Welcome to the latest installment of Entrepreneur’s Spotlight on the Health and Fitness Law Blog. In this series, we look at successful startups and ventures in the health and fitness industry and interview the hard-working entrepreneurs behind these companies to discuss how they did it and what they learned along the way.
Today, the spotlight is on South Loop Strength and Conditioning (“SLSC”). SLSC is one of the most popular CrossFit gyms in the greater Chicago area, and is located at 645 S. Clark Street in Chicago, Illinois. For more information on what sets SLCS apart from other gyms in Chicago (and nationwide), please check out its website at http://southloopsc.com/.
SLCS is co-owned and operated by four individuals. We met with one of the original founders, Todd Nief, to listen to his story. As you will read below, Todd originally did not have a background in fitness, but he has gone on to obtain a wide variety of certifications, including the following:
- Certified CrossFit Trainer (CrossFit Level 3)
- CrossFit Specialty: Movement & Mobility, Running, Powerlifting, Kettlebell
- DNS "A" Course (Dynamic Neuromuscular Stabilization)
- DNS Exercise Level 2 (Dynamic Neuromuscular Stabilization)
- FMS Level 2 (Functional Movement Systems)
- OPEX CCP Level 2 (Formerly OPT)
- Poliquin BioSignature Level 2
- POSE Running Coach
- Precision Nutrition Level 1
- SFMA Level 2 (Selective Functional Movement Assessment)
- USA Weightlifting Level 2
Due to the abundance of information Todd was willing to share, we have decided to break this interview into a two part series. This is Part I of II. To view Part II, please click here. If you want to learn more or have questions for Todd, he can be reached at firstname.lastname@example.org.
Todd Nief: This was an entirely accidental transition. I had been doing CrossFit on my own for a few years - mostly training out of a Bally’s. So, I was the weird guy doing weird stuff that I should not have been doing and attempting to lift weights that I had no business lifting. I mostly followed workouts from www.crossfit.com but I also had gone in to CrossFit Chicago to receive a bit of instruction.
I had started going in to Atlas CrossFit on occasion so that I would be able to do workouts with a lot of weight dropping (they did not like that at Bally’s) as well as things like ring muscle-ups. I was not expecting to coach there, but, after being around a bit, I started working with some of the beginner classes there right around the time that I was laid off from my consulting gig.
After spending about a year at Atlas, I wanted to run a facility based upon what I considered to be best practices in coaching and training. So, I started looking into what it would take to open a gym and began heading down that path. Within the CrossFit community, there is a lot of glorification of the gym owner (which makes sense from a business model perspective as well…), so it never seemed that impossible to get into the gym business - especially after seeing some of the back-end of what a successful gym looked like.
Todd Nief: Well I certainly had absolutely no understanding of business, sales or marketing. I was a coach and a musician with a chemical engineering degree - as well as a negative attitude towards business based upon a youth spent in punk, metal and hardcore. So, the most consistently challenging thing for me has been overcoming my own negative and maladjusted thoughts surrounding what it means to own a business and what it means to promote yourself, take money from people, and hold others accountable to your principles (employees, clients, business partners, investors, etc).
We also opened probably about 9 months too late to really reap the benefit of “early adopters” to the CrossFit program. The gyms that opened about a year before us basically had to do nothing to attract clients, since they were some of the first gyms in the city and all they had to do was open up and put “CrossFit” on the door. There was a whole city of people learning about CrossFit and searching out gyms. By the time we opened, there was a certain level of saturation and a lot of the early adopters had already found a home. So, we were in a position where - to have success out the gate - we would have needed to open at scale and have an understanding of marketing, positioning, sales funnels, and customer experience. Instead, we opened in a little hallway on the second floor of another gym with an attitude towards sales and marketing that resembled a depressed vegan sixteen-year-old talking shit about McDonald’s (I was that teenager).
And, man, we also really got kicked around on the real estate market quite a bit (leases falling through, leases not being countersigned, lack of respect from landlords, etc.)
H&F Law Blog: What was one thing you expected would be easy in owning or managing the business that was actually much more difficult than anticipated?
Todd Nief: I do not know if “easy” is the right word, but the CrossFit community has a lot of cultural push towards a meritocracy of marketing that I think is, at best, misguided and, at worst, disingenuous and pandering. The assumption is that, by providing a great service to your clients and getting them results, they will do all the marketing for you and you can focus on coaching. This may work in an early adopter environment, but, as soon as the market reaches a certain level of saturation, this is an impossible way to exist and grow a business.
So, I got into the business to coach, and now my main role is understanding how to grow the business - by understanding how to communicate with potential clients and how to reach them. I do not think I ever thought that marketing was easy, but I also underestimated how much marketing I would be doing.
H&F Law Blog: Conversely, is there anything that you expected would be difficult that turned out to be very easy to manage or figure out?
Todd Nief: This is a tough question for me, since I think that I generally assume that most things will be “difficult” but that I also trust myself to be able to figure them out.
I think that a lot of businesses have a lot of challenges around hiring, finding the right people, and raising cash when they need it. We have certainly had some frustrating, bizarre, and sketchy endeavors in all of these arenas, but we have also had some insanely fortuitous occurrences here as well - one employee leaving and another walking in the door within a few days, one investor flaking out and another reaching out within a few weeks, one lease falling through and another falling into our lap, etc..
Todd Nief: Fortunately, one of my partners is a mergers and acquisitions lawyer, so he was able to get us set up with a pretty sturdy operating agreement when we started the business. The business started as three of us, and there are now four; over four years we have removed one partner from the operating agreement and added two.
While the operating agreement did make these processes pretty clear in terms of what removal and addition of partners looks like, I think one of the biggest things here has been maintaining a level of respect between partners. Even when one of our original partners was dissociating (which does not tend to happen if things are going swimmingly), there was never any bad blood and things never became unprofessional in that process. The operating agreement pretty clearly stated that we would buy out his shares for an agreed upon fair market value, so we crunched some numbers, went back and forth on a few things, and came to an agreement pretty quickly. In terms of adding partners, it was a situation where two people came along at the right time that had an interest in the business and the right skillset to jump in and move us forward, so - similarly - we hashed out agreements that we thought were fair and amended our then-existing agreements.
[Note from Aaron Werner (Health and Fitness Attorney/Interviewer): Be sure you have a very clear and enforceable Operating Agreement (LLCs) or Shareholders’ Agreement (Corporations) when starting or buying a business with other people. If you are raising outside capital, you need to be very careful about the securities laws involved concerning fundraising and documenting the business deal with your investors. Be sure to work with an attorney well-versed in Operating Agreements/Shareholders’ Agreements/Other Fundraising Documents.]
H&F Law Blog: What advice do you have for other people that are going to go into business with other co-owners of a gym or studio? What characteristics in your own business partners makes your partnership work so well?
Todd Nief: This is a somewhat challenging question since I think that this is somewhat similar to hiring - and there are many books and courses and videos and seminars and masterminds on this topic.
There are all kinds of things you can do to vet people, but the only consistent thing that works seems to be working with them to see what happens. Sometimes you make good calls, and sometimes you make bad calls. And, similarly to hiring, sometimes you meet the right person at the right time, and then you can end up starting some gym together and having to figure out a bunch of stuff that no one ever told you before.
People say all kinds of corny stuff about vision and mission and whatnot, but that is all kind of inspirational quote fodder as far as I am concerned. I think there are basic understandings of how human beings should relate to each other that are essential for an effective partnership - most important is honestly probably generally treating other people with respect, whether that is clients, employees, or your other partners. Once contempt, deceit or manipulation enter a relationship, it can be impossible to salvage.
So, my advice would be to work with people before you enter into a partnership with them so that you know what you are getting into.
To be continued next week…