Knowing your customer is the key to a profitable business. The better you understand your target audience, the more effectively you can build a customer journey, decide what features to build, create appealing content, and so on.
And what better way to truly understand your customer than having been in their shoes? John Franklin and his cofounders Mateo Lopez and Kaleda Connell launched Kilo to help make life easier for gym owners. Previously, John had owned five gyms in the New York City metro area. He learned how to successfully manage and market a gym and knew he could help others do the same.
Now, Kilo helps over 1,000 gym owners successfully run their businesses, generating $3 million in annual recurring revenue. Kilo’s all-in-one platform provides gym owners with all the tools they need to capture more leads, increase sales, and manage a growing gym member base.
Trading Gym Ownership for Agency Ownership
John started as a gym apprentice, learning how to run every aspect of the business. Eventually, he worked his way up to owning gyms in the NYC metro area. John says, “To compete as a bootstrapped gym, we had to get really good at marketing. We were going up against companies like Soul Cycle and Rumble that have raised millions in funding. And since New York is one of the most expensive markets in the world, it was crucial to get bodies in the door to keep the business open.”
During that time, John was also a member of a business group for gym owners. The group’s creator, Chris Cooper, coached gym owners on how to succeed in the industry. The group’s members shared revenue numbers and lessons learned, including strategies for operational excellence, effective marketing, and client retention.
John says, “It’s hard for gym owners to run a successful business. With Crossfit, for example, you pay three grand to use the name, but the company doesn’t provide any guidance or advice on how to succeed.” As the owner of a successful gym in a notoriously difficult market, John gained some clout in that group.
In 2018, Chris was looking for someone to teach his members in larger Metropolitan areas how to acquire new customers and selected John. John says, “Running main street businesses in New York City is extremely difficult. We made just about any entrepreneurial mistake possible: hiring the wrong people (like family and friends); keeping bad people on staff too long; growing too quickly and not focusing on quality; getting scammed by NYC contractors, landlords, and lawyers; getting mentored by frauds; doing a bad job of communicating with our customers, etcetera.
“I was able to share all those lessons with the group. And it got to the point where I was becoming more successful teaching marketing and sales tactics than running my five gyms.”
A year later, Chris suggested that John acquire the website agency he’d been recommending to his coaching clients. John says, “I didn’t want to acquire the website agency at first, but Chris encouraged me to take the deal because it would be serving a real market need, helping small gyms create effective websites.”
John teamed up with Mateo Lopez, now Kilo’s Head of Product. Mateo was the first general manager at one of John’s gyms, and they’ve been working together for almost ten years. John sold his gyms and the duo bought the website agency together.
Acquiring and Upselling Customers to Grow Kilo
John and Mateo acquired the website agency at the end of 2019 and then partnered with Kaleda Connell (now the CEO of Kilo), whom they met in the coaching group. During those first months, the founders spent time interviewing customers, understanding the product, setting up the infrastructure to scale, and building the right team.
In March 2020, they officially launched Kilo and slammed straight into a global pandemic. Gyms were one of the main industries shut down. With global lockdowns, gyms suddenly weren’t able to make any money. During April and May of 2020, every gym on the planet needed to update its website and business model.
“The competition was slow on the draw, but we could spin up Covid-specific websites quickly. We got customers live in a day or two instead of two weeks. Our competitors were small agencies backed up with clients’ website changes. So, we were lucky to be able to move a lot faster, which helped launch Kilo,” John says.
One of the main strategies that contributed to Kilo’s growth was upselling clients. With the purchase of the website agency, the founders also acquired their first set of customers. They turned their attention to creating a great customer journey. Step one was listing out all the pain points they had received through customer feedback and reverse-engineering what a frictionless onboarding process looked like.
Step two was clarifying who their product wasn’t for. At this stage, Kilo was building websites for gym owners who didn’t want or need to customize their sites or tinker with their messaging. “We had to turn down clients who saw themselves as ‘marketing experts’ because we limited their website permissions. The upside of doing this was that the websites never broke and looked great at all times,” John says.
With these upgrades, Kilo was then able to upsell those original customers to a better service, helping them build lead-converting sites. John adds, “Many of these customers also knew us from the coaching group. Since we were active and well-known members, we built a lot of trust and proved our expertise over the years. People believed us when we said we had something that would work better for their businesses.”
The founders also built their first tech product to complement their website services. It was a marketing automation toolset to nurture leads through customizable forms, automated emails, SMS messages, and a trackable sales pipeline. They used a white-label solution as the foundation and then customized it for their niche. The development costs were negligible because they didn’t have to build anything from scratch, and they could launch and iterate quickly without full-time developers.
During Kilo’s first year, it acquired four additional website agencies in the gym space, knowing the upsell potential of existing customers. The founders built their sales funnel around the conversion metrics from their first acquisition and were able to replicate the results. The core strategy was cheaply acquiring clients and then upselling them into Kilo’s software products.
Gradually Turning Kilo Into a SaaS Startup
In early 2021, the founders realized that they wanted to turn Kilo into a true SaaS company. Until then, they’d provided agency services alongside some software tools. John says, “There’s a huge discrepancy between the valuation of an agency and SaaS business. Website providers are agency businesses with agency valuations. We saw an opportunity to buy agency businesses and then turn that into SaaS revenue.”
They decided to reinvest all their profits into developing an all-in-one SaaS platform that helps gym owners run their businesses. At that point, Kilo was already doing seven figures in revenue, so they could finally expand the team with full-time software engineers.
Kilo’s product strategy relied on three pillars of success. One, the founders knew the market well since they used to be customers. They were building something that they wished had existed when they ran a gym.
Two, while there were existing tools in the market specifically for gyms (like gym-tailored website providers, marketing automation tools, landing page builders, and email software), gym owners had to use Zapier to duct tape them together. The founders wanted to make Kilo a more effective and affordable alternative that allows gym owners to access everything they need through a single login.
Three, Kilo wanted to help reduce owners’ workloads while boosting their profits. Founders face a huge learning curve in marketing, sales, and operations. Often, mom-and-pop businesses with one or two employees need to teach themselves how to do everything without a dedicated expert or team.
With nine full-time developers, Kilo now builds features from scratch to cater to gym owners’ challenges – from marketing to management. Kilo’s average customer captures 202 percent more leads, books 172 percent more sales appointments, and closes 210 percent more sales. The company now focuses on upselling its full-stack gym management software to customers.
Kilo was supposed to be a side gig. But its answered a growing need in the market for small coaching gyms. Now, the startup has grown to $3 million in ARR, running 1.3 million marketing automations through its platform and processing 87,000 customer support interactions.
John says, “The saying goes: If you can make it in New York, you can make it anywhere. And I think there’s truth to that. When we went from surviving the grind as an NYC gym to running Kilo, it was an easy transition. We’d already earned our entrepreneurial scars, made every mistake there was to make, and understood our customers through and through.”
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