For cash-based physical therapists just starting out, deciding whether to go the brick-and-mortar route or partner with a local gym is a crucial decision. Both options have pros and cons, but if you’re leaning towards the gym route, this blog will guide you through negotiating rent and ensuring you’re set up for success.
In this post, we’ll cover strategies for determining how much rent you should be paying and how to negotiate a win-win arrangement with gym owners, so you can scale comfortably without overextending your budget.
Why the Gym Model is Ideal for Starting Out
When you’re first launching your cash-based PT practice, overhead costs are a big consideration. Renting gym space can offer flexibility and lower risk compared to locking yourself into a long-term brick-and-mortar lease.
A gym model allows you to pay rent based on the number of patients you see, which can be extremely beneficial when starting out. Unlike a fixed rent in a brick-and-mortar setting, paying per session means your expenses grow alongside your revenue. You only pay more as your practice expands.
Key Benefits:
- Lower Risk: You only pay rent when you generate revenue.
- Scalability: Rent increases as your business grows, not before.
- Community Engagement: Working within a gym helps you build relationships and credibility with local gym-goers.
How to Calculate Your Rent: Aim for 5-10% of Revenue
One of the biggest mistakes practitioners make is agreeing to a rent structure based on a percentage of revenue—sometimes as high as 20-30%. While this might seem appealing at first due to low upfront costs, it can spiral out of control as you scale. Paying a high percentage of revenue means you could end up paying more rent than the gym itself makes from their own members!
Example Scenario:
Let’s assume you’re seeing 20 patients a week at $200 per session. That totals $4,000 per week, or $16,000 per month. If you’re paying 20% of your revenue in rent, that’s $3,200 per month—far more than the recommended range of 5-10%.
Instead, your rent should range between $1,000 (5%) and $2,000 (10%) based on this revenue. This is a sustainable model that allows you to grow without handing over a large chunk of your income to the gym owner.
Negotiating Rent: Key Strategies for Success
Here are some effective strategies to negotiate a fair rent structure that works for both you and the gym owner:
1. Avoid Percentage-Based Rent
As mentioned earlier, a percentage-based rent structure can quickly become a financial burden as your business grows. Instead, aim for a per-patient rate with a monthly cap. For example, you could negotiate paying $10 to $20 per patient seen, with a cap of $1,000 to $2,000 per month. This keeps your rent manageable as you grow.
2. Introduce a Ramp-Up Period
When starting out, your patient load will likely be lower. You can negotiate a ramp-up period where your rent starts lower (e.g., $10 per patient) and increases as your patient load grows. Once you hit full capacity, you can agree on a fixed monthly rent cap that aligns with your revenue projections.
3. Cap Your Rent
Negotiate a maximum rent cap so that even if your practice grows exponentially, you won’t end up paying an excessive amount in rent. For example, if you project earning $20,000 per month, aim to cap your rent between $1,000 and $2,000.
4. Leverage Your Value to the Gym
You’re not just a tenant—you can bring value to the gym beyond rent payments. Position yourself as a partner who helps keep gym members injury-free and enhances the gym’s reputation by having a Doctor of Physical Therapy on-site. This can reduce member drop-offs and attract new clients, which can be a great selling point when negotiating lower rent.
Building Value for Gym Owners
Gym owners are often hesitant to refer members to external healthcare providers because they worry those providers will tell clients to stop working out due to injury. By positioning your practice as a way to keep people working out safely, you offer real value to the gym.
Here are a few ways to demonstrate your value:
- Injury Prevention Workshops: Offer workshops on injury prevention for gym members, helping them stay active while avoiding injury.
- On-Site Consultations: Gym members can come to you directly for guidance on how to modify their workouts safely.
- Increased Credibility: The gym can market itself as having a PT on-site, helping them attract new members concerned about injuries.
Why the Gym Model is a Win-Win
By negotiating a rent structure that aligns with your revenue, you set yourself up for financial success without the heavy burden of overhead costs. The gym benefits from having a qualified professional on-site to help members avoid injuries, while you gain access to a steady stream of potential clients.
Before finalizing any rent agreement, make sure everything is in writing and agreed upon with the gym owner. A well-structured partnership can provide the stability you need to grow your practice confidently.
Wrapping It Up
Starting your cash-based PT practice inside a gym is a smart, scalable option that allows you to manage expenses as your business grows. Focus on negotiating a rent structure that stays within 5-10% of your projected revenue, and be sure to leverage the added value you bring to the gym to negotiate favorable terms.
By approaching negotiations strategically, you can set up a win-win partnership that benefits both your practice and the gym, allowing you to focus on what matters most: growing your business and helping patients stay active and injury-free.
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About Author:
Although the company eventually failed, it provided Jordan with invaluable learning experiences. He became passionate about designing world-class patient experiences and building efficient marketing & sales funnels for cash physical therapists. Utilizing this expertise, Jordan became the CMO of a well-known physical therapy media company, and consulted for and built marketing funnels for some of the top physical therapy business coaches.
Eventually growing tired of the typical agency and consulting grind, Jordan, alongside Max Zirbel, founded Clinical Marketer. They infused it with the hands-on support and mentorship that they benefited from in their initial venture. The company was a success from the start, aiding clinics in scaling to 6 and 7 figures in revenue. During its first launch, Jordan and his team met Dr. Ben Bagge, whom they later partnered with after helping him grow his business from $200K/year to over $1M/year in three years.
