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- [00:01]
Nick Kuss
Welcome to the New Books Network.
- [00:06]
Richard
Good morning, good evening, good night, entrepreneurship and Leadership Channel listeners on the nbn. Richard here with a very interesting guest, Nick Kuss, who I met a few weeks ago at a social event. He's had considerable business success in the world of fitness centers and gyms and possibly other things I don't know about. But rather than me try to introduce you based on your LinkedIn profile and what Google told me, why don't you introduce yourself the way you like to be introduced, imagining that it's some kind of context where the person you're meeting might be interested.
- [00:42]
Nick Kuss
Okay, so I'm Nick. I'm a little bit more than a century, half a century old. I've lived for more than half my life in Portugal, in Cascais and Estoril. I'm English, but I've lived in about, I think about five different countries and worked in about eight different countries. But yeah, for the last 27 years, my base has been in, in just outside of Lisbon, on the coast in beautiful Cascais. And I, my main business, my main area is gyms, fitness, the fitness sector, which I started in, in 1991. And I basically was lucky enough to start my career in a business which is just at the point of starting to grow. So I was lucky in that sense and I led the growth and the expansion of a chain of a brand called Holmes Place Half Clubs out of London. And so I was the, I became the club manager of the first club when they just had one club in Chelsea. And then we grew that brand across about seven, seven countries that I was eventually responsible for across Europe. And the brand went into various other countries as well, notably Israel, where in fact, the founders are a Jewish family. And so they've got, they're the dominant health club chain in Israel and they went into Eastern Europe as well. Those weren't countries I was just sort of for, but I was running and rolling out the brand in Iberia, in Germany, Switzerland, Austria, which is one in France, and did that for a few years. And then in 2010, I left Holmes Place to start my own brand, my own chain of gyms. In this case, not health clubs, but just gyms. So basically fitness centers. And with a couple of colleagues, we rolled out what became the biggest chain of gyms in any segment of the market in Portugal. So we had about 150,000 members across 44 clubs and we sold it to private equity and got out. And then we went through a phase of non compete where we dived into lots of other Businesses which we didn't know much about, which was quite fun, quite expensive for us in some cases. And then just recently we decided because we were able to jump back into fitness. And so that's what I've been working on over the last about two years is getting ready to launch what we think is a really cool new disruptive gym offering which we're going to start rolling out in Portugal from the early summer. So in about three months time we'll start opening our gyms.
- [03:29]
Richard
Fantastic. And we're recording this in March 2026. So summer means summer 2026. Well, yeah, that's very interesting. So when you think of your first job, I mean, because Holmes Place, I mean completely by chance, I live near the football stadium, one of the football stadiums in, in Lisbon. And there's one of the Holmes places is there when I go into town, I go past another one. So I was sort of vaguely aware of the brand. And it's a pretty, it's a pretty upmarket place with sort of lots of different machines, fitness trainers, all sorts of stuff going on there. And it's more than a fitness center. But when you. We're very interested in origin stories. So when you became the person who led the international experience, were you qualified for that? Obviously. I mean, so what were you doing before you got into this sort of management growth role of building an international.
- [04:27]
Nick Kuss
Yeah, I did a degree in sport, which some people say is an oxymoron. Yeah. So I did a degree in sports management, sport and recreation studies at university. And then two weeks after I graduated I was working in Holmes Place just as a gym instructor, just having a bit of fun, living in London, enjoying the London life, but earning quite good money for me, for a student working in this amazing health club right at the beginning of the evolution or the start of the growth of that segment. And so I was basically put on a, I suppose an unofficial management training program. So I was working as a gym instructor, then very quickly working in the sales department, selling memberships because it was very easy because people were just walking in and saying, I'd like to join. That wasn't particularly difficult. And then I moved into being a shift manager or a duty manager, then an assistant manager and then club manager. So I was basically learning on the job, being taught by my boss at the time. But I did have a degree which has got some relevance, not, not an enormous amount of relevance, to be honest. Doing, doing a sport recreation studies degree doesn't give you a huge amount, a huge advantage if you want to get into, into fitness management. But now there are, there are courses which are much more relevant. So I was kind of learning on the job.
- [05:45]
Richard
Okay, and then I'm just going to stop you there. So the guys you mentioned, it was an Israeli, an Israeli business group. Were they experienced in this beforehand? You mentioned they're number one in Israel. So did they come to London with a SOR blueprint and they knew exactly what they were doing or were they
- [06:01]
Nick Kuss
learning by doing as well in Israel? It's a South African man called Alan Fisher is a Jewish man and a London resident for many, many years who was not. Who had no connection or experience to the fitness industry. This is in the, in the 80s, in the mid-80s, decided to buy a health club with his friend Lawrence Alkin, a financier. And they, they basically bought a health club. I think maybe they even bought the health club that they were members of because they thought they could do a better job. And so they learned on the run. And, you know, for a few years it was, it was, you know, not a pretty good, good club, not much competition, but in a fantastic location, lots of famous people joining. And if you weren't famous, you were certainly rich because it was very, very expensive back then. And so I think there was quite an acceleration in terms of learning. But when the business started, it wasn't from a base of people who had any experience at all in health clubs or fitness. And that was the case for most of the people who were opening what became the dominant health club chains of the early 90s. At the time, Fitness first, which went on to become the largest chain of health clubs for one point in the world, LA Fitness and Homes Place, those were the three big health club chains that grew out of London. You know, nobody had any experience. It was just, you know, the beginning of the development of the sector at the time.
- [07:32]
Richard
But in a sense, because it was a new. I mean, you're, you just mentioned you're about 50, I'm just coming up to 60. So, you know, when we were growing up, there weren't gyms everywhere, were there? This wasn't a sort of. There were occasional clubs, but it wasn't like a. It wasn't like things were different back then, were they?
- [07:49]
Nick Kuss
Yeah, yeah, yeah. It's still a young industry. I mean, there were gyms. Right, but. Excuse me, but there weren't health clubs. And that's the. There were, you know, there's the different phases of the sector. You know, you had the Arnold Schwarzenegger Wader, la, La Muscle Beach. Sorry, Venice beach, you know, in la, and the bodybuilding thing. Then you had Jane Fonda in the 80s and eventually the health club phenomenon, which is essentially, there is a gym where you lift weights and you go on things like that. There are studios where you do fitness, but there's also normally a swimming pool, there's a sauna, there's steam, you know, decent changing rooms with showers. Probably they're going to provide you with towels and shampoo and conditioner and soap. And there's a restaurant or a cafe. So it's the whole suite of things, not just. You don't join a health club just to go and work out. It's more than that. Typically people, when they join health clubs, at least when they make the joining decision, they imagine that they're going to be there for a couple of hours for each visit, a couple of hours three times a week. Whereas if you join a gym, like a pure fitness gym, that is it. There's no swimming pool or sauna or everything else. And so you go in and of course there are people that work out for two hours in the gym. But typically the stay, the period of time you're in the facility is much, much shorter. So a gym is a fitness club, you're in about an hour, whereas a health club, you know, there's a lot more that you can do and people take their time there.
- [09:20]
Richard
Yeah, okay, so you sort of, you were in early at a trend, but at this stage you're working for someone else. But presumably while you were working for these guys, you observed what an interesting business it was because you were learning by doing, but also developing your own know how in human capital. Would that be fair? And was it, was it very early you on you thought, wow, this is an amazing business, or was it something that gradually dawned on you?
- [09:46]
Nick Kuss
I worked for Holmes place for 19 years, which is quite a long time in the same as my first job. I left 19 years later. But during those 19 years, I moved from being a gym instructor to sales, to a club manager of one club, to an area manager of several clubs throughout London, in really cool, exciting areas of London like Notting Hill and Kensington and Chelsea. Then I was running clubs as a country director in Portugal, then a European director and CEO. So I was working for the same company and the same brand, but in various guises and growing responsibility and making, I mean, a very decent salary, I mean a really good salary. But you're an employee, right? As a CEO, you know, I know there are CEOs and CEOs you know, some CEOs have significant shareholdings, et cetera. I didn't, but it was very well paid and we did a few. So we packaged up various parts of the business and sold them and there were all sorts of sales going on. And so I could see that the ownership structure of the business was making a lot of money and I didn't resent it. Good, you know, good for them. But I did take stock and so did a couple of my colleagues and think, you know, here we are heading towards 40, having made tens of millions in profits and sales, et cetera, for other people. And I think, you know, when you're, I think this is really interesting because I'm fascinated by entrepreneurs and when they decide to jump in and go for it, you know, and I love talking to people who've done it and there's so many ways you can do it. Right. I mean I've talked to, you know, the. The son of one of my friends was doing his first business at school. The stereotypical but true, he was buying chocolate bars and things wholesale and then selling them to his mates. Completely illegal, got shut down. But, you know, had a couple of summers where he made money and understood, started learning about all this kinds of things, supply and demand and all of that, avoiding tax, just joking. And he's now doing great, you know, in a really interesting startup and I just got, no doubt the guys going to do very well. He's already done well somewhere else, so he started early. But in our case, me and my two colleagues, you know, we're heading towards 14 and you know, one of our colleagues was over 40. We thought goodness, if we don't, if we want to do this, we better get on with it. But it's difficult, you know, if you're earning a decent salary, it's quite scary to jump out of that and leave the security. Typically at that age you've probably got a young family, you've got all of the, you know, the decent things sort of organized in terms of maybe you've got schools for them you've got to pay for, etc. Etc. To leave the certainty, even though it might not be setting you alight with enthusiasm and excitement, to jump into the unknown and the risk, etc. It's quite brave. And so in our case it was helped along by the fact that we got the new chairman and I was a CEO and we really clashed and you know, if you're, if you're the
- [12:45]
Richard
CEO, I'm just going to, I'm just going to stop you There because sometimes a bad thing is a good thing because you think some guy comes along and you don't get along with them, that may be the nudge, that pain that mild. Because you were very clear about this. You know, you said that they were looking after you, they were paying you well, you didn't resent it, but you just noticed they were making all this money. But then if something comes along that rocks, that comfortable situation, in this case a clash that actually was a trigger towards you moving to take the decision, then.
- [13:17]
Nick Kuss
Yeah, I'd say a couple of things. Yeah. Number one, it wasn't just purely that they were making money and I felt I was. It's more than the money, right. I mean, hopefully it should always be. It was also, also about thinking what, you know, what do you really identify with? Are you. Do you really love the thing you're doing? And in, in my case, I was running a very successful health club chain, high end health club chain. And I noticed this phenomenon which was, which it was and is the lowcost gym chains which are just starting off in the UK and in Germany and in Holland. And I went to have a look and I thought, that's coming to Portugal and to Spain and I'm either going to be the guy trying to defend against it or I could jump in and try to, you know, get on with it myself. And yes, you're right. You know, the catalyst was seeing that coming down the tracks, but also looking back, luckily I suffered through a year of clashes and discomfort with this chairman, myself and my two colleagues, which made it very easy for us to leave. He wanted us to leave. So we kind of jumped and were pushed at the same time. And of course, if we'd been really comfortable, I probably would still be there. Yes, I said suffering was there.
- [14:40]
Richard
Yeah, we'll, we'll come on to the local. I think it was fitness you founded in 2011, right. The low cost, the low cost model. But I wanted to ask about the learning by doing and your skill set. Were you. Because this is entrepreneurship and leadership. We don't talk that much about leadership, but obviously you, you've been, you were given a number of different roles and were you a good manager or a good leader of all these, like motivating coaches? Quite often fitness coaches or the local manager, you know, they might be interested in, you know, beautiful and not EBITDA or stuff like that? What did you do to get the outcomes as you grew in responsibility to get the outcomes your boss or your owners expected from you? And what were the sort of, the key leadership skills you had. And was there anything you got wrong that with hindsight you should have done differently?
- [15:30]
Nick Kuss
Yeah, I think I was a really good leader when things were going well and we had so many years where we were doing really well and that was partly through we, us investing in people, which sounds a bit, you know, stereotypical, but we really spent a lot of effort and money and time on developing people. So loads of training courses, loads of team development and motivational meetings and trips and reward systems, a lot of time around that kind of thing. And so. But when things start to come under pressure, I think looking back, I felt it at the time, but looking back, it's clear, you know, a really good leader is somebody who can make tough decisions early. Right. And. And I didn't do that.
- [16:27]
Richard
Yeah.
- [16:27]
Nick Kuss
And that, that's. If I could go back and advise, you know, the me of the time, I take, you know, go for it early, don't avoid it. Don't avoid it, don't put it off. You know, you can see the trend, things aren't changing and it's very easy to just avoid the painful thing by saying, well, maybe next month, you know, and so that, that, so, and I think I was a good leader in some aspects and in others not, and that, that was definitely one of them, you know, I just didn't pull the trigger. But so to speak, early enough and decisively enough in a few scenarios, you know.
- [16:55]
Richard
So thank you for sharing that, Nick. And so for people who listen, obviously these days, quite often some people listening may imagine one day they might leave a lead, a funded startup. And funded startups quite often have more money than the people like me who've bootstrapped things where, you know, every single month you're thinking, you're just making sure you've got enough money to pay the wages and you're not, you don't have that capital cushion. And figuring out how to motivate and lead people when you can't give them all the benefits is really, really important as well as. But having said that, you know, people want their salary, they want their bonus and they want to be treated fairly. But then on top of that, people want a sense of growth and development. And if they're in an environment where that's normalized, that can. Even if they're thinking of doing what you finally did, of going off and doing their own thing, if the company they're working for is paying them reasonably well and developing them, it makes them feel, you know, it's worth hanging around for longer. What about, what about non. Apart from training and training and you know, parties or trips and these sort of bonuses and money, was there anything else you felt was important so that people should really respect you as a, as a boss and work go the extra mile to do a really good job?
- [18:11]
Nick Kuss
Yeah, I mean I am the kind of, I was and still am the kind of leader that I really don't like. The kind of, in the extreme example, the kind of the cult of personality, you know, I really, that's just my point of view. I'm not saying it's right or wrong, but I'm not comfortable leading a business by being the leader in the spotlight that everyone says only, but that he is the business. I mean, if people draw that conclusion, that's fine, but I was quite happy to encourage people to take ownership and feel confident, at least at a leadership level. And you know, I'd make speeches and things like that, but I think encouraging and supporting a group of leaders to take ownership and feel able to lead themselves I think was key. And the other thing which is more easy to do in the fitness sector than in some is I was really keen on recruiting people who were passionate about fitness. And that's not just like a, you know, a strap line or a phrase I'd bandy about. But what I mean is, you know, you can't be a gym instructor unless you really, really want to be a gym instructor. Right. And you've got to walk the talk and live it and all of that. But there's plenty of fitness brands. There were and there probably still are who think, oh, gym instructor is a gym instructor, but now we need management. Those are, that's a different breed. Right. And I disagree. So I always, this is one of our, the things we always did. And again, I'm not saying it's the only way to do it, but this was the only way we did it and they will and I'll do it again. Now in this new venture, all of the managers, all of them came through the gym. So we didn't hire anyone at management. So there was not one club manager who we recruited from outside of the business. They we set up a west code, a potential club managers structure where we gave people in the gym training courses for free that they could earn credits on. And then we selected from the pool of people who graduated from those internal courses to be the new club managers. We always did that. So I think then you ensure that everyone in a management position is there because they love fitness and it's really encouraging for people at the lower end to know, okay, I'm on my way, maybe, you know, maybe I can get there. And also the other thing we did, which I also really stand by, although not many people do it, but resonates, is when people became a manager in some brands, you know, if you had come through the gym, once you became a manager, you put a suit on and that was the end of it. Right. And you'd see, I'm not talking about, I'd have a problem if somebody's a bit chubby. That's not the point. But you'd see people slowly lose their kind of their fitness industry, not, not just the aesthetic, but who they are, what they, who they were. Because they think, now I'm a manager, I wear a suit, I've got to worry about reports and sales targets and I don't have time and I'm in my office. And we basically structured it whereby the manager would still be expected to, still could and was indeed expected to still be a personal trainer. Right. So you're running your club, you've got your team, but you also then go out and you personally deliver personal training sessions to your clients. And if you want to, if you're a group fitness instructor, you still teach classes. And that was really empowering and liberating and ensured that our managers, as they matured into their roles and in the business, were still not just in touch with, with the core product, but living it and keeping in shape and keeping enthusiastic, keeping that energy up and not slowly disconnecting from what the core product is and where and where the member experience is being lived.
- [22:08]
Richard
Absolutely. And there's another aspect of this that I imagine you're going to confirm that also, like, if you've got managers who've done the job of the people they're managing, they know all the tricks. And like, if someone, they'll have spotted lazy colleagues, you know, who find little ways people might, like the less good people might cut corners, but also know what a good job looks like. And assuming the manager is getting the best performance out of the team they've got, the fact that they've done the job reduces the chances of someone like getting away with sloppy work or cutting corners on the negative side, but also knowing what to praise and support on the positive. But just if you walked into a random fitness center or gym anywhere in the world and you, this is something that environment, you know really well, what would be two or three signs, either that it was really well run or it might be, you think, wow, If I was running this, you know, there are two or three things I could do a lot better. So positive or negative signs that just the eye of experience will.
- [23:13]
Nick Kuss
Yeah, yeah. I mean I do it all the time, you know, wherever we, whenever I go away or we go away, you know, we always find out where are the gyms and it's because you want to have a workout. But also we like going in. Right. And seeing. But every time I work out in the regular gyms I go to, which the ones I used to own, I can't help but still have that filter. Right? Yeah. Now I'm just a civilian working out, I need to sometimes tell myself just go do workout, then get stressed about something you've seen that's not right. But sometimes you can't help it and it just starts as you say, as soon as you walk in. Some gyms, let's say most gyms have a reception desk, right. They have their turnstiles and the reception desk. Some don't now. Right. So you know, some you just have turnstiles and go in. And it was always my argument and this is why in Fitness Hut we didn't have a reception desk. Is the one thing that worse than having. Sorry, if you're going to have a reception desk that is unmanned during some hours because. Okay, that's okay. But the worst thing you can have is a reception desk with a receptionist or receptionists on it that are not acknowledging members as they come in and out. You could have a receptionist on the phone dealing with something and a member comes in and they should be available to go, you know, just that, you know, all know how to, the cues and the, the, the non verbal welcome, all that kind of thing. The worst thing I see, the thing that still gets me going is when there's for example two receptionists and a personal trainer sharing a private joke, looking at one of their mobile phones, chatting as members are coming in and out. And you think I would, I want to just fire them all on the spot. And I think I might have done in the past because it's just awful. I mean you just as an owner, you're throwing money at these people for nothing. And it is such, such, it's such a bad look for members. It's much better to have nobody. Right. And so as you come in, you know, we go into gym sometimes and you just feel, wow, they have really made me feel welcome. It's lovely. The smile, the acknowledgement, the couple of words they say in and out, you know, and you know, we used to say things like, oh, you must learn everyone's name. It's ridiculous. You know, our gyms had 1500 people coming in each day per gym, so that's not realistic. But you don't need to know somebody's name, you just need to acknowledge them, to say things, look them in the eye. But just ignoring them is just unforgivable. So that's one thing. The thing that gets my goat in a gym itself is, you know, as we know, most of the people that work in a gym also like to work out, and that's good and we should encourage it. So sometimes you spot a person that works in the gym having their workout, and then a couple of gym instructors hanging around with that person, talking to them whilst they're on the leg press or whatever, you know, leave them alone, they know what they're doing. You know, you're being paid to seek out members that need your help and talk to them. Don't spend your time talking to your friend. Do that in your coffee break. Right? So, but it's like everything in, in life or in business, you know, you. You inspect what you expect. And if you don't, then unfortunately, people will gradually drop down to the lowest common denominator, you know, and vice versa, right? You can, you can pull up the standard of customer service and of behavior. If the standard is really, really high where you want it, and somebody comes in a new element of the team, they will go up to where the standard is and vice versa. And it's quite hard to fix it as a manager without just being there and insisting. And you just have to insist. I've spoken to managers in the past. They. Well, but I told them you didn't tell them you have to be in the gym. Lead by example. Keep doing it, keep insisting, keep encouraging, occasionally telling somebody off, but just constantly do it. Because, you know, we're all kids at the end of the day, almost, that's what it feels like. You know, he's gone, now we can start messing around. So constantly being there, leading by example, you can get it, you can get the standard right up, but if you leave it, then it will gradually deteriorate. So it's just a constant, constant, constant presence and constant insistence on getting the standard and the behavior to where you want it to be. Yeah. And so, in summary, I go into some gyms and it's just awesome. It's brilliant, it's just great. But it's not by accident. It's because that manager is doing it.
- [28:05]
Richard
And so. But you mentioned you don't have receptionists. So how do you create that welcoming atmosphere? Because you're known for low cost and people are quite a high expense. So how do you, how do you combine sort of friendliness with fewer people than normal?
- [28:20]
Nick Kuss
Well, when I say we don't have receptionists, sorry, receptions, we didn't. Right. So when we sold the business, they immediately put them in. You guys put them in. They didn't agree and I think standards have gone down. So it didn't really work.
- [28:36]
Richard
Yeah, a bad person is better than no person. That's very, It's a very interesting observation.
- [28:41]
Nick Kuss
Yeah. So, but I think if you. What, what we did is we didn't have a physical reception desk. Right. But we did have people. Right. A meter and a greeter. It's just what you don't have is a desk with a computer that somebody can be hiding behind, feigning that they're doing something or on the phone. So. But we, we had a. We had a person around. Excuse me, I'm going to play my nose for a second.
- [29:06]
Richard
Listen,
- [29:10]
Nick Kuss
so, but I think, you know, if you go to very low cost, right, people, at the end of the day, it's about setting the expectation and meeting it or beating it. And, you know, if you're paying 90, 100, 120, 150 years or more per month, you might expect to be well met and greeted and all of that. If you're paying 20, you can completely understand why there isn't somebody meeting and greeting you. Right. But it's all set up and it's all clear. So I know if I pay my 20, what I expect is the club opens on time, it's clean, the weights are good, I can get in there, I can do my job, my workout, and I can leave and maybe people will see me and say hello, but it's not guaranteed. But I'm paying €20. So there's a kind of expectation that's set by, well, which segment of the fitness sector am I paying for and what do I expect around that? And the big issue in fitness across all segments, whether it's premium, mid market, low cost, super budget, the big challenge isn't sales, it's churn or levers or attrition. That's. It doesn't matter where you are in the world, what segment you are, that is the challenge. Because people that look at our industry from another industry, when they hear what the churn rates are, they say, wow, that's not sustainable. But that's kind of coming from a slightly ignorant place. Because club membership is a cyclical thing, right? So first of all, most people work out. The vast majority of the world's population doesn't work out. They don't like it. They associate it with pain and discomfort, which there is, you know. And so when they join a. Sorry, when they join a gym, they do it on a wave of emotion and commitment. They say, okay, I'm here, I'm going to commit to three visits a week and this is it, I'm going to change things. Great. And they start off and maybe they do that for a couple of weeks, but there's a crucial period of where if they don't achieve this connection within that first six week period, the chances of them continuing is reduced dramatically. And so they've got, let's say, about six weeks to get this real stickiness, what we call it. And if they don't, they don't say, okay, I'm leaving. They just gradually, consciously or subconsciously find excuses to not maintain their rhythm of workouts. As soon as they ever get connected, it's raining, oh, I've got to do a report or I know, need to go and pick up my husband or whatever. And so attrition, as we call it, is so high, particularly in the low cost because there's a low barrier to entry, there's a low joining fee and there's a low barrier to exit because typically there might not be a 12 month commitment contract. So you can pay and play and you can leave. Attrition is 100% or more, which means if you have a gym that has 2,000 members paying members, if you want to have 2,000 members paying by the end of the year, you need to join 2,000 people during the year just to sail. 2,000. It sounds crazy, but that's it. And then you've got seasonality, which means the population is more or less enthusiastic about fitness according to where you are in the year. So January and February are the biggest months for joiners and usage because of what happened the month earlier in December. Right. You know, you get to May. It's a pretty good month for joiners because people are seeing the summer approaching
- [32:59]
Richard
and imagining they want to look good.
- [33:02]
Nick Kuss
It's really true. Yes. And then the worst months for joiners, as in fewer joiners, many more leavers, far fewer usages, are July and August. And then September's really big again because people realize they didn't look great on the beach, they've had time off, they've been on their summer holidays, so they come back. So September And October are great, November's not good, December's a disaster. And that is the cycle. And so there are things you can do as a gym to try to influence the number of levers and there were joiners, but you can't influence the cycle. That is the shape of the year, always.
- [33:40]
Richard
So I think so. Sorry to interrupt you so something. I didn't want to cut you off. I realized I interrupted you.
- [33:49]
Nick Kuss
Go ahead, it's fine.
- [33:50]
Richard
No, so, I mean, one of the things that when we met, you told me about pre sales and then looking at your business history as something you put a lot of effort into before you opened a new point for your own network, you have a kiosk or something for pre sales. It's kind of brilliant. And something I hadn't done come across. And the way you told me, I thought maybe that's what everyone does. But then it seems like so obvious you should sell before you start. Was that. Were you borrowing that from other people or did you come up with that yourself? And how did you get the. The sites to do the preset? Can you just maybe explain what it was to someone who hasn't dug into it first?
- [34:30]
Nick Kuss
Yeah, yeah. So, yeah. So I mean, if you, you know, a health club or a gin is not. It's retail, but not. Right. So retailers, you open a shop and you start selling products. Clients walk in, they buy it, they walk out. So each day you're creating revenue based upon how many people came in to buy something, whereas gyms and health clubs, at least most of them, are based upon building up a database of live members or people who are paying. So over time. So it's a much more. It's a business where you can predict and forecast the growth and the revenue and the profits of the business more effectively, particularly if you factor in the seasonality that I was talking about. And so the business survives or thrives or dies based upon how quickly and how effectively you can grow your database of paying members and everything else flows from that because you've already set the location and the rent, the fixed cost, you can manage the variable costs a bit in terms of how big are the salaries, et cetera, et cetera, and then everything else is members. So how quickly can you grow, first of all, to break even? So how many members do you need to generate enough revenue that all of your costs are paid for? Right. So you don't need to put in more cash to survive. And then how quickly can you grow beyond and start making your profit and the correct return on investment and there are still some gym owners and operators, amazingly, who say, I'm going to build a beautiful gym now I'm going to open it now I'm going to start selling memberships, which is just bonkers because the J curve that you go through before you reach profits is that much bigger, so you need more cash to survive until you get there. And it's just so embedded in me and my colleagues because this is what we always did, we didn't create it. Back in the day, everyone started doing this and I didn't really understand how somebody could come into the fitness industry and not do this. But for us it's just obvious. We typically, you know, we'll build a gym and it might take, depending upon what kind of gym you're building, it might take two and a half months or six months of building. You have your opening date, which you never really have a date, right. You have period where you think you're going to open because it's difficult to predict the opening date because that's the nature of building. They were looking back, we're going to start selling memberships, making them more attractive. So you do a discount offer to make people join then rather than when you open. So why would I join three months before you're, you're even ready? Oh, because the joining fees reduced or because you get a T shirt or because your monthly fees are less, whatever. And so you say we're going to sell for three or four months or two months or whatever it's going to be. And in the, in that period, that pre sale, we call it pre opening sale, we're going to join x hundred or x thousand members so that on day one of opening we're at break even or over break even or at least close to break even. So back in the day when we were selling for homes place health clubs in the early 2000s, we did massive pre sales. You know, we would sell for six months and open the best club we had opened, opened with 4,000 members. You know, we joined 1,500 members in the, in the last weekend we opened queuing and the box. So different times. But these days, yeah, in Fitness Hut, I think we were selling at least a thousand five hundred before we opened. And this new chain we're going to start now, we will be at break even the month after opening. That's our plan. So it always makes sense to do it. And it's, you know, it's a formula. There's lots of ways you can pre sell, but some people do it all Online. So lots of these days, lots of social media and SEO and stuff like that. You can have a central sales team doing telemarketing, you can have sales consultants in a, you know, if the club is a building site, you'll have a prefab office or shop nearby that they sell out of. Or you might have a, as you alluded to or as you mentioned, you might have a kiosk or a stand in a local shopping center anywhere where there's heavy traffic or movement. If you're doing corporate, if you're in a corporate environment, you'd have a corporate sales team that would go and reach out and do structured presentations and closing of multiple joiners to local offices and corporates. There's lots of ways you can do it but the goal is to sell a significant number of memberships so that on you win on two, on two levels. Number one is you've got lots of members and lots of income. So financially it's great. But the other benefit is you've got an atmosphere, you've got a vibe, you've got an environment that is exciting during those first days and weeks because if you start selling only from day one, you're kind of, whoever joins and starts using the gym is kind of bouncing around in a void for a while and people that come have a look don't really get the vibe. Whereas if you, if you sell really well on your pre sell you could have, you will have hundreds of people working out per day right from, right from when you open and that, that is just kind of a self fulfilling kind of environment of excitement.
- [39:46]
Richard
And where do you get the people? Because I mean one of my kids worked in sales for software sales for a while and it's a very tough job to be doing outbound sales. So. And are the trainers involved in that or do you have a completely separate team? Where do you find the people to go out and sell memberships? If you suppose you've got your project coming up, where are you looking advertising right now to get the right sort of people for selling?
- [40:09]
Nick Kuss
Oh yep. So my other colleague JP who is, we've worked together since the mid, since the late 90s. So we, we did homes place together, we did fitness out together and his area is sales and marketing. So he was a sales and marketing director for all these companies. Started as a sales consultant, then became a sales marketing director for these companies. And so we've got our network of, you know, of people, of sales managers and etc. It's for us it's very straightforward to find the people, we need telemarketing guys and girls and the, you know, we've just got tentacles everywhere, you know, kind of thing. We won't, I don't think we'll advertise through structured recruitment. We'll just reach out to specific people. But typically if one wanted to find these people. Yeah, you just put the adverts out in the, in the relevant press and online and you'll be, you'll get lots and lots of people, lots of hits. Yeah. All of our marketing, sorry, all of our sales training is done in house because, you know, we've got a lot of experience on that. So it's quite straightforward for us.
- [41:11]
Richard
Yeah. And for people listening, I mean, the importance of having good sales processes just cannot be overestimated. You don't have a. If you can't, if you can't sell whatever it is you're offering, you obviously don't have a business. And.
- [41:24]
Nick Kuss
Yeah, I think, yeah, I would agree. I think. Sorry to interrupt. So I think, you know, there's sales and sales, right. You know, you know, are you selling, are you selling a house or a car or a pizza or a gym membership? And you know, our sales process to sell, to sell a gym membership is quick, right. You know, it's, it's basically, it's not, it's almost a failure if the person says, I'm going to go and think about it. Right. If you don't close it, it's called a be back. Maybe they'll be back, maybe they won't. It's still a sale when they come back. But once they drop off the call or leave the tour of the gym, you've lost control. And basically it is a process. It's funny, it's interesting talking to or witnessing sales consultants. You have to keep insisting that they follow the process and follow the script because it's very difficult for them to really, for some people to really understand, no, this is the way it's done. Don't go off script. Don't think you know a better way. Don't decide something. Just literally follow the steps. That's all you've got to do. And it's a funnel, right? So imagine a gym may need to sell in. In a pre sale. Let's say the gym needs to sell 300. 300 memberships. 300 joiners in a month. Let's just say, for example, you might have your sales consultants, okay, to do 300 joiners. This is just an example. It is not definitively like that. 300 joiners means 500 tours. If you're going to be touring them around the gym, 500 tours means 700 appointments to tour. 700 appointments means a thousand conversations. A thousand conversations means 1,500 phone calls. Now I need to make a thousand. 500 phone calls to achieve 300 joiners. Thousand 500 phone calls means I need a database of X leads. And it's just a. The funnel just does that, you know, and then it's a process, you know, divide, divide those 300 leads. Sorry, 300 joiners across. Let's just say six sales consultants, which is 50 joiners each. Yeah. And just break it down. Each of them needs to make that many calls because some people will not answer. Of the people that answer your close X appointments. Of those, some people won't show up. And so it goes. And it's just a numbers game, you know, you break down those, those 60 joiners across, let's say 22 days, and you can just map it out. It's that simple. And then, you know, this successful sales process is about saying, okay, we've got a target of 300 in this example I'm using for the month. So how many is that per week per person? And then the sales manager is on top of them. That's the wrong expression. It's following up with those six sales consultants during the day, saying, how are you doing on your calls? Are you up to speed? And not letting anyone fall behind and making sure that they're following the process. And then it just happens. It's not magic.
- [44:28]
Richard
No, no. And I think sometimes it's interesting. I've interviewed so many people, but it's a long time since someone's been so clear about how, on the one hand it's simple. On the other hand, actually getting it done well is not simple. And you've got jp, you know, it sounds obvious, but someone listening to me might think if they've not done it before, each of these steps is like, well, how do I monitor them? Are they all in one place? What software do I use? There's a whole load of things which you've got sorted because you've got JP and basically you've done it many times or you've been in a team that's done it many times. But finding someone who's. Do you. I suppose you're. Are you younger entrepreneur listening to this, thinking, well, my business, it might be completely different sector, we need something like that. Do you try to find a partner in your team, your founding team, who's got the experience or can you learn this just by listening to people like you and doing it? Or is the danger you're going to hire six consultants, mismanage them and you're going to, at the end of the month you've sold 50, not 300, and you spent €9,000 on wages rather than the 5,000 you hope for. Or you know how easily it can go wrong?
- [45:37]
Nick Kuss
It can go wrong, right? I mean, I talk to entrepreneurs, typically young people who are doing startups and all different things, and they seek me out. It's not like an official consultancy and I don't charge anyone. I just like having a chat with people. I find it inspiring for me as well. I like talking, as you can see, and sharing ideas. And I come away inspired by some of them as well. And sometimes it's about gyms, mostly it's about fitness, but sometimes there's other things. But these days, particularly where I live, where we live in Lisbon and Cascais, there's an influx of super wealthy people from all over the world. So we're. This is the place to live, right? Lisbon, Americans, Brazilians, you name it. Lots of people with lots of money moving here. And within the fitness sort of sector, a lot of these people don't need to make money, but they're interested and they think, oh, gyms, that's fun, that's easy. I like working out. I'm going to open a gym or a studio or a boutique and so I have calls and meetings with some people and, you know, everyone's clever and intelligent, switched on and successful, but you can be all of those things and still slightly naive about how things are going to go. And I'm sometimes amazed when I'm talking to somebody. We used the example of the pre sale, but there's lots of other ones where I think, my goodness, you're about to do this thing and you were going to do it like that. Wow. I can tell you this is the way to do it. And they don't have the capacity in their current team to achieve or to do the things you're talking about, but they can. I always tell them they can go out and find expertise and support and know how it's all out there, it's just. But I suppose the thing is, in many cases I've seen that expression, you don't know what you don't know. So the most important thing is to talk to somebody like me. Doesn't have to be me, but don't have the ego to think, oh, it's ginger. It's easy I mean, I made that mistake with restaurants. It's not easy. You know, I'm not sitting here saying I know everything, I'm telling you I've made mistakes. Assuming something's easy because it looks like it is as a client.
- [47:56]
Richard
Yeah. I mean this is such an important lesson and let's just take some completely random like, I don't know, industrial cleaning systems or for chemical companies, something that I've no experience with that. But you know, if that's what you're thinking of doing, even if you've got no experience with the sales process, you can run a job advert on LinkedIn saying you're looking for someone with experience of that talk to 10 people and you know, and you can say, and you can be truthful, you say you've got this startup and you're looking for people with experience. And you know, probably the person you're interviewing won't want to come and join a startup, but he or she will be trying to impress you, telling you everything they know so you can actually get, they get experience like that. But how else would you get experience other than, you know? Because that's not everyone's ready to do that. Although I think it's.
- [48:39]
Nick Kuss
Yeah, I think, I think, I mean people have, you know, consultants, whether it's the big guys, you know, KPMG and that kind of thing, or smaller consultants, I'm wary. That's just my opinion. Lots of people aren't particularly as a startup. I would, personally, I would avoid hiring consultants totally because they don't have skin in the game, they've got nothing to lose. And often, you know, it's all kind of MBA type advice which seems okay, but how does it work in the real world? What real experience do they have of in this instance, the gym industry? I would say none. So I'd avoid them like the plague. And also your pay extremely rare that there'll be a success fee. You know, take our advice and if it works, pay us. They won't do that. So. But you do get people in startups if they, particularly if they have some decent funding that might think that's the way to go. And I'd say just don't do it. I'd always want to hire in and or structure something around success. But yeah, I mean there's just so, particularly again in, in fitness there are so many people with so much experience who've been there and done that, who are good people who are not going to rip you off, who are going to be honest, who are going to Be excited but are going to provide you with the stuff you're missing that if you go it alone and it doesn't work out well, you know, you've got, you've only got yourself to blame because you could have sought out, you could have been self aware enough to say I don't know what I don't know. And I think one of the best pieces of advice I heard from somebody in this kind of interview what's the best advice you can give somebody is spend a lot of time talking to people and asking them, well, what doesn't seem right about what I'm planning to do? Where are the gaps? What do you think I'm missing? Because lots of people,
- [50:29]
Richard
sorry. I wrote a blog post years ago called Rip My idea to Pieces and I said quite often young entrepreneurs think or even older people who worked in corporate and are starting a business open like they show people their new business idea as if it were a new baby and they're just expecting praise. And I always say if you just get in the habit, tell people about your idea and you say, nick, it would be so helpful if you tell me what, what can go wrong with this idea. And that's a much more. And also sometimes people, they genuinely want to be nice and they don't realize that it's not helpful. It's not nice not to tell someone that, you know, their baby isn't symmetrical. You know, if one eye is bigger. Exactly. If one eye is bigger than the other, you, there are probably stuff you can do to address that.
- [51:10]
Nick Kuss
Yeah, I agree. I can think of two instances where I very transparently and firmly, but with some care, told two different buddy entrepreneurs that their idea was not great or was just nothing. Why are you excited about this? There's n versions of this out there, massively funded and so far ahead of what you think is a great idea. I mean, surely the first thing you do with what you think is a great idea is spend a few days googling it to find out if it's out there already. And in one case, this guy just hadn't even bothered doing that. I was thinking you've come and you've sat down with me and kind of presented a really bad version of what's already out there. What are you doing?
- [51:59]
Richard
Yes, and I'll put a link to it. I have in the show notes I have a blog. I get asked, I'm a bit older than you, but I came from a very different environment in Poland. A lot of people would ask for advice and I had a blog post called 10 tough questions from a Potential Investor. And I sat on the blog post and said, look, come back to me. And this would include things like, what's the competitive landscape? What's the business model? And I said to people, if they don't want to go through that process beforehand, I don't want to spend 45 minutes listening, discovering that they haven't done that. And if, to some extent, it was a kind of filter in the pipeline, and also the questions I was asking, any experienced business person would be asking as well. And if I say talk to. If you think it's going to be easy to sell, talk to 20 of the people you think it's going to be easy to sell to and verify that that assumption is true. And boy, is it good news if they all say no. You've discovered before you spent your savings building something that's really hard to sell.
- [52:59]
Nick Kuss
Yeah, exactly. 100%. I think you can really. And I've been there myself, you know, you get what you think is a great idea, and there's that kind of. That sort of delicate dance between wanting to get this support or challenge and so that you can curate it and either. Either kill it because everyone's told you you're daft and it's terrible, or curate it and pivot and adjust and make it really solid. There's that, but then there's also this kind of reluctance to share too much. Right. Because this is really common. Well, if I tell everyone, if I tell people, I'm at this stage where I'm so vulnerable because it's a brilliant idea, but I don't have any money, and if I go and start talking to people, there's people out there who are just waiting for a great idea, they've got loads of money, and then I'll be dead. I'll never get going.
- [53:48]
Richard
So that isn't true. There just aren't that number of people out there. And the people with money often are just enjoying spending it, or so the
- [53:56]
Nick Kuss
chances of somebody picking it up and running with it because it's such a great idea, it is tiny. And if you hold it, if you keep it all close to your chest because you're worried about that, you'll either never get going or you will, but you won't know. And then you're much more likely to potentially fail because you didn't go through the process which you were just describing, which is checking and asking for feedback and challenge.
- [54:20]
Richard
Yeah. I want to go back a bit to your upbringing and childhood and the do you think there's such a thing as an entrepreneurial personality? And would your parents, your family or siblings, your friends from before, when you were a kid, when you were young, would they be surprised about your business career? Or was there always something in you of sort of doing things your own way? And did you have any role models or examples? Or would they all be astonished to think of nick, the successful 50 year old, you know, entrepreneur?
- [54:53]
Nick Kuss
Yeah, no, I don't think I, I didn't, I didn't have entrepreneur role models and like I said, I, you know, I was a company man for 19 years and had showed. No, I suppose I was risk as risk averse in some ways, so didn't really meet the typical entrepreneurial mold or standard. Not, not at all, I'd say. And what I have had for a long time, even when I was in the plain vanilla CEO role, was a personality that meant in many aspects of my life that I needed to have various things going on to feel like I was doing something. So one could say, oh, you're in the same company for 19 years. Yeah, yeah, but working in different environments, different roles, same brand, but lots of stuff going on, lots of different countries, different languages, different people, cities, and just couldn't have felt content or fulfilled just doing one thing. But again, even that's not necessarily the definition of an entrepreneur. Right. Some entrepreneurs start something and do that. But I've enjoyed having various different irons in fires. And you know, one could say when businesses fail or startups don't work, it's because you didn't give it enough attention. Maybe, but there's plenty of businesses that fail when people are exclusively dedicated to them as well. So there's so many aspects as to why things work or not. Right. Some of it is lucky timing, definitely. I mean, the most money we made was in our Fitness Hut business where we made a fortune. We also lost a fortune because of COVID So we invested back into a business and lost millions. You can't predict, nobody could predict Covid. Right. And I was talking to somebody about this recently that some businesses were just set unknowingly set up to do badly if in the event of that kind of thing. And some were unknowingly set up to do very well in the event of that kind of thing. You know, I know people that made a fortune through Covid by chance because their businesses, for example, things like, you know, here we are using Zoom. I mean, goodness, how that catapulted Zoom to, you know, a fortune or peloton, you Know Peloton.
- [57:31]
Richard
Yes, yes.
- [57:32]
Nick Kuss
I mean, I know that it then crashed for various reasons after that, but goodness me, I mean that the valuation, the Peloton just went bank thanks to Covid, but we lost a fortune. So there's lot, there's luck. There is really an element of luck, you say? Oh no, there's no luck. It's when preparedness meets opportunity. Well, yeah, maybe. Although.
- [57:57]
Richard
Thank you. I think there's a couple more questions I want to ask. I appreciate timing, but what you're saying makes so much sense. And there's aspects where you've financed your business. There's also things about your motivation and what you're doing with your new business and your investment. And do you have the time to go on for another 10, 15, 20 minutes? Are you okay with that?
- [58:16]
Nick Kuss
Yeah, I could do 10 minutes. Yeah. But I'll talk quickly.
- [58:18]
Richard
Okay. So the, you're well off enough not to have to do this, so, but you're getting back into the game of running it. Why, what, what's the driver for that? And if it goes well, say over the next three, five, seven years, where are you going to take your new venture? So not so much what you're going to do because we've already established it's a new low cost gym model in Portugal or fitness center. But why are you doing it when you don't have to?
- [58:47]
Nick Kuss
Yeah, I mean, I kind of do. I mean I have to because I want, you know, when I retire to live the life that I want to lead. You know, got some plans. You know, when they talk about retirement, I, people that kind of, when they retire, they stop doing stuff. Yeah. For various reasons. But my, my plan is to do all sorts of things to have purpose.
- [59:13]
Richard
Can you give. So there's three or four examples because I've met you, I've had the privilege of meeting you, our listener. Just don't know what is that a yacht of race sauce or is it going to.
- [59:21]
Nick Kuss
No, no, no. I mean, I, I, I don't, I mean, I'm not really interested in that kind of thing. It's, I, I'm, it's what sound a bit funny? I, I want to have a little, a little farm. They call it a kintha here. It's not really a farm. It's like a house in the countryside with a few geese and the pot bellied pig and a goat and some dogs and you know, not, not out in the middle of nowhere, but you know, just have some space and have a, have a, have fun. I've Got, I've got a three year old kid, you know, which I want to spend lots of time with, helping her grow up and have fun and experiencing, enjoying that. I love sport, so I want to travel the world, going to my favorite sports events. You know, I want to do things to help other people as well. So I've got some, some ideas for how we could get involved with less fortunate people and try and set them up in business. So I'd love to be able to do that.
- [60:14]
Richard
Mental note, when you're ready. I for one of the entrepreneurship projects I run Doughboy, that listeners here know about, maybe more than you cam entrepreneurs. Our leader in Manchester already is doing coaching in prisons. And I think, you know, entrepreneurship for people coming out of incarceration is a really big, big opportunity. So as and when you've got bandwidth, there are things that you, you can knock on my door and there are people I, because I sound, because I'm quite posh and privileged, I sound like I might not hang out with that sort of people. But there are people in my network who could really use help. So that's nice to know. So anyway, so you're financially motivated in the sense that although you've done well, you'd still like to make a bit more to finance some things that you haven't yet, you haven't yet got. Is that correct? Is that fair enough?
- [60:57]
Nick Kuss
Yeah, exactly, exactly. And our new venture is basically the following, the standard kind of model of raise the money, open the clubs. Very ambitious growth because these are relatively small clubs. These new ones, you know, cost about half a million euros each. They're small, modular built gyms which we build a network of. So it's not, rather than putting one gym down, you join, you download an app as a member and you have access to our network of gyms. And we put lots of them in a neighborhood, Right? So within a neighborhood you'll have a gym every four or five minutes in any direction. That's our goal. Because the two things we think that influence what is a relatively small percentage of the population using gyms in Portugal, it's only about 6% of the population compared to 12 in Spain or 20 in the UK or over 30 in Scandinavia, is price. Because actually low cost in Portugal is still quite expensive versus the average salary. So we're going to come in a lot cheaper and also convenience. Right, so where is the gym? How far away from my house? That's the same anywhere in the world. That's one of the reasons people disconnect. So our approach is put loads and loads of small gyms in neighborhoods, modular build, which means we can get locations, we can build on locations where traditional build is impossible. So you still have a licensing process but we can put them into public spaces and things like that. So point being we want to roll out 30 gyms per year. Okay. So we think there's about a space according to the population and catchment studies which we've had done, there's space for almost 300 in Portugal of our gyms independently of what other people are doing with gyms. So we want to roll out 30 a year and then exit the business at around 100 gyms. So it's about a four year plan. So my goal, I'm 55, my goal is to have exited successfully before I'm 60.
- [63:04]
Richard
Well, you're going to be welcome to be back on the, back on the show to tell us what, what I'm sure you know, obviously we've only met once and now we're having a second follow up. But obviously you, you know what you're doing in the googling or what's not whatsapping the, the llming of you. There was interesting stuff about the financing like you had mezzanine finance so you weren't diluted. Is that, could you talk a bit about how you, how you financed it and how as someone you had corporate experience but you weren't an established entrepreneur in this sector. So how did you manage to do quite a creative finance. Can you just explain the headline points and what was it about you for the previous one?
- [63:45]
Nick Kuss
Yeah, yeah, for Fitness Hut. So we basically, it was amazing. We left Fitness Hut. We found an investor who actually we were just looking for locations. We thought we had an investor, a verbal agreement with an investor. So we started looking for the first three locations and as we were looking for those locations we met a landlord who said I really love your concept by the way. I have a private equity business as well. I know that you've got an investor but if anything goes wrong, give me a call. And the next week our existing investor pulled out. So we went back to the landlord, gave him 50% of our business, secured three locations and we'd also secured amazingly bank debt, bank finance. As a startup, I think we raised about 3 million. It was a different era. It's very difficult to do that now. From the second bank we went to because we were entrepreneurs and it was a startup. But we were also quite incredible because we had been leading the biggest chain of jit of health clubs in the country. So we Wear names that say big fish in a small pond. It's. It's difficult to replicate that. You know, we know that we had a certain cachet.
- [65:00]
Richard
It's difficult. But, you know, whatever you're going into, I mean, even. Who's fish fingers? If there's someone who's had the. Obviously, fish fingers isn't a food concept in terms of retail. If you want to have a fish chain, if there's someone in, in your team who was leading a major chain of that thing. And the banks aren't stupid. I mean, it was a good business for them to lend you the money because you. Presumably they made their fees and their interest and, you know.
- [65:27]
Nick Kuss
Yeah. So basically we, so, so we had our, our, our, our investor. We had the banks, so we had enough to open three. And our investor had said, there's lots more money where that came from. Then things started adjusting, you know, because of course, with investors, it's not just how good, it's how their other investments are doing as well. And we were doing really well. I mean, we opened three clubs and we had waiting lists and it just went absolutely bonkers. And then we suffered, kind of limped along for a couple of years where we were struggling because we were doing well, but we couldn't access more funds. And then one of our. One of the guys that worked for, with Prior, Vesta, sought out a private. A mezzanine fund. We did a deal with them and they lent us, I think, 12 million, which is quite a lot of money. And yeah, what mezzanine is, is essentially, it's not equity, it's not debt, it's somewhere. It's a loan with higher interest rates than the bank. But you don't get diluted. Right? So they don't take equity. I mean, you kind of do because in the end their equity has cost you, but it's nowhere near as much dilution as if you'd given equity. And they were a really good partner for us, not just in terms of what the deal structure was and the interest rates, but how they behaved. They had an observer on the board. We were in this great position where in board meetings, the conversation was, here's the money. Can't you open clubs more quickly that you need more money? And that's just a luxurious privilege position to be in. And so we rolled out really quickly. And I think when we sold. When you sell a business that's in growth, there's different ways to value the business. And in gyms, there's a multiple. Right. So you apply a Multiple, typically to the ebitda, to the profit, the EBITDA level. But if it's really a growth business, you look at the EBITDA of the current business, but it's in growth. So you might do a run rate where you extrapolate forward. Where are we now? You could apply some valuation to some clubs which have not yet opened. So you might be building some clubs, but because you've got some evidence that the clubs you've opened are working, there'll be evaluation put on those clubs which have yet opened. And then the other thing you want is, of course, you want what they call meat on the bone. Right. So if you have. We. I think when we sold, we had 30 clubs open, plus another few in construction. But you have to show evidence that they're within the market you're in. There's. There's scope to build another whatever, because the incoming buyer also wants to grow the business and sell. So those are all important aspects and that will influence what the multiple is. The multiple if you don't own the asset, because in some gym and healthtube chains, they own everything, they own the building, they own the land. But in most cases, as a gym operator, you do a fit out of an existing shop or an existing space, so you don't own that. You do a rent on that shell, then you invest your capex and you've got your X years of maybe 10 or 15 or 20 years of leased, but it could be anything from 5 to 15, depending. And. Yeah. So I think mezzanine is brilliant. It's difficult to get it very early on, but if you can get it, it's just brilliant because of the lack of.
- [68:58]
Richard
Yeah, thank you. Sorry, sorry. Unfortunately, something cut out just before you said between 5 and 15. I guess you're talking about EBITDA multiple when you talked about between 5 and 15. Yeah. And for those who are listening, who don't, EBIT stands for earnings before interest, tax and depreciation, or stroke amortization, and is, in common language, it's basically profit and people. And according to my research, you were getting 10 million EBIT on a turnover of 30 million. So that's 30% in 2018. And these are good numbers. And if you're looking for that kind of debt finance, make sure you're borrowing against a really healthy business, because if you load yourself up with debt on something that's not very profitable, you'll struggle to pay the interest, won't you?
- [69:48]
Nick Kuss
You will, depending upon. That's the other thing about mezzanine. Is you structure, you get the money in, but you also negotiate the repayment terms. Right? So some mezzanine you pay. You might pay the interest on a quarterly basis, but only pay them, you know, pay the principal at exit. In other cases, you might pay it all as what they call a bullet, everything at exit.
- [70:17]
Richard
But all these things, it is debt, so you do have to pay it back and it's, you know, it is. And you don't want to give equity away in a business or sell equity if the business is going to get more and more valuable. And. But again, it's great to talk to people with experience and just like have someone independent who's just say to someone experienced like Nick or. I'm not so good at the corporate finance stuff, although I know people who've done it, but just that two cents who talk it through. It's not independent. And tell them what could go wrong with this. And sometimes it's completely obvious, but it's really helpful. Good. Well, and you mentioned you got involved in one or two other things. So just one question. If someone listening to this is in a country other than Portugal and they like what they're listening to, are you open to replicating this in other countries, like transferring know how. Suppose you've got an operator or someone who just. Do you have the bandwidth to support out of Portugal or do you think really, you know, you know, you know, Portugal, the building regulations, the local market and this.
- [71:16]
Nick Kuss
No, no, we. Yeah, no, we. I mean, somebody asked me, why Portugal, dude? Because this is where we are. But, but you know, we've operated gyms and health clubs in, as I said, in eight countries. Not what we're doing now. So I know how to do it, we know how to do it. And in fact, you want to get something going, prove it. And our business plan and model and evaluations, I think we've got forecasts exclusively on Portugal, but I think there are going to be opportunities. In fact, we signed an NDA a while ago with a guy just by chance in Australia. I mean, I wasn't looking at Australia, but it's an old colleague and friend of mine, a really good friend of mine who I used to work with, with in Holmes Place back in the day, who's now in Australia and reached out and said, what are you doing? And I sent him the deck. He loved it and he's got really good financing contacts in Australia and got excited about it and you know, I have no problem at all. If people are interested, we'd love to talk to them. Because, yeah, we know the building ranks here better. But, you know, I, I'm. When we, myself and my colleague JP said, let's get back into fitness, finally, we agreed with each other. We said we'd only do it if it's really exciting, if it excites us. We can't just dive in going, we're going to do what we did, but it's going to be better. It's got to be truly disruptive. And I would say one thing, if you're talking to young entrepreneurs, don't be seduced by something being disruptive if it's not relevant. Those are the two key things you can do something disruptive, but relevance is key. And what I see here, not just in Portugal, elsewhere, is that convenience is everything. I followed the trajectory of the supermarkets, right? So when we looked at supermarkets in the UK and elsewhere in Europe, we all remember how the first supermarkets appeared out of town. You'd get in the car and you'd drive there and do the weekly shop. And meanwhile there were all the mom and pop corner shops around. And then the next phase was hypermarkets, even further out and even bigger, with less frills and less trappings, further out, even cheaper. Now what's happened with all the big supermarket chains in the UK and elsewhere is they've retrenched, right? You still have supermarkets, but they've bought up the corner shops. Waitrose and Tesco's local and all of these, Sainsbury's local and these kinds of things. So more convenient, you can access them more easily. They're smaller, but they've got the reassurance of the brand. And we have taken that approach to gyms, which is saying you don't need to get in your car to drive to the gym. It might be, of course, a bigger gym has more equipment, it has everything. But what really defines if somebody's going to go to the gym regularly and therefore get the benefits long term of wellness and fitness and health, is can they get there easily and psychologically, consciously or subconsciously, not be put off? So convenience is everything. My point being that is a transferable need, a transferable benefit, irrespective of the country. Humans are humans. Is it convenient for me? So if somebody reached out from the US or Germany or any country you can think of, I reckon two things. The modular build solution has to mean that, well, it definitely means that we build much more quickly and then in eight weeks from when we sign the contract, eight weeks later, the club is there because it's all built in A factory and then delivered and put together. That's what it sounds like. It's a bit more than that. Right. So it means we can do it quickly. We can go into places where you would not get a license for traditional build. It's just. It's a land negotiation. How much will I pay for rent on the land rather than fitting out a shop or an office? Right. So. And thirdly, you know, convenience is everything. So I think it's really transferable to other countries and therefore I'm excited, as you can see. I think a year from now, let's say at the end of this year, just at the end of this year, we'll have multiple clubs open in Portugal, which is only one market. I know, but I think we'll have a really compelling set of data and also the look and feel, you know, the touchy feely vibe that will, I think, create a lot of interest from entrepreneurs and investors and maybe people that just want to come and have a look and go and do it on their own. I think we're going to create something that will be replicated in other markets. I'm absolutely convinced it works elsewhere.
- [75:53]
Richard
Yeah. And it certainly sounds credible. But anyone listening will, who's a bit experienced. So there are lots of things that sound great. Are you raising money? If anyone listening to this has got money and passes your due diligence test of the sort of people you want to take money from, which is another very important question. Are you looking for any.
- [76:15]
Nick Kuss
We are. We're down to the last. The last 1.5 million. So we want to have that raised. We raised last month. We're raising. We're closing it around this month. I think May is the last one. So we'll do one. One this month, one in April, one in May, and that's it. Because after that, we think it's going to be mezzanine. We hope. We plan that it will be only mezzanine after that. So. Yeah, there's 1.5. I've got a deck. I'll send you a deck.
- [76:41]
Richard
Yeah. Okay. Do you want to go. Do you want to share anything? Like the. The basic valuation? Would you rather keep that to individual conversations?
- [76:47]
Nick Kuss
Yeah, let's keep it. Let's keep it to. If anyone shows any interest, wherever they are.
- [76:51]
Richard
Yeah, good. And if people. You mentioned you do mentoring and things. If people are listening to this and obviously Nick is going to be busy, but he's also sort of. They quite often say, if you want to get something done, get a busy person to do it. That what. So what sort of people do you like? Are you available to give advice to if they track you down? I assume that something like LinkedIn or what would be the right way for people to reach you if they wanted advice? Or are you going to have to stop doing that for a while?
- [77:17]
Nick Kuss
No, I like doing it. I mean, if I'm too busy, I'll say. So yeah, if anyone wants to talk, I love it. So LinkedIn is fine. And what sort of people rob? Anyone?
- [77:26]
Richard
Anyone. That's a very. Yeah, I mean, the nice thing about being an entrepreneur is you can do exactly what you like. There's just one note I made that when you were talking about what you hated seeing in a gym of the staff ignoring the customers and talking to each other, that one of the things I do is compare things from one world to another. And when I was organizing TEDx events and my entrepreneurship events, I always, always said to the volunteers, and we were all volunteer run teams so we didn't have the tools of money. I said like it's, you may not be paid, but it's still a job. You, you may join this because you want to make friends, but do not talk to your friends while, while greeting people. You know, arriving at an event is like arriving on a webpage. You've got seconds to make a good impression. And you know, if you arrive and everyone ignores you, your first impression is maybe it was a mistake to come. And just this idea of, and like when I'm, even now the global things I'm running, I say train your volunteers to do this properly. And people think, but, you know, we're welcoming friendly people. No, there's a difference between being a friendly person and knowing how to make someone feel great when they arrive at a venue. And that kind of detail matters. And it's not going away even in this world of automation, is it?
- [78:38]
Nick Kuss
No, it's not. And I think there's a fine line, as you say, between being, providing professional courtesy and focus and empathy with just being friendly and having fun. And particularly in gyms where, you know, we want the customers, the members to feel like they're having fun and that they've got friendships with other members and even with the staff. But the staff always have to remember that, yeah, you can, you can be really good friends with, with a member, that's fine. But when you're being paid, your job is to be looking after members, not spending time with your friends if they are another person, trainer or a member. It's literally coined the phrase member interaction, which Means when you're a gym instructor, your role is not to just talk, not to just be in the gym. And the worst case is, oh, I correct people when I see them doing something wrong. Great. It's to talk to members. Not only to talk to members, to seek out members, to know which members. You've got 15 members in the gym. You have to know like that, which are the ones that need your attention. Because if you try to divide up your time, you know, across those 50 members, it's a minute per member. You have to look and it's just common sense. You can get better at it. You know, look at all these people, those three muscly guys who will come in together laughing and joking, and they're on the bench press, don't need your attention. You can walk past them and do that. The lift. I mean, using a stereotype, the little old man who looks a bit nervous, who's kind of making a mess of the lap pull down machine and not meeting anybody's eye, that's the person that needs five minutes of your time, you know, or the three, whatever, the three women who are kind of ineffectively doing some kind of terrible ab crunch, need you to go and do an impromptu little small group core training thing with them for 10 minutes. Whatever. It's about being able to filter and distill and go and provide your expertise and your attention according to who needs what. That's, that's the mark of a really excellent, you know, fitness professional in the gym. And yeah, so I say, you know, coming back, you, you raised it again. You know, the people that just spend their time really generally not getting what the problem is, because I was being nice and we were laughing. It's like, no, that's just like basic, completely wrong.
- [81:00]
Richard
Okay, I just to wrap, is there anything that you else that you've learned on your journey in your 55 years that we haven't mentioned that you'd like to share with the listeners? It's been extremely interesting and I really appreciate it. There might be something else that you feel, you know, that not everyone knows or some other thing that you'd like to share before we close.
- [81:24]
Nick Kuss
I think, yeah, I mean, introspection, I think the pressure is there, right? Pressure to perform whether you're working for somebody else. I mean, you're kind of always working for somebody else to an extent. Even as an entrepreneur, unless you're in the position where all the money's yours, it's having some standards and it's kind of getting the right, the balance between and being prepared to pivot and adjust. Like coming back to what I said at the beginning about being a strong CEO when things aren't going well, you know, recognizing it, making serious decisions that will affect and fundamentally change the trajectory, hopefully with also staying, staying true to what the long term goal and vision is. And I think I've been lucky because my business, well, I've chosen to do startups with a small team. Always partners, you know, my, my brothers, you know that we do this together. But I know there's lots of entrepreneurs that do things on their own and I take my hat off to them because I, I wouldn't stand, I just wouldn't stand a chance doing it on my own. Some people, some people do. But whether you're on your own or you're like me and you, you have a, you know, your small team of guys that you're doing it with. You have to be able to talk to people and, and say, you know, what's going well, what's not. Be honest and make decisions and don't, I think, don't get too, not arrogant, but too complacent and self congratulatory when things are going well because sometimes they're going well in spite of you, not, not because of the amazing decisions and amazing leadership. It's just like, well, great timing. A potential competitor made a mistake. I don't know, lots of things can contribute towards you apparently being awesome.
- [83:14]
Richard
So Nick, it's been a pleasure to have you on the show and all the best with your venture.