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Martin Seibold: How to lead in times of crisis
The secrets of a humble but passionate path to success.
Martin Seibold is a resilient business leader who has overcome many obstacles in fitness. Today he's overseeing LifeFit Group's six brands, including Fitness First, Barry's Bootcamp, elbgym, Smile X and The Gym Society.
Passionate about the fitness experience and the atmosphere of the gym, in this episode of the Escape Your Limits podcast, Martin teaches us how to lead in times of crisis, lessons from the rise and fall of one of the biggest fitness brands in Europe, and the highs and lows of reopening after COVID-19.
The Escape Your Limits podcast is brought to you by Escape Fitness – a global community of gym design and gym equipment specialists that are looking beyond exercise alone to escape mental, physical and professional limits.
Martin Seibold on the Escape Your Limits podcast.
Who is Martin Seibold?
Martin Seibold started out working in the family-owned gym of his parents. The facility was the first member of IHRSA in Germany, bought by Fitness First which took on the staff and achieved incredible growth both nationally and around the world.Martin's passion for fitness had been sparked. He joined as marketing manager and, within six years, the business has expanded to over 90 gyms.
Today, Martin is leading multi-brand strategies and teams around the world in implementing humble growth strategies for the long term success of the LifeFit Group.
The LifeFit Group unites multiple fitness brands from the boutique, high-value-low-price and premium segments under one roof, including Fitness First, Barry's Bootcamp, elbgym, Smile X and The Gym Society. The Group is committed to inspire and support its customers to live their best lives through personal, fun and focused health and fitness experiences.
For more information visit www.lifefit-group.com
Martin Seibold episode highlights.
- What lessons Martin has learned as a business leader responsible for incredible expansion, and what he'd change if he could do it again.
- Why looking after people and partners, both internally and externally, is the only way to achieve long-term survival. Expansion isn't the only goal and it's easy to forget how important relationships are to success.
- How you can diversify your offering in the right places to ensure that the customer has exactly what they want in the right location, and ensuring a sustainable business.
- Why you need to assign specific teams to specific responsibilities, and not spread your resource over too many different skillset needs.
- How important it is to take interest in what your teams are doing in order to get the best out of them and support them.
- What merging cultures, strategies and teams together is like in practice when a business is acquired.
- Why buy-outs can be awful for members, leading to a worse service offering in the short term at least, but how it can also be used for good.
- What multi-brand strategies can do to provide flexibility in an offering, and how you can decide which responsibilities are based centrally and which need to be carried out by local teams.
- Why it's important to celebrate mistakes. Everyone makes mistakes, but being open and honest, or even laughing about them, means that you can learn from them to ensure that a problem doesn't get bigger.
- How you can manage and forecast in uncertain times, and what benefits there are to ensuring there's trust between operators and investors when it comes to a business model.
- Why this is not the time for cutting percentages here and there, but making substantial changes to how you work and the structure of everything that you do.
- How long will it take to get back to pre-COVID revenue levels after the pandemic passes.
For more new and views about fitness, wellbeing and workouts, visit the blog homepage.
Full episode transcript.
Matthew Januszek 1:00
Thank you so much for joining us on the escape your limits podcast. You look as though you're somewhere quite sunny. Where are you today?
Martin Seibold 1:11
And today is home in the southern part of England. And as we know England isn't always sunny, at least in the heart. So we are fine,
Matthew Januszek 1:20
right? I wasn't. Wendy mentioned that. Yeah, you're living in England for some reason. I thought you was in Germany, how long you've been living in England.
Martin Seibold 1:30
I think in England since 2006. Since the very famous Mike Balfour from the founder from fitness first dragged me over after I had a standard eight years in Germany around the business forum there. He said, Martin, I need help in England, please come over. And I was very fortunate that I was traveling reporting the numbers of the German business every month. So I knew pool I knew the area and attract my wife over on a most sunny January the seventh of 2006 and it was raining and bad weather and cold Germany and England was a stunning sunshine time trees 30 degrees for the whole weekend. I think I've never seen in all my twin 14 years in England and other January day like this, but she came over at the best of you can said Martin, when can we move?
Matthew Januszek 2:27
Fantastic. I bet that doesn't sound the way you described. It doesn't remind me of England. So you're you're obviously in a wonderful part of the country where you've got your own weather system by the sound of things.
Martin Seibold 2:38
It is true because we have the second largest natural harbour after Sydney. So the pool hub is actually quite big. We do a lot of paddleboarding here. Lots of windsurfing, kitesurfing. More to sport, water sports. It's a really lovely place and I've ever fought It is first started off here,
Matthew Januszek 3:02
So for those of you who don't know, you, it'll be good. Maybe just give us a bit of an overview. I know I think I must have met you about 20 years ago, I think, you know, in a restaurant in Holland or some somewhere like that with a group of people when fitness first, I remember I remember sitting around the table and it was it the days when fitness first was just starting, I think you're probably called fitness company at the time. And I remember there opening the Dutch operation and I think that's where we first sort of first met each other, but give us a bit of a background of how you know how you got into the fitness industry and, and, you know, the sort of transition to where you are today.
Martin Seibold 3:37
Absolutely, and you're right. And it was actually a Japanese restaurant in Holland. And we ate all these funny things. And obviously, the Dutch people have a really funny way, you know, about approaching life and they did the same with the food. So I was a little bit but but we were okay. So um, yeah, no, look, my my family owned it. Jim in, in Germany in Frankfurt, it was a ladies only gym. And it was pretty unique in the 90s of the last century. And they were actually the very first Ursa international member in the entire world in Germany. So, so so we are good, you know, and I was an intern at Ursa in 1992. In Boston, the first international student who did a three months work experience there. So I'm in this industry for quite a while, and my family business got bought by fitness first. And, and they wanted to hire people in order to to grow the business. And I actually said to my bio for, you know, Mike, it's nice to be getting involved, but unless you promise me you can build 100 sites in Germany. I'm not interested. I studied sports management. I'm ambitious. I want to do something really big. And we're six clubs in Frankfurt. That's not really Really interesting for me, and he said, Okay, we're gonna do this and and and surely he did you know, fitness first one was on iTunes in Germany, so he kept his problem.
Matthew Januszek 5:13
Right. And and, you know, the interesting thing I guess about that business was it was I was very involved because we were fortunate to be one of the first suppliers when Mike was there and Shawn Phillips In fact, I remember going to the office import probably not far from where you are and you know, the the process was I used to come there with a bunch of samples and Shawn would show it to Mike and Mike would stick his thumb up and and that was it, is it Yeah, okay, we're gonna put this in our club. So it was quite a, an interesting company that started very, very small and expanded massively and obviously is not really around too much nowadays. So what what are some of the you know, from being on that journey as you know, small club and taking it to where it is and then sort of seeing it come full circle what what is Some of the lessons that you've learned as a leader in the, in the fitness industry from that,
Martin Seibold 6:05
as he would say, times when they look good, and never as good as they shine, and when they are bad, they're not as bad as they look. And I think we had the same situation right now. Similarly, but look, we have had some tremendous years, I joined the business in 1998, in Germany, as a marketing manager, and we had six gyms and and and I was brought to the table to open the seventh and then expand the business. And within six years, we had almost 90 teams. So it was fabulous. The UK at that time had 17 gyms. And it you know, it had over 100 in this timeframe. And it started to roll out into Holland it started through into France, and Spain, then Australia came on board and Asia. So it wasn't a mandus growth story. So in a way, you know, it was on the stock exchange, there was a lot of money around and And, and everything was focused on expansion. And I think that was the big mistake at that stage that we never really looked on the existing business. And that's something you know, which has been true over the next 10 years, I've been involved with the business, that if you don't look after you remember your existing member and you don't look after your staff and your teams, then you know, you might have a couple of 510 years good role, but in the long term, you will not be successful. And I think that strategy really only hit us really, when in 2005. A, no sorry, in 2012, a possible listing on the stock exchange, evaporated. I think since then, you know, fitness verse has been on a more humble road and on a more focus to the member and the team's activity.
Matthew Januszek 8:00
So would you say then it was the sort of, I guess the focus of the company, as you say, was on expansion. And it was probably just keeping the investors happy, because they wanted to see lots and lots of sites opening. And so you were very successful at doing that. But once that changed, and you know, that that wasn't probably quite as important they they struggled to make the shift to sustain the business. And is that is that pretty much what happened?
Martin Seibold 8:34
Yeah, and I think that's in every relationship, you know, whether it's private, whether it's business, you know, if you if you just look after to, you know, to gain to grow and to do this and you're not looking after the partnership, then then you struggle. And I think there's numerous example in the health club in the tree, who has done the same thing. You know, we remember all 24 hour being once the biggest in the world, you know, you had you had other Jim change health learned you had curves you know yes only tend to focus on expansion and Time will tell you know when companies like anytime like f 45 when when they really when they really move so fast you know it's the right angle. So what we've done with Mr. Business nowadays here is that we have set it up as a multi business company, multi brand company so we formed life with group last year and we have added other brands to our facilities. We have done we have now had fitness first in Germany, with around 60 gyms. We have about 20 gyms which is a low cost segment and expanding fast and we have Barry's boot camp opening up as the boutique offering around for 20 years slow ramp up source of really focus on quality coming in frankford in our towba and then in Berlin in January next year, you know so so we really start to differentiate and to diversify, and I believe this is something which is happening in the industry that the consumer has changed with all these offerings and all these new initiatives. And I think when you are focused on one model only, then you struggle over a 20 year lease to maybe have just one offering and at least so we have started to convert some of the fitness first now into the smile expand. We're looking even in one of the smaller fitness first to put the berries in. So it gives you more flexibility that's why we believe something like this is potentially the right future to really focus What does the customer in that location really want.
Matthew Januszek 10:49
And with some of the lessons and from the the sort of scale rapidly model E and you know, D, D, as well as providing different solutions. For the customer, do you think there's any operational things that can do so you kind of get that balance between just opening locations but ensuring that you're building a business that's that sustainable. So, you know, is it having more focus on looking out, you know, as simple as it sounds just more focused on trying to, you know, provide good value to the customers that are coming in or, you know, is there any other things that you've seen that you know, if you'd have done that fitness first thing again, that you'd have said, Well, okay, I'm just I'm gonna I'm gonna do this differently now.
Martin Seibold 11:34
Yeah, that's a very good point. I think, what what really works well as they have different teams, working on the individual activities, if I would do it again, I would have a team sport clubs were open longer than a year ago. And then you have clubs who are open longer than maybe three years ago. And then you obviously have a pre opening team. And I think because the nature of the business and and Who is the customer in those sites changes. And, and I guess that's the big learning that you need specific teams for certain areas. You can't have someone who was doing pre opening and trying to fill up the gym, at the same time looking at a demo is three or five years old, and we just need to maintain the membership level. It's just two different skill sets. One is a hunter, and the other one is a farmer. So that's definitely a learning we would apply. Hmm,
Matthew Januszek 12:30
yeah. Interesting. And what about the role as a leader, you know, you've you've been at the head and your team that you've put around you have a lot of people, a lot of organizations, a lot of across a lot of different regions with very, very different sort of ideas. What, what are some of the things that you've learned over that time as a leader, and I suppose Where are you now compared to where you were when you was in the middle of all that expansion?
Martin Seibold 13:00
Wow, that's a big question. I guess you learn to how you be a leader you actually learn in your private life, you know, the personality you develop there. And when I look back at my childhood, you know, I have I've never been the most popular kid in the class, you know, but I've always been given responsibility. You know, I was I was I was one of the head boys in the school. I was with the scouts. I then developed into a person who was in a team, I was actually despite only being 5.9 a decent basketball player would do that. And you know, very passionate I'm not very good in individual sport and better as a team player, and not because I'm actually okay at a decent three point shoot rains I even could dunk but you know, never become a Michael Jordan, but, but I could get the best out of my team. And I think when I when I look at all the things I've learned and throughout my private life you become a personality and when you're done in the job you apply those those learnings you've you've got so in a job I've had 21 positions in those 20 years at Fitness first and our life that group and and I had numerous positions at the same time and what I always find is that I just wake up and I'm interested in almost everything I'm interested at one moment how you you know how you take a shower head apart and and how you really do that or an air conditioned and at the same time and interested in our to see what's not working, oh, you do a sales call? You know, what's the email? How does it have to say? And then you have an interest in what your teams are doing? You find out? Can they do their job, and I've surrounded myself with people who are much better at the end Which task and I ever been? So I was a marketing director and one of my positions, you know what, wrong guy for marketing in general. But I could judge my team around me, you know, do they can they do marketing? So actually, I was the right position because I could really get them. You know, the online guys, I could get the CRM, guys, I could get the people who who do the outreach, I could get them by asking good questions to achieve their maximum and their potential. And I think as a leader, it's important that you show interest in what your teams are doing. And that you actually also understand maybe 40 50% of what they're talking about. So you can judge do they actually, you know, do they do the right thing? Are they on the right track? Do I need to fill in Do I need to say or maybe you are asked to this agency, or you bring a new team player and I think that's one of some of the learnings Learning so you get over the years.
Matthew Januszek 16:03
Yeah. How was it when, when you was part of the DW? I guess transition, you know, was what was that like as a as opposed because you've got two very different cultures, you know, you've got a dw fitness that was, you know, as sort of a northern England, sort of mid market club and then fitness first, particularly in London, we're doing some really innovative stuff at the time on their small group training. In fact, they're probably you know, even today some of the things that they do, you know, far ahead of a lot of organizations, how did you How was that To try and sort of merge those those two different sort of cultures and I suppose business strategies together.
Unknown Speaker 16:44
But first, I need to give you a good elbow check with the one I'm not sneezing into, because that was really cool. And you recognize the functional training being some of the and of course, you have been a huge help at that stage. Because you know, when we started, look at this whole, you know, because we style. The word was looking at that only pts. We're doing this. So you helped us to make this mainstream. And a lot of other companies have done this now. But yes, we hope that we are still with our small group training and all this pretty, pretty good.
Martin Seibold 17:15
Look, the reality is is dw bought us for exactly that reason. And it takes a business to acknowledge that they do a lot of things good, but in some business parts, they are not so good. And that's why they really liked it. They wanted the London footprint, but they also wanted to know how and the skill set and I'm quite proud that my original team who who joined dw with me is are still there. You know, and that was always the plan. You know that and now the team is, you know, they are responsible for the all. All business, not just the 60 Fitness first, but they also are responsible for the 70 dw and now it's 20 w fitness first. So it's a really win win situation for both companies that they merged because they were big enough to say we have a weakness in an area and and from what I hear from the guys is that they are still you know, doing the innovation, one of the famous things we're doing, you know, every two months there's a new kind of equipment coming in whether it's just a small little thing which is out in industry or whether it's an assault bike or ski work, you know, it could vary but every two months there's a new initiative coming in and and that's still the case entirety of his 10 minute workouts and digital so in a way they kept this kind of innovative spirit and have dragged it over into the into the other part of the company so it's it's quite a success story I believe.
Matthew Januszek 18:52
And and with the you know, with with as it relates to the fitness first Germany business then you know, For quite some time. There you were looking at one point to probably sell or move on the business to maybe somebody else, what was the? What was the sort of turning point where you, you sort of decided, Okay, well, we're all you know, we're going to, we're going to stay with it and we're gonna build this sort of, you know, House of different brands to complement the fitness business.
Martin Seibold 19:27
Well, first in 2017, when I left GW, and I joined the German part, first of May, I actually didn't join as an employee. I actually joined as a consultant because within the fitness first family, the German business didn't have the best of reputations. And it was under invested, there was no there was no real values. They were they were focused on some new business areas outside The core business they said there was a lot of things and I just had feeling Whoo, you know, is this the right place for me. And so I looked at it for three months. And I saw the massive opportunity this business had because the locations are unbeatable and we know people join for location and then for price and quality. So, so that most important part was take and then you know, money can fix a lot of things. So you know, the private equity house we work with oak tree, you know, when you when they are convinced that you can get a good return of investment, they're business people. And we have shown this kind of revived, invigorating fitness first in the UK. We have shown that in Australia and Asia, so we knew the program. So we knew if we take you know and apply this, it's not just going to be lipstick on a pig. It's going to be from inside out a really good change to the business. And, and we did all that we invested the capital, we change the product. We changed all the Facilities knowledge is immense, incredibly well invested at this moment in time. But the heart of the business is the difficult one, you need to change what you do with people, you know, it's unionized, one of the only few chains in the world. So So, you know, we have 42 union with 60 gyms, you know, so that, you know that that's a big undertaking, you know, and, and in a way, you know, we really work with them. And we really felt I found that they were really wanting to make the changes this business needed to do. So I worked really closely with them and and they're really good partners now. And we've reduced the union's we're not 42 anymore. We are now like 11, you know, so there's a lot of trust there. And so we had the facilities, we had the equipment, and we had the people, but we had no story. Because in that upper market for fitness first, where do you go, you're in math politan areas you have, you know, 10 sites in Frankfurt eight sites in Frankfurt, you have five sites in Cologne, you have 12 sites in Berlin, there's not room to double the business. It's not like in the UK, where you have 27 Fitness first, and you can do in London alone, you know, 4550. So there is no real story. So you need to create something. Also, we saw that some of our sites were still despite all the investment, despite the good people, you know, working really well. They were still under threat and not successful anymore, because competition is coming to town. So we had no solution for them, other than to sell them. I had to sell eight sites. And I hate that every single time. I hate that because someone puts a new logo on top. And that's a worse job. Cheaper, no investment, not looking after the members and makes a lot of money, at least in the short term. So we said we can do that ourselves. So we looked in the market in the German market, look at all the rest. You operators and then we decided for one smile x because we felt their system, their personality, their leadership and their their processes. And their whole value system was very similar to ours. And luckily the CEO and myself and the management team we got along incredibly well you know, so we said okay, let's let's go together at the same time we looked at the high end of the market because we know from Equinox we know from for virgin we know from us Korea and and all these chains that there is a market over fitness first, you know, we if the fitness versus the E Class and the cedars there is an S Class you know, so we looked at that and we found a gem which is it's a fabulous gym, slightly more expensive and even closer relationship with that wisdom member. So we said okay, why don't why don't why don't we do it with that kind of we have the management team. We need brand teams who deliver on their on their promise, but all the background work. It financial, you know website digital artist you can you can you can do that essentially. And we had a solution for fitness first. So we converted some of the fitness first into a smile x. And you know what, same location, same people
or a different brand with a different promise cheaper and suddenly you had from three and a half thousand members you go to four and a half you know, and so in a way, you know, we and now we have the story. So now, okay, you know, if you wouldn't have had Corona, you know, this business would have now been valued real decent and probably sold at at the moment we're speaking. Because it has a real growth story, you'll notice my expand can really grow. We've added to boutique market, because we know the boutique market is was the fastest growing market segment. You know, so we got Barry's bootcamp. It should have opened in May. It's now opening in October. You know, we have the exponential brands, not far from where You are in New York, obviously, you know, Anthony and their team, john Kershaw. And the guys, you know, we got actually, you know, we have two club pinatas and pure bar brands for Germany and Austria as a license, but we haven't started them yet. But for the obvious reasons, so in a way, it was natural to kind of say, what are we going to do with the business? And what's the envy look internationally? I mean, there's so many brands who are multi brand who are successful equinox, with with with all the brands they have, and on top of it, blink and soulcycle you know, but then you have in Australia, you have the team around, you know, with its fitness first as its as its core and good life, and all the other brands on top of it. Also Barry's boot camp that we have in Asia, that group so I think that over time this multi brand, we look at hotel industry. I mean Marriott is not just Marriott, it's 17 other hotels. Hmm. You know, so in a way it's the natural thing for the market. lead us to develop into the multi brand. But it gives also asked the story and the growth story going forward to expand. Hmm,
Matthew Januszek 26:08
it sounds like I guess it's a relatively new thing for the fitness space, I guess because the fitness industry is relatively new compared to hospitality and in terms of lessons with putting together a multi brand strategy, you know, is it do you tend to start in, in like a single market? So let's say Germany, where it's like, Okay, well, we can't grow any more fitness first in Frankfurt, which is what you recognized. And so what we'll do is we'll create the sort of multi brands so that we can tap into a wider audience. In your experience, is it better to sort of get it right in one market and then take that internationally or do you do both at the same time? What What's your thoughts on how that concept scales?
Martin Seibold 26:54
Well, the lesson from fitness first is don't go into the market when you don't have a local management team. You know, you cannot come from another all the all the things where the management team came from another country and did another country with them, they all failed, at least at first. So we would never go into Austria Switzerland is one of the brands just from Frankfurt, you know, so we need to get the model working in Germany. And when we are confident that it works here that we understand the consumer because they're slightly different than they would be in America or in Australia. So but between Germans and Austrians and Swiss there, there wouldn't be such a big difference. So get it right in Germany, then you probably find a local team, local people who they can execute and build on on that kind of so we probably if we if we move smile x internationally, we would look at a little chain in Australia and we would say okay, this is a good chain 15 clubs. Okay, this is the smile x model, it would really work very well. And we basically Go in there, keep the management team, take all the back office, centralize that in in Frankfort, where we have our office, and then and then let the execution and the operations be done by that original team off the ground we would acquire. Huh?
Matthew Januszek 28:16
How have you seen that? That strategy work from a brand perspective? Because I guess the temptation is, you know, as you build different brands, you know, the marketing and the story, and even maybe the people, I guess, from a berries would be different to maybe the smile, so you know, recruitment. So there's a lot of differences. And I guess that to do it, well, you could end up with a lot of duplication in terms of cost to do it successfully. So that and I guess the temptation is, okay, well, we'll let's centralize a lot of that stuff as well. But then, you know, do you get a sort of a merging of some of the brands and the values for doing that. So what are some of the sort of pros and cons of the multi brand strategy then
Martin Seibold 29:02
But first, it's more complicated and challenging than you would imagine. That's definitely a learning. Everything is takes way more time. If you think it takes six months double, it always does that that's definitely learning. The second learning is you need to keep your core operations that needs to be one brand. I'm a sole believer that is that that everything else I've seen has failed. And you need to keep your product, your fitness product and service person they need to be they need to be brand specific. And I'm a big believer that you also need your HR team who supports the development of the team. They also need to be brand specific. I'm a little less inclined to say on the marketing on the eight our payroll, certainly not it certainly not finance, certainly not profit. That, that those those divisions can can be multi brand. You know, like, if you negotiate a lease for one brand, you can negotiate the same for another for another brand. That's not a problem. If you look after the facility, not a problem, if you pay invoices, if you do pay staff, that's all the same, but the development of the staff the development of the product, and the cooperation need to be brand specific.
Matthew Januszek 30:28
Yeah, yeah, it does sound is though it can be quite complex to manage those. And I suppose, you know, if you look at some of the other brands that are that are out there as well, I suppose if if you get some negative issues that are happening, you know, how do you how do you sort of protect that from affecting the other ones as well, you know, if something goes wrong in one of those, I suppose it's trying to trying to sort of separate them enough so that they don't all get lumped together which I think is so happened, we went to the American brands over here as an example.
Martin Seibold 31:00
Yeah, and I guess the personalities you have in those, that's the key. So, you know, do you get along, like in every partnership, you know, we've always kept the original founder. That was key for us. We wanted to keep the spirit, of course, you know, over time, maybe in two or three or four years time, and as the next round was a new investor coming, and it's management changes that that might change. But at this moment in time, we wanted to keep them and what we've seen in the corona crisis, and, you know, we went from having every month, a two hour call with the brands, and two weeks in between a visit, to spend the day in their crops and all that that was the interaction I had as a brand. We went in March to a daily including Saturday, Sunday phone call for two hours in that six, eight weeks, and actually, you know what, we really got to know us in that time, with all the ups and downs There's all the challenges. But what it really meant was, is that the one brand, you know, that did, let's say the distancing sought out, think about the distancing that did that extremely well, you know, and we looked at Ali Patterson's you know, what, we just gonna take this from this brand. Then the next one, they already thought about joining online. You know, when, when we were still thinking, you know, will we ever open again, and they started to join online activity. So suddenly, we were the first in Europe, continuing, join online having decent online numbers, because one of the brands did that. Whereas on the other hand, you know, the one brand had all sorts of because they're small, and they were thinking about a plan. Okay, what happens if there's a second wave? Hmm, but we were not even like we were still closing and they were thinking already what's happening when there is a second wave. So so I think when you have smaller and bigger organization and you work tight, knit together, you can actually utilize this to an extreme measurement, I was on a call today with them now now they are bi weekly. So we've gone to from, from daily to twice a week and once a week and now to bi weekly. And this morning, you know, the team said, You know what, I just saw how you doing the distancing now, because the regulations change all the time. And and they said, I'm going to seal this, I'm going to steal this pride, and we're going to take this we're going to adapt it. And I think we have created this kind of culture that first and foremost, one of our key principle is is we celebrate mistakes. You know, so so we really go brilliant. That's it that was a screw up, well done, you know, what do we learn from this? You know, I mean, every every call, we talk about mistakes, and we giggle about it, and we laugh about it, because we got to do them anyway. You know, and if they are open and transparent about them and don't make a big myth about it, they don't get bigger. So So anyway, way, when we feel that this kind of different management teams, when they're aligned under one vision that you're open honest that you're looking after your teams, you're looking after your members. And, and you're not looking after the last cent of profit, you know, so you just look after a decent business how you want to be treated and see your multi brand really gives you because the boutique brand looks completely different than a mass market valued brand. You know, so in a way it's quite, it's quite exhilarating to actually work and be very fortunate to to lead that kind of group of people. Hmm.
Matthew Januszek 34:38
So it does sound as though there's a lot to get your head round certainly for for your position in the organization. What it sounds like you had a great strategy and you had some really exciting stuff going on what what sort of went through your mind when this COVID situation happened and and what did you decide was important for you to do as a little To be focusing on when you realize, you know, shit, you know, the clubs are going to be closed down. What does this mean? What you know what, What went through your mind? And what are some of the key steps that you took immediately as you realize you're in the middle of it all?
Martin Seibold 35:17
Yeah, look, I think this is where it pays out when you're well connected in the industry. Because and when you go to these international shows, and when you when you meet people and you're open and straightforward, because somewhere in the world, Corona happened before you, you know, everything what happens to us it happens, you know, happened in China, first in Australia next and all this. So, with all the relationships you have usually grateful to Greg Oliver and the Australian team. I'm usually grateful to Simon Flint and the agent team because they're constantly, you know, kept the information flowing allowed us to get insights. And when times were dark, they said look, it's going to come back Is this what's going to happen? So in a way, you know, we already knew in February that, that this will come, we actually canceled our Ursa trip in February, because we knew, you know, we might not get home again. And sadly, we were right on this one. And so in a way, we kind of felt we were always ahead, you know, two or three weeks of what's going to happen. So so we had our closure plan, ready. And when we had the staggered approach, and throughout, that the traffic flows in Germany is a federal system. So you don't have like in the UK, the whole UK closes. It states, the 11 states and we had seven of them, they close separately, they also open staggered. So in a way we always felt we are ahead of the times. And it was challenging for me because I had that knowledge, but my team and particularly the club staff did didn't see it coming. So we needed to educate them at all times, to kind of tell them, this is what's going to happen, we're going to close the door to collapse. This is what's going to happen with your salaries, that's what's going to happen is freelancers. But, but we had to plan for all these areas, and all these departments in a way ready. And we also ready now for the next things which might come our way. And this this in a way you have to manage on site in these periods. But you also can relax when you kind of well connect internationally. And you just learn from the mistakes of the doing, I think then, you know, but of course, you know, our whole exit strategy out the window. You know, we're not going to sell business this year. You know, which means for me brilliant, I definitely haven't had the job for another two years. You know, and my management team because the new owners there, you never know, you know, so so The way it always has to both sides, you know. And as, as we can see, things are coming back, you know, in the first month of the opening, you know, we had 40% of sales and 40% of visitation. You know, that's a disaster. But we know from China, you know, it's going to ramp up. So now we are in week six, where 70% visitation and at 75% sales. So and we know they're already you know, 234 weeks ahead, so they bounce back, you know, so so in a way we actually used it. This whole this whole thing now, with this for us is probably the chance of a lifetime to accelerate changes to the business. You would have done over two years time. digitalization, you know, okay, we always did it and now we had to do it. You know, our first class was like three days after the close the first Club Life Class Monday. We closed on a Thursday, the first class was up Monday on and you know what? We had 78% of visitation that we would have had in a normal class. So we have a capacity of four and a half thousand people in a live class on a Monday, digitally. We had 78%, which is staggering. You know, mean, meanwhile, we had over 27,000 views of that very first class. So of course, digital was always important, but it's now increasing and obviously now we've put resources behind, but the filming got the teams we're gonna, you know, we live filming from Frankfurt, we're gonna live film in future from Berlin and Munich and Hamburg. So you know, we've done and use the time to focus on those kind of initiatives.
Matthew Januszek 39:52
If you look back over that period, would you have done anything differently?
Martin Seibold 39:59
Probably under thing, you know, we could talk for an hour for this because, you know, despite knowing what's coming, you don't, when you act and when you manage, you continue to do you go you go basically in a way from mistake to mistake, you know, so, so you order the first masks, only then to realize, oh, they've been heavy, you know, because now you need to, you need to you need to use them while training. Alright, that does work. So you have to order another set of mass, you know, then you then you think about screens then you think about, okay, so we do class bookings in future and you get a software that software doesn't work with that, you know, penalties so when you don't show for your visits, doesn't doesn't give you so we have a lot of classes now. And and they're booked within 10 minutes after they're gone live on the class booking app, but suddenly, you know, is only 50 60% showing and All these things when you, you know that you you make tons of mistakes, and and we make mistakes even now, all the time, so, so you need to just be agile and and learn from them and move on and just laugh about it in a way.
Matthew Januszek 41:15
So what do you do when you when you sort of, I guess, for everybody, for anyone in business it's been it's been a pretty tough period but what what's your escape route where, you know, how where do you sort of go and think, you know, Damn, it's been a tough week and we've made a bunch of these mistakes and we've got all kinds of stuff going on, you know, what, what, what do you do to sort of allow you to sort of get off the canvas and come back fighting again the next day? Yeah.
Martin Seibold 41:45
For me, it is always connect with the teams who work actually with the, with the member. So in times when you're not allowed to travel, you know, and we all on video cause to actually You know, call the club and, and speak with them through what they are experiencing, and doing that, to actually call the people who are in the customer service department, you know, who actually speak to all the people who are connecting with our members. That has always been for me in that period, Ria sanction airy and, and really, really motivator because, you know, we do a strategic review decisions, but what does it actually mean for the people who work with the customer? And, and they give you obviously instant feedback, but for me, you know, I probably have four days out of five, I have a conference call with the team, which actually works with the customer, and we drag the supporting teams into it. That then has been a real joy and a real, you know, putting it putting everything into balance. And and then obviously, I think have actually increased exercising.
So so so I've trained less hard. But I've trained more, I've been on bike rides on runs on walks on yoga. So I've done all these things that I'd push up and pull up and all that my son, you know, as a team full of energy out into the world, you know, I did 22 pull ups. And he said, Daddy, I'm going to beat you, you know, within a month, he was at 25 pull ups, three times with a 10 minute break in so, you know, but I said, Okay, I'm not gonna compete in there, you know, he's doing 100 You know, my little girl, Laura 15. You know, she's obviously you know, very good and all these videos and tic tocs and all this. I've tried to be, you know, have a patent there. I certainly don't have so you know, you get these kind of things to families to together. No one is traveling. I live in the UK. I don't have to travel to Germany for three months. So in a way, you know, you know, we play sports together, we play other things we cook together. In a way it has also been really nice, you know, in a hard way to kind of connect with your inner circle again, and you know, do the video calls is the parent, your parents in law, you know, and I have to say, you know, my mother in law is much better on the video call and then I'm actually beat her. But it could be somebody says I didn't know this continues, but that that that in a way has helped me Hmm.
Matthew Januszek 44:36
And what do you do? You obviously got investors and shareholders and that to answer to and they're looking to you to say okay, Martin, you know what, what is the future look like? How are you? How are you with so much uncertainty and with clubs opening and then re closing in certain areas as well? People talking about the second wave, how do you how do you you know, plan and forecast and budget with very very little information to go on because, you know, we've never been in this situation before. How do you manage that uncertainty as it relates to financial planning of the of the business?
Martin Seibold 45:13
Yeah, it heads that our private equity partners of the business, you know, they I've been with them personally for 678 years now. You know, I've gone through them when they picked up fitness first, and when, when we've turned around the UK, supported in Asia and Australia, and you know, so so we get along really well. There's a real trust element. And that definitely helps. They do understand the business model whereby they know that in the times now, because Germany is one of the few countries in the world who actually could take the data out of it.
We could build a member's fitness first and smiles and attitude they could continue to build Remember, so So in a way, we had the money and the revenue, you know, so we have limited liquidity at this moment in time, but they know the loss join us will really be impacting us next year. So they know the business model. So they knew immediately. And the good news is we we have protections, you know, middle case, upper case, lower case, and we knew every number we put in there, it's going to be wrong. Yeah. So the biggest thing we got wrong was, you know, we thought the clock set close to two months, that was our expectation, okay, it was two and a half, three months. And after that, there will be a rush coming to us. Please join us? Well, we heard from China and from other countries for my friends. That's not gonna happen. Yeah. So so but in our original model, we had it in so we had to re educate our owners that actually it's not gonna happen, you know that that was a tough one. You know, because Logic implies, all these people out there, they need to get fit immune system is the best thing you do. Why? Okay? They're not. I've not heard many who say they're better numbers than the year before. So we going into summer also. So in a way, I guess, you need to keep an open and honest relationship with your owner. We are transparent. I write a board report every Friday. So firstly, I write it, and they get the full detail of everything we do. It's a one pager, you know, never bigger than one page and has some supporting documents. And I think in formation open and transparency is the most important asset you have in that time. Because I don't know the numbers. I don't know what's really gonna happen. They don't know. So so we can only be open and transparent. I think you need to have you need to demonstrate that you really sincerely understand the revenue pack this will have. So this is normal. All right, and we're going to cut this cost by like 5%. And this is not the time for that, you know, the time is you got to make substantial changes to the operating model in order. So, we made one of the boldest decision I've ever made in my career in that time. And it is go away from a commission scheme for sales people in the gym. We always felt that the proactive sales collectively on the street on outreach, call him up, do all that. That time is phasing out, you know, digital is becoming more important. Bring your friend is more important. So we said this is it, because how do you run around with a mask on the street? And how do you ask a member in the gym with a mask, you know, this whole thing about collecting leads and calling them and doing all that That that will change over time you need to really convince people with the service element. And so so we've taken that away. That's 2 million of costs for us out of the business, and a lot
of PCs people a lot. Yeah, at the same time, we invested 2.5 million to change our reception area to a concierge model. So we actually have no more turnstiles. So we've completely changed the whole look and feel of the club's like massive change, like the members are coming back turning around thinking that the wrong place Seriously it is. It's that mesmerizing. Think about an old hotel, and you had this whole you had a concession at the beginning and you had the desk there you have the queues and lines and all that all gone. A small little desk in the middle where only one person can fit almost behind huge lounge and massive addition to the training space because we stole 75% of that space for training for functional training. So So You know, a lot of hobby gym, you know, a lot of escape equipment. And so in a way, you know, we've completely transformed and we've put all staff while they were not working three months on elearning to learn about fitness to really become experts in training, how do you speak to them? They've gone through E learnings and either produced them just like you know, like pancakes. And so there's a huge change within the business away from a proactive kind of sales kind of type towards a member centric focus, if trust started to do the learning programs, what is the name of the customer? What's his training goal? And what's his pet, young kid last holiday something personal. You might think all right, we should have that. You know, but we don't. And you know, I don't see it in the big chains. I see it in the smaller boutique studios, but you know, in the yoga halls, and all that In the big change, you know, we are bloody friendly. And you know, we all that, but we're not really personal. So we decided to become the personal company, the new three year goal is, we are a personal company, you know, we know, we know you. And, and we feel it's it's the right approach for these times. So we have not only, you know, made some small adjustments, you know, we know, a lot of people will leave us a lot of stuff. And because we need to reduce staff Anyway, you know, isn't, you know, you have 10 15% less members 20 30% less visitation at the moment. So you need to cut your costs and how do you do it? You change towards the model, what you think is the right one, and we've done that, you know, so that's, that's pretty, a big, big leap for us, but we know it's going to be the right one.
Matthew Januszek 51:54
Hmm. So one of the questions I guess a lot of people are interested in particularly You know, there's there's a lot The markets are still not open, I think the UK today it was announced that about another couple of weeks they're going to open. So what do you what are your thoughts in terms of the, you know, how this, how the fitness model is going to look in the future? You know, you're one of the few people that have got the budgets, they've got the boutiques that have gotten the mid market. Do you see those all surviving? If they are surviving? Is it going to be different as if you take the boutique, for example, you know, that it is based on getting a certain number of people in a relatively small space to make the financials working, that's not potentially going to be possible with with the social distancing? So in general, you know, what are the what are the sectors that you think are going to be struggling and what do you think how do you think they're going to deal with with those changes specifically in terms of masks and distancing that are that are in place in a lot of areas. What
Martin Seibold 53:01
There's no doubt that the boutique market you know, we see yoga studios and spinning studios and all that and we will see how our various opening go you know, when we look at Sweden where where they kept running with, you know, half the amount of people but more classes that seems to be successful and still economically good. And they will they will suffer for a moment, but bear in mind, they have been the boss of the industry for the last three years. You know, I remember my time about seven years ago, I went into went into the us into Unity New York, and I typed in boutique fitness in Manhattan, and I got a kickboxing studio. You know, I got probably like 30 hits, and I still have to screenshot from it. I was it 18 months ago and I typed in fitness, I stopped counting after 300 you know, so, so you this is a market segment which has been growing exponentially. Naturally. It shakes out. And Corona is just doing this at this moment in time. So I just think this, this would have happened more naturally in the next two or three years anyway in some markets, but it's now getting accelerated. So the fitness will survive, you know, does it mean that that model won't, won't be successful? No, it doesn't. Because there are numerous places including Germany, where there is no real boutique market yet. You can still type in boutique fitness into your Google and you don't, you know, you'll find maybe in Berlin, you know, 2 million people or 3 million people and you may be playing CSGO at studios, and it should have 500. So in a way, I think it will just reorganize the market and unfortunately, a lot of one, single side operators, you know, a yoga studio or spin studio, they won't have the firepower, so There will be a lot of consolidation going on, like it has been in business. But but that market is usually attractive. And and you know, one day we will have a vaccine. Also we shouldn't forget retail same will happen, they will go more digital, we know that so in a way, there will be more and more retail spaces available great, you know High Street spaces for those kind of models that actually it will put the visibility of our product into people's mind and that will help the overall business when you have a yoga studio pelada Studio spin studio run studio, you know a kettlebell studio on the high street, people will go Oh, hang on a second that's too specific to meet Where is actually the victim. So so I think that will continue to drive. It will get bigger visibility that you know, and and rents will be more affordable. So I think you know, it will come back in two or three years time, we are always exponential extremely well positioned. So, so, we will do it just not for now, if you then have the low cost segment that is the segment, which which obviously has been growing fast, you know is it increased the penetration in all the markets. And naturally, when jobs are less secure, maybe unemployment goes up spending power and all this, that market will grow, you know with and they are also communicating. You know, in Germany It's Mike fit and FedEx and others and smile x, they have the best numbers on the joiners at the moment. So in a way that model will be short term, and we continue its acceleration. So we believe there will be m&a opportunities. Some smaller chains might struggle. So we might come in with our firepower and the mid market. You know, everybody talks about the mid market. What people forget is it's by a country Maya the biggest market segment so how can we say it won't survive? You know, I mean when you think about airlines, you know, which which is a premium airline Which one do you know and which is the mid market one you know and what's the low cost there's massive around mid market airlines so so in a way that market segment will always be successful. We just got bloody complacent you know fitness first and I'm one of those senior managers we just got cocky complacent full of ourselves not looking after the member well not more importantly, even not looking after the staff very well. You know, so so i think you know, when we do these things, right, we will be successful no doubt and I think everybody would approach it that way. But to be successful.
Matthew Januszek 57:45
Do you think there's gonna be a lot of casualties still to come like we're starting to see it in America. You know, you're seeing this in Central Europe as well.
Martin Seibold 57:55
Yeah, look, I mean, reality is you know, work from home will change. Our life so so when you are in an area city center, you know and so we are in Frankfort city center in 90% 80% of the staff is working there. So naturally you know companies go look, you know, we have a corporate membership but it won't work, you know so So in a way, depending on your location, there will be casualties in the short term because of that work work pattern. On the other hand, we see clubs outside Frankfort in the living areas suddenly are getting busier and busier and more occupied because obviously the members live somewhere. So in a way, it really depends on where you are. Our look. Nobody knows. My personal estimate after speaking a lot just putting, you know, my thumb out is 15% of operations will cease in the next two years as a casualty. So that's that's a big number. But it will be a lot of small ones and it will be in the big one. You know, the ones who weren't successful as a single side Anyway, you know, even we we carry some clips with us. We're not really 100% successful. So that's the casualties that we've speeded up, there will be another 10 15% which will be consolidated. Yeah. But But I'm a true believer that in but as I stumble every month, we were closed will take us a year to get back. So in a way we were close two and a half months, we believe in two and a half years we add the revenue levels, the membership levels, the profitability in areas where we are now, probably higher profitability, we because we really addressed our cost base, you know, so So, so that should come back within 18 months, half the time because we are reducing the cost, but ultimately, revenue wise, we believe it's going to take that time.