“How I Built This” (SoulCycle) Notes January 6, 2019

  1. Both founders had babies when they started the company around 2005.
  2. Saw boutique fitness studios were a thing in LA (no changing of user behavior)
  3. Quote: “Had a need for a product” – not “I want to be an entrepreneur”
  4. Quote: “One of those things that would not leave me.” Always came back to this idea.
  5. Everyone thought this was the dumbest idea – including loved ones. (“Spinning is over.”)
  6. At the time, no fitness class charged per class. This was a novel business idea. Breakage was the business model.
  7. Husband said she would ruin her life – work 24/7. Neither founder cared – they were going to do this.
  8. Founders met through a cycling instructor, who was initially the third founder.
  9. Assumption: Exercise didn’t have to be torture.
  10. May be revisionist history but founders had such conviction that people would pay for this and this needed to exist.
  11. Found first location on CraigsList – 1,200 square feet. Signed 5 year lease (!)
  12. Founders met in January, moonlit while they created the idea, and opened first studio in April.
  13. One founder had $200 per week budget for her personal life with her husband and baby. Husband was extremely supportive.
  14. Another founder had banker husband. Invested $250,000 to start business. Husband was also supportive. He was mocked at work for what his wife was doing.
  15. Quote: “Worst thing that could happen – in 5 years, it wouldn’t work and we could look at each other and say it didn’t work.”
  16. Husband thought of name in the shower. Didn’t hire branding agency.
  17. Original business plan: 100 riders per day, cash flow break even, enough money to take care of kids.
  18. In early days, what was different? (19:08): First thing, need tech to help them plan their weeks (OpenTable for class). Those at front desk were focused on knowing customers by name, whether they wanted room temp or cold water. They wanted to create a “sanctuary” in NYC.
  19. $27 per class – “two cocktails”. Wanted to charge from day one (endowment effect).
  20. Went door-to-door to doormen to slide fliers.
  21. Had excess $2500. Decided to print t-shirts, at the time schwag was not a thing. Plan was to get the coolest people in NYC to wear the shirts!! Never happened. But this became a big part of the business (“buying t-shirt from best vacation you went on”).
  22. Painted a sign on sidewalk to get foot traffic, chained it to parking meter. Was in violation of local permits so they got a ton of parking tickets – studied traffic patterns to avoid this.
  23. Very slow at first but got cash flow positive by month 5.
  24. Business was ridiculously lean. Being lean was critical – “It allowed us to learn every job – understanding how the website worked… what were the cleanliness standards, what the bathroom looked like. ” (28:08)
  25. Opened summer studio in Hamptons. Game-changer. Profitable from day one.
  26. After that, they were a phenomenon. Customers traveling subway, fancy cars lined up around the block for classes in NYC.
  27. One founder left. Important that all founders have same “vision and same work ethic.” Because if you don’t have that, you are fighting internal battles as well as external ones.
  28. Hired an executive coach to help foster the founder relationship, which they found really beneficial (“I’m having a full panic attack so I need to see someone”)
  29. Made a commitment to dedicate a lot of time and resources to partnership.
  30. Expanded in 2008, heart of recession.
  31. “We never missed payroll and we always had toilet paper.
  32. Former founder started competitor, Flywheel, in 2010. “Of course, we flipped out at the time but we took opportunity, talked to our coach…who do we want to be? we didn’t want to react. We wanted to make decisions that felt good for us.”
  33. “High road, long view” was their mantra.
  34. Let’s build the stadium, bring in the rockstars (i.e., instructors). Turned other people into faces of the brand.
  35. Sold a chunk of business to Equinox. Having strategic playbook would be helpful – for example, expanding to West Coast.
  36. Today, there are 88 studios. Not clear if they could have done it without Equinox, but it definitely gave them the confidence, which is critical.
  37. They are rich today, each of their children has their own room – a monumental accomplishment.
  38. “You should franchise” – why would we do that? Not consistent with their mission.
  39. After selling, definitely a mourning period, a period where you spend money and now, a period of what’s next?
  40. Would you take money again from Equinox? We started business to be “secular sanctuary. We never forgot why we did that. We got to do all of those things.” (Success has many paths)
  41. Was it luck or skill? “Ignorance is bliss. Being naive and making decisions without knowing anything – that was an advantage.”