💼Get that core solid 💪 (Business Feature #13)

🧠Top of Mind Technology

• Due to the blood brain barrier, treating neurological conditions, brain cancer, and other head related illnesses and injuries can be very difficult. This is why you have seen companies like Neuralink and CraniUs work to develop implantable devices that can be used for direct treatment. There has been further progress in this field, as researchers have developed 'jelly-like' batteries to power wearable devices and brain implants.

• Shoutout the military, not just for protecting our country and freedom, but for inventing these ten common household products. Spoiler alert – they invented the greatest product of all time – duct tape.

• We’re going to the moon! Well not quite yet, but if we do, we may have found where home base could be. A team of international researchers have discovered a cave on the moon that could house future lunar astronauts and protect them from solar radiation and the general inhospitableness of the moon’s surface.

🍪Business Bites

• Over the past 20 years, new technology, media deals, and the consumer economy have driven sports to become one of the largest industries in the country. This explosion has essentially invented a new market for Private Equity firms, as Front Office Sports writes How Sports Became a Private Equity Darling.

• While there is a push by some within congress to ban lawmakers from trading stocks, it could take some time until such a law is passed and implemented. In the meantime, you can check out the trades your favorite politicians are making on Capitol Trades.

• So, you want to buy a home, but interest rates are through the roof. Maybe there is a light at the end of the tunnel! There was some positive news earlier this week as interest rates dropped slightly and mortgage refinancing demand jumped to a 2-year high.

The Idea Journal Business Feature of the Week

🤔What It Is

Solidcore is a Pilates-inspired, high-intensity, low-impact workout class. Solidcore leverages customized reformers in their private studios to help you crush your strength and fitness goals.

💸The Business

Solidcore is a fitness studio that was/is a social media darling that exploded in popularity in the years leading up to COVID. The core-focused, full-body, pilates based workouts are hard, yet low impact. For years, Pilates as a fitness practice had never really been branded, it was just one-off studios. Founder Anne Mahlum knew she could change that, and thus, Solidcore was born in 2013. Fast forward ten years to 2023, and Mahlum sold her shares of the business to a private equity firm for $88 million.

Today, the company has 110+ locations around the country in 25 states. To really get an idea of what these classes are like, we recommend you check out this video.

🧑‍💻The Model

Fitness classes are an awesome business, especially if people are willing to pay good money for them. Why? Well, for starters, the costs are relatively low. While fitness equipment is expensive, it can be reused for years will low maintenance costs. Add in an instructor to teach the classes, and you are good to go. You can reach profitability pretty quickly. Mahlum says Solidcore was profitable from month one.

It seems hard to believe a business could be so profitable, but laying out the math of a single fitness studio shows how great the margins can be. Let’s break it down with some estimates:

Startup Costs (Expected)

• Reformers – Let’s assume there are 15 reformers per studio and each costs $5000. Seems reasonable per this list of similar devices. Total Cost - $75,000

• Rent – The studio locations are typically pretty large and in commercial spaces. Let’s assume $5,000/month.

• Coaches – Let’s assume coaches make $25/hr and there are 2 coaches in the studio at all times, working 10 hours a day, 30 days a month – this adds up to $15,000/month.

• Maintenance/Insurance – Let’s include a flat fee of $1000/month for this.

Total (Including Startup Costs) - $96,000

Monthly Expenses (Post Startup) - $21,000

Revenue Streams (Expected)

• Class Revenue – The average cost of a class for a member is tough to decern because Solidcore offers so many different deals, subscription types, and rates depending on when and where you sign-up. As a result, we made the following assumptions:

  • Average cost of a class - $15/participant

  • Average number of classes per day per studio – 12

  • Average capacity per class – 75% or 9 people

With these numbers, a studio would bring in $48,600 in revenue per month (15 x 12 x 9 x 30 days).

From these numbers, we can see a studio run properly should reach profitability within a few months, and then could cash flow close to $30k/month beyond that point. Unbelievable. When expanded to 100+ locations, you can see why the founder was able to exit for almost $100 million.

😎Customer Appeal

• Get the Six Pack – “Core” focused brands can grow in popularity for the simple reason that people want a six pack, or at least a flat stomach.

• Hard work, but low-impact – Many high intensity workouts can be harmful to your joints long-term, and Pilates style workouts like Solidcore are a great way to get the intensity needed to build strength, while not killing your joints.

👍The Good Stuff

• Cash Flowy – From the numbers above, you can see that a well-positioned, well-run studio can make a killing.

• Ease of expansion – Once the first studio is up and running and profitable, you can transfer that playbook and cash to help you open new locations.

👎The Risks

• Fitness can be trendy - The competition is fierce in the gym/studio space, mainly for the reasons we shared above. Sometimes, customers transition to a different studio or class type to try something new, which can hamper a studio’s ability to keep customers. Not all fitness studios and gyms are great businesses. This was seen recently when Gold’s Gym and YogaWorks both had to file for Bankruptcy.

📚For the Road

• Anne Mahlum: I ignored 'worst advice' to build fitness chain Solidcore

• How to thrive in the global wellness market | McKinsey