Staying zen in the early days of a small business startup can be tough. Steve McGrath, owner of YogaSource, knows first-hand the tools required for successful organic growth. On this episode of “The Heartbeat of Main Street,” stretch your mind and learn tips every small business should know when expanding.
“The Heartbeat of Main Street” delivers timely insights tailored to the needs of small business owners and entrepreneurs. Featuring a rotating line-up of small business experts and industry leaders – and covering a range of topics – each episode explores the trends that have an impact on revenue creation for small business owners.
The series is hosted by ForbesBooks, and more information can be accessed through a dedicated home page. New episodes will appear regularly on the Small Business Community podcast page. Be sure to check back often – so you don’t miss a beat.
Steve Strauss: Today we're speaking with Steve McGrath, owner of YogaSourcein Los Gatos, California. YogaSource is the largest and most-awarded yoga studio in Silicon Valley. Independently owned since 2002, the studio offers 130 weekly yoga, Pilates, and revolution cycle classes with world-class teachers.
Steve, great to have you with us.
Steve McGrath: Thanks very much. Great to be here.
Steve Strauss: So, let's start at the beginning. Why don't you tell us a little bit about YogaSource?
Steve McGrath: My wife, Linda, opened the studio in March 2002, and thankfully we met through yoga shortly after that. I became involved in the business pretty much that way, really supporting her dream and her entrepreneurial drive. I manage a lot of the day-to-day maintenance of the studio, the development of the business, the marketing, and a lot of the things that are often not quite so easy to manage, which is the customer service elements of the business, and of course the maintenance and literally keeping the business running.
Steve Strauss: Tell me a little bit about the early days of YogaSource. How did you grow it? How did Linda grow it when she started, because the start-up phase is always challenging for people.
Steve McGrath: She opened the studio as a young 24-year-old. Went out and got an SBA loanand started from scratch. I came along about six or eight months later and was immediately involved in the studio. We sat in a very small space. We had 800 square foot practice space. We could fit 28 people maximum, literally kind of mat to mat.
Like any small business, we grew organically. Small classes became medium size, and we got 10, 12 people. Then a few months later we had 15, 20 people. And eventually after a couple of years, the classes were packed, and we added more classes. We added more styles of yoga, and then of course expanded into the larger and larger spaces over time and moved the business into a bigger location.
Despite our size now, we're still looking for opportunities to grow. We're about to open a second location in Morgan Hill, thanks in large part to the support of Bank of America and the SBA.
Steve Strauss: Nice.
Steve McGrath: Yeah, you know it's sort of that classic organic growth story. We don't take credit for all of it, of course. It always frustrates me when you hear business people describe themselves as geniuses when they've taken advantage of what sort of market offers.
Steve Strauss: One of the things I love about what you're doing is you do something that I suggest to small business owners often, and that is to create multiple profit centers. Mainly you have one way of making money in your business, but what great businesses do is they create a second and a third way so that when one part of your business is down, the other is up, and vice versa.
It seems to me that's what you've done at YogaSource. You started with yoga. Now you have Pilates. You had one location. Now you're going to have one in Palo Alto and one in Los Gatos, so you are definitely creating multiple profit centers. Has that been a conscious decision on your part?
Steve McGrath: Yeah, it has, and actually there's even more elements to it within that matrix of the business. If you look at our business, in the early days we had that very small location. When we were considering moving to a larger location, we wanted to look and say, "What are the aspects of this experience that we're delivering at this small location that we can take and we can move across to the larger space?"
And one of the things we had a few lines of clothing that we were custom making for ... you know, t-shirts and yoga pants. We thought, maybe if we included a bit of retail, we could really benefit from that, and so we built retail into our model into our next location, our second step, as it were in expansion. And what retail allowed us to do was it allowed us to differentiate from all the other yoga studios around because back in 2005 when we expanded, most yoga studios were a case where you sort of roll up to the door of the studio and your instructor comes huffing and puffing around the corner on their bike and says, "Sorry, guys. Sorry, guys. I'm late. Let me just open the doors for you."
Steve Strauss: Right.
Steve McGrath: And it's not a great experience. Where we are in Los Gatos, there's a very high expectation of a very high quality service, and so we said, "well, we need to keep the doors open all the time—we need to have staff on location all the time." And one way to pay for that is by having a retail store, so a retail component to the business where the profitability of the retail can help the business, but it also can pay for those employees who are at the front desk selling, and they happen to be always there to check into classes.
So we immediately approached Lululemon, which is one of the ... at the time was the brand in yoga apparel.
Steve Strauss: Sure.
Steve McGrath: And asked to be a distributor, and we are now their largest distribution partner worldwide.
Steve Strauss: Wow.
Steve McGrath: They partner with yoga studios and gyms with a very limited line of clothing, and we currently are their largest partner worldwide to sell their basic black yoga pants. So it's been very successful for us.
We've also developed other revenue opportunities. We have a very well-developed retreat program where we take people to exotic destinations like Tulum near Cancun. We go to Bali. Linda takes a yoga and art retreat to Paris. This year we're going to Florence, Italy, where she takes people to do yoga in the morning and do art visits in the afternoon with a guide from someone who is a practitioner at the studio.
In addition to that, we are a teaching institute. So we are an approved teaching institute by the Yoga Alliance, who are the governing body for yoga, which basically means we have the ability to run training programs to educate students and teachers in our own style, empowering them to become yoga teachers themselves.
So we have lots of streams of opportunities and revenue parts of our business.
Steve Strauss: That is definitely multiple profit centers.
I'm wondering if you could give us two or three tips about what's worked in your business that you think other small business owners could learn from. What might they be?
Steve McGrath: I think, number one, I would say to people focus on the experience that you're delivering for your client. Many small businesses get caught up in what their competitors are doing, which is a natural tendency, but I think you really need to focus on the experience that you're delivering.
We, early in our process ... we took kind of a page from my experience with marketing at HP where you look at the customer experience. How are people aware of your studio? How do people select your studio to visit? What is their experience when they walk in the door the first time? How do they continue to sign up and experience classes? And as they develop in their experience, how do you continue to inspire and challenge them and deliver that experience?
And so, focusing on all the elements of that experience and literally going through an exercise of documenting how you want people to talk about your business in each part of that experience will help you build out that experience. And don't worry about competitors. If you are doing the right thing with your experience, then people may go, but they'll come back if you're filling their needs.
The second thing I'd say is don't be scared of taking calculated risks. Look for those trends in your market. We saw yoga developing as an exercise modality and took some risks to expand into that bigger space. That helped us double or triple almost overnight. We tripled our business by adding more classes in a bigger location. We added a second practice space so we could have multiple classes at the same time.
And I think the third tip I'd say is if possible, as soon as you can, invest in real estate. Be your own landlord. Try and avoid that burden of paying someone else rent and investing in their property. Try and own your own building or your own location as early as you can.
Steve Strauss: Steve, if you could do anything different, if you could talk to yourself or your wife back in 2002, anything you might suggest that you've learned along the way?
Steve McGrath: I think it's really important to acknowledge your weaknesses and look for support where you need them. If you're an artistic, creative, extroverted, big-picture type personality ... I mean, that's terrific, and if that's the business you're in and that suits your business, that's great.
But don't be shy to find people who can keep your feet on the ground. Find a good business advisor to help you on those sort of boring accounting kind of business decisions. Balance is very, very important.
Steve Strauss: Steve, if listeners want to find out more about you or your business, where should they go?
Steve McGrath: Just go to YogaSourceLosGatos.com.
Steve Strauss: YogaSourceLosGatos.com.And I also want to thank you for taking time out of your busy schedule to work not just in your business, but on your business. So keep up the great work. And for more great small business tips, check out Bank of America’s online small business community at BankofAmerica.com/SBC. That’s BankofAmerica.com/SBC.
For Bank of America and ForbesBooks, I'm Mr All Biz, Steve Strauss.