How Do You Run An Extreme Fitness Company When No One Can Leave The House?

On March 13, Joe De Sena, the founder and CEO of the 10-year-old extreme fitness company Spartan Race, found himself in Sparta, Greece. He was there to become an honorary citizen (along with the actors Gerard Butler and Billy Zane), a result of the tourism boost Spartan Race has brought to the town. When President Trump suddenly announced he would be closing the borders to Europe, De Sena (a US citizen) caught the first flight out of Greece. It was on his flight that he started mapping out an emergency plan for the Boston-based company, which has nearly 500 employees and puts on endurance competitions (with feats such as spear-throwing and mud crawls under barbed wire) for some 1.8 million participants a year. To add insult to injury De Sena had just acquired his competitor Tough Mudder out of bankruptcy — for $700,000, assuming its $10 million in debts and liabilities — he’s since had to shut down all of his company’s races in the 45 countries they operate in and furlough 85% of his staff. Now working out of his home in Hingham, Massachusetts, along with his wife and four children De Sena is trying to figure out how to run a global live events business that can no longer do live events.

— As told to Courtney Rubin for Marker.

I was in Sparta when I was woken up at 3 a.m. with about 500 texts from all over the world that said, “Oh my God, you’re going to be trapped in Sparta,” including several texts from my wife, who was losing her mind. And so I did 300 burpees [an intensive squat/push-up combination], said goodbye to Gerard Butler, and flew back on a more than 20-hour trip home, which is when I really had time to think about what I was going to do.

China is a very large market for us, so the coronavirus had been on my radar for a while. And when things started happening there, we had to immediately pivot. We canceled the races, and switched to online fitness content. And to be honest, shame on me, I wasn’t really worried about anything. The virus seemed pretty contained in China. Then our markets in Japan got shut down but our team there said, “Oh Joe, Japan is going above and beyond to protect the Olympics.” I believed it would soon be under control. Meanwhile, one of my best friends who runs a hedge fund — I used to be in finance — was going on and on about how the world was going to shut down until May 5. But I used to sit on a trading desk, and I think you overreact because you’re seeing the news every day. At the time I was thinking: Everything is going to be fine. Spartan up!

It wasn’t until I got to Sparta, where there were a bunch of Italians who had escaped Italy, that I really started to understand the whole situation. I certainly didn’t act quickly enough. I didn’t anticipate the full effect that this would have on our business. On my trip back it was like: Okay, this is very real now. I remember sitting for four or five hours in Heathrow, because I got stuck there, getting calls from 30 or 40 small fitness businesses that have partnered with us that are all in a complete panic, telling me they were finished. Out of business.

I remember seeing my dad go through the ’87 crash, I saw the 1990s recession, the ’99–00 internet bubble, and on September 11, I was 50 yards away from the two towers collapsing. I got through the 2009 end-of-the-world financial crisis. So I’ve seen this stuff. And I’m sitting in Heathrow and I’m thinking: Okay, we’ve got to preserve liquidity, that’s number one.

I’ve had to furlough 85% of our employees and that sucks. The remaining 15% have all taken drastic cuts in pay, and I’m not taking a salary at all. We’ve got to prepare for a situation that lasts into July 1. It could be 100 days. Nothing is nailed down; everything has to be adjusted, every bill, every vendor. I was reading today that Goldman Sachs expects the economy to contract by 25%. From what I’m seeing on the ground, that might be optimistic.

Right now, our races are shut down in all 45 countries. In the U.S., we’ve canceled events for the next seven weeks, according to CDC guidelines. We’re lucky in one sense because 80% of our events are in the back half of the year, from mid-July through December. I’m going to give customers whose races have been canceled entry to another event in 2020 as well as another event in 2021. We’re also going to have virtual events on the date that things were supposed to take place so that folks have a reason to train every day when they’re stuck in the kitchen. I think it will be indoor bodyweight training, like — I’m making this up — 100 burpees.

We have a core team building out all of the events for the post-CDC lockdown period, and now moving chess pieces all over the board. They’re like, “Okay, if we’ve got to move the April event in Citi Field, what date can we get? September 15? Okay, we’ll take it.” Online sales of our fitness gear are up 300%, which is great and helping — although it is not filling the hole created by canceled races.

Besides preserving liquidity, we need to protect our people, and we need to connect with our community. We don’t want to lose that connection with our customers. We’re putting out new fitness videos all day every day. It starts at 6 a.m. with me doing a live workout, but we also got a ton of videos done really quickly: How to deal with fear, how to switch to a plant-based diet, how to train at home. We filmed them at home with computers and iPhones.

Although we’ve pivoted to content for now, I don’t think there’s any monetization for us in content in the near future. I just think we have to keep our community together. I mean, are we really going to ask people to pay us $2 a month right now? No. It’s all free. In some ways, this is what we do as a business: We build resiliency, we build grit, we get people healthier. This is the biggest obstacle any of us will have ever faced.

I’ve lost track of what day it is anymore. I get up at 4:30 in the morning, and then at 5:30 a.m. every day, including weekends, I’ve been doing a call with a bunch of smart people around the world — analysts and CEOs and gurus I put together, up to 100 people — and it’s a shit show. Everyone’s getting hit. At 6 a.m. sharp, I do my online workout, and then it just becomes one big blur after that.

I’m still glad I bought Tough Mudder. Even though things seem really bleak right now — this is our darkest hour — I still think we will come out of this. We will be stronger. We’re going to be leaner, we’re going to be sharper.

Literally in the last 24 hours, we have gotten phone calls from no less than 100 event companies looking to merge, to sell. I mean, this situation is wreaking havoc on the fitness and events industry. Certainly we’re going to take a look at any opportunities, and be ready so that when the lights go back on — and they will — we can take advantage of these opportunities. But this is priority number four, after liquidity, our employees, and our customers.

The good news for us is that, in all our years of doing this, when an economy is having a tough time, we thrive. Because a Spartan Race event is a $100 way to completely transform your life — it’s a very inexpensive form of entertainment that is extremely healthy. So I think when we bounce back, we’ll bounce back hard in the right direction. We just need to stay healthy.

idlesocietyco

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