The Great HALO Reboot 2021, We Eagerly Await Your Arrival

As 2020 finally winds down to its merciless end, I find it exceedingly difficult to express how utterly destructive this year has been for our bricks and mortar HALO players and for us, as Strategic & Financial Advisors. Morphing into a Certified Entrepreneurial Therapist role, starting in April 2020, was not what we had in the cards. While we are humbled & grateful for the trust you have had in sharing the true picture/financial/psychological stress you have endured, we are hoping we can all move into the REBOOT for a brighter 2021 and be a trusted source for your future growth plans instead!

It’s more-than-cliché to write something as trite as “look on the brighter side.” Thousands of big box and boutique facilities have gone out of business . . . some making a graceful exit (as I’ve alluded to in past webinars) and other brands, formerly thought untouchable, find themselves in trouble. Any way you slice it . . . it has been ugly as landlords have shown their true colors and our “flexible debt providers” to the sector (who initially exhibited the proper level of empathy at the uncontrollable nature of the pandemic) now have the gloves off. We continue to be up against what I call the Star Wars Compactor Box. (Landlords and debt providers squeezing us from the top and bottom, while member counts and government restrictions come in from the sides.) I’ve touched on this in a recent IHRSA article.

Suffice to say, it’s been a massive wakeup call. Many of the larger big box chains have always, (basic rules of Finance 101 notwithstanding,) been way over-levered, and they’ve now paid the price . . . and will continue to do so until things get back on firmer ground. Boutiques are no different. Those who threw modalities together for novelty sake have (or will) continue to close their doors. Those who have managed to hold on are now forced to much more closely examine the unit economics of their chosen model and proceed accordingly.  Valuations will reset to high single digit multiples for strong companies, but don’t expect double-digit EBITDA multiples or 10x revenue if you are a SaaS or tech company.  Be realistic and be rational.  Put yourself in the buyer or investor’s shoes given that what just happened in the rear-view mirror . . . Objects Are Closer Than They Appear.  After these high profile bankruptcies and wipe outs, imagine you worked in finance. Then think about appearing in front of your firm’s Investment Committee in 2021 and putting your career on the line trying to get them to buy a multi-unit health & fitness chain.

Also, better management of finances must prevail. Companies wanting to expand simply cannot (nor should they have ever) allowed themselves to become too heavily levered. Perhaps most importantly, our industry has (for a variety of reasons) let ourselves slide into the “zero down” race-to-the-bottom pricing model, and that must be reversed immediately. There’s no better time to do it, but we must do it together. Unless you’re an HVLP model that has always had prices at the bottom rung of the ladder, you need to strongly consider raising your prices back to where they used to be. People are not value shopping now when it comes to their health and immune systems. If you’re uncomfortable even thinking about that? Fine, but stop discounting! Our portfolio company Promotion Vault, which is in over 3,000 clubs, bases their entire model on this—and they have hundreds of case studies to show that what they do works exceedingly well.

Among the many things COVID has taught the country (although we’ve always known it as insiders) is that fitness facilities are essential. They’re not optional. They were always essential, but now? Maybe . . . just maybe . . . with the increased lens on our industry politically, Washington will start paying more serious attention. It’s been clear for a while that we need a much stronger presence in DC, but that is another post entirely.

Despite all of this, I’m bullish on not only the return, but the thriving of our industry in 2021. As discussed above, ZOOM (and other) forms of online workouts, apps, and streaming services are here to stay. While the first two months of sheltering at home may have been a welcome respite for many (myself included) as we moved into months three and beyond, the novelty quickly wore off, regardless of how good the content was and how professionally it was filmed. Data has clearly shown that traffic is coming back. We all know quarantine fatigue is real, .and it will only get worse if there’s a second round of shut downs. If that happens, it will serve to make the return that much more powerful in 2021. Humans are face-to-face, social animals  . . . period. 

Your digital presence needs to be spot on. Don’t abandon it in 2021 . . . integrate it into the business model.  View your digital (or your members’ digital at home as additive.  Hey, we are in the business of helping humans achieve the results they need to live a happier, healthier lifestyle. Instead of competing against a Peloton, find out if your member bought one and say, ”3 days of personal training, 1 GroupX class and do your Peloton 2 days a week.” (That is the new protocol and DON’T FIGHT technology because . . . if you fight it, you’ll lose.)