Life Time Founder and CEO Bahram Akradi: Reinventing and Captivating the Fitness Industry
01.22.19
Interviews

Bahram-Inside-Photo.jpg Bahram Akradi came to the United States in 1978 at the age of 17. Within a few weeks of his arrival, he began working so that he could pay his way through college. Bahram got his start in the fitness world in 1984 at Nautilus Fitness Center while simultaneously working towards a BS in Electrical Engineering from the University of Colorado. After graduating, he continued to grow the business until it was sold to Bally Total Fitness in 1986.

Bahram realized that something was wrong in the fitness and health club industry and set off to fix it. He started Life Time in 1992 with the goal of redefining the industry by employing a razor-like focus on the customer experience. With this founding principle, Life Time has grown to 140 locations across 39 major markets in the U.S. and Canada. Going beyond the confines of the traditional fitness club, Life Time is a “Healthy Way of Life” brand that has expanded into educational content, healthy food, fitness classes, sports competitions, and more. In 2015, Life Time was taken private by Leonard Green and TPG in a transaction valued at more than $4.0 billion.

Despite all of his success to date, Bahram has no signs of slowing down. In fact, he has a refreshingly optimistic view on the future, not only for his business, but also for the country he now calls home. He maintains a clear-eyed appreciation for the opportunities that the United States provided him and firmly believes those same opportunities are becoming increasingly accessible to anyone who is willing to work hard and push forward.

(Hear the full conversation with Bahram on iTunes or Podcasts.com)

RJ: Thank you so much for joining us today, Bahram. Absolutely delighted to have this conversation. As mentioned, my wife and I are huge fans of Life Time. I originally had my doubts when folks started to talk about a new gym coming to Princeton. But once I experienced it, I was absolutely delighted and amazed by what you’ve built.

Could you share with us a little bit about Life Time? How you developed and evolved the idea over the years and what you think makes it different?

Thank you so much, RJ. It’s my pleasure.

If I go back to the beginning, I was really focused on the customer experience and what was being delivered in the club business. My observation was that the club business was not focused on delivering an experience from a customer point of view. 30 years ago, when I was working in the first chain of clubs I had built, everything was designed from the business owners’ point of view. The membership types, the contracts, the way we designed space, the way we sold memberships, it was all designed around what was the best thing for the business owner. In many ways I felt that the customer was being treated poorly. The team members and the people who worked in the companies were not being treated the way they should be. However, the amazing thing was that these customers kept coming back. I remember I was in my mid-20s and I thought to myself, “There is something really big here.”

I went to school for electrical engineering. I got into the club business because I received an offer I couldn’t refuse. I thought I would do it for a number of years and then I’d go on and do what I wanted to do, which was design and build, things more related electrical engineering. However, the revelation was, “Oh my God, I can’t believe this customer keeps coming back when they’re being treated this badly. What if we did everything from a customer point of view?” I literally sat down and designed a club based on how I would want to use it if I was the customer. I designed the layout, the lighting, the colors, the amenities. It all stemmed from the idea of being completely customer focused and customer centric.

We haven’t deviated from that initial thought. Every pivot that we have made over the last 25, 26, 27 years has resulted from really paying attention to the behaviors and actions of our customers in the clubs. Seeing what they’re doing, listening to what they’re saying, and trying to figure out how we can overwhelm them by giving them a product and service program that exceeds their expectations. I unfortunately cannot claim that we always succeed, but I can tell you, unequivocally, that me and my entire organization are committed to doing it at all times.

RJ: I’ve been a member of lots of different gyms throughout my life, which is why initially, when people here in Princeton started talking about the new gym that was opening up, I had low expectations. When I got there, it really was a different offering. You seem to have really thought through all of the needs of not only an individual, but of a family. The facility is new, it’s clean, and you’ve got great staff.

However, the thing I start to think about is, when will it become outdated? How can Life Time keep up and evolve with the customer? How frequently are you thinking of new things to implement at the club? Is it a continuous process? Is it a continuous implementation cycle?

We actually need to go back to a word you have mentioned a few times. Very early on, I felt that the “gym business” was a business I wasn’t interested in. The term gym reminds me of a sweaty space – not necessarily attractive, not necessarily designed to make me feel like I want to be there. It’s a place I feel like I have to go because the exercise is good for me, but it’s a punishment.

I wanted to build a country club. I wanted to build a destination that was entertaining. It just happened to be entertainment that was athletic and healthy. I had to change the mental impression of where it is the customer is going and I hope that we have done that for you. Are you going to a place that is more like a resort, more like a country club? More like a destination where it’s fun and it’s attractive? People are there expecting you and greet you, it smells good, it looks good, you can get your massage, you can get your workout, you can get your healthy food. You can go by the beautiful outdoor resort pools and lay by the pool.

What I was trying to do is build an athletic country club that invited you in and kept you there. Then I wanted to design something that I could continue to invest in and remodel over the years to ensure I stay relevant to the modality of exercises that a member wants.

As you know, health and wellness is a megatrend. For the last 40 or 50 years, more and more people are doing physical activity. More and more people are focused on their health and longevity. However, the way we achieve “fitness” is a fad. Whether it’s step classes for five years and then after that no one wants step classes. Or it’s another type of workout and after five years no one does it anymore and they want something different. That’s a moving target.

What I really wanted to design was something that I could continually adapt to ensure it always stays relevant to the customer. Princeton is new – it opened last year. However, you should go to one of our clubs that has been open 15 or 20 years and see how we continue to invest. We spend over $100 million a year in maintenance Capex, to ensure the clubs stay physically relevant. We spend at least $20 million per year at our Life Time University to train our professionals to provide a “Four Seasons” like level of service and quality. We spend over $10 million a year on the performers in the clubs who teach the classes. It’s not their payroll, this is just to cast them, train them, and retain them. We have machines in place that are continually reinvented to ensure we always deliver the best places, the best programs, the best performers, and the best people at all times. The relentless effort to not fail on these things becomes the reason our brand is not only continuing to prevail but become more coveted rather than falling apart like other entities that you see after 20 or 30 years.

Lack of focus and attention to detail in how they manifest their brand is killing companies. Unfortunately, in many cases they blame it on something else. They blame it on Amazon or they blame it on some other outside factor. But in fact, they’re just not paying attention to their brand, they’re not paying attention to their customer, and they’re not paying attention to the experience.

RJ: You really do have raving fans – I found out about Life Time through word of mouth even before the opening. Two different individuals were telling me how great it was going to be. Do you have a lot of natural, organic customer acquisition through word of mouth? Do you find that your spend on marketing doesn’t have to be as pronounced as some of the other clubs because you have this natural spreading of the word? How do you think about customer acquisition?

That’s a very important question. The answer is yes: we spend substantially less on promotional outbound marketing and substantially more on the actual product, which again, in our case, is the place, the people, the programs, and the performers. The message that I have for other executives or CEOs is that, luckily for me, I have been forced to run every portion of my business over the last 25 or 26 years. For many years I was running technology. For many years I was running the marketing, sales, etc. Being able to look back at my takeaways from those times, one of the things that’s changed over the last 30 or 35 years is that we used to be able to dominate our message by over-spending on marketing and creating an image for our company based on marketing campaigns. We could buy three radio stations, four newspapers, a couple of direct mail pieces, and you were basically covering everything.

As you and everybody else knows, over the last 30 years the medium has changed. Now the strongest force in your marketing is not what you say, it’s what your customers say. I have been on a mission to get to not just 30% of what everybody else spends on marketing. I’ve been on a mission to spend zero. We’re not there yet. And we’re going to continue our effort.

A product, an experience, service, food if you’re in a food industry, it needs to be so amazingly extraordinary that it by itself makes the customer tell the story you want to be told about you.

RJ: A little bit of a segue into how you operate. One thing I noticed is that you have what I will term a “360 approach” with the existing customer once they start experiencing Life Time. You have the magazine, you have athletic events, you have all the amenities once you’re in the facility, and you have the great people that work at Life Time. My wife asked me to mention Daniela, who’s doing an amazing job in the Princeton location. She keeps my wife coming back to the classes.

How do you think about setting up an organization and what are some of the keys to success in executing on an ambitious plan?

I do my best. I have always considered myself to have an ordinary level of intelligence. I don’t think of myself as extraordinary or smart or anything like that. I need to work harder to get ahead. That has been my mentality all along. I think it’s about commitment. It’s commitment to what you want to deliver, and you need to be uncompromising in that commitment. Then you need to focus on alignment. Basically, how many of the people in your organization can execute passionately on what that commitment was.

If you think about a rowing competition, you have eight guys sitting in a boat and then you’ve got the guy sitting in the front, the coxswain. What does that guy do? He is creating alignment across the other eight people. He’s not pushing his own weight but is making sure everybody else is moving the oars with the right alignment. That makes up for the weight of that extra person sitting on the boat.

My job is to organize my team and make sure we’re all marching down the same path and we’re focused on the same thing. Customer service and delivering things from the customer point of view in a service business, a lot of that is 100% dependent on the team members. At Life Time we are about 36,000 rough and tough employees. We’re gaining about 4,000 employees a year. Frankly, it’s the people like Daniela that make your experience what it is. She’s amazing, but she’s not the only one.

There are thousands of incredible and passionate people who show up and try to ensure the customer has the best experience possible in whatever it is they’re doing. Our performers who are teaching classes, who are conducting personal training sessions or group workouts, they don’t think of themselves as employees; they think of themselves as performers. They’re on stage and they’re trying to create the most entertaining and productive experience for the customer.

It just takes work. It takes commitment from the CEO and it takes commitment from the executive team to lead the way. Not to push their people, but to be willing to do what they’re asking their employees to do themselves. I can’t ask my employees to put in more hours than I do. If I want them to work passionately, I’ve got to work passionately. That’s really the kind of philosophy that drives Life Time. Honestly, it’s not because we are smarter or more clever. We’re just more committed and more relentless.

RJ: Your personal story is amazing. You came to the United States at the age of 17. You worked in order to pay for college. You began your working life early on. I would love to hear a little bit more about how you got your start. And maybe you could share some of the challenges you had to go through along the way. That’s always been helpful for folks in our audience who are going through the same journey now. From what I’ve read about you, it’s been amazing what you’ve been able to accomplish.

I appreciate that. First of all, I’m blessed to have had the opportunity to make it here when I did in 1978. Shortly after I came to the U.S. there was a revolution in Iran. Things got displaced. I didn’t want my dad to work in yet another job to send me an extra couple hundred dollars a month. I decided to go get a job and work within a couple weeks of arriving in the U.S. to try and make it on my own. I focused on doing what I needed to do in order to improve myself – to make enough money to pay for school and to pay for my place to live.

I also want to make a point to America during your podcast that I think is really important. Unfortunately, I hear a lot of people trying to divide us in this country today, screaming and playing the blame game on this or that. The reality is, there is no place on Earth that has more equal rights than this country. We’ve had an African-American president for eight years. We have women who are CEOs of some of the biggest companies. We have gay people in Congress. This is beautiful. This is fantastic – that we live in a country where we have truly equal rights. It doesn’t mean there aren’t a few ignorant people who still demonstrate some aspect of prejudice, but you’re going to have that everywhere. The fact is, we are free in this country to be free.

I was 17. I was from Iran. Shortly after the revolution in Iran, they took some hostages. There was some hardship and sometimes people would look at you differently, like you were part of the morons who took the hostages. But I never let it bother me. I understood. It’s just an emotional response.

I have always seen myself as a citizen of the world, number one. Particularly, I see myself as a complete American citizen, nothing short of that. I feel privileged to be here and to have had the opportunity to work and make it happen. If you put your back into it in this country, you can do anything. I can’t say that’s the case for many, many other parts of the world. If I have any advice for others, it’s to think about the positives. Think about how open the doors are, how amazing the opportunities are. Just put one foot in front of the other and march ahead.

RJ: That’s fantastic. That’s an excellent reminder of the opportunity that we all have. Just to work hard – we have the right environment set up.

Think about it. Just 100 years ago, there was a real lack of equality for African Americans. Just 50 years ago we had the mindset that a woman couldn’t run the Boston Marathon. We’ve come a long way and we are still moving in that direction very rapidly. The future is really bright, and I think the opportunities are just bigger and bigger and bigger. But the equality is amazing. I think people have to start thinking about what they can do instead of focusing on why they can’t do something. “How can I do it?” instead of, “Why I can’t.” That’s the kind of message that you have to take into your heart and soul and never deviate from. “How can I get it done?”

RJ: What’s been the toughest part of your journey? How have you been able to overcome the toughest challenge that you faced along the way?

There was a period of time when I was trying to raise money to launch Life Time. Unfortunately, for one reason or another, every time I got close to the goal line, some things didn’t want to come together. It took about three or four years of complete failure. I failed and I failed and I failed. I met with investors that were close to investing and then they checked out.

For a period of time I felt like I was witched, like things were working against me. However, then I realized I was doing something wrong. It was my fault. I wasn’t being witched. I wanted to start my business really big. Impatiently, I wanted to be bigger, within a year or two, than the business I had left behind. The learning, the education that I got, the wisdom I gained from the “school of hard knocks” was, I need to start small. I need to start at a level that I can get going and then hustle to grow the business.

Now I always tell people, “Think big, start small, and move really fast.” That’s how I was able to overcome. If it was an airplane, it was too heavy to get airborne the way I had planned. I had to lighten it up to get airborne and then make adjustments. Does that make sense?

RJ: That makes complete sense. Just to put things in perspective, over a big span of time, you went from having challenges with investors to now being backed by a couple of the most prestigious private equity firms out there. We’ve had TPG on the podcast. We know folks over there and they are very talented. What made you decide to take the company private in 2015?

Let me tell you a funny story that I think your audience will appreciate. About 27 or 28 years ago, I was talking to someone and they said, “You know what your problem is? You’ve been very, very successful in the past, but you’re an impatient person. You need to learn patience in order to get success again.” I started formulating a question in my head and started laughing. He asked why I was laughing, and I said, “I was just thinking, how can I learn this patience thing a little faster?” Again, I had become very impatient.

It’s been almost 30 years since I started on this journey. If I have learned anything, it’s literally just putting my back into it and allowing enough time for the dividends to come. Sometimes a dividend doesn’t come when you want it. It will come six months later, or a year later, or maybe even five years after you were expecting it. You just have to keep working.

Today we’re blessed. TPG, Leonard Green, LNK, Texas Teachers, and many, many other investors are either backing the business or would like to be part of the Life Time story. We believe that we’re going to be at 50, 60, 70, 80, maybe even 100,000 employees in the next 10 years or so. Making an impact on not only 2 million, but maybe 5 or 10 or 20 million people in the United States, and maybe other countries, in living a healthier and happier life.

It’s really the culmination of putting the right foot forward, always doing the right thing, and keeping at it, which has made it all possible. I could not ask for better partners in Leonard Green, TPG, LNK, or Texas Teachers. They have given me the utmost level of autonomy, respect, and support, to help this company reinvent and create all the things we’re doing today with Life Time Living, Life Time Work, Life Time Villages, the athletic resorts, and all the different things we’re working on.

It absolutely feels like we are at the beginning of a journey, not at the middle or end of a journey, which is exciting.

RJ: I really appreciate the time you’ve spent with us here, Bahram. I know you’re a very busy person. Thank you for carving out the time. If you ever find yourself in Princeton, I hope you’ll let me know. I know there are some folks here that would love to say hello and we’d love to host you for a dinner or a brief gathering.

Thank you very much, RJ. I’m looking forward to meeting you in person when I’m out there. Thanks again.

Hear the full conversation with Bahram on iTunes or Podcasts.com

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