I was recently reading a report that Zen Planner put out as a benchmark report. They put out a thorough and really interesting report showing data that surrounded many topics around being a gym owner. They touched on the “leaders” and “laggards,” number of coaches in the system, membership numbers, size of facilities, and other cool statistics.
As I read the article, I was trying to view it from the perspective of a gym owner. I used to own two gyms so I can shift in and out of that mindset but the bigger reason I was doing it was because I work with hundreds of gym owners within OPEX Gym Licensing as well as in a mentorship capacity. What became very clear to me was that this data could be construed very inaccurately if looked at through the wrong lens so I wanted to give some thoughts as to what I saw
Here are a few pieces to think about when looking at bigger data sets surrounding fitness businesses:
Having more coaches doesn’t make you “good” – the data in the report discusses that the leader gyms have upwards of 9 coaches in their system but that their total payroll is $8,000/month or less. How can coaches build a life if they are, on average, paid less than $1,000/month? One of the biggest challenges for gyms is recruiting and incentivizing coaches so that they continue to service their clients well, keep learning, and STAY WITH YOU. If they aren’t earning enough money, and $20/hour as seen in the report for 15-20 classes per week isn’t enough for an aspiring coach, they will eventually leave you or stop putting out the effort needed for you to grow your business. We believe that coaches need to EARN a living by working directly with clients so that they can be paid a percentage of the revenue that their clients are bringing in. This allows for them to see how they can make more but it also allows the gym to understand and forecast where they will be as more clients come into the system.
If you think that you aren’t going to spend money on marketing in the long-run you are wrong – The report shows that the leader gyms spend $283/month in marketing and nothing in advertising. If you see data that shows little to no marketing spend for great gyms, take it with a grain of salt. There is a reason why you see Orange Theory ads all over your newsfeeds. They work (when done well). I am a huge fan of referrals, “free” network marketing, and building content that you can push out organically but Facebook is becoming a “pay to play” model where what used to be free, you now need to pay for more people to see your content and everybody around you is also pushing out the same “Tips for shedding fat” content piece that you are. To stand out isn’t free. You don’t want to burn money in marketing but you have to plan for it in order to build consistency of clients coming through your door for YEARS.
When looking at payroll expenses make sure you understand what they mean– The report makes mention of the $8k payroll expense for the leader gyms. What does that mean? Is it coaches? Is it administrative and/or marketing people? Is it the owner(s)? The data alone won’t shed enough light on how you can design your gym’s strategy. Number one, coaching expense should be in your cost of goods sold section of your income statement in my opinion because they are directly associated with the delivery of your product and they wouldn’t be paid if you didn’t run those classes. The other component is that you must understand where and how you earn money as an owner. Are you on that payroll or are you earning a draw off of the monthly profits? When do you begin to take pay?
Understand your rent calculations – the report makes mention that small facilities pay upwards of 45% of their monthly revenue earned in rent expense while leaders pay 22%. Of course that is accurate based on the revenue that is being earned by those facilities. When you are getting up and running your revenue has to have time to catch up to the expenses that you are forced to spend to get started in business. While I agree with the idea that you want to get to 22%, you cannot start your business there. You need to look at the size of your facility and what that size will cost you vs the number of clients whom you can service on the floor. Look at the outright cost structure of the business not only the percentages. If your goal is to get to 100 clients who are paying $200/month that is $20,000 in recurring revenue. If you follow the 22% rule here you’d need a facility that cost you $4,400 or less each month but you’d also have to forecast how long it would take you to get to 100 clients so that you managed your cash smartly and didn’t run out of runway to stay open.
Remember that profit is the goal in the end, not just revenue – The report had great data on both revenue and profit but the gist felt like you had to grow membership to high numbers to win. That I don’t necessarily agree with. I know people who have a 1,500 square foot facility who make over $10k/month in PROFIT. If you are trying to have the most revenue, more clients in a larger space makes sense but if you are looking to grow a business you need to control your cost structure while also driving revenue, not just total clients. Remember that revenue is clients multiplied by price. We believe in an individualized design fitness model where 80 clients are likely to pay $350/month. But, you can easily run those 80 client through a facility that is 1500-2000 sq. feet which may only cost you $2500/month. Do that math, it’s $28,000/month in recurring revenue with a facility that costs you 9% of that recurring revenue. That’s a winner. Even in a market where real estate is more expensive, don’t go big just to go big.
Be careful when looking at your menu of membership options – The report showed a lot of options which could be confusing to an owner looking to scale up. With OPEX Gyms we offer 1 product, Individually Designed Fitness. No confusion, no weird decision on how many days the client will workout based on how much it costs. And, punch cards, no thanks. People horde those like golden tickets where they never want to use them out of fear of running out. Align your business to frame your service(s) to give your clients a service that gets them where you PROMISED them that you’d take them and don’t cloudy it with a bunch of “blah” options.
Having a large number of types of workouts isn’t necessarily what it’s cracked up to be – Ask yourself why you need to have so many services in your gym. Is it that you are bringing new clients in with those other services or is it that your current clients aren’t getting what they need out of the service that you’re offering them. Most places say “you get everything with this main service” but then they turn around and offer 5 specialty classes on top of it. How is that aligned? Don’t automatically dilute your main service(s) because they aren’t getting the job done. We believe in a coach to client relationship where there is 1:1 support and an individualized program design for that client so that they can enjoy and focus on making tangible progress for years. That progress and environment will keep those clients in your gym for a long period of time. Fix your service before adding more services to a weaker foundation.
I agreed with a lot of the data. Some of the big pieces of note:
- Charge more for your services – I absolutely agree for this…IF YOU EARN IT AND IF YOU ARE UNIQUE. You can’t just charge more and expect to win. You need to create a service that people can see as tangibly different than the next gym across the street. Without that differentiation, you will fall prey to the market’s pricing. You need steak and sizzle.
- Get clients on Auto-pay – nothing more to be said there haha
- Understand your numbers – The more you know about your business the better you will be able to service your clients, increase your retention rate, speak about and market your gym, grow profits, and duplicate yourself so that you can actually live some outside of your gym
Thanks to Zen Planner for the numbers. Aggregating that data is a really helpful thing for gym owners. Just remember, as a coach or owner, that data is merely data, how you interpret it, plan based off of it, execute on it, track it moving forward, and make changes in your business will define how successful you either will or won’t be! Onward