How a Gym Membership Taught My Son About Recurring Revenue

I joined our local gym recently, and this morning my 6-year-old son asked me if the gym makes money. We looked it up together and wow it's pretty profitable, so we had a quick conversation about the business. I thought it was interesting enough to share with you, and maybe it can inspire some fun chats at home too.

Me: “How does the gym make money?”

Son: “Membership!” (He knows because I told him it's quite a bit,  and there’s an initiation fee.)

Me: “So what does that mean?”

Son: “The members pay them every month.”

Me: “Yes, that’s called recurring revenue. It's great, because once you have a happy customer, they keep paying you every month. But of course, the gym has expenses too. What do you think those are?”

Son: “People who work there, and the machines.”

Me: “What are some other businesses that have recurring revenue? What are some things we buy over and over?”

Son: “Food and snacks!”

Me: “Yup! Oh, you know our Wyze camera? They sell cameras, right? But they also have recurring revenue.”

He took a few guesses at what Wyze’s recurring revenue could be but couldn’t figure it out, so I told him: Wyze charges us money every month to store our videos for us.

I also explained to him why gyms charge an initiation fee, even though it costs them almost nothing to add a new member. It is to make you think twice before canceling!

From there we talked about some other recurring revenue businesses, rentals, supermarkets, and so on. It was fun, and it got him thinking about the different ways businesses make their money.