How to Talk to Investors When Opening Your First Climbing Gym - A practical guide to pitching friends, family. and early backers on a seven-figure dream
- gheverly
- 7 days ago
- 8 min read
Opening a climbing gym costs real money — typically $1,000,000 to $3,000,000 for a first location, depending on square footage, build-out intensity, and your market. The most common path to funding is an SBA 7(a) loan, which is excellent news. The slightly complicated news is that the SBA requires borrowers to put in 20–30% equity from personal sources — and for most first-time owners, that means going to the people who believe in you most.
This guide will walk you through how to structure that raise, how to model the investment so it makes sense, and how to pitch it without it feeling awkward or amateur.
The Typical Capital Stack
70-80%
SBA 7(a) loan coverage, up to $5m available for qualified borrowers
20-30%
Typical equity injection required - this is what your investors are covering
5-7 Years
Typical timeline to investor return, depending on deal structure.
Understand what you're actually asking for
Before you pitch anyone, you need to be precise about the ask. The SBA 7(a) program doesn't care where your equity comes from — it can be personal savings, gifts, or investment — but it does care that it's real money that's been deposited in your accounts or documented properly.
When you go to friends and family, you're offering them equity in your LLC or corporation in exchange for their cash contribution to the equity injection. You are not asking for a loan. You're asking someone to become a part-owner of your business.
CRITICAL DISTINCTION: Do not structure friends and family money as a personal loan that you then contribute as equity. The SBA looks hard at where equity comes from. If the source of your equity injection is borrowed money — even from a family member — it may be counted as debt by underwriters, which defeats the purpose. Work with an SBA-experienced lender or attorney before closing your round.
You're likely raising somewhere between $200,000 and $500,000 in equity from a small group of 3–10 investors. Keep the round tight. More investors means more communication obligations, more potential conflicts, and more complexity at exit. Aim for meaningful minimums — typically $25,000 to $50,000 per investor — so everyone has real skin in the game without feeling stretched.
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Structure the Investment Clearly
The most common and cleanest structure for a friends-and-family equity round in a small business is a membership interest in an LLC. You set up an operating company, define ownership percentages, and give investors pro-rata shares proportional to their contribution.
What Investors Should Receive
Equity Percentage
Ownership stake proportional to their investment relative to total equity raised. A $50K check into a $400K round = 12.5% of equity.
Preferred Return
A first-out return rate (typically 6–8% annually) before profits are distributed to common equity holders. This is your goodwill gesture — not required, but shows respect for the risk they're taking.
Distributions
A share of annual free cash flow after debt service and reserves, typically twice per year. Often this starts in Year 2 or 3 as the business stabilizes.
Exit Provisions
Language defining how investors get paid out at sale, refinance, or after a defined number of years. Common terms: 5–7 year buyout right at 3–4x original investment, or pro-rata of sale proceeds.
Have an attorney draft your operating agreement. Do not use a template you found online for something this important. The cost is $1,500–$3,000 and it protects everyone — including you.
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Build a financial model that shows your work
Sophisticated investors won't just take your word for it. Even less sophisticated investors — your college roommate, your aunt who trusts you — deserve to understand what the math looks like. A basic financial model is the most important document you'll create.
Your model should have three sections: revenue build, cost structure, and investor return. Build it in Excel or Google Sheets so investors can poke at your assumptions.
Revenue build
Climbing gyms are primarily membership businesses. Start with your capacity and work backward. A 12,000 sq ft gym with 30 rope stations and 3,000 sq ft of bouldering can reasonably serve 1,200–1,800+ active members in addition to day users. Model your ramp conservatively
Period | Members | Avg Monthly Fee | Monthly Revenue | Annual Revenue |
Year 1 (avg) | 550 | $72 | $39,600 | $475,200 |
Year 2 | 900 | $74 | $66,600 | $799,200 |
Year 3 | 1,200 | $76 | $91,200 | $1,094,400 |
Year 4+ | 1,450 | $78 | $113,100 | $1,357,200 |
Add secondary revenue lines: day passes (~15% of membership revenue is a good proxy), youth programs, classes, gear retail, and café/food if applicable. A mature gym typically generates 45-65% of revenue from non-membership sources.
Cost structure
Climbing gyms have high fixed costs and modest variable costs. The three biggest line items are:
Rent — typically $12–22 per sq ft NNN in most markets. Budget 22–30% of revenue at maturity.
Payroll — staff, management, and yourself. Budget 35–45% of revenue at maturity. This is where most gyms get into trouble.
Debt service — your SBA loan payment. On a $1.2M loan at 7.5% over 25 years, expect roughly $8,800/month, or ~$106,000/year.
A well-run gym at maturity should generate EBITDA margins of 20% or maybe a bit more. If your model shows 40% margins in Year 1, you've missed some costs. If it shows 5%, your rent or payroll assumptions are too high — go back and check your site and staffing plan.
What investor return looks like
Model at least two scenarios: a base case and a conservative case. I often times build an "upside case" as well. Show investors both. In the base case at a mature gym, a $50K investment at 12.5% equity in a $400K round might look like this over a 6-year period:
Year | Free Cash Flow | Investor Distribution (12.5%) | Cumulative Return |
1 | Break-even/reinvest | $0 | $0 |
2 | $80,000 | $10,000 | $10,000 |
3 | $140,000 | $17,500 | $27,500 |
4 | $200,000 | $25,000 | $52,500 |
5 | $220,000 | $27,500 | $80,000 |
6 — Buyout | Valued at 4–5x EBITDA | $75,000+ | $155,000+ |
Key Modeling Rule: Show your assumptions explicitly. Don't just show the output numbers — show the inputs. What membership price did you assume? What attrition rate? What year-over-year growth? Investors who can see your reasoning will trust your numbers more, even if they push back on specific assumptions. Black-box models raise red flags.
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What to include in your pitch materials
You don't need a 60-page pitch deck. You need a tight, honest package that covers the key questions before they're asked.
The Opportunity
Market overview: climbing participation growth, local market, demand, target demographics
The Business Concept
Your gym's format, offerings, what makes your business viable and unique
The Team
Why you/your team? Include business experience and relevant skills. Be honest about gaps and how you are filling them
The Site
Location, size, lease terms, photos, and why this is a desirable location that supports success
Capital Structure
Total project cost breakdown. SBA loan details, equity being raised and how it will be used. Contingencies.
Financial Model
5-7 year P&L projection based on believable and trackable assumptions. Include EBITDA and debt servicing.
Investor Terms
Equity offered, return structure and distribution schedule. Discuss an exit timelines and mechanism. Any governance rights (most friends & family get limited/no voting rights)
Risks & Mitigations
What could go wrong and what you're doing about it. Including this builds credibility.
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How to Actually Pitch
The pitch conversation with friends and family is different from a formal investor pitch. These are people who care about you. Which also means the conversation carries emotional weight that you need to handle carefully.
1 - Have the Conversation in Person
Don't send the deck and wait. Request a dedicated meeting. "I'd love to walk you through this project — can we grab coffee or hop on a call?" gives the conversation the gravity it deserves and lets you read the room. It can also be really helpful to ask for feedback instead of investment, "Hey I am working on this project and have my pitch materials ready and I trust your opinion and would love to pitch to you and get feedback." This approach reduces the pressure in the conversation.
2 - Lead with Honesty About Risk
The single biggest mistake first-time founders make in friends-and-family rounds is being too optimistic. These people trust you. If you oversell and the business struggles, you've damaged a relationship that matters far more than any investment. With friends and family, be hyper-aware of how investment and money can affect a relationship.
3 - Separate the Ask from the Relationship
Make clear that a "no" is completely fine and changes nothing between you. This isn't manipulation — it's genuinely how you should feel. If you're quietly resentful of people who don't invest, that will show, and it will poison the relationship regardless of how the business goes.
4 - Know Your Timeline
SBA 7(a) loans take 60–120 days to close after submission. Tell investors your timeline: when you need commitments, when documents need to be signed, when funds need to be in the account. Give people time to consult their financial advisor or spouse — usually 2–4 weeks to decide is reasonable.
5 - Proactively Answer the Questions They are Afraid to Ask
When do I see money? — "We project starting distributions in Year 2, though Year 1 cash flow goes to building reserves."
What if the business fails? — "In a worst case, the SBA loan is secured primarily by the business assets. Your investment would likely be lost. That's the risk of equity investing."
Can I get my money back early? — "The investment is illiquid for the term of the deal. There's no mechanism to exit early unless we find a buyer for your interest, which I can't guarantee."
What say do I have in how the business is run? — "As a limited member, you won't have day-to-day governance rights. I'm the managing member and operator. You'll receive quarterly updates and annual financials."
The Quarterly Update Commitment: Commit to sending investors a quarterly update — a single-page email covering membership numbers, revenue vs. plan, any notable events, and a note on the next quarter. Most operators skip this and it destroys investor confidence. The ones who send consistent updates, even when numbers are bad, maintain trust and goodwill through the hard months.
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A Note on Ownership & Valuation
You don't need to formally "value" your business to raise a friends-and-family round. What you're doing is simpler: defining what percentage of the company a given dollar amount buys.
Think of it this way: if your total equity raise is $400,000, and an investor puts in $50,000, they own 12.5% of the equity — full stop. The company isn't "worth" $3.2M today; you're simply allocating ownership proportionally to contribution. Don't overcomplicate this. Don't pretend you've built something worth $2M when you're pre-open.
What matters is whether the return on that equity stake is compelling given the risk. Model it honestly. If a $50K investment at 12.5% returns $150K over 6–7 years including distributions and buyout, that's a 3x return, roughly 17% IRR — attractive for a high-risk private investment, though not guaranteed.
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Common Mistakes to Avoid
Raising too little. Undercapitalization kills more gyms than bad locations. If your SBA lender requires $350,000 in equity, raise $400,000. Have a buffer. Buildouts always run over, and you want 3–6 months of operating reserves before you open.
Mixing personal and business obligations. If your dad gives you $100K and also co-signs your lease, your financial exposure and your relationship exposure have gotten tangled in a complicated way. Keep the roles clean if you can.
Projecting profitability too fast. Some climbing gyms can take 18–24 months to reach breakeven. Model that honestly. An investor who expects profit in Month 6 and sees a loss in Month 10 will panic. An investor who expected Month 24 and sees breakeven at Month 20 is thrilled.
Skipping the attorney. The operating agreement is the document that governs your relationship with investors for the entire life of the business. Draft it properly. It protects them and you.
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THE BOTTON LINE
Raising money from people who know you is one of the more emotionally complex things you'll do in business. The best protection for those relationships is honesty, documentation, and consistent communication — before the investment, during the build, and long after opening day.