Many business decisions can lead to a club's downfall. Some decisions can come before the club grand opening, some can come after. Either way, the decisions can turn an energetic club into an empty facility with boarded-up windows.

Although it's difficult to tell how many clubs go under annually, small businesses do close with alarming frequency — and many clubs fall under the small-business category. According to the most recent statistics from the American Institute of Small Business, 590,000 new small businesses were started in 1999. At the same time, 530,000 closed.

Don't let your club become one of these casualties. To help keep your business alive and well, Club Industry asked the experts to dissect the practices that frequently cause clubs to fail.

Diagnosis: Bad Location

Location, as they say, is everything, and the wrong location can be the “kiss of death” for a club, says Bruce Carter, founder of the Longmeadow, Mass.-based consulting firm Optimal Fitness Systems.

Location means more than just the club's address (although an operator probably shouldn't settle for a facility hidden behind several storefronts off a rural country road 10 miles from the nearest neighborhood). Rick Caro, president of the consulting firm Management Vision and part-time chair of Spectrum Clubs, points out that an operator should also take into account the demographic density of the area. In other words, is there enough demand (i.e., prospects) to match the club's supply?

To answer this question, consultants and other experts can analyze the potential location and determine whether the area will bring success or failure. Unfortunately, club owners skip this step, looking at price instead of nearby demographics.

“What happens is people will choose a site because of very low rent,” explains Joe Cirulli, the owner of the Gainesville Health and Fitness Centers in Florida.

In addition to picking a site rich in prospects, operators should look for a location lean in competition. “If you go in the same as the competition, but the competition has been there longer, why should anyone switch?” argues Cirulli.

Diagnosis: Poor Business Planning

A bad business plan is all too common with many entrepreneurs — whether they are opening a fitness club, restaurant or antique shop. This is because the entrepreneur may lack business experience to back up his passion.

Frank Margarella, the president of Premier Club Consultants in Tampa, Fla., gives this example: “People who like to play golf and have a little money think they want to open up a golf club…. They don't really understand it takes a lot of work.”

Similarly, in our industry, people passionate about fitness may decide to open a health club. Yet they may not have the slightest idea what a functional business plan entails.

“They think that the club is driven on fitness, but it's not,” Carter says. “It's driven on business.”

And that drive includes a sound business plan. In fact, companies with business plans are 50 percent more likely to succeed than those without one, according to Max Fallek, director of the American Institute of Small Business.

Potential entrepreneurs who don't know how to put together a business plan can still open a club — as long as they work with someone with the proper education and experience. Operators new to the business of operating a club should hire senior staff with plenty of expertise, Caro recommends.

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