In the “Episode” posts I’ll try and recount the steps I took toward opening a Box. Considering I haven’t officially opened yet it’ll be an ongoing process.
After I had made the decision that starting a box was where I was headed, I came to a bit of a chicken and egg scenario. I needed to find a location and equipment prices so I knew how much start up capital was needed. But I also needed enough money to know what kind of location and equipment I could afford. You can see how this can go back and forth for awhile.
Looking back, I think it’s a waste of time to start with trying to find funding first. No investor of any sort (be it family, friend or a bank) wants to invest in your “idea.” Doesn’t matter how much you know about neuro-endocrine response, broad time and modal domains, or exercise theory; people want hard fast data to look at and make their decisions. Look at “real” things like location, equipment, etc.; then try and find the way of raising the money.
I was fortunate enough to have a good amount available to me to start. Certainly nowhere enough to start my own gym, but enough to at least intrigue other people by showing them I had a good bit of money to start with. If you don’t have a sizable portion that you are willing to put up, good luck trying to convince anyone else that they should put up their’s.
Next, I looked into the Small Business Administration. I’ll start by saying the SBA did a lot to teach me some good basics. They have a lot of very valuable and free seminars that teach some important and basic business concepts. They offer sample business plans, financial statements and how-to’s. When it comes to trying to get money from them though, if you don’t have at least 3 years of business financials to back up your request for money, you have almost no shot. While they are supposed to help small businesses, they aren’t in the business of making poor decisions. Also of note: the SBA does not actually give loans, all they do is act as your guarantor. In other words, the SBA vouches for you to a bank for them to give you money. So even if you get “approved” by the SBA you STILL have to go to a bank to give you a loan, so it’s not a sure thing at all.
After the SBA was dead, I decided to try and find some private “angel investor” funding. Having coached high school rowing, I knew a lot of very wealthy parents. I had decided that all I really needed was $100K. To some really loaded parents that’s a drop in the bucket, right? So I called one of the wealthier parents I knew and set up a lunch meeting. At this point I was still running my summer camp so I knew his kid spoke about how much fun he was having when at home. For 8% interest (which is funny to me now because interest is a measure of risk… the more risky the investment the higher the interest… I found out later that 8% is the same amount of interest on most bail bonds… So in effect I was saying that investing in me was as risky as lending money to a criminal… nice!), I figured I could return all of my investors money ($100,000) in 3 years. I even managed to whip up a simple Cash Flow Analysis (far simpler than the one I posted earlier) showing that by month 6 we still weren’t broke (though the spreadsheet literally showed we only had $28 dollars in the bank) and that by month 7 we’d be profitable. Who WOULDN’T want to invest in that company?!!?!? I actually thought this guy might find it in his good Catholic nature to not ask for that much interest. Thankfully he was nice enough not to laugh me out of the restaurant. He politely refused, bought me lunch, and wished me good luck. Angel investors? Done.
Next I tried to find a partner. I knew of a few athletes at Potomac CrossFit who wanted to start their own box too. I even overheard one or two talking about how they had some extra dough floating around and would love to start one up. So I eventually called one of them to lunch. On the advice of my “angel investor,” I offered equity (percentage of ownership) instead of interest. I cleaned up my spreadsheets, whipped together a real business plan (which I didn’t have last time), and asked him to join me. He seemed pumped, after all it was a chance to make money doing CrossFit. He got back to me a few days later and told me everything was go, let’s do it!
So somehow I had managed to whip up about enough start up capital Potomac CrossFit had, and was ready to find a space. This all took me about 2 months. So it was August and I actually figured I could get this thing off the ground by October. All I needed was a real estate broker in order to find me a space. Great! I was well on my way… almost there. Hahaha. Yeah. Right……
