Losing Money to Be a Tycoon

The mysterious question stumped Guo Licheng at that moment. Pei Qian continued speaking. "What's your base salary now?"

Guo Licheng answered honestly, "1,500 yuan."

Pei Qian asked, "How do you earn commission?"

Guo Licheng: "It varies from trainer to trainer. On average, we get thirty percent as commission and two hundred yuan per personal training session."

The personal training sessions cost as much as Pei Qian remembered. That was the price he was paying for his employees' personal training as well. Of course, in ten years, this would look cheap. In fact, it looked like peanuts.

Pei Qian quickly calculated in his head. "If you teach three sessions per day on average and don't rest for the entire month, you would earn 5,400 yuan from commission. In addition to your basic salary, that would be 6,900 yuan."

At the moment, that income was not considered bad in Jingzhou.

Guo Licheng hesitated. "In reality, I don't earn that much. Many customers that I teach were transferred to me by other trainers. That means I have to split my commission with them. Each month, I only earn about five to six thousand yuan."

Pei Qian nodded. The man lived up to his name. He was very forthcoming and honest with all of his answers.

For personal trainers, the main competition was in selling training sessions. The more one sold, the more commission one earned. Many personal trainers in large cities could earn thirty to forty thousand yuan per month from selling training sessions alone. However, those kinds of marketing geniuses were rare.

Naturally, personal trainers like Guo Licheng—who were inarticulate, quiet, honest, and forthcoming—would not be able to bluff many students into buying his training sessions.

On the other hand, personal trainers who were good at sales and bluffing sold more personal training sessions than they could handle. Thus, they could transfer some customers to trainers with more time on their hands, like Guo Licheng.

However, they would not have transferred customers over for free, unless they were extremely close.

Pei Qian nodded. "I'll give you a basic salary of eight thousand yuan. There'll be no commission, but we'll provide food and lodging allowance and various other benefits like regular physical examinations."

Guo Licheng was shocked. "Er, Boss Pei… it's not the basic salary that's the problem. I want to leave the industry because—"

"I'll make it ten thousand yuan and give you more benefits, but there still won't be commission."

Guo Licheng, "…"

He was moved. A basic salary of ten thousand yuan… even if he left the fitness industry, he would not be able to draw a salary like that.

What's more, Guo Licheng really liked the fitness industry. He had only wanted to leave because he felt disappointed in its current situation. A basic salary of ten thousand yuan was ridiculously high, but the words 'no commission' were even more shocking.

Boss Pei's sincerity had moved him.

However, it also caused Guo Licheng to worry about Boss Pei. He did not want such a genuine man to become a pushover in the industry and end up losing everything after taking over the gym.

Guo Licheng hesitated and then asked, "Boss Pei, you don't understand the fitness industry very well, do you?"

Pei Qian answered frankly, "No."

Guo Licheng looked like he had expected the answer. "To tell you the truth, you have an overly simplistic view. Your proposal sounds very tempting to me, and having 'no commission' is a good thing. However, it would not be in the gym's interests!

"Trainers would only try to sell memberships and training sessions if they would be paid a commission. That's how the gym would generate revenue and profit. If you don't pay your trainers commission, they would not make sales enthusiastically. Who would pay the gym, then?"

Pei Qian laughed. "Nobody has to. Our gym can just do away with personal training."

Guo Licheng, "Huh?"

Pei Qian found Guo Licheng's confused expression very interesting. He briefly explained various aspects of his plan for Deposit Fitness to the latter.

Guo Licheng's expression changed from confusion to shock, to doubt, to bewilderment, and then to pity.

Once Pei Qian was done speaking, Guo Licheng sighed softly. "Boss Pei, I can now confirm that you don't understand the fitness industry at all! Honestly, gyms with a conscience would not last long in this industry.

"If you want to run your gym this way, you would not achieve either of your goals. You would neither have a good reputation nor be able to generate profits."

Oh?

Pei Qian was elated. It seemed like his own plan had been validated by an experienced insider of the industry! It was a good sign.

Still, he had to bury his joy deep in his heart as he asked, "What do you mean?"

Guo Licheng cleared his throat and then glanced at Assistant Xin and Branch Manager Wei who were negotiating the contract at that moment. He whispered, "I'll tell you the truth, Boss Pei. The fitness industry is now a gambling den.

"The trainees are betting that they would go to the gym every day upon signing a membership, while the gym is betting that they would not.

"Often, the gym wins.

"Still, local gyms are closing down and winding up in batches. Some people don't visit the gym for several months, even after signing up for a membership. When they finally decide to go, they realize that the gym has closed down. That's very common.

"That's why I say that this is an industry where bad money drives out the good. It's… very similar to other industries that eagerly push people to sign up for things and then run away.

"You can only earn profits if you have a dark heart. Those who survive based on their good hearts or good foresight are few and far between."

Guo Licheng sounded very upset, but Pei Qian was over the moon.

If what you're saying is true, then the situation is much better than I thought!

Pei Qian inwardly celebrated what he was hearing.

"Tell me more about it in detail," said Pei Qian, his expression unchanging.

It looked like Guo Licheng had a strong desire to diss the industry more as well. In a low voice, he said, "Boss Pei, honestly, pricing usage of the gym at fifty yuan per day would not please either side.

"Most customers only visit the gym four times a week. That means they would have to spend ten thousand yuan a year. That's five times more expensive than ordinary gym memberships! They would surely think that our gym is extraordinarily expensive.

"However, in reality, gyms price their membership at two thousand yuan and then depend on people wasting their membership and buying private training sessions to generate profits.

"In other words, setting a fixed price might make customers find this gym expensive, and you might not be able to generate profit. To me, you're just being good-hearted, especially to the noobs who don't have any motivation. Yet, those noobs might not even thank you.

"They would imagine visiting the gym every day with a membership card. Thus, they would not find your pricing worth their money.

"That's also why I said that bad money drives out the good in this industry. There are too many noobs, and it won't be easy to earn money good-heartedly. Instead, being despicable would be more profitable.

"Gym memberships are sold at two thousand yuan for a year and three thousand yuan for two years. Obviously, the memberships that last two years are more cost-efficient. Since the gyms bet that customers would not visit very frequently, the longer one's membership extends for, the cheaper it would be priced.

"Still, gyms only focus on the situation before them! They would think about future problems in the future, as long as they get their hands on the three thousand yuan first. Only one gym had to start doing this before the others had to follow suit. Otherwise, the first gym would have won all the customers over.

"These gyms sell as many memberships as they can, which last for one to three years. After receiving cash upfront, they distribute flyers, rope customers in, and sell as many private training sessions as they can, without caring about the gym's capacity. Still, such gyms become more famous than others.

"They would attract all the nearby customers so that the other gyms have no source of revenue.

"If you start a gym with a conscience and give up earning quick bucks, you would be pushed out of the market by the other gyms' aggressive marketing strategy before long. What future would you be able to plan for, then?

"Gyms that try to earn quick bucks are flooding the market and making a surplus on all the future consumption potential. Once they see the situation getting worse, they pack everything up and go, leaving a mess behind.

"Another important point is that training is very painful for beginners. The consumers in our country don't have the right view of fitness and training. The barriers are too high, consumer experience is horrible, and there are too many newbies. That's why gyms have to adopt the current model.

"If you want to make money the good-hearted way, then you must be prepared to incur losses for the first few years. You would have to invest more resources and manpower than you can imagine. Not only must you provide good products, but you would also have to nurture the market and change people's lifestyles. That's way too difficult!

"All in all, if you're only interested in making a quick buck and running away, just act like I haven't said anything. However, I know that Tengda is a business with a conscience. That's why I hope that you'll give it a bit more thought. Don't jump into the industry too rashly."

After hearing these words from Guo Licheng, Pei Qian fell into deep thought.

He was elated!

Hear ye, hear ye! My plan has been validated by a professional! What's more, it's been strongly validated!

If I do what he says, it would be much easier for me to incur losses, right?

Seeing Boss Pei in deep thought, Guo Licheng quickly said, "Boss Pei, I don't think they've signed the contract. It's not too late to back out now."

Pei Qian sniggered. "Back out? No, no, no. I've thought about this long and hard.

"You think that bad money drives out the good in this industry, and you want me to be prepared to incur losses for a few years if I want to earn money the good-hearted way… let me change this industry, then!

"From now on, you will be the branch manager of Deposit Fitness' branch near Handong University. You'll have three tasks to work on in the next few days.

"First, recruit a team of coaches. Their basic salary would be seven thousand yuan. They'll be given various benefits, but no commission. All the trainers must model after you. Look for introverted ones and reject those who can speak very well.

"The trainers would take turns to have a break—two days per week. There will also be two shifts—morning and night. Make sure that there would be enough trainers to guide the students on normal days.

"You can figure out exactly how many trainers we need to hire. Err on the side of hiring more trainers. I'm thinking that twenty-odd of them would be enough. If someone falls sick and takes sick leave, we would have to find someone else to substitute him immediately. Do not let anyone work overtime for no reason under any circumstances.

"Second, hire a renovation team. Redo the entrance and paint it so that it looks less eye-catching.

"Third, purchase new gym equipment. Buy equipment of the best quality. Don't be afraid of spending too much money, understand?"

Guo Licheng was confused. Had he spoken so much in vain?

"But Boss Pei—"

Pei Qian patted his firm shoulder. "No 'but's. Get ready."

On the other side of the gym, Assistant Xin had finished speaking to Branch Manager Wei.

"Boss Pei, the agreement has been signed. The gym is 1,800 square meters large, and the original owners invested 1.7 million yuan in it. These were their main expenses: five hundred thousand yuan on the mid- to low-end equipment, some of which were secondhand; fifty to eighty thousand yuan on other products, including the equipment and machines used for private training, computers, and office desks; nine hundred yuan on renovation; and a little more on salaries, advertising fees, and the like.

"If we had opted to take over everything, we would have had to pay them five to six hundred thousand yuan in assignment fees. However, since we only want the space and not the equipment, we would only have to pay three hundred thousand yuan.

"Branch Manager Wei will remove all the equipment. We can purchase new gym equipment, recruit new trainers, and pay the rent for the space…

"We want to purchase equipment of the best quality, and we want to pay trainers higher than the market standard. That means the initial investment would be about 1.5 million yuan, which would include the equipment, assignment fees, and other miscellaneous expenses. Our annual expenses, including rent, utilities, and manpower, would add up to about three million yuan… that's 250 thousand yuan per month on average."

Pei Qian nodded, realizing that the investment was not as huge as he had expected.

He would be making an initial investment of 1.5 million yuan and paying 250 thousand yuan each month. Even if the gym did not draw in any customers, he would not lose that much money.

Still, on further thought, this was only one branch.

If he opened ten branches, he would easily be able to lose tens of millions of yuan each year, right? He would set up this branch and observe the situation. If no one cared about the gym, he would open more branches.

In any case, he would surely incur more losses if he set up more branches!