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Tuesday
Sep292015

Genesis of Success

Steven and his brother, Brandon, have constructed an entrepreneurial conglomerate on the foundation of the Genesis Health Clubs.

CBI: You’ve clearly come a long way since you acquired your first site in 1994. The Genesis Health Club chain is now at 21 units, with 1,500 employees, and 60,000 members, in Kansas and Missouri … and still growing. How did you get started? 

RODNEY STEVEN II: When I purchased my first club, the owner of the building it was located in financed it through an owner-carry agreement, without using a bank; for three years, he was my bank, and we developed a very good relationship. 

CBI: Your first chance to expand beyond that first Wichita facility came in 1996, but, we understand, it happened to conflict with your honeymoon, requiring you to leave a day early. What was so exciting about the deal that it couldn’t wait for 24 hours?

RS: It wasn’t about the excitement, although it was exciting; it was more about the situation. … When my landlord/banker heard about an opportunity that had surfaced suddenly that he felt was right for us, he didn’t hesitate to call. A club that was renting space from him was about to close, and he wanted me to act quickly. He called and said, “Get back here and buy this club now. I’ll finance this one as well.”

Since, at the time, he was my only source of financing, and since I didn’t want to lose any of the club’s members before it went dark—yes, I moved quickly.

CBI: Since then, things have changed rather dramatically. Genesis has been on something of a roll.

RS: I guess you could say that. After we opened the second club, I brought my brother, Brandon, on as a partner; and, a year later, after he’d acquired his second used-car lot, he brought me on as his partner. Now, 18 years later, Genesis is the largest health club operation in Kansas, and we’re the largest car dealer in the state; last year, we sold more cars than any other dealer group in the Sunflower State. We’ve also expanded into auto-related businesses, sports team ownership and management, and other activities.

CBI: Let’s fast-forward to the present. Genesis experienced quite a growth spurt between 2014 and 2015. How did that happen to come about? 

RS: There’s no question that Genesis has had an explosive year. We acquired eight new clubs over an eight-month period in 2014 and 2015. It’s been quite a ride! We hadn’t planned on nearly doubling our footprint in such a short time, but we’d been working on several deals that all happened to come to fruition at about the same point—that’s a good problem to have. … In fact, we’re also looking forward to another growth phase in 2015-16. Our team is growing, too, and that’s really exciting for me.

CBI: Is there anything like a prototype of a Genesis facility?

RS: Of our 21 locations, 19 have been acquisitions, while two have been built from the ground up, so they don’t necessarily all look the same. However, there’s no question that the renovations and new construction we impose following each acquisition—which always seem to take too long—clearly imprint our brand on each location. With the most recent acquisitions, we now have eight tennis clubs with aquatic facilities, so those are a bit different. Outside of that, all of the clubs have similar amenities, including state-of-the-art cardio equipment with personal viewing screens on most of the pieces, two to four group fitness studios, for yoga, cycling, and general activities, and luxurious locker rooms. The facilities range from 20,000 to 150,000 square feet in size—the average is about 50,000—and six of the larger ones are over 100,000. Our great personal training team and programs have also helped define our brand. I honestly believe we have the best results-based program and trainers in the Midwest, if not the country. We’re also about value across the entire chain, with pricing ranging between $52 and $80 per month for a single membership.

CBI: All of the ventures you and your brother have pursued have a strong customer base; in fact, you’ve described yourself as a “customer freak.” What is it about a business like the club industry, where you’re seeing members every day, that appeals to you?

RS: This industry is unlike any other in that you have the opportunity not only to meet customers, but also to watch them achieve results, changing their lives for the better. If someone entrusts their health to you, you have no choice but to be “customer freaks,” and to do whatever you can to encourage, motivate, and guide them along the way.

CBI: How would you describe your expectations about the customer experience?

RS: Nothing makes me happier than when a member submits a comment, request, or complaint—I welcome and appreciate that. I realize that they didn’t have to take the time to express their concerns, and I value the opportunity to address them. I surround myself with staff who feel the same and have the same outlook.

CBI: Do you make use of the net promoter score (NPS) program, which qualifies and quantifies customer satisfaction, helping operators to transform dissatisfied clients into “raving fans”?

RS: We currently make use of it in a number of our clubs, and it’s helped us to quickly address any concerns that arise. NPS allows a member to have a say without having to fill out a comment card. And when we ask whether they’d refer friends or family to their club, and why they would or wouldn’t do so, it demonstrates that we care about their experience, are eager to improve it, and want to make them happy.

CBI: As Genesis has grown over the years, how has your role in operations changed?

RS: That’s a tough question. Many of the things that I enjoyed and that made me successful in the beginning, I’m just not able to do anymore. Working the front desk, training staff, signing up new members, and spending time on the floor—that’s all changed. Now my days are consumed with construction and other major issues that, originally, didn’t drive the business. However, as I said, we have good people, and my staff has been able to take over the tasks I’ve relinquished.

CBI: Going forward, what types of growth opportunities are you looking for? When considering an acquisition, how close do a facility’s existing amenities and layouts have to be to those of current Genesis clubs?

RS: We just look for opportunity—period. Many of the properties we’ve acquired haven’t had the amenities
we needed or wanted, so we’ve simply added them. In fact, when we’ve moved into some markets—like Salina, McPherson, Hutchinson, and Leavenworth, in Kansas—we’ve haven’t purchased fitness businesses; we’ve just found good buildings and transformed them into clubs.

CBI: How do you finance your growth these days?

RS: Today, we do everything through traditional banking; and we own almost all of the properties where our clubs are located.

CBI: Right now, you’re focusing on Kansas and Missouri. What’s next? Do you plan to expand further both inside and outside the Midwest—new states and new regions?

RS: I’m not going to get into any specifics, but, yes, we’re currently looking at several opportunities beyond our current footprint.

CBI: You and your brother, Brandon, might well be described as something beyond serial entrepreneurs, uber-entrepreneurs, perhaps. You’re into clubs, cars, professional sports, and now, we understand, you’re part of a group planning to build the Castle Rock Casino Resort, a $145-million casino. Is that correct?

RS: We’re still in the process of trying to win the bid, so I can’t say much more than that.

CBI: How do you and your brother divvy up oversight of your overall business operation?

RS: Brandon and I pretty much split responsibilities 50/50 on all of the businesses. Having said that, Genesis tends to be my top priority, while the auto dealerships tend to be his. Fortunately, we have really great people, so we don’t have to try to manage everything ourselves. That’s how we’ve been able to achieve success and maintain growth.

CBI: What about synergies, intersections? Do the various businesses share any functions?

RS: Yes, every department crosses over to some extent, and our people help each other in a variety of different areas.

CBI: Are you exploring any other business opportunities that we haven’t yet heard about? Anything beyond clubs, cars, and sports?

RS: I hope not. We’re pretty focused on the businesses at hand.

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