Lease Management in Pilates Studios: Aligning with Your Business Plan for Optimal Success

Introduction:

Welcome to the fourth of ten focussed blog posts in our special series on What makes a Pilates studio truly profitable.   Drawing from my 20 years of experience in owning, running, and consulting for Pilates studios, I focus here on lease management and its importance in developing a profitable Pilates studio.   

In the UK, the financial landscape of Pilates studios varies widely.   Boutique Pilates studios, typically sized between 800 to 2000 square feet in leased buildings, see turnovers between £200K and £400K, with net profits ranging from a loss to 20%.   In contrast, smaller home-based studios, spanning 300 to 700 square feet, have turnovers between £30K and £80K, and net profits range from 10% to 30%.   These figures are grounded in the realities of running such businesses, where "turnover is vanity, profit is sanity, but cash is king. "

Effective lease management is a crucial element in the success of a Pilates studio, serving as a cornerstone that aligns closely with the business plan.   Spend too little on your lease in the hope that this saving will hit the bottom line of the P&L account is often misguided yet spend too much and you will never be in the top performers when it comes to studio profitability.    However, lease management is a strategic approach that goes beyond mere location and cost considerations; it's about ensuring that the physical space furthers the studio's business objectives.   This expanded exploration underscores the importance of aligning lease management with a well-thought-out business plan, avoiding the common pitfall of choosing a building first and then trying to adapt the business to fit the space. 

The Primacy of the Business Plan in Lease Decisions

Why It’s Essential for Profitable Studios:

Profitable Studios: Approach lease management as an extension of their business plan.   They recognise that the business plan must come first, dictating the type of space needed, the ideal location, size, and cost structure.   This approach ensures that the studio space aligns with the studio’s service offerings, target market, and growth projections.   Profitable studios look for buildings that support their business model, not the other way around. 

Why Less Profitable Studios Encounter Problems:

Less Profitable Studios: Often fall into the trap of selecting a building based on superficial appeal or perceived potential, only to realise later that it does not align with a practical business plan.   This backward approach can lead to operational inefficiencies, higher costs, and limitations in service delivery that could have been avoided with proper planning. 

 

Understanding Lease Costs: Proactive vs.   Reactive Approach

Why Proactive Approach Benefits Profitable Studios:

Profitable Studios: Proactively analyse lease costs, considering how these expenses will impact their profitability and cash flow as outlined in their business plan.   They seek leases that offer the right balance of cost, location, and flexibility, ensuring that each factor contributes positively to the studio's financial health. 

Why a Reactive Approach Hinders Less Profitable Studios:

Less Profitable Studios: May overlook the importance of aligning lease costs with their business plan, leading to financial strain.   By reacting to the market or making decisions based on limited information, these studios might end up with lease terms that are financially unsustainable or restrictive to their business model. 

Negotiating Lease Terms with Foresight

Why It’s Strategic for Profitable Studios:

Profitable Studios: Go into lease negotiations with a clear understanding of what they need to fulfil their business plan.   They negotiate for terms that provide the right environment for their services, considering factors like layout flexibility, potential for expansion, and lease duration that aligns with their business projections. 

Why Lack of Foresight Affects Less Profitable Studios:

Less Profitable Studios: Often enter lease negotiations without a strategic plan, leading to agreements that may not support their long-term business goals.   This lack of foresight can result in a studio space that limits growth opportunities or requires costly modifications. 

Location and Accessibility: Tailored to the Business Plan

Why It’s Critical for Profitable Studios:

Profitable Studios: Choose their location based on the specific needs and demographics outlined in their business plan.   They seek areas that not only attract their target clientele but also offer the accessibility and amenities that their business model requires. 

Why Misaligned Location Choices Impact Less Profitable Studios:

Less Profitable Studios: Might choose a location based on availability or cost alone, without considering how it fits into their overall business strategy.   This can lead to challenges in attracting the right clientele or offering the types of classes and services that are central to their business plan. 

Conclusion:

In summary, lease management in Pilates studios should be a strategic decision that is intrinsically tied to the studio's business plan.   Profitable studios understand this connection and select their studio space based on how well it aligns with their business objectives.  In contrast, less profitable studios often make the mistake of choosing a space first and then trying to adapt their business to fit it, leading to avoidable operational and financial challenges.  For studio owners, prioritising the business plan in all aspects of lease management is not just a recommendation but a necessity for achieving sustainable success in the competitive world of Pilates.    In my experience, a studio owner should be prepared to budget between 10% and 12.5% of their planned 3rd year turnover on their building lease and combined energy costs.   Sometimes leases will be inclusive of energy and 12.5% is not unreasonable.    Where the lease is building only 10% should be the top end – so a 1,500 square foot Pilates studio budgeting for £400,000 turnover in year three should not go beyond £40,000 in lease costs to find the ideal property.    

Author:  Chris Onslow - Pilates Consultant

Chris Onslow, has run Pilates focussed businesses since 1998.  He and his team specialise in supporting Pilates entrepreneurs and business owners.  With a rich history of owning and running successful Pilates studios in the UK, and supporting others in Europe and the Middle East, Chris has broad expertise in maximising profitability and optimising operational efficiency.  His agency provides top-tier advice on selecting new, pre-owned, and hireable Pilates equipment from renowned brands such as Align-Pilates, Balanced Body or Stott-Pilates/Merrithew.  As the founder of Mbodies Training Academy, Chris continues to revolutionise Pilates education, offering premier online and hybrid CPD and qualification courses for Pilates apparatus instruction and special population CPD.  Discover more about how Chris can support your Pilates Business or home exercise choices at www.pilates-consultant.co.uk 

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The Art of Space Optimisation in Pilates Studios: A Financial Imperative

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Mastering Strategic Financial Management in Pilates Studios: Navigating Towards Profitability