retention rates, underpinning your UVP. Get firm quotes detailing warranties and service contracts upfront. You need to know the total cost of ownership, not just the sticker price, for every treadmill and weight rack.
Step 3 : Calculate Fixed Overhead
Determine Monthly Burn
Understanding fixed overhead sets the floor for your financial reality. These are costs that don't change with membership count, like rent and salaries. Getting this wrong means you won't know how many members you truly need to survive past Q1 2026. It’s the biggest lever for assessing defintely initial risk.
Summing Fixed Costs
Here’s the quick math on your base expenses. Take the $15,000 commercial lease and add the initial team wage bill of $32,083. This results in a baseline monthly burn rate of $56,183 before accounting for variable costs like marketing or utilities. This figure is critical for calculating the breakeven point in Step 6.
Step 4 : Model Membership Revenue & Mix
Fixed Cost Coverage
You need to know exactly how many paying members you must acquire monthly just to keep the lights on. Honestly, the data shows variable costs eat up 100% of subscription revenue in 2026. That means the recurring revenue stream provides zero contribution margin toward your $56,183 monthly fixed burn rate. So, the only lever available to cover overhead is that $50 one-time activation fee. To cover fixed costs in a single month using only this fee, you’d need 1,124 new paying members (56,183 / 50). This gives you a baseline target for acquisition volume.
Modeling Sales Mix Impact
While the subscription revenue doesn't cover fixed costs right now, you still need to model its expected value. We use the sales mix from Step 1 to find the Weighted Average Revenue (WAR) per member. The mix is 45% Basic ($40), 35% Class ($65), and 20% All-Inclusive ($90). The quick math shows the WAR is $58.75 monthly. If you can cut variable costs below 100%—say, down to 70%—that $58.75 suddenly generates $17.63 in contribution per member, which is defintely a better position.
Step 5 : Set Acquisition and Conversion Goals
Set Acquisition Volume
Setting acquisition goals links your marketing spend directly to membership growth. If you don't define the required volume, that $50,000 annual budget is just an expense, not a strategic investment. The main challenge is ensuring the marketing funnel converts efficiently enough to hit membership targets without burning cash too fast. You defintely need clarity here.
Model Funnel Efficiency
With a $50,000 budget aiming for a $15 Customer Acquisition Cost (CAC), you must secure 3,333 new paid members annually. This means every dollar spent must yield $0.20 in new member value, based on that CAC target. That volume is the non-negotiable output.
To hit that 3,333 member goal, you must model the internal efficiency of your pipeline. This is where your conversion rates matter. What this estimate hides is the raw lead volume required before those conversions happen.
- Target annual paid members: 3,333
- Required trial conversion factor: 300%
- Required paid conversion factor: 400%
If you need 3,333 paying members, those conversion factors dictate the exact number of initial marketing leads you need to generate from your budget. You can’t just hope for a 400% conversion from trial to paid; you have to engineer that outcome through strong follow-up.
Step 6 : Forecast Breakeven and Cash Needs
Breakeven Point and Cash Runway
Hitting breakeven on schedule is your first major validation point. The plan targets June 2026 for this milestone. Before that, you must cover the monthly cash burn until revenue catches up. This analysis highlights the peak funding requirement. You need enough capital to survive the ramp-up period without running dry. If you miss the target, your cash runway shortens defintely fast.
The $286,000 minimum cash balance needed in June 2026 is the number you must raise now. This figure absorbs the initial $605,000 capital expenditure (CapEx) deployed in Q1 2026 and covers the operating losses incurred while ramping membership toward the breakeven volume.
Managing the Cash Trough
Manage the cash trough by watching acquisition costs closely. Your $15 Customer Acquisition Cost (CAC) needs to be hit consistently. Remember, fixed overhead is $56,183 monthly, even with zero members.
The $286,000 minimum cash level in June 2026 accounts for the initial CapEx deployment in Q1 2026 and the operating losses until breakeven hits. Don't let marketing spend overshoot while membership lags.
Step 7 : Structure Key Personnel
Staffing Baseline
Getting headcount right defines your operating leverage before you hit scale. For 2026, you need a baseline structure of 60 FTEs to support initial facility operations. The General Manager, budgeted at $80,000 annually, is your primary fixed cost driver in leadership. This initial structure must handle the planned $32,083 initial monthly wage bill mentioned in the overhead calculation.
If you staff too leanly now, service quality tanks, killing retention early. This 60 FTE number is your starting point for managing fixed personnel costs against the target breakeven point in June 2026. That's the reality of overhead.
Growth Hiring
Map instructor and front desk hiring directly to membership milestones, not just calendar dates. The plan requires scaling these specific operational roles up to 30 FTEs by 2028 as membership matures. If member acquisition stalls, these hires become immediate cash burn, not just overhead.
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Frequently Asked Questions
The initial capital expenditure for facility build-out and equipment totals $605,000, covering major items like $250,000 for renovation and $220,000 for cardio and strength gear;