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market sizing; # of members in a gym-chain and annual revenues for the chain

Kristian asked on Oct 14, 2019 - 3 answers

During my MBA program I remember we got this market sizing:

How many members are there in a certain gym during a day? And the followup question was; how much revenues does this chain of 50 gyms make annually?

I guess nr 2 will be ok if I could figure out how to solve nr 1, but I have no clue. My only solution is:

- x % of the population in the area goes to the gym

- They go on average 2 days a week

- Divide by 7 (days a week), and multiply by 2 in order to get how many that works out each day (alternatively divide by 3 for simplicity?)

This sounds way to simple and not precise.

How would you guys do it?

Kristian

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Aws
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replied on Oct 14, 2019
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Hi there,

Your approach is from the demand side. You can also use the supply side as a constraint and work from there. So how many people can actually be present in a gym, the percentage utilization for the peak and off peak hours, and peak and off peak seasons. You will get an average that you can work with.

As long as you can show the interviewer the logic and they can follow you, that's key.

Does this help?

Best, Aws

Emily
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replied on Oct 16, 2019
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Agree with the above answers that demand side approach might not be very suitable here. Remember that there could also be multiple chains out there and as such there needs to be an assumption on market share %.

Using the supply side approach, you could work out the sizing based on the following components, with some assumptions to be made

- Capacity of a gym at a given point of time e.g. X machines with 1 person for each machine at any time

- Avg opening hours of a gym in a day

- Avg spend of time of customer in the gym e.g. 1hr? 30mins?

- Typical occupancy rate of the gym

- Avg frequency of customer visiting the gym e.g. once a day? once every 2 days?

- Assumption on % of people who pay for the gym but don't show up

Hope this helps. :)

Vlad
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replied on Oct 14, 2019
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Hi,

The population approach is flawed since there are many people coming from other districts who just work in that area

It's better to calculate the average occupancy of the Gym (Number of training machines, occupancy on different days / seasons + pool, etc)

Also, you should take into account that 30-50% people hold the memberships but go just a couple times per month

Best

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