Why Greg Glassman chooses to make less money than he could--but is still on track to produce $100 million in revenue this year.
A prospective CrossFit trainer at a seminar at CrossFit Morristown in Morristown, New Jersey.
Anyone is free to do CrossFit. The company puts instructions and videos up for free on its website, and posts a workout of the day, or “WOD,” right on the homepage. (CrossFit’s over 6,000 affiliate gyms, or boxes, are free to do the same). Meanwhile, founder Greg Glassman vows the company will never expand into supplements, equipment, or other ancillary products he calls “bright shiny objects.” So how does CrossFit Inc. expect to double revenue this year, to $100 million? (See the feature story "Do Not Cross CrossFit.")
The company gets a trickle of royalties from Reebok, which started selling CrossFit-branded gear in 2010, and some more from tickets and registration fees to its annual CrossFit Games tournament. But the two primary sources of revenue, are education and licensing fees. CrossFit runs at least 15 seminars a weekend, hosted at existing CrossFit boxes, where the company’s red-shirted training staff (most of them box owners themselves) explain the CrossFit philosophy, demonstrate the nine fundamental movements (variations of squats and power lifts), and show how to design a WOD and teach CrossFit to beginners. Attendees must also complete Fran, one of CrossFit’s most grueling workout routines. Tuition is $1,000, and passing the standardized test on the last day allows you to become a Level 1 Certified Trainer, which lets you open a box and teach CrossFit professionally. Then there is licensing: Once a trainer opens a box, he or she must pay CrossFit an annual fee, now $3,000, to advertise the box as a CrossFit gym and to teach the methodology.
Glassman explicitly limits his company’s scope to these two businesses, calling it his “least rents” approach (the opposite of what economists call “rent-seeking” behavior). The minute CrossFit expands into new or unfamiliar products, he believes, it will dilute its brand, degrade CrossFitters’ experience, and slow overall adoption. So while he continues to add more specialized and advanced CrossFit classes, and annual fees have gone up (though affiliates are grandfathered in at their original rates, which are as low as $500), he prefers other companies to sell the peripheral products. “We're not trying to widen our share of the pie,” says Glassman. Rather, he hopes to keep making the pie bigger. He estimates that the entire CrossFit affiliate system will net between $1.5 and $2 billion this year.
BURT HELM is a senior writer for Inc. magazine. In 2013, his Inc. feature “After the Squeeze” was awarded the Stephen Barr Award for Feature writing, and his stories “After the Squeeze,” and “Turntable.fm: Where Did the Love Go?” received awards from Society of American Business Editors and Writers. Prior to Inc. he worked as a reporter for Bloomberg News and a department editor for Businessweek. He is a graduate of Yale University with a double major in Physics and English. He lives in Brooklyn, NY. @burthelm