HOW DO I MEASURE MY MONTHLY RETENTION RATE? - EXPLAINED
In the fitness world, you need to constantly improve two things:
How many new clients you bring in each month
How long you keep all of your clients each month
Keeping all of your clients each month is what retention is at its core. Let’s look at what retention is and then talk about how you can calculate it monthly and annually so that you can decide how you’ll track this critical metric moving forward.
Before we move forward, though, I’ll use the term “clients” in these articles. Please note that clients can mean:
Members
Customers
Athletes
Attendees
Riders
Participants
…..
Any person who is paying you money to do fitness or health and wellness is exactly who I want you to keep more of in your coaching business (heck, if you run any business that intends to retain your customers, this article series will help you)
The other two articles in this series for your reference are:
Ok, let’s press on!
(Resource: Coaches are only as successful as their business skills. Get an introduction to the most important business skills for your coaching career here.)
What Is Client Retention And How Do I Calculate Client Retention?
Simply stated, retention is a number that we believe needs to be calculated at the monthly and then the annual level.
We will look at the “churn” number first and then turn that churn into your retention number immediately after:
Monthly Churn = the average percentage of clients who leave your gym each month over “x” number of months
Monthly Retention = the average percentage of clients who stay at your gym each month over “x” number of months
Whether you look at monthly or annually, the concept of churn and retention is still the same. Your churn is what you lose, and your retention is what you kept.
How Do You Calculate My Monthly Client Retention?
Retention math should be pretty easy once you begin practicing it.
Monthly Retention Rate is
Your monthly retention rate is one minus monthly churn rate.
For Example:
You begin with 50 clients
You Lost 5 clients that month
Churn Rate = 5 clients lost / 50 clients you began with = 10% churn
Retention Rate = 1 – 10% churn = 90% retention for that month
Monthly Churn Math
Monthly Churn =
The Number Of Clients You Lose That Month Divided By ( / ) The Number Of Clients You Began The Month With
Example
You begin the month with 50 clients
You lose 5 clients that month
5 clients lost / 50 clients you began with = 10% client churn that month
Something worth noting here is that you would not add in the number of new clients who began with you that month as part of that month’s retention number. You would add those clients into any subsequent months, though.
How Do I Calculate My Annual Churn Rate?
I like to look at annual churn rate in a few ways because I think each way teaches me something a bit different and helpful.
Annual Retention Math v1: Total Clients Who Were With You + Total Clients Who Started With You During That Year vs. The Total Number Of People Who Left
This version of annual retention math looks at an ongoing client count vs the number of people who leave. The reason why this is interesting is because if you are putting new clients into your gym, you are factoring in that increase in client count as part of your math.
Annual Retention (v1) =
The Total Number Of Clients You Lose Throughout The Year Divided By ( / ) The Total Number Of Clients Who Were A Part of Your Gym Throughout The Year
The easiest way for me to explain this is through an example:
You began the year with 50 clients
You added 60 clients to your gym throughout the course of the year – we’ll assume that you added 5 clients each month
You lose 60 clients throughout the year – we’ll assume that you lost 5 clients each month
Churn = 60 clients lost / 110 total clients who “touched” your gym = 55% churn
Retention = 1 – 60% churn = 45% retention for the year
If you’ve not looked at longer-term retention much before, this may look daunting to see a churn percentage that high. I’m telling you that your retention is sub 50%, but you still have the same number of clients you did to begin the year. It doesn’t feel as bad when you look at your net client count as 100% of your previous client count, but you must take into account how many people are leaving your gym throughout the year.
Annual Retention Math v2: Total Clients Who Began The Year With You vs. The Number of Those Who Began With You Who Left
This example is the same exact idea as your monthly math except it lengthens the time frame from 1 month to 12 months (we’ll discuss rolling averages below).
Annual Retention (v2) =
The Number Of Clients Who Began The Year Who You Lost Throughout The Year Divided By ( / ) The Beginning Number Of Clients You Began The Year With
Let’s use the same exact example from above:
You began the year with 50 clients
You lose 30 clients throughout the year – we’ll assume that you lost 5 clients each month
Churn = 30 clients lost / 50 beginning clients = 60% churn
Retention = 1 – 60% churn = 40% retention for the year
Why do both percentages in the first place?
It’s a different perspective for the business, and it really shows you how effectively you’re growing and retaining your clients. To not go into spreadsheet math here, here is the difference between the 2 calculations:
The annual calculation percentage that adds in all of the new clients changes percentages a good amount based on the number of new clients that go in throughout the year. If you put in 5 new clients per month, your retention percentage is 45% like we discussed. However, if you bring in
4 new clients per month or 48 clients throughout the year, you’d have 39% retention. That’s a 6% drop from if you had 5 new clients per month
3 new clients per month or 36 clients throughout the year, you’d have 30% retention. That’s a 9% drop from if you had 4 new clients per month
2 new clients per month or 24 clients throughout the year you’d have 19% retention. That’s an 11% drop from if you had 3 new clients per month
1 new client per month or 12 clients throughout the year, you’d have 3% retention. That’s a 16% drop from if you had 2 new clients per month
0 new clients per month or 0 clients throughout the year, you’d have -20% retention. That’s a 23% drop from if you had 1 new client per month
All that’s saying is that your new client acquisition matters an awful lot to your retention calculation. It’s not right or wrong, it’s just a different perspective
The annual calculation percentage that does not add in the new clients is a pure retention metric looking at the starting point and number of clients lost throughout the year
Something important to note here – you must keep closer track of which clients were with you in which months and when they left to make this calculation work. With the other annual number, you can just take total clients and total lost clients numbers. This calculation forces you to know when specific clients were with you to properly do the math.
Use Rolling Averages To Help You See Your Retention Rates Over The Longer-Term
It’s one thing to look at 1 singular retention statistic, but as with most metrics, it’s very important to have context on where you were, where you are, and what the difference between the two is – i.e., the trend.
There are two nice ways to look at the trends of your retention:
Look at your monthly retention percentage, by month
You can then Graph your monthly retention rate, by month, on an XY axis – this shows you if you are trending higher, lower, or flat in your ongoing monthly retention percentage. You can add a simple trend line into your graph (Excel or Google Sheets can automatically do this for you) to help you visualize those trends more easily.
Look at your annual retention percentage ongoing via a rolling average
What was your annual retention percentage (either v1 or v2) 12 months ago, how about 11 months ago, 10, 9, 8, 7, 6, 5, 4, 3, 2, 1? In this example, you are always looking at a 12 month period, but you are seeing what the last 12 months has been for each of the last 12 months.
What you’re after in either case is to learn how you are doing in the longer-run, the trend. You want to see if your efforts to improve your retention (if you have concerted efforts) are working or not. Those calculations and graphs are extremely helpful to learn that.
Hopefully, you have a great sense of what retention is and how to calculate it. If you have any questions, just comment below or send us a social media message, and we’re happy to clarify.
If you feel comfortable here and you want to read about “what impacts your retention rate” so that you can continue to grow your gym, click here.
Learn how to improve your retention rate in this free Professional Coaching Blueprint.
