In this episode, Paul sits down with Integrity Square’s founder and managing partner Pete Moore. Pete shares unique insights for empowering fitness entrepreneurs with information on fitness business finance , consolidation, hybridization, and the relevance of the attention economy.
Integrity Square’s mission is to advise, connect, and empower fast-growing companies, exceptional entrepreneurs, seasoned executives, and capital providers in the $4.2T Health, Active Lifestyle, and Outdoors (HALO) sector.
His education in finance from Harvard Business School and his passion for fitness and sport, are what ultimately led Pete to a business deal with Gold’s Gym brand in 1999. In 2010, he morphed the two finance and fitness competencies into Integrity Square. Pete is also the host of a leading business-to-business podcast, HALO Talks for fitness professionals.
Tune in to hear Pete share unique insights about the financial side of the fitness business, consolidation, and hybridization, and the relevance of the attention economy. This information is pertinent to your fitness business and will inspire you to upgrade your business playbook.
Pete Moore discusses the challenges facing the health club industry and the opportunities that lie in acquisitions. He emphasizes the importance of understanding one’s business model and aligning it with all facets of the operation.
Empowering Fitness Entrepreneurs
A passionate advocate for education in the fitness industry, Pete Moore shares insights into the Halo Academy. This unique program empowers fitness executives with the necessary knowledge to market their businesses effectively. We educate them on the financial side of this business and if we can educate more executives, we can get more capital. They can talk to people who have done it before. It’s a huge learning curve because you have to understand the language if you don’t come from the traditional roots of club management.
“The first thing I say to entrepreneurs is — How do you run your playbook? —- We wrote a book called Time to Win Again, which basically said if you’re a football team or a soccer team you have to have a strategy. You have a playbook. What’s your offensive strategy? And that strategy needs to be aligned in all facets.”
— Pete Moore —
The Role of Private Equity In The Fitness Industry
Discussing the role of private equity in the fitness space, Pete sheds light on the sources of funding backing growth scenarios. Most of the private equity that is backing companies in any growth scenario is coming from universities, endowment funds, pension funds, hedge funds, and retirement funds.
Private equity money is important because it allows investors to get better returns that the stock market. One example Pete share is how Crunch’s private equity money came from the State of California’s pension plan, enabling them to obtain a better return than other investment alternative available.
Fitness Business Consolidation and Its Challenges
Pete Moore highlights levels of consolidation in the fitness industry. One approach is to go into a market by buying an established business, build thier prototype model around it, and then renovate whatever the clubs they bought.
Then there are private equity firms that are backing consolidation plays, but they’re being very prudent about what they’re paying. It all comes down to unit economics for private equity guys. How much does it cost to build, how quickly does it ramp up, how soon can we sell it, what is the return, and then move on to the next one. So you have to focus on unit economics.
There is a lot of impact from pricing and tight debt markets on consolidation decisions.The debt markets are very tight right now because of Silicon Valley Bank and First Republic. Also, interest rates are getting higher to the point where if you’re an entrepreneur and you want to do a deal, you’ve got to be very careful about what rates you’re locking in for growth. Some of these debt facilities are 10 -15%, but 15% is a lot of money. Realize at the end of the day that there’s a big debt security and there’s no equity left for you guys.
Hybridization and Leveraging Technology
The discussion delves into the significance of hybridization in fitness, where technology and human interactions work together to enhance member experiences. We emphasize the importance of using technology to understand and motivate members. Leverage technology to improve member experiences and building lasting relationships beyond the club walls.
You have to view hybridization and technology as weapons, and your javelin is your relationship with your members. This relationship needs to go outside of the four walls here and you need to be in a position to provide outcomes. You must understand what they are viewing, give them what they want, and then you can enhance their fitness experience.
“Our research keeps pointing back to the fact that everyone wants outcomes. The fitness industry keeps talking in membership terms, but members want outcomes. And there is the disconnect. If you can relate the product to the outcome they want to achieve, you can hook them.”
— Paul Bowman —
To provide the best combined experience, our industry will really need to do great things. We can establish personal and physical relationships with people, and we can micro-target with the hybridization.
“The point is we have to dial it back to how do we foster relationships, how do we help people, how do you get results. Hybridization is a no brainer because everyone’s got their cell phone. That’s basically all they stare at all day. So, if you’re not relevant on that phone, you’re not relevant anywhere.”
— Pete Moore —
Each fitness evangelist or group exercise instructor can be responsible for 50 to 250 of your members. Give them some showtime and realize that they could affect a larger majority of your members.
One example is we realized that 1,000 members were affiliated with three trainers, and those three trainers were only doing one session a week. So we weren’t serving a majority of the members because they couldn’t get access to that person.
The digital and technology platforms within a club can allow more access to group exercise instructors and personal trainers and can help to scale their business. So getting people online allows you to provide more alignment.
The Future Of The Fitness Business
Moore’s predictions for the future of fitness offer intriguing insights. From regional changes to club locations and subleasing areas, the industry’s transformation is expected to be driven by member preferences.
There’s going to be further segmentation and there’s going to be winners in each category. There are going to be 100 to 200 regional changes in U.S. fitness club locations, and they’re going to listen to their members to find out what they want. Everyone’s got to be working together to provide what members want. They may sublease areas or have profit centers inside to increase member
The impact of the COVID-19 pandemic on the fitness industry has led to a surge in bricks-and-mortar fitness and the potential of digital platforms to get closer to members.
Building Value and Selling a Business
Pete shares the importance of building value in a fitness business and avoiding stagnation. Many people get into the fitness industry because they are passionate about fitness, but they have no clue about how to build value to sell a business. So he shares valuable guidance for entrepreneurs on how to plan for a successful exit strategy.
Paul Bowman and Pete Moore share a treasure trove of knowledge for fitness enthusiasts and industry professionals alike. Pete’s journey from investment banking to the fitness industry, along with his founding of Integrity Square and the Halo Academy, offers invaluable lessons for aspiring entrepreneurs. His insights into consolidation, hybridization, and the future of fitness provide a roadmap for industry players to navigate the evolving landscape successfully. As the industry continues to adapt and innovate, these valuable insights will prove essential in shaping the future of the fitness world.
Podcast 20