Thomas Plummer

The business of fitness


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Protect Your Gym during the Virus Scare

It is going to get tougher to keep your business open during the next several weeks, but if you can, and this is my personal opinion, do not close until you are forced to by the local governments.
There are two ways to look at this problem for gym owners.
First of all, we could voluntarily close for several weeks and do everything we can do to keep the virus from spreading. This is an option many of you will feel comfortable with and I will give you some guidelines for this if this is your choice. If you are personally concerned about the virus, then do not hesitate to close.
The other option is more complicated. We should be, and can be, a beacon of calmness and a safe haven for those who need a place to go, are not willing to give up the benefits of fitness and health defending them against illness, and who need support.
If we do everything right, we mitigate the risks associated with staying open and become that one place a person can visit and feel safe while doing something good for themselves. But that is if we do everything right, which means your gym has to be the cleanest it has ever been, you need to practice commons sense on the sizes and contact points with your groups, and that you need to be part of the solution, not part of the craziness by refusing to spread rumors or become so politically lopsided you cost yourself business.
The harsh reality is that if many of you close you do not have the reserves to last for more than a month or two. I have given you a few ideas in the first two of these letters that are worth reviewing, but I am going discuss shutting down in this one.
If you have to close your gym…
·     If you are forced to close, try to limit the closure to two-week blocks but you may be forced to close indefinitely by your local or state governments.
·     Immediately assess your reserve capital and go proactive. I would assume you will need two-months of reserve to get by. This includes rent, debt service, utilities and other essentials.
·     Do not try to cover shortages after the damage has been done. Figure out your situation and the money you will need and start trying to put it together prior to getting in trouble.
·     If you have a good bank relationship, ask now about setting up a quick line of credit, again trying to cover at least two months of reserve.
·     If you have an investor, see if it is possible to borrow two months’ operational cash paid back over five years at a decent interest rate.
·     Pay your staff for as long as you can. Some of you have staff that have money in their lives, but most of our staff are people who are living one check away from being seriously hurt. If you can, pay your staff for as long as you can. Yes, they could file for unemployment, but that takes weeks to get done and there will be an influx of people filing.
·     If your members are on contracts, and all clients should be, then let them know that all time missed will be added to the end of their agreements reassuring them that they will not lose anytime while you are closed.
·     If you close, contact the members daily with tips and stuff they can do at home. Do not lost contact with your base. If you can scramble together park workouts or other suitable situations that do not break gathering rules for your town, then try that too
·     Talk to your bankers, landlord and investors about your monthly payments and what can be done if anything. For example, here is a landlord talk:
“My gym is going to have to close for two months and I will have limited income during that time period. I have cut expenses of course, but I still need to pay my staff. May I take my next two rent payments and skip them now but then amortize them spread over the remainder of my lease?”
For example, your rent is $4,000 and you have three years left on your lease. You are asking the landlord to skip two payments, or $8,000. This $8,000 would then be divided over the next three years of lease payments since you have three years left.
Banker talk:
“My payment is $3,500 per month. May I skip two payments and add them to the end of my loan period, or may the two payments be split over the remainder of my loan. I have cut all other expenses, but I want to still pay my staff and be ready to open in two months without being so far behind I will fail.”
The banker and the landlord have an incentive to work with you since putting you out of business doesn’t help them get paid.
·     “BIG.” There will be recovery loans available from the states and local governments when the situation lightens up, especially in those areas where small businesses are forced to close for a considerable amount of time. You need to be ready.
Keep exact records of what you lose in income with documentation
Keep your financial statements up to date. Talk to your accountant about making sure you are financially prepared to apply for one of these loans when they become available.
Document any deals with investors and landlords.
·     If you are a team gym depending on large groups, try offering small group or 1/1 to your clients stressing you will have no contact except with a limited group or just an over-sanitized coach. If you do this, offer a limited, 90-day agreement only for this service. Do not offer packages and sessions for this unless you are already using that system.
·     Promote daily that health is the best defense against disease using all social media platforms
·     Video people working out and post letting your community know you are still there
·     Post online workouts daily your clients can do at home
·     Weather permitting, get your members together in a park, but honor the group limitation rules per your community
If you go proactive, you have a better chance of surviving this situation as a business owner. Wait and see what happens, or try and fix any financial messes too long after the fact, and you might get hurt.
Take leadership in this situation. The gym is a safe haven that tries to protect the people who trust us. Stay in touch with them, support them, give them ideas to help them get through this, but do not lose touch with the people who support your business.


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The Illogical Logic of the Fitness Business

There is little logic in the fitness industry.

We endlessly repeat the past building exact replicas of 1995 over and over again; we scream the market is jammed and there is no way another gym could squeeze into this town, yet here comes one more pretender; and we hire the same tired leaders to get us the same dated results, hoping we can find a hotel guy or Starbucks person who will finally understand fitness has little to do with room bookings or coffee.

We talk about a national fitness revival in industry conferences, then drop our prices so we stay trapped in the equipment rental business where $10 will get you a gym with no service but you do get to walk slowly on a treadmill seven days a week. And we open more chain gyms while the country gets fatter, proving again the mainstream fitness world exists to take the money and run, and has little to do with true fitness or getting results for the clients who trust us with their money.

Even our one ray of sunshine in an industry gone mad, the hybrid training gym–where results for the client are traded for fair money–is ignored by our largest trade associations, which remain dedicated to protecting the biggest players and their own self interests.

The gym industry is currently a business representing all what we used to be, and little of what we could be if we embraced evolution instead of remaining trapped in the Dark Ages of the 90s. We have become a business segment that ignores the logic of good business, replacing logical growth with a chase for the glory days when we all rich and all beautiful in the fitness world.

It is illogical to think that growth in this industry follows a logical pattern.

Approximately ten years ago, there were about 2,700 fitness facilities in Australia. During a workshop there, I was asked if I thought growth was possible for a market that already appeared saturated to those in the business?

My answer, which was met with twenty minutes of denial, was that the market would double in less than ten years. It did. And the Australian market will double again within five more years.

The U.K. market was fairly flat a decade ago. The big players had the best locations, the training gym (please never again use the words “studios” or “boutiques”) hadn’t arrived from America yet, and the mom and pop gyms were regulated to small villages in Ireland. And the UK market doubled in a decade. And it will double again in five more years.

In the U.S. as of 2017, there were about 38,000 gyms in operation. The growth here is happening in the training-gym segment, where 1,500 to 3,000 square feet gets you a boot camp or single methodology gym. We have 38,000 gyms now. We will see this double in ten years. No, this growth isn’t logical, but it will happen.

Growth in this industry is fueled by emotion. The “what is next” drives out the old. The “It doesn’t matter how many gyms are in this market. I will be different and beat them all,” mindset is still alive and well, now driven by investment money cast out from other industries, such as retail. Emotional growth is fueled most often by ego, and backed up by cash, but growth witjhout reason is coming, and it just isn’t logical in many markets.

It is illogical to think single methodology businesses will survive over time

Single methodology fitness facilities are the wild children of the industry and date back to the 1950s of last century when Arthur Murray dazzled us with his dance moves and commercial dance studios, a predecessor to the modern fitness industry.

Single methodology, such as the old Curves model, is where you have a single product offered at a single price point. Modern examples abound disguised as boot camps, forty-five-minute circuits, boxing clubs, mind/body studios and other single concept offerings.

Single methodology has always failed, and it always will, for two main reasons.

First of all, if you only have one price point, even with deviations on that price, someone will always cut the price:

  • I open my new single methodology circuit gym at $159 per month
  • Imitators appear and lower their price
  • I then lose members and cut my price
  • The price war ensues, and both of these gyms ultimately fail

The weakness in a single methodology business is you only have one product to offer the consumer. When sales of that product slack, it is hard to change the offering since that circuit or style of training is the product.

Sales slow, we cut our price to match the competitor and the business ultimately fails because it was nothing more than a volume-based system that dies quickly when the flow of its single price members is cut off.

Secondly, the consumer always moves on. Consumers get bored, and even if they love ice cream, and you have the best vanilla in town (your only ice cream) they get tired of the same circuit repeated forever until they sit in a corner crying tears of boredom and finds another ice cream store.

Single methodology is falling in love with a single tool. Fitness delivered in these models is about the repetition of this tool and the owners find it impossible to change tools as the consumer fades away since the business is based upon this tool as its sole offering. Circuit training gyms might change the equipment slightly, but you are still doing the same circuit, in the same little space, over and over again, and it dies by overexposure.

It is illogical to cling to technology we
used 
in the last thirty years of the last century

 New mainstream gyms look just like old mainstream gyms. Same equipment, now new and improved we are told by the salespeople, in the same rows, with the same group rooms, pricing structures, old sales schemes and price marketing scams from four decades ago.

The consumer has joined these gyms in the past and has failed in these gyms. There is no need today to build a 40,000 square foot monument to the 90s when we can build smaller (20,000 square feet or less), sleeker, and more functional gyms, for clients who might want to get results for the money they pay, and will pay more than the equipment rental mindset client.

It is not logical to cover a huge training floor with single plane, fixed joint equipment in today’s fitness market. It is no longer logical to offer programming that only attracts a few percentage points of our clients, such as group exercise or childcare, swimming or basketball.

Big gyms require big money to build, big money to maintain and need a constant flow of new blood to replace the members who leave making no sense today. Why consider a 60,000 square foot castle when you could build three, 20,000 square foot gyms chasing more target specific market share more cheaply?

The biggest mistake here is we try and build a fitness palace for the entire market assuming the guy who eats at the cheap fake cowboy steak house, and orders a steak, drink, side and dessert for ten dollars is the same guy who goes to the Capital Grill for a fifty dollar steak and hundred dollar bottle of wine.

Gyms of the future have to be smaller and more target specific to survive. The training gyms have figured this out already and you can easily find a sports performance specialist, a fitness after forty gym for women, and an elite training gym specializing in one-on-one training all across the street and draining the members of the mainstream monsters who are everything to everybody and nothing to anyone.

No one goes to a cheap gym looking for a hundred dollar per hour trainer and on one walks into a training gym expecting to pay less than one hundred and fifty per month to get supervised group coaching. The clients are different, but we try and force them all to live together in one box rather than understanding likes attract likes, and the Capital Grill guy probably doesn’t like being in the same gyms as the cheap steak house guy.

It is illogical to believe you can survive in this
business without a minimum five percent growth rate per year

This is a tough business. Wear and tear destroy a gym in just a few years. Equipment dies, cost of labor rises each year, and utilities, marketing and the hundred other items in your expense section can jump a few points while you are sitting in the bathroom.

In this business, we grow or die, but most of us have left the growth part out of this equation.

There is only three ways to drive a business. You increase sales, which will become more difficult each year as the market adds new players all chasing the same clients, using the same price-driven business plan; you can cut expenses, or you can seek a higher-return-per-member-served.

Endless growth isn’t sustainable in most markets. There are too many players fighting for the bottom. Market share is impossible to grow if all you sell is price because there is always someone opening next to you next week willing to offer the same product at a lower rate.

The new trend is offering more options in a massive warehouse type of facility, at a cheap entry with a small upgrade. This too is illogical since your market is restricted by drivetime from your gym. The average consumer will only drive about twelve minutes from his house to workout (twenty minutes in the training gym specialist world) and offering more in the big box for a lower price still demands a sheer amount of volume hard to sustain.

If you can’t chase volume, then you cut the expenses, but can you cut your expenses each year to match the increased cost of doing business? In other words, can you slash five percent this year, again, to match the three-to-five percent increased cost of doing business this year, again?

Three percent might get you even, and we need five percent growth to keep the profits growing, but you cannot save yourself into profitability more than once.

Growth is coming again to this industry, but repeating the past is not the way to financially benefit from this surge. Logic states most of what we do doesn’t work anymore, but illogical behavior wins because emotion drives us in this industry.

Seek the logical, evolve away from the past, and embrace a future industry where the client gets the results he pays for at a fair price.

 


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What is old is new again… six methods that failed in the past and shouldn’t be part of your business plan today

You seek the future, or you constantly relive the past.

The gym industry is currently flooded with consultants, gurus, mentorships, make-six-figures-now guys and the social media obsessed who wish to be known as great influencers of trends and the future.

But what are they selling you?

You either create the future and drive change, or you search the past, or just steal from others, and repackage yet again what the industry has moved past decades ago. Here are six hot trends, which were created, used and failed over 20 years ago, that were recently dusted off and offered as fresh to an entirely new generation of owners who weren’t around when these failed the first time.

Off prime-time pricing

The idea, promoted by a financial service company in the industry, is that a gym owner should offer clients cheaper rates to work out in the non-prime time hours. The idea is to fill the gym with clients who want a deal and who will come when the gym is supposedly slow anyway.

This was a brilliant idea… back in the 1950s (yes, the middle part of last century) when Jack LaLanne first used it in his gyms. He only built one locker room back in the day and men and women used the gym on alternate days. One of the centerpieces of his early plan was that you could workout at a cheaper rate prior to 4:00 in the afternoon. Great idea, and it lasted well into the mid 70s, but here is why it failed then, and will fail now in any gym crazy enough to use it:

  • The lower price became the price. For example, if you offered $39 a month for a regular membership, but sold a cheaper off prime-time membership at $34, the lower price became the price. New clients just refused to pay the full price when the gym had established its price at a lower rate and would not become members unless they too could get the lower rate no matter when they wanted to come to the gym. What is this gym really worth, $34 or $39? The lower the price, the lower the perception of quality.
  • What happened to the guy who paid less, but was still there at 4:30? “Hey, didn’t get out of work on time. You don’t mind if I just get my workout in a little late, do you?” What would you do with a member paying you $34 for a membership where he has to be out of the gym by 4:00, yet there he stands at the desk at 4:30? No matter what you chose, either let him in or throw him out, you lost. You either let him workout, and now established the precedent pissing off all existing members, or you refused him costing you a member.
  • Everyone finally realized that some gyms just had quiet times and trying to stuff those few lower usage hours just killed your business over time and it finally stopped in the mid 70s.

In today’s gym environment, the client might be paying much more for the class or workout, but when you discount to fill a quiet time in your business, the lower price will become the real price and again you lowered the perception of value in what you offer.

The old 1/2/3 time per week pricing schedule   

Again, this was brilliant stuff back in the early 90s when I first used it with clients, but it proved to be a failure over time fading in the late 90s but resurfacing again now through gurus looking for a way to put their own ideas on a new gym owner. Here is why this too failed:

  • Does the soccer mom really know today how many times a week she will work out for the next year? Talking about putting an additional hurdle at point of sale. She didn’t know, and had no way of possibly knowing, so she took the path of least resistance, which is the next point.
  • They always, at a rate of about 80 percent, take the middle choice, or two a week. This lowers your overall client rate potential because you are artificially lowering your own price through your offerings. For example (think about the example, not the prices here):

1 per week at $149

2 per week at $249

3 per week at $349

About 80 percent took the middle one. They always do, and this has been part of retail strategy since the beginning of the last century, but in our business, it fails us because we really want to get a higher per client average. This system forces the client to go lower price because there is less risk and very few, or about five percent, take the highest price. In other words, you created a system where you automatically lowered your own price.

  • If the client didn’t use the sessions, he wanted them back the next month. I signed up for two a week, didn’t get them all, so please add them to the next month. Managing this became a nightmare over time, because everyone missed and wanted sessions added and keeping score became an ongoing issue with the clients.
  • We built failure into the system. If you don’t come as promised, then you failed, but most importantly to us as owners, the client felt that if I couldn’t make two a week, then I am wasting money and I want to quit now. This was the biggest issue with this system, and still is for anyone living in the past trying to use this yet again.

The current system that does work is to shift the burden to the client instead of the gym. In this case, we sell access instead of a set number of sessions or times per week. For example:

Unlimited access up to 12 times per month with a coach (1/1)                                           and additional coaching support to design workouts to do on your off days

$899 per month x 12 months

Limited access up to 5 times per month plus additional coaching support

$499 per month x 12 months (based upon $100 per session)

Selling access means the client can either come up to 12 times per month, or up to five times per month, but if she doesn’t make all the session she didn’t lose anything, nor feel like a failure. The burden is shifted to her and away from the gym to come when she can, but since she purchased access, not set sessions, she determines how much and when she shows up.

Month-to-month memberships

Eliminating contracts and going just month-to-month sounds so seductive to an owner. If you use this magic system, sales are easier, people don’t leave, your client complaints just fade away and life is easier, which all sound good, but none are true:

  • If month-to-months are easier, you screwed something up further upstream. If you are talking about price, after the client has had an extended trial, met you and your staff over time, met your members, experienced your service and has had a chance to try all of your offerings, then you either have a weak gym, terrible sales people, or most likely, skipped all of these things and just went for the price too soon when the client didn’t have any experience with you and your gym. If it comes down to price, meaning I really don’t trust you so just give me the month-to-month low risk thing, then you failed the client earlier in the process. There are legitimate people who need to come and go with flexibility in the gym, and they should have the option to pay about 20 percent more for that option, but these people are a small percentage and shouldn’t drive the entire pricing strategy.
  • Month-to-month makes it so hard to ever borrow money or sell your gym. What buyer is going to pay you much for your business in the future when every client can walk out the door an hour after I buy the thing? What bank is going to loan you money when you have nothing of value to secure the note? Members on contract are worth a lot as a receivable base. Members just paying monthly have little value to a bank since it is nothing but cash flow that might just go away any day. The last blog in this series covered this topic in-depth. The short version is that month-to-month came from the 80s, was wildly copied, and ultimately faded because of the weakness it causes in the business.

Circuit training

The concept that is hard to kill and rises yet again. Circuit training, where the client travels through a series of machines or workouts in a standardized set pattern, started back in the 50s of last century. The gym saved immense labor costs since the client just did his own thing and didn’t need supervision or help.

Curves made circuit training popular and reached a peak of over 10,000 units worldwide and then faded. The client outgrew the technology and the company failed to evolve.

Mainstream players keep the concept alive and about 94 percent of a mainstream gym’s population practices do-it-yourself fitness doing some form of machine circuit.

And now we are on to the current circuit players, such as F45 and Orange Theory. Same concept, but is the product both companies offer anything more than a circuit where the client completes a set course under the supervision of a single trainer, or worse, just follows along on a television? Circuit training is still alive today, but has simply been repackaged again for a newer generation that hasn’t been bored to death by the repetition from the old days.

It is important to note here that single methodology gym businesses always fail over time. Circuit training, my only offering and trick in this business, gets boring and the clients move on to something else. Kettle bell gyms, cycle-only studios, most mind/body businesses and any other gym business that only offers a single method or approach always fail, and will always fail, simply because the clients evolve and the gyms never do.

One-on-one training

One-on-one training has its place. You have a small percentage of clients who are sports specific people and need a directed approach, you have medical issues where the client needs more intense supervision, and you have the wealthy client that has so much money that he or she just has to give you some for an hour of your time.

But overall, old school one-on-one training is still the least effective thing you can offer and do in a training-centric gym business. There are not enough hours in a week you can work, and few coaches can charge enough over time, to make this concept work. One-on-one coaching is simply too labor intensive and has too low of a financial ceiling to work as a business concept in today’s market.

Yet we keep chasing the idea. There are gurus who still sell their secrets to finding the clients you need, how to charge, how to keep them paying, but all of this if even done correctly is a very small way to make a living compared to a gym owner who has mastered small group and team and that can generate $1.2 million a year or more with only 300 or so clients.

Making a $100k a year is great money when you are single and in your 20s, but add a few kids, a mortgage and a life in your 30s and beyond, then working 50-60 hours per week, six days a week, eating out of plastic bowls and working endless split shifts ultimately just to chase a hand full of one-on-one clients wears your ass out.

The old 3/6/12 pricing strategy

This another plan rediscovered after being introduced in the 1960s, failed over time and yet here it is, alive and well in small training gyms everywhere.

The method works on the strategy that the longer you commit, the less you pay per month. Sounds logical, but this method has the same weaknesses as most of the rest in that the emphasis is put on price, not what you get for the price, and as in the 1/2/3 times per week method, the client always grabs the middle option. For example:

3 months @ $99 per month

6 months @ $89 per month

12 months @ $79 per month

So is this gym, and these coaches, worth $79, $89 or $99 per month? This method makes it about price and absolutely kills your credibility as a coach or owner since your value is now placed on a sliding scale. Pricing here is a gimmick and lowers the perceived value of who you are and what you offer. And it doesn’t work over time.

The clients pick the shorter agreements and then you have the same problem as the month-to-month, where all of your clients are now on short-term agreements and can just walkout if things change and you have no time to fight back since all agreements are based on just a few months.

The safest thing you can do in your business, and the most profitable over time, is to create a strong receivable base where your clients have some type of obligation that allows you to project your income into the future.

Most of these very old methods are the result of a poor sales system and were created to overcome that major weakness. Pressuring a potential client to become a member of your gym during his first visit always leads to a reduction in your ability to charge and price logically for the business, since you have to continually lower the price to overcome the fact no one on your team can properly track, follow up and sign up a client at a fair price.

If you start every client with an extended trial membership of somewhere between 15-30 days, pricing objections should never occur. Yes, some people simply can’t afford to be a client of your gym, but that does not mean you should lower the price to the lowest rate possible hoping to attract every single person who ever walks in the door. Some people just don’t have enough money to be your client and that is fine if you understand you can’t be everything to everybody.

Any business can be fixed. Start with the pricing strategy first. How you collect, how you charge and what you get for the money is the foundation of any gym business. Get this right, and you can screw up a lot of other things and stay in business. Get this wrong, and the business will always ultimately fail.

 


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The oldest financial tool in the gym is still the best one to grow your business

The oldest financial tool in the gym is still the best for your business

The 12-month contractual agreement, used to create a strong receivable base for your business, has been around since the early 1970s and if there has been one common denominator that has added to the financial success of most of the major gyms in the world it has been using this tool.

Many people have tried to eliminate this classic from the modern training gym for a variety of mostly poor reasons, but there is nothing you can do that is more important in your business than using a 12-month agreement as your client membership payment collection tool, especially if you ever want to sell your gym for more than a few dollars and some change.

Here are several reasons the 12-month agreement is a must to build a financially successful training gym over time:

#1… The receivable base is the only thing you own in your gym that is of value to a potential buyer, or to the bank if you want to expand into a second unit, or to borrow money to grow your business.

A receivable base means you have clients that have signed some type of agreement with the gym that projects revenue into the future. Remember there is no receivable base if there is no obligation to pay on the client’s part. If you use a 12-month agreement, then you have created an obligation between the gym and the client allowing the gym owner to anticipate money that will arrive in the future, as a month-to-month payment, and that he can count on that money arriving since the client signed a contract stating he will pay.

Most of your clients are honest people. If they give their word they will pay, by signing a membership/client agreement, then they normally do. I promise to pay for 12 months and I will because I said I would. On the other hand, if you do not ask for an agreement, but only a month-to-month obligation, then I will honor that as well and leave anytime I want since that is what you requested as an owner and that is what I agreed to as a client.

What is a receivable base? For example, let’s say the gym only has 10 clients and they owe the owner these payments left on their memberships to the gym:

  • One client owes 7 payments of $300 = $2100                                                                       (he started at 12 months, but only has 7 months left to pay for his first year)
  • 12 payments of $400 – $4800 (new client just getting started)
  • 3 payments of $350 = $1050
  • 6 payments of $300 = $1800
  • 1 payment of $400
  • 9 payments of $149 = $1341 (this might be a person in team training)
  • 3 payments of $400 = $1200
  • 11 payments of $149 = $1639
  • 5 payments of $350 = $1750
  • 6 payments of $300 = $1800
  • 12 payments of $300 = $3600
  • 2 payments of $149 = $298

If this gym owner never sold another client another membership, he could collect up to $21,778 over the next 12 months. In other words, if every client paid as promised, and most will, but we will discuss loss rates later, then this owner might have a chance to collect up to $21,778 over the next 12-month period. This assumes one very important thing: we assume the clients are on a contract and give their word they will pay.

What happens if there are no contracts or 12-month agreements? Then the owner does not own a receivable base. This means that the owner has monthly cash flow from his clients from their payments, but since the clients have no obligation, defined as no contract, then all of them could leave immediately if they wanted.

When an owner tries to sell his gym, he only has two assets worth buying: the lease so the buyer can extend the business into the future at that location, and the receivable base, which is a pile of contractual obligations between the owner and the clients that could be transferred to the new owner.

If there is no contract, every client could walk away the day the business sold. If there is a contract, or in this case a 12-month agreement, then the buyer can count on client payments arriving as he gets his team and business plan into place. This receivable base also gives the new owner a chance to build his own relationship with the clients before they choose to leave.

An important side note is major staff change in your gym. If there is no receivable base, again meaning the clients can get mad and leave immediately, you are always held hostage if you need to replace a key staff person. Hey, get rid of Freddie and we quit the clients say. But you have to get rid of Freddie because he was once good but now is bad for the business. If the owner has a strong receivable base, based upon a strong contract, he can make that change and not lose half his members over nothing.

Banks don’t get too excited to loan against cash flow since it could disappear so easily, but banks love receivable bases since you have proof you will have a certain amount of cash arriving in the future that can be validated through the contracts.

If you want to create a business of value that can be sold in the future, then the only tool you have to base your business on a tool that adds this value, and that is making sure every client, or as many as possible, are on 12-month agreements.

#2… Why 12-month?

Every client tool has an associated loss rate. This means that you never collect all the money from all the clients, but she who collects the most money from the most clients will win. Twelve-month memberships have the lowest loss rates of all possible membership agreement tools, or stated another way, you will collect the most money from the most clients over time using a 12-month membership.

Here are the loss rates for the typical tools used in the fitness business. Remember, losses are figured monthly, but compounded annually. If you have a 4% monthly loss rate, which doesn’t sound too bad, you really have a 48% annual loss rate, or in other words, you just lost have of your entire membership (4 x 12 = 48):

  • Open-ended month-to-month memberships = 4-7% each month
  • 12-month agreement losses are < 1% a month, or about 10% annually
  • 24-month agreements lose about 5-8% each month

As you can see, the most effective tool over time is the 12-month agreement. Many attempts have been made through the years to replace a contract with month-to-month memberships, but all the supporting data has been too short in length to uncover how really bad this month-to-month system is.

You read somewhere, “Yes, we stopped 12-month agreement and started month-to-month and our sales shot through the roof.” As we note later, there are probably other issues in play, but most important here is the fact that no one tracked these memberships for the next several years. The losses will be there, and they will be big, but in the short run this seems like a good plan, although over time it erodes the entire membership of the gym and can you down, while lowering the potential to ever sell your gym for any real money.

Most training gyms offer a 12-month membership at a fixed price, but if the client travels, has a second home or just doesn’t want to sign a contract, we usually charge him 20% more. This system rewards the clients who support the gym all year long, while charging a premium for the clients who want to come and go.

The losses are higher in the month-to-month group as stated, but you still have a solid base of 12-month contractual members along with a much lesser number of month-to-months, usually representing about 10% of your membership/client base.

#3…. Are open-ended, month-to-month memberships really that much easier to sell?

No, they are not, but if you find they are, then you messed up something earlier in your system.

One of the attempts to kill 12-month memberships always includes the, “it is easier to sell” promise, but is this true? Think about this chain of client progression for a few minutes:

  • The client does not belong to a gym and is sitting at home. He currently isn’t searching for a gym, might have had a bad experience at a gym, or he is finally to the point that he might consider getting back into shape but does not know where to start.
  • He is watching the game, scanning on social media, and a testimonial ad pops up from the local training gym featuring a guy in his age group who is successful in that gym.
  • The current population in this country divides into two segments that join gyms: the first represents about 2/3 of the population of this country and are deal seekers who support the low-priced gyms, while the other third are money people, more educated, more sophisticated and who worry less about the cost and more about what they get for the money they paid. They sort themselves out when it comes to joining a gym. This guy is in the one-third and is interested in getting the best for his money.
  • The ad features a link back to a website where there is a large number of testimonials all similar to our guy here. He is also given a chance to sign up for a 30-day trial. This means he will be given a chance to meet the other members, experience the gym’s service and see the quality of the product before he is asked to join.
  • He books his trial, finds his gym stuff he hasn’t used in two years and shows up. Remember, he hasn’t tried a gym in several years and had to find the emotional courage to give it a shot one more time. Even getting to the door for the first time is a huge step for this guy.
  • He comes into the gym, spends an hour with a good assessor, is set in motion somewhere in the gym where he fits, but he has not yet been asked to join. Remember, if you ask the potential client during the first visit to start today the discussion always comes down to money and contracts since the client has no, none, not any experience with your gym or product. This is the biggest mistake you make here. You ask too soon, too hard, and then blame the tool (12-month membership agreement) instead of questioning how you sell and how you ask for money.
  • Two weeks later, the guy is asked to join. He has been in the gym five times, met everyone, has a free shake or two, attended a social event at the gym, has been introduced to every client in every workout he attended and is happy.
  • Do you really think this guy is going to balk at a 12-month agreement after going through all this effort to get this far? We blame the tool, but it was the system, or lack of in most cases, that fails.

#4… How you collect the money is important too

How hard do you work to get clients? Imagine doing all that work to build your clientele, yet you only collect 70% or less of the money you should have received.

Many gyms get enough clients, they just can’t collect from any of them. If you want to build a financially successful training gym, get control of the money first. You have to create a system that allows you to collect the most money from the most clients over time. There are three key parts to make this happen:

  • Is your price structure right for the market? Is your programming defined by your pricing strategy?
  • Do you have a collectable 12-month agreement in place?
  • Do you have your memberships serviced by a strong, third-party financial service company?

If you have these three components in place, you can screw up a lot of stuff and still stay in business. In fact, for most of you reading this, get this right and you would have a hard time killing your business.

The company we have used for years and recommend through our workshops is ASF Payment Solutions out of Denver. They started in 1971 and today specialize in training-centric gyms. Above all else, protect your money and make sure a professional company gives you the best chance to collect the most money you can from the most people.

Summary

The training gym business is a harder business than it looks. You not only have to be a good, or even great coach, you also have to be a good business person as well. The first thing you need to master on the business side is how money works. If I build a business on getting clients to pay me monthly, then how can I collect the most money from them over time?

The key is build a solid financial foundation based upon pricing, using a 12-month membership agreement and then using a solid financial company to help you collect the most you can.

The 12-month membership is an old tool but is has survived for a reason through the years; it is still one of the most important decisions you can make to help your business be financially successful over time.


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The 17 Immutable Laws of Coaching

#1: Never fail to charge what you are worth

You cannot be the cheapest coach in town and then expect to be perceived as the best.

Successful coaches learn to charge what their talent, education and experience is worth to the client. Many new coaches believe charging less than their competitors gives them an edge in the market, thinking that if they charge less now than the other coaches, they will take everyone else’s clients, because they will be viewed as cheaper and; therefore, a better deal.

This strategy fails every single time. The client simply doesn’t believe the cheapest of anything can be the best of anything. Our clients make their decision to choose a coach on whether he or she believes the coach can get the results they desire. In this client’s world, price is secondary, behind the anticipated ability to get the results the client pays for over time, but price is also a perception of quality and if you are a money person, which our clients usually are, the more you charge the better you are valued.

Simply put, if one trainer is $50 per hour and the other trainer is $100, then which one is going to be the best trainer to choose in the eyes of most of our clients? These clients believe the expensive trainer is usually the best trainer. The higher priced coach must have the experience and education to charge this amount and he or she must also have had enough clients to validate that someone else pays this amount.

One of the biggest mistakes a coach makes is undercharging for what they do and who they are. Your price sets an expectation of quality and the cheapest is never the best.

#2: Never tie yourself to a single methodology

Single methodology coaches fail over time. Single methodology people are much like a carpenter that is really good using his special hammer and then he believes that his magic hammer is the only tool he would ever need to build a house. This would be a great theory until you need a drill or saw and then the one tool wonder falls apart.

Single methodology coaches suffer the same fate. We become married to a tool, such as a kettle bell, barbell, yoga mat, suspension trainer, or go so far as to build an entire gym around a single methodology system, and we then try and force every client into our single tool approach, or put another way, I am a hammer and you are going to be a nail rather you like it or not.

Master coaches move beyond tools and think more as an architect who is working with a master builder to create a beautiful house. The architect can design an expected outcome, and the master builder, with all his vast array of tools, can build it efficiently. The master coach has to play both of these roles to get the most out of any client. He must see what can be created, but he also must have all the tools in the bag to be able to get it done, because every client is different and every client might need his own unique application of tools to get it done over time.

Single methodology people limit their businesses to the one client who can benefit from that exact process. Master coaches spend careers mastering many different tools so he or she might always have the right tool for the right client at the right time.

#3: If it hurts you, why do you think it won’t hurt them?

If you are hurt and beat up from your own workouts, then what are you doing to your own clients? There is nothing more pathetic than a coach who is constantly in pain and beaten up from his own workouts applying this same brilliant approach to his clients.

Many young coaches believe that constantly being dinged, in that six Advil a day pain range and held together with tape is a status thing: “Yeah, been pushing it hard lately and going for another PR this week,” is nothing to brag about to any other human, but rather a negative statement on your IQ and mental stability.

If your approach to fitness is keeping you constantly fighting pain, then what do you think you are doing to your clients, who believe every word you utter, but who have so much less base conditioning, technique and experience?

Maybe you are the problem, not the solution you believe yourself to be? Maybe your technique, choice of exercises, willing to push through pain and overall willingness to destroy your body in the name of fitness is just a wrong approach that is killing you and hurting the very people who trusted you with their fitness?

#4: Never lose your integrity

It takes a lifetime to create an image of integrity, but only a few brief moments to kill it.

Integrity is who you believe yourself to be in life. You create your own code, based upon your personal values, and then live by that code. Coaches need to be honest to the extent of obsession; respectful of others, including yourself, your family and especially those who pay you for your help and guidance; are willing to help when others can’t or won’t, and especially willing to never do anything to a client for the mere sake of trying to make a little money off of him selling him something he doesn’t need and he only bought because you told him to buy it.

You can never be a master coach without integrity nor can you ever be a good human being without integrity. Integrity is nothing more than a bond of trust stating you will do what you promised and that the other person will not get hurt in the process. This applies to clients of course, but also to your life in general. Do what you say you will do, when you promise to do it, and make sure you do no harm in the process and you are on your way to discovering the integrity within your soul.

#5: Professionalism is the separator between the good and the great

Everything matters. How you dress, how you speak, what time you show up, how prepared you are for a client, how you follow up, how you do not ever talk about other clients, how you shake hands, how you charge, how you protect yourself by never making a deal with any client that you wouldn’t give every client and how you value your team are just a few small parts of what it takes to be a true professional.

There is usually an aura around those you respect over time, those of whom you want to learn from and emulate in life. The aura you sense is a shield of professionalism that is never compromised or let down. If you are a professional coach, then you live it every day.

Being the best dressed coach in the room, the best spoken, the most prepared and the one who is simply the most put together compared against every other coach is a huge edge as you build your career over time. You can be the most educated person in the room and neglected, or you can be the one who is educated wrapped in professionalism and be a guru to others in your field.

#6: I would rather go broke and die on the street than scam a client

There is always a time in every career of every coach when you will consider, even if it is only for a few seconds, taking advantage of a client. You could be broke, desperate for money or simply the guy who spends more than you make and then you consider looking for the easy money.

You tell yourself, “Hey, just once, and besides, this client has so much money who will care?” Then once you have talked yourself out of your integrity, you now are trying to do some outrageous cash deal with a client to pay your rent, or worse, you enter the world of multiple level marketing and you are now advocating products to the clients that they don’t need, and you may not even really believe in, because you can see yourself making some easy money.

When you cross that line, it is almost impossible to come back to the light. Once integrity is sold, there is almost no way to buy it back. If you want to make a living as a professional coach for the rest of your life, then swear to yourself that you would rather go broke and die on the street than ever scam a client.

#7: You are not a role model, you are a professional coach

Your physical perfection is not why the client comes, and is definitely not why the client might stay with you over time. The client trusted you, because he or she believed that you were the one, and the only one, that could get the results they were willing to pay for over time.

Wait, you say, the client trusted me in the beginning, because he thought all of my almost naked selfies and videos lifting heavy stuff with my exertion/sex face action proved that I am a stud/studette and the client just knew that if I can get myself into this kind of shape, just think what I can do for them?

If you ever said this to yourself, and you actually believe your own bullshit here, then you are too stupid to be a professional coach and should move back to your mother’s basement and go back to being the biggest stud that ever worked for Starbucks, because this is not why 99% of clients you will ever meet chose you.

Professional coaches are chosen because they have the skill set, reputation and experience to get results. Any drunken monkey with a one-day certification can take 20 people through a workout and only kill two or three, but it takes a professional coach with years of experience to be able to get the maximum results, from the maximum number of clients, over time.

Getting this done is not about how you look, but what you know. Despite the misguided belief that every coach has to be a specimen suited for framing at your local art gallery, coaches come in all shapes and sizes, and yes, many of these fine coaches are considered works in progress chasing their own fitness goals and wrestling with their own fitness demons.

Consider that all of your ego induced social media posts might actually be the very things that are keeping serious adult clients out of your gym. Also consider that your need to be in every ad without a shirt, every video in a workout bra and every group shot flexed up might be more of a personal issue you need to deal with rather than ways to help you create a financially successful training business.

And it won’t last. You will not be perfect for ever, but if you base your business on a perfect day on your 30th birthday, then what do you do for a living when you are 40 and not so perfect? Being a perfect specimen doesn’t last, but being a professional coach can feed you until you die.

Replace you in all of your social media with clients that have succeeded because of your caring and helpful guidance. Your potential clients care much more about how you can help them meet their goals than they would ever do about how you look without a shirt.

#8: It is never about you; it is always about them

We push clients too hard, and for too long, because we apply our own personal standard of fitness to them. Your goals and vision for the client maybe the exact thing that will drive him out of your gym, and maybe hurt him as well.

It is not about you and what you want, professional coaching is about them and what they need to be successful. Your client might just want to move and feel better and not give a damn about his weight, although you know that is what is hurting him. You can guide and suggest, but when you push you lose him forever. He is moving, he is happy dropping in once or twice a week and that is enough for him.

The side note here is that purists drive your clients, and probably your family too, crazy. Nothing worse in life than a Paleo freak at a holiday dinner yelling at poor Aunt Edna because she just stuffed a giant biscuit covered in butter in her mouth and washed it down with a beer.

Living pure is your choice. Expecting your clients to live up to your idea of a perfect fitness life is not going to work very well in the business world. Yes, there will always be a posse that will follow you because of your intensity and purism, especially for those coaches who own those single methodology businesses, but will 25 hardcore clients be enough to support your career over time?

Understand that your clients have different goals, lives, time commitments and that while you could create the perfect fitness life for them if they would only listen, most just want to venture down the fitness path of life slowly, maybe stop and drink a beer along the way, occasionally stop for a biscuit and just don’t have the same deep believe that you do… and all of that is okay because at least they are with you and moving forward and that is enough.

#9: One-dimensional coaches fail over time

Coaching isn’t enough. If you want to be successful over time you have to force yourself to be good at all aspects of professional coaching. For example:

  • Have you mastered marketing and branding?
  • Can you handle your own social media and then teach someone else how to do it for you?
  • Do you understand money? Do you save and invest? Can you run the financial side of a growing business?
  • Do you understand staffing and can you hire and create a team to grow your business?
  • Have you learned to speak and can present your ideas in public or speak in front of groups to grow your business?
  • Have you ever had anyone look at your professional image and help package you as a professional?
  • Have you learned about negotiating professional contracts that might affect the jobs you may have in the future?
  • Have you learned to network and surround yourself with a team that can help you and your career grow over time?

Being a professional coach isn’t just about learning to train someone. Being a professional coach is about becoming a well-rounded person able to create and manage a career that could span your entire life. Multi-dimensional is your plan if you want to hang around for more than a few years.

#10: You can help more people with a million dollars in the bank than a $12.92

It is never about the money, until it is. Easy to say I am not in it for the money and be that reverse snob as a coach where your poverty is a badge of honor; but then a kid gets sick, you get married and look for a house or your parents age and need some help, and then it is about the money and the so little you have ever earned or saved.

Money only has one purpose and that is freedom. Money lets you work where you want to work, leave when you don’t want to be there any longer, live where you are happy, help people who need your help and in other words, let’s you live your life on your own terms without being held hostage by anyone else who controls your cash flow.

Chasing money is not important, but the process of chasing money is in your life. The difference is you will build a more successful career, a more financially successful business and enjoy a sense of freedom and peace so many coaches never find who live check-to-check in life, if you make creating money part of your life’s work.

We create money to take care of our families. We create money to allow us to say no to stupidity that makes us unhappy. Most importantly, making money validates your talent in many ways, because making money proves you were right, you are a professional coach and people are willing to pay you for your help and guidance.

You can be happy and poor and you can be a simple monk and change the world, but for most of us who desire to live as a professional coach, you will find you can help a lot more people in life with a few dollars in the bank than you ever could being broke and barely surviving to each payday.

There will also be a day where you might not be able to do what you do any longer. You might become injured, burned out, or simply have had enough and want to move on in life. Money is your way out. Money is your way to turn 50 and say, “I have had enough of this and just want to go back to college and maybe teach for a few years.”

The hardest conversation in the consulting life is telling a guy who is 57 years old that the $2000 he has saved in life isn’t enough and that he will have to work every day until he dies to just stay alive and pay his bills. Remember, money isn’t made as a status and the biggest houses, newest cars, and most gadgets isn’t what you are chasing; you are pursuing the freedom that only comes from having enough money in life to live life on whatever terms you desire.

#11: You did not get to be you without a hand up from somebody

You are you because somewhere, at some time in your life, somebody gave you a hand up. There are no self-made people, only those who have forgotten where they came from and who helped them in life.

Remember who helped you and say thanks and make sure you help others who are further down the ladder than you are. You are who you are because someone cared… and now it is your turn.

#12: Hire a coach to coach you/break out of your comfort zone

You have been training for 20 years and think you know it all? Hire a coach you respect and have him or her train you for a week. You need to force yourself out of your own comfort zone, but most importantly, you need to be reminded there are other ways to get results and what you know is not what everyone else knows and maybe, just maybe, you are all right and you might learn something new.

Same thing is true for life. When you think you know it all is the day you should hire someone to ask the hard questions in life, from everything to money and family to personal goals and retirement. Often asking for help when we think we have it all figured out gets us to the point where we remember that we don’t even know all the questions anymore and fresh eyes can help us leap ahead years of just going our slow and self-dictated pace.

#13: Knowing when to say no is the sign of coaching maturity

One of the best days you will ever have as a professional coach is when you look at a client and say, “I don’t think I can help you, but I can refer you to someone who can.”

That is the day you have arrived as a professional coach, because that was the day you stopped faking it and finally stopped forcing a client into what you know and admitted there are clients that don’t fit your skill set and the best answer is, “No, I am not the guy for this job.”

Young coaches too often force every client into their box, even if the client doesn’t fit their training model, or worse, has medical concerns he shouldn’t even touch. Hey, this is what I know and if I throw you into the box I will force something to fit you somehow. This approach is sort of like a guy buying a shirt and the clerk says it looks fine, we can make it work, you look amazing, while the shirt is a 3XL and the guy wears a medium. I have the shirt for sale, and it is the only one I have, and you will buy it now.

Knowing when to walk is a sign of maturity. Knowing who to refer out to is a sign of a professional coach. You do not need to be right every time, or know how to train every client in the world, but a professional coach does need to know who can get it done if he can’t. Sometimes the best advice you can give a client is to go somewhere else.

#14: Why are you different than every other coach?

Generalists eat last; specialists own the future.

The future of coaching belongs to specialists who focus on narrower populations and then master that area. For example. You might focus on:

  • Fitness after 50
  • Women only after 40
  • Severely obese
  • Junior golfers
  • Stressed out female executives
  • Guys over 50 with fitness and hormonal issues
  • Movement analysis and correction for corporations
  • Male executives who are in the 40s and later

This is just a partial list of specializations a coach could make a living and a career mastering. There is truth in many of the old adages, such as: Find something you love and learn more about it than any other person and you will always make a lot of money.

The age of the generalist coach is fading and that one size fits all approach that worked so well 20 years ago is dead today. People want to work with coaches who understand them physically, but also mentally as well. Someone specializing in stressed out female executives would not only have to know how to train those women, but what they think, what are they going through in life at this age, their special nutritional issues, how they learn and what do they really want in life and from their fitness?

Generalists eat last for a reason these days; the specialists in coaching have driven them away from the table.

#15: You have to earn the right to be called a master coach over time

There is nothing funnier in life than a coach with two years of experience, an entry level certification, 12 clients, a one-day wonder certification that states, “You are now the man,” and who is still working for $10 an hour at a mainstream fitness chain where trainers have the status of a farting uncle in church, now declaring himself, because no one else will, a master coach.

You have to earn being a master coach. You have to pay your dues over time. You have to take the beating through the years that molds you into a coach who has seen it all and who has practiced his craft with discipline through those long years.

What does it take to be a true master coach?

  • You have to have done at least a thousand hours of sessions with every type of conceivable client per year for at least 10 years.
  • You have to have a strong entry level certification, a movement based certification and advanced nutritional certifications and training. Couple these along with a never-ending string of skill set certs, such as kettle bells, the Olympic lifts or sand bags that are added every year as new tools are introduced into the market.
  • At least 30 hours of education a year garnered through attendance at major coaching events, such as Perform Better Summits.
  • The willingness to at least once every two years admit that everything you learned up to this date might be out of date and you need to reinvent yourself one more time.

There is no certification for a master coach, but there is that moment when your peers come to you for help and guidance and then you know you have arrived at the point where what you know, and who you are, is respected by others in the industry. Until then, keep your head down and just keep working.

The driving force behind all of this of course, is the premise that if you do not grow each year, you will wither and die early in your career. Coaching is not only about making change, coaching is about accepting change and what we knew even a few years ago might be considered out of date and something the industry has moved past.

Grow or die should be your motto if you want a career as a coach that lasts and is respected by others, and if you put the years one by one, then one day you might just become the master coach the two-year wonder child already thinks he is.

#16: You will not be successful until you know what it means to be you

What do you want from your experience of being a professional coach? Ten years from now, if you are sitting in a bar and someone asks you, “So you have been a professional coach your entire life? What did mean to be you?”

You can’t ever reach the upper levels of success if you don’t know what you are trying to accomplish in your career. Ask yourself these questions:

What professional mileposts have you set for yourself?  Speak at a major conference? Own a training gym that does a million dollars a year? Get an advanced degree? Create an online training empire?

The problem isn’t that you don’t know what you are trying to accomplish, the problem is that you don’t dream big enough. Create a list of milestones that stretch out for years and dream big. Give yourself permission to chase your real dreams, not those watered-down things you share with your drunken friends over too many beers.

There are other questions that matter too when you come to the end of your career. Did you make a difference in the fitness world? Did you leave the industry a better place because you were in it? Did you help others and create a generation of young coaches on the right path because you gave a damn?

What will it have meant to have been you? No coach whoever amounted to anything couldn’t answer this question.

#17: We change lives

If you want to be a respected coach, then remember this: You exist to change lives!

Changing lives is your purpose in life. If you are a true professional, then this is why you were born; to make a difference and to change the lives around you.

If changing lives isn’t your thing, then you will have a difficult time ever reaching any upper level of coaching. All the great ones make the world around them a better place every single day they are alive. If you think everything written in these last few sentences is something found steaming in a pile under a bull, then you will not ever make it as a master level professional coach.

Changing lives is what you do. Changing lives is what professional coaching is all about in life. You are either in, or you are out, but if you aren’t driven to change the world, then it will be a very short and boring career before you leave to find work that might be important, but that will seldom have the impact on as many people as being a professional coach.


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Too busy being busy to make any money

Do we have enough leads?

How many trials did you get from those leads?

How many new clients did you convert from those leads?

What is the average return per new client sold (average client payment)?

This should be in huge letters on the wall of every single person who owns any type of fitness business. This is your business plan and is where you have to start every single day as an owner if you want to be successful in the gym business.

In this business, you get so busy being busy you forget there is a huge difference between being busy and being effective. Busy is where you fill your day scrambling from one project to the next putting out fires and burning up your time. You stumble home late, check and see if the kids remember you, open a beer and flop on the couch mumbling to yourself, “What the hell did I get done today? I was really busy but didn’t make any money at all.” You can be busy all day, but still not make any money.

Effective is a completely different game. Effective means you work about the same hours, but what you get done in those hours changes the outcome of your business. The difference between hopelessly busy and effective is the difference between failing or staying in business and ending up with a financially successful gym.

So what do these four statements really mean in your business, and most importantly, how do we go from busy to effective?

Do we have enough leads?

There are no profits unless you have accumulated enough clients. You will never get enough clients unless you have a lot of perspective clients. All perspective clients start as a lead, defined as someone who made a serious inquiry about your business, or more common today, tried one of your trial programs, such as a 15-day quick start.

Your business will never grow unless you have dedicated person who does nothing but bring in leads for the business. In today’s world, this is usually a dedicated social media person who spends 10-15 hours a week doing nothing but concentrating on generating enough leads. This person cannot be an outside person. He or she has to be inside and one who can pick up the voice of your gym, how it runs, how it feels, who the clients are as a community and what makes you unique.

Everyday, you ask yourself, “Do we have enough leads to make this business profitable?” If the answer is no, then that is your main focus for the day, because you can overcome almost any problem in business if you have enough new potential clients to keep what you own growing.

The order for lead generation in today’s training gym is:

  • Social media marketing including your website
  • Referrals and internal events and promotions
  • Long-term working of your acquired list of former clients and missed potential clients
  • Traditional old school retro marketing, such as ads in newspapers

How many leads turned into trial memberships?

There are people who will take a look at your gym and then go no further. The question to ask yourself is, “What could we have done better to get more people to at least try our gym?” Start with these:

  • Does the potential client perceive this as too hard to even try?
  • What does the lead see that stops him or her from even trying us?
  • Is our trial too expensive to even try?
  • Did we target our marketing toward the right potential client?
  • Are we just plain bad salespeople who can’t follow up properly or ask for the business?
  • Is it too hard, or too many steps, to get from inquiring to trying?
  • Can a potential client sign up and pay for a trial of their choice online without even having to come to the gym first (your answer here better be yes)?

How good do you have to be converting leads into trials? You have to convert at least 80 percent of all leads into trial memberships of some type. If you are not hitting that number every month, think of the money wasted on marketing to buy nothing but misses. If you can’t convert at least 80 percent, you have an issue and there is nothing more important to fix today than how to be more effective at getting more leads to trials.

How many new clients did you convert from those leads?

Leads are important, but only relative in relationship to how many new clients were derived from that number. Leads without sales are just very expensive misses.

We will define leads as a client who has engaged with the gym in any way. A phone call, for example, is an inquiry, but not a lead, since the potential client is merely asking about information and has not engaged in moving to the next step.

The old school players who read this will cringe at that notion that a phone inquiry is not a lead, but in today’s electronically driven market phone calls are fewer and trials and social media leads are far more common. Leads have to be classified as a butt in the door trying something in the gym.

You can of course track calls and the conversion rate from calls to firm appointments, but with trial memberships as our primary tool, it is just more efficient to get people from the phone or social media directly into some type of trial membership.

Each trial has a different expected conversion rate, because the various trials attract different potential clients who respond differently depending on the tool.

Short terms trials

These trials are sold as solutions to specific problems. If you sign-up for a 15-day quick start program, you are most likely looking for a short and intense chance to lose weight. The same psychology applies to anyone taking the 21-day shred type of trial as well. These potential clients aren’t necessarily in the gym to join a gym, but to use the gym as a tool to accomplish a personal goal.

Based upon all of this, the closing rates are lower for this class of trial membership. The expected rate for these trials should be in the 40-45 percent range; meaning you will convert about 40 percent of those who sign-up for a 15-day trial into regular memberships in your gym.

If you fall below 40 percent conversion rate, you might have a sales problem, or in other words, you can bring them into the gym, but you aren’t strong enough to convert enough to new business to make a difference.

Longer trial offers

The longer trials bring in a different client altogether. The 30-day trial and the six-week version bring in an often more serious membership potential client with different expectations. He or she is looking for a more long-term solution, is willing to explore options in the gym and statistically is usually a more qualified buyer.

Perhaps the biggest difference in clients is the difference in price charged for the trial. Shorter trials are sold for less money; therefore, these trials attract a younger and more price conscious client. The longer the trial, the more is usually charged, which attracts a client more likely to commit for a longer period of time.

In the case of the 30-day trial, some gyms position this as a higher priced option while others price it lower to attract more volume. The price for this trial should be in line with your shorter term versions and should be sold at a higher price than your 21-day.

Closing rates on longer trials are significantly different over time. You should expect to convert at least 60-70 percent of all longer trials into memberships. The client is just more serious and more prepared to become a member than those who pop in on the shorter term trials.

What is the average return per new client sold?  (average payment per client)

This is probably the most important number no one is tracking in their business.

Each client has a value. Your goal as an owner of a gym over time to is to drive up that average per client. In other words, you need to understand how to make more money from fewer clients as your business matures.

The volume era of the fitness business, defined as the time when selling memberships, letting a client fail and then replacing that client with the next warm body, is gone replaced by a new generation of owner seeking better clients who are willing to stay longer and pay longer if they get the results the paid for each month.

For example:

Club Volume

3500 members paying $27 per month average = $94,500 per month before losses

 

Gym Next Gen

300 clients paying $319 per month = $95,700 per month before losses

It should be noted that the losses on the volume club are significant.

$94,500 x 12 months = $1,134,00

$1,134,000 x .64 = $725,760

(Figured on losses of 3% per month compounded to 36% annual losses)

The losses on the gym are far less. Clients have more money, are more sophisticated, better educated and are there for results and are getting the help and results they paid for so most are happier.

$95,700 x 12 months = $1,148,400

$1,148,400 x .88 = $1,010,592

(Figured on losses of about 1% per month)

In this example, the volume club needs to add hundreds of new clients each month just to replace the losses from members who leave for a variety of reasons ranging from losing a job, moving, just plain quitting and other issues associated with a client paying a small amount of money each month to access equipment without help.

The gym only needs a small number of new clients each month to maintain that number since the population in that class of client is more stable over time. In this example, assuming 300 clients at maturity for that gym, which would be around 18 months into it, this gym would need about 15-18 new clients per month to maintain the 300 number assuming normal losses.

The gym only needs a small number of new clients each month to maintain that number since the population in that class of client is more stable over time. In this example, assuming 300 clients at maturity for that gym, which would be around 18 months into it, this gym would need about 15-18 new clients per month to maintain the 300 number assuming normal losses.

Summary

We often get so busy we make the gym business harder than it has to be, but your business plan can be reduced to just four questions:

Do I have enough leads?

Did I convert enough leads to trials?

Did I convert enough trials to new clients?

What is my average per client sold and is it rising slowly over time?

If your gym isn’t performing the way you hoped, start here. This is your business plan for any gym. Focus on what makes you money each month and be sure and do it in the order listed here.

Don’t be so busy you go out of business focusing on everything but the right things.