Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How This Gym Scaled to 30 Million by Fixing Retention
Transcript
- Lucas: There's this gym in Austin called Fuse — started as a single boutique studio in 2018. By 2022, they were doing about two million in revenue, which is solid for a 3,000 square foot space. Luna: Nice. And I'm guessing they didn't stop there. Lucas: They did not. By the end of 2025, Fuse hit thirty million. That's a 15x revenue jump in three years. And they did it without a single new location outside of Austin. Luna: Wait — all same city? How do you scale a gym that much without expanding geographically? Lucas: That's exactly the question. And the answer is retention. Most fitness businesses chase new members constantly, but Fuse realized that keeping a member for twelve months instead of six effectively doubles the lifetime value. They made retention their core growth metric. Luna: It's funny you say that. If these conversations have moved your work forward in some small way, and you'd like to support the show staying ad-free, you can do that at buy me a coffee dot com slash fexingo. No pressure, just a low-key way to keep us going. Lucas: Yeah, absolutely. And it really helps. So back to Fuse — their founder, a woman named Kara Chen, told me that in 2022, their monthly churn rate was around 8 percent. That means out of every 100 members, 8 were leaving each month. Luna: That's pretty typical for boutique fitness. Industry average is around 7 to 9 percent. Lucas: Right. But here's the thing — at that churn rate, the average member stays about 12.5 months. If you can cut churn in half to 4 percent, the average tenure jumps to 25 months. That's double the revenue per member without spending a dime on acquisition. Luna: So what did they actually do? Like, concretely? Lucas: First thing: they overhauled their onboarding. Instead of a generic tour and a sales pitch, every new member gets a 30-minute 'success session' where a coach maps out their goals, schedules the first two weeks of classes, and sets up a check-in cadence. Luna: That's a lot of labor. How many coaches did they need? Lucas: They actually didn't add headcount. They repurposed the sales team — because they realized they didn't need salespeople if they weren't constantly chasing new members. The same people who used to make cold calls now do onboarding and retention calls. Luna: Wait — they stopped cold calling altogether? Lucas: Completely. By mid-2023, Fuse had zero outbound sales. Every new member came from referrals or organic foot traffic. Kara told me that decision alone saved about $200,000 a year in marketing spend. Luna: And that went straight to the bottom line? Lucas: Partly. But they reinvested a chunk into retention technology. They built a simple CRM that tracks each member's attendance streak, milestones — like 10th class, 50th class — and sends automated texts from the coach. 'Hey, congrats on 50 classes! Let's grab a smoothie after your next session.' Luna: That personal touch at scale is hard to pull off. Did it actually move the needle? Lucas: They saw a 22 percent reduction in churn within the first three months of implementing the milestone system. And they added a 'buddy system' — if a member misses three consecutive days, their designated buddy gets a text to check in. Peer accountability, not nagging from the gym. Luna: That's clever. The buddy feels helpful, not like a sales rep. And it builds community. Lucas: Exactly. Kara told me that the buddy system alone dropped churn by another 10 percent. Combine that with the onboarding overhaul and the milestone texts, and their monthly churn went from 8 percent down to 4.8 percent in about eight months. Luna: So from 8 to 4.8 — that's almost a 40 percent reduction. How did that translate to revenue? Lucas: Here's the math: in 2022, they had about 1,200 active members. At 8 percent monthly churn, they were losing 96 members a month and had to replace them just to stay flat. By the end of 2024, with 4.8 percent churn and a much stronger referral engine, they had 3,600 active members. Luna: And they didn't open any new locations? That's all in one studio? Lucas: One studio. But they did expand hours and added more class times. They went from 30 classes a week to 90. They also started offering virtual classes — live-streamed from the same studio — which pulled in members from outside Austin. Luna: Wait, so they did expand beyond Austin, just not physically? Lucas: Right. Virtual members pay a lower monthly rate — $79 versus $179 for in-studio — but the retention is even higher because the barrier to attendance is lower. Virtual churn is around 3 percent. So that's another lever. Luna: What about the in-studio experience? Didn't it suffer with three times the members in the same space? Lucas: That was their biggest fear. But they redesigned the class schedule to avoid peak crowding. They introduced a reservation system that caps each class at 20 people, and they run popular time slots back to back. So a 5:30 PM class now has a 6:30 PM follow-up. Luna: So they effectively doubled capacity without adding square footage. That's smart. Lucas: And they raised prices gradually. In 2022, a membership was $149. By 2025, it was $179. Members didn't balk because the perceived value was higher — more class options, better coaching, and that community feel. Luna: So the retention playbook here seems to be: invest in onboarding, automate personal touches, build peer accountability, and expand capacity within existing space. Any of this applicable beyond gyms? Lucas: Absolutely. Any recurring revenue business — think SaaS, subscription boxes, even pet care — can apply the same principle. The key insight is that your best growth engine is the customers you already have. Most small businesses spend 80 percent of their energy on acquisition and 20 percent on retention. Fuse flipped that ratio. Luna: And it's not just about keeping them longer — it's about turning them into evangelists. I bet their referral numbers went up too. Lucas: Huge. By 2025, over 60 percent of new members came from referrals. That's essentially free acquisition. And because referred members already have a social connection, their retention is even higher — around 2.5 percent churn. Luna: That's a virtuous cycle: better retention leads to more referrals, which leads to better retention. So the question is — how does a smaller business start this shift without a big tech budget? Lucas: Kara's advice is to start with one metric: track your monthly churn. Most small businesses don't even know what it is. Once you have that number, set a goal to reduce it by 10 percent in the next quarter. You don't need a CRM for that — just call five departing members a week and ask why they left. Patterns emerge fast. Luna: I've heard that the most common reason people leave gyms is 'I just stopped going.' It's not price, it's not the facility. It's a loss of habit. Lucas: Exactly. And Fuse's entire system is designed to prevent that habit from breaking. The buddy check-in, the milestone texts, the coach check-ins — it's all about keeping the behavior going. They're not selling fitness, they're selling consistency. Luna: That's a good way to put it. So for a listener running a service business — maybe a lawn care company or a tutoring center — what's the one thing they should steal from Fuse? Lucas: The buddy system. It's low-tech, nearly free, and it works because it taps into social accountability. Pair up your customers — or even your employees — to check in on each other. You might be surprised how much that reduces churn. Luna: And it builds community, which is hard to replicate. Fuse essentially turned their members into a retention team. Lucas: That's the whole idea. If you can get your customers to help you keep each other, you've built a moat that competitors can't easily copy. Luna: So what's next for Fuse? Are they going to start franchising? Lucas: Kara told me they're actually considering a licensing model for the retention system itself — selling the playbook to other boutique gyms. They're calling it 'The Fuse Method.' If it works, they could scale without adding any more physical locations. Luna: That's a great example of turning your operational expertise into a product. I wonder if that'll become a trend. Lucas: I think it will. The businesses that figure out retention first will have a massive advantage in the next decade. And Fuse is proof that you don't need a million-dollar tech stack to do it — you just need to care about the numbers that actually drive growth.