UKC

Scenario:

1) 1 local bouldering gym

2) Insanely busy after work, to the point that it's not even enjoyable to climb there. 150 to 200 people in 7,000 square feet. 

3) Lackluster setting 

Would you pay £2,000 for a lifetime membership to a new bouldering gym that's not opened yet? 
If it doesn't open, money is refunded. 

Local average earnings £37k per year, to give you an idea of what kind of money you'd have to be working with. 

Existing bouldering gym is £550 a year. 

No. 

Yes

Do you get your money back when it goes bust in 10 years?

Lifetime membership of National Trust, maybe - I'm considering it for the kids.

Local bouldering gym that's not yet open - absolutely not.

I would for sure. 

Though how do you know it’s busy with crap setting if it’s not open yet?! 

At £500/year for their local wall, you only to be a member for 4 years to break even. If they stay open and you're still climbing in 10 years you'll be £s in.

If the money's not at risk, what use is it to you? You can't spend the money on opening the gym if you have to set it aside for possible refunds. If the money is at risk, you should offer people equity in the business or some kind of proper return on investment.

If you're hoping that a lot of people will take up the offer to help you get the business off the ground, isn't your cashflow going to be really screwed later when all those people keep using your facilities for free for years to come?

Lifetime must be a somewhat loose definition given the potential for the business to go out of business.

And unless it's a very limited offer, the risk that the wall is very busy, but with pre paid consumers who don't actually generate any income to pay cover the daily running costs.

How likely is it that you'll move away from the area in the next 5 years?

How does the spec of the wall compare to the existing one?

Are you likely still to want to visit other local walls for variety?

Is membership guaranteed always to entitle you to zero-cost entry or could it become reduced cost at some stage?

Many questions, but your answers may direct your decision.

Sounds reasonable but an awful lot for most people to risk.

I was happy to give £50, in exchange for a £75 voucher, to help set up a local brewery. They did raise the 25k or so they needed. There was certainly an option for £100 that some people I know took up. I think they did have £500 and 1k options, but not many/any  takers. 

I think what I'm trying to say is it might be worth thinking of more than one offer. 

That would depend. Are they chucking in some complimentary moustache wax?

To clarify, I want to open a gym but I don't have the money behind me for any bank to take me seriously. 

I'm trying to think of ways I might be able to get seed capital. I'd still need to get a loan, but a bank will take me more seriously with £100-200K behind me.

In regards to losing out on 50-100 memberships, I'm not sure it's that big a deal. 

I've found a really really good location, with a ton of footfall, and I am quite sure there would be a lot of walk ins. I'm don't think 100 less memberships per month would make any difference to profitability. 

It's also got a lot more going for it in regards to location, to get members to switch from the current gym. Better parking, lots of other stuff going on nearby, etc. 

Someone above asked how money would be refunded, if the gym didn't open. 

Simply put, enough money would be secured to get it opened before a penny is actually spent. If for example I can't get planning, or can't secure a bank loan, or anything like that, money is refunded back. 

I have a bit of my own money, which I would use to do the first stages before the build happens. Legal, etc. 

If it was called a climbing wall, and anyone who called it a gym was thrown out and banned for life then sign me up.

No, never, if it goes bust, you could be denied accessed the day the receivers take over and certainly not new owners, as your contracted payment was with previous owners. 

If I'd paid that when Ratho opened I would have by now saved myself about £8000!

I think the Boulder Hut in Ellesmere Port did Crwodfunding when it started so maybe something like that would work and make people more trusting than just asking them to pay you directly. 

Ar fookin' many?!

Seriously, is that what you're paying for this stuff. Why not go climbing somewhere interesting for real?

That is over 20 years. I pay about £50 per month which pays for itself if I go once a week. If I'd paid £2000 for life it would have paid for itself going about once a month.

I also go climbing in many, many interesting places for real.

Ok - that should give the OP some useful input.

Boulder Hut was crowdfunded initially and is a great venue. They had to raise a fair chunk more a year or 2 in though. Mr Moustache, there’s a govt scheme for small investors meaning you can invest tax free, that would make it more attractive. They used the Crowdcube platform for initial funding.

Wow. I climb 2-3 times a week and haven’t paid for indoor climbing for a decade. Always somewhere dry and a good mix of routes, boulders and traverses. I do have my own cave which is limited but also only cost £200.

This sounds a bit like you haven't actually modelled it accurately yet. Perhaps you have, but the post gives the impression you haven't.

It's an interesting idea but you should model the impact of different numbers of lifetime memberships on future cashflow and sensitise it for varying amounts of footfall. Have a careful think about the discount rate you use in the model or the whole thing will be wack (or even wacc). And if any of that has gone over your head, get yourself a good accountant to do it for you.

Might also be worth thinking about Angel investors. There are a handful of wall owners and hold manufacturers out there that have at least considered going into joint ventures to open new walls, especially in London.

Is this suggestion benchmarked against the latest individual BMC membership fees? 

No.

There are lots of reasons I personally would probably not.

But if we assume our hypothetical person interested in this has roots in the area and is very unlikely to up and move somewhere else, and then assume climbing is very important to them, and then assume their family life allows a splurge like this, and then assume their bills, rent/mortgage and everything else allows for this extra expense... _then_ I can consider the question I think you are posing.

And the answer depends massively on a wide-ranging and deep evaluation of everything to do with the project. Location and planning permission, other funding secured, identity and past business history of people involved in making the project happen, Information on how many lifetime members they will involve and how quick that signup process is going, business plan, comparison of projected start-up costs with similar enterprises already in business, small print on the contract, how they propose to refund the money if the project goes under, what the timeline of the project is.... The list is almost endless.

I'd want to have several sit-downs and multiple phone calls and e-mails with those involved to get some kind of overall picture of the reality of the project.

When you ask if people on UKC like mint chocolate, it's easy to make an informed opinion. But baring in mind how much information you would need to make even a semi-informed opinion on your question, I'm not sure you will get many useful responses and I wouldn't put too much store by responses you do get. You need to do your homework.

Btw. If this new gym were to get sold a few years after being built, I wouldn't count too heavily on that lifetime membership being grandfathered into the sale contract.

Oh, well I guess my other reply might still be useful so I'll leave it.

This is a _titanic_ undertaking and personally I would say you need to do a _huge_ amount of research with actually proper real numbers for the capital costs to start up and to model the cash flow of existing walls - what do they take in a day? How much are the costs like insurance? What is the real staffing cost? (it'll be about double the salary of their workers) What are their business rates, electricity, water, etc. etc? You need as complete an overview of your potential business as you can possibly get. You want to get an accountant friend to pull the tax returns from Companies House on other walls and see what you can glean from that. You want to see if you can payersuade a wall owner/manager to sit down with you and go through all the numbers of their annual finances - realistically it's probably going to be someone who has a wall a good distance from where you're starting yours.

You need to do another truckload of research on your prospective site, including all the zoning and any local bylaws you might have an issue with if you want to stay open late etc. etc. Just a monolithic undertaking, I barely know where you'd start on this, maybe the local council.

And you need to do _all_ of the above before you lift a finger to raise funding because you will need a serious business plan to underpin what I can only assume will be £million enterprise (or more?).

I have to say that in the current interest rate environment I can't imagine undertaking something like this.

5 years ago I would have said "remortgage the house" or "get a couple of £15k to £25k personal loans from the bank" (though you'd have to lie about what you'd be using them for! - relax, the bank doesn't actually want to know as long as you are meeting repayments). The interest rate would have been 1 to 3% and it could have got the ball rolling but at 6 to 8% now, it's just a terrifying prospect.

I don't think you've thought this through - if you need the money to build the gym then if it all goes to **** during construction then people don't get their money back, if you don't need the money to get the wall all the way to business open status then you don't need to do the fund raise. And you have to consider that if the project goes under when you have multiple creditors, Mr and Mrs Miggins are most definitely not going to be in front of the bank when it all goes into administration. So you absolutely would have to be up front with your prospective lifetime members - they will lose their money if your project goes under.

I would encourage you to do the soft research, some of which I sort of detailed above which is free and just takes time before you start spending money.

I started a business a couple of years ago and funded it by selling my house, scraping together every other penny I had and taking loans from two family members. Thankfully it is knock-on-wood going very well and loans are paid off. But I did try to find bank funding, I had a proper business plan, I had done shedloads of research, I had capital items to secure the loan against (probably not something you can do with a literal climbing wall) and I had an impeccable credit history and I still basically got ignored or turned down by almost everyone and the only offers that came through were complete pisstakes from total pirates with bizarre contracts that didn't even specify an apr and when I dug into the numbers and crunched them for myself, they equated to 20%apr to more than 100%apr.

I think what would make the £2k for a lifetime of free climbing a more attractive option for people would be if it came with a share in your limited company, the percentage would have to be low to avoid you giving away half the company before you had got anywhere but it would help people to feel invested and you might even get some of those people helping you out during the process of getting the gym "to market" as it were because they can see that they will be getting a little bit of the profit each year after you open.

I think your math might be wrong there Rob.

I think you would in fact have just added a further £2k to the £10k you've since spent and saved almost nothing. Because Ratho went bust about 8 times between first opening and finally being bought by the council. Which does a neat job of illustrating the exact worry several posters in this thread have!

I wouldn't spend £2k on a lifetime membership.

A half-share of a joint membership at my local wall (Ratho) will set you back around £47 pcm meaning if you climb there 3 days a week you're only paying around £3.50 per session.

Ratho is (apparently) the best climbing facility in the UK- indeed one of the best in the world. So at only £3.50 per session a £2k gamble doesn't make much sense for me.

I'm extremely fortunate to live so close to a facility such as EICA Ratho. Everything about the place is incredible. Also just 2 hours from Glen Coe for the handful of days when it's not pissing down sideways.

It is indeed a great deal. But I think the op is looking for a bit more projection - (s)he doesn't have eica ratho nearby and what they do have has been described as incredibly busy and not that nice.

Also, as eica ratho is government-run, it doesn't need to break even, where a private enterprise needs to make a profit, so I wouldn't compare it to what the op is doing.

I was going to e-mail you but you have the option turned off on UKC so I can't. Let me know if want to talk any about your plans.

If I was still living near Sheffield, then I’d probably pay more than £2k for a lifetime membership of the Climbing Works, same if I lived further up the M6 to make Eden Rock local. It’s hard to really make decisions until a wall is actually up and running.

I think if you can convey what kind of wall you’re thinking of, that would be a good start, because a lot of them are very different

But that's exactly the problem, isn't it. You'd be willing to pay a large sum to those established operations because you know the wall is good enough that you'll visit a lot and it's an established business so you're confident it'll stick around and honour its "lifetime membership" commitment for long enough to make the up front expenditure worth it. Really clear plans for the new wall would go some way towards helping with the former, but even then they're only aspirational, with no guarantees.

Personally, I think it's a pretty dubious proposition. But then I think most crowdfunding is essentially asking people to take all the risks normally taken on by venture capitalists with none of the significant returns they would have expected if the business goes on to be successful. Yet crowdfunding is now a really common model for all kinds of things so it can still potentially work.

No.

I've seen several walls offer similar things in areas I've lived, and I'm quite glad I didn't commit lots of money to them after moving away/deciding their setting is poor/preferring to boulder indoors.

For an established wall, which I knew I liked and would regularly use, and - critically - that I felt confident wasn't going to fold in the next few years, £2000 for a lifetime membership is probably quite a bargain.  That's only a little more than 3.5 annual memberships - given the way inflation is going, more like 3 annual memberships.

To stump up £2000 for an as yet unknown wall - I would take an awful lot of convincing.  I think, frankly, I'd be looking for equity in the business and some voting rights to influence the direction it takes.  Which means that, even if this works and you get £100k of seed capital, you're now looking at 50 shareholders you'll need to keep happy.  And you're still going to have to then persuade a bank to lend you ten times as much to actually get off the ground.

I'm in the middle of building and opening a wall myself, in a roughly comparable location - I'm not going to be too free with figures on a public forum (!) but DM me if you'd like to ask anything.

Ratho isn't relevant to someone living in Devon or Hertforsdshire ....

In answer, no, likely not - It would be about 6 years to break even compared to what I pay now, and you don't know if it will be any good, or 'better enough' to be worth it.  Are you offering equity as part of the £2000 - ifi t goes kaput after 2 years , and you need to sell the holds etc..

For some context my local golf club is £1850 per year for membership. It's also open/closed earlier than my local climbing wall and is affected by weather. 

Ah, I see now. I replied to the question without reading the added context.

Apologies.

It's Edinburgh-Council-run - isn't it? And I would assume definitely needs to break even (at least, in the wider sense of collected 'leisure' resources.)

Happy to be corrected by anybody who has access to actual financial reports.

Quietly canvas some customers at your local bouldering gym - guage their appetite for an alternative venue.

Or, if the place is as busy as you say it is then surely it is financially stable? Could they perhaps expand?

I was at Ratho earlier and although not as ram-jammed as the OP's local gym, it was still quite busy. 

Some midweek evenings can be extremely busy. 

Nice to know you've been thinking of me

;  P

Good-oh. The principal problem with Ratho is that it is f-ucking freezing in mid-Winter - which is exactly the time of year I myself would want to go to a climbing wall.

Not that my reply - or yours - has anything to do with the OP's question!

I don't think so. The thing about leisure resources run by the council is that they are there to keep the population healthy and happy, that is their purpose, turning a profit is secondary. You obviously don't want any running subsidy to get too high though. I believe things like swimming pools are famous for not being profitable and they are very much in the same vein as a climbing centre.

This isn't to say that eica Ratho isn't profitable, I suspect that it is. Modestly. See below. I just don't think it _has_ to be profitable.

I believe that for the first 5 or so years that eica ratho was run by the council, it continued to be lossmaking before finally breaking even. This is all historical data though and based on hearsay really. I don't know what its books look like in recent times but I would imagine that with the huge increase in climbing popularity, it should be making a healthy profit... Right up to the point where some part of the building needs a major repair, which could easily wipe out multiple years of profit... and it's a gargantuan and complex building.

I can see where you are coming from but I don't think this is a useful comparison. You can get an annual Ramblers membership for £40. Different activities have completely different prices for participation. What the op needs to consider is other climbing walls, preferably in areas with similar socioeconomic situations.

Very true. 

If the OP's local gym is so busy perhaps it could expand. That may make the place a bit cooler in winter mind; with the bodies being more spread out over a larger space.

I imagine that starting up a whole new facility could become quite stressful. And as well as the financial risks, there could also be the risk of losing some love for the climbing- defeating the purpose of the whole venture.

If the business plan and the facility were inspiring enough then I would consider buying a £2k membership to make the place a reality. 

So long as you don't leave yourself open to complete financial and social ruin, push on with your plans.

Life is tough mate. And short. So if you genuinely believe that you've found an opportunity to do something interesting and potentially beneficial to you, your friends, and your community. Do it. 100%

Interesting that my local bouldering wall (not the closest) when I lived in the Peak was, like yours, insanely busy to the point we decamped to a couple of corporate walls (CAD design, lots of space, painted white and very bright). The group I climb with were all soon back because at the end of the day, it’s all about the route setting.

I would flag this up as another risk, because there’s some kind of voodoo attached to route setting. Where I live now, my closest wall has outstanding lead climbing, but not outstanding bouldering, whereas my next nearest in the same chain has great bouldering (by the same setters!). When I lived in Clwyd, The Boardroom opened and was outstanding from day 1 and got even better.

Overall, I have to agree with posts above that on reflection, I would definitely take a £2k lifetime membership, but only after a wall had settled down to a good level of setting. Not sure whether longevity de risks the 2k up front though. The Edge was a popular wall for years but is now a fishing tackle superstore.

You need to find an outside “ angel investor” with you doing the project and that person financing it for the most part . My understanding is that this is how most good walks kick off. 
 

Great replies everyone. A lot to think about!

Just to answer a few posters, I can’t see how to do multiple quotes so just going to answer points made that I remember. 

In regards to company house records, directors (2) took a 300k dividend last year. So 150k each. Not too shabby. No idea if they take a wage too, would assume they do but likely only at personal allowance levels. 
Will be interesting how much the dividend is this year very much post Covid and with so many more members visibly attending. They also put up all their prices. If I were a betting man I’d expect another 100k.

In regards to whether the new gym would be any good. That’s a risk that would just need to be accepted. I think the turning point for the current gym was when they moved away from primarily guest setters, to getting the employees to set. Probably a cost saving measure. So I would want plenty of professional setting to differentiate my gym. 

To the people saying no, they have the outdoors/good gyms nearby. Put yourself in the shoes of someone whose nearest crag is a 3 hour drive away, and the local gym is meh. 

In regards to cash flow problems for constantly being down 100 memberships.. that’s realistically £5k a month max. But is it even? People stop climbing all the time. Or move for jobs. Or just have life get in the way. Also a £200k loan from a bank at current interest rates is going to be making a significant dent anyway. Payment to a bank would be about £2.5k a month over 10 years. Obviously more over shorter time. 
After 4 years, how many would still be using their lifetime membership? I would bet nowhere near 100.. so do they represent lost earnings at that point? 

In regards to offering shares, that creates a lot of legal overhead from what I understand. Will look into the suggested crowdfunding site though. Cheers

To the members who asked me to reach out, thank you and I will definitely do that if I start to progress this idea more. 

Biggest issue by far locally is rent and business rates. I suspect that’s what’s been limiting a new gym opening up given the clear demand for one. There will be a tipping point though..

I did exactly that about 7 years ago after I collaborated with many others to build the wall. I bought the lifetime membership along with a lifetime upgrade for classes run in the exercise room. Fortunately a friend did the same so over the years as the walk has changed and other better facilities have opened I've always had someone to climb with. I find the wall a little small these days but if it was a significant problem I could easily take monthly membership at another wall as my original investment has long since paid for itself. But being part of the wall from its inception is something to enjoy and I know everyone there. I will stay there until I can't climb any more most likely. 

if you're certain you won't move to a different town in 5 years and pay back the £2k to your savings on monthly/annual bases then perhaps yes. 

There's a couple of things that I'm struggling with here.

100 x £2000 is only £200k. You're still going to have to raise a lot of money to open up a climbing centre, and I assume you don't have the assets to secure such a big loan against.

I don't know how big a centre you are thinking, but I doubt you can do anything meaningful for less than £500k.

Your second issue is how are you going to get a property. I'm guessing you're proposing to lease since you don't have the capital, so the first thing the landlord is going to ask is for your record of trading history to which I'm guessing you have none. Unless you have a connection with the land lord I suspect they will refuse to lease to you without a several years paid upfront, or a string history. Unless the place is a shed, and you simply can't make it any worse.

I could never imagine going to one wall so regularly to justify it, but that's from the privileged position of having a variety of choices. 

There are of course other ways to raise funds for business but if the OP doesn't have any record of running a business then I would have thought they would have to give away quite a large proportion of the shares and profit. The business case needs to demonstrate that the running costs can be met. If there are 100 lifetime memberships that's 100 revenue streams cut off. That is t going to pay for staff, heating, new holds, route setting, and rent. Better to offer advantageous terms on the first years membership. Thereafter the supporters become normal customers but perhaps ones who are motivated to support the wall.