BreakingMuscle
CoachesOnly

Coach Compensation: Beyond Dollars Per Hour

Craig “Patty” Patterson
Guest Contributor
Business, CrossFit

 

For the last 13 years, hands down the biggest complaint I hear from gym owners:

 

“My coaches can’t sell.”

 

Before getting involved in the fitness industry, I worked as a mechanical engineer for two fortune 100 companies. One of them had 87,000 employees and 905 people on the sales staff. They had an entire team devoted to figuring out how to line up incentives to generate the right behavior to essentially help the company’s bottom line.

 

This kind of performance-based pay is seriously lacking in the fitness industry today. And it’s 100 percent the reason your coaches can’t sell. There’s nothing in it for them.

 

Typically, there are two choices for most fitness coaches: Become a personal trainer or coach group exercise classes. Both are generally paid by the hour, or maybe via salary, and neither of them works for the long-term success of the client, the coach or the business.

 

A quick personal story to highlight the point

When I was studying at McGill University in Montreal, my hockey buddies and I got involved selling beer in the stands at the football games. We were paid 25 cents per beer sold. I quickly discovered there were two major flaws in the system.

 

One: There were two sections in the stands nobody wanted to work. One was the opposing team’s section (fear of being mobbed). The other was the alumni section (Uptight wives wouldn’t let their husband’s drink).

 

Two: When we sold our flat of beer, we had to wait in a long line-up for a new flat. The girls pouring the beer were slow because there was nothing in it for them to move any faster.

 

By the third game, I had figured it out:

 

Early in the game, I would make a “friend” in the opposing team’s section and sell him the entire flat of beer for a $10 upcharge. He could then sell individual pints to his friends for whatever he wanted. Win-win for everyone. I made an additional $10 per flat and could dump an entire flat for one single transaction. The thirsty and frustrated Queens University students got beer.

 

Problem number two: The alumni section. Simple: Befriend the wives.

 

“Let the poor bastard have a beer. He works his ass off for you and the family. Right? Let him have a damn beer and enjoy himself.”

 

Next thing you know, the wives were on board, I’m dropping off flats of beer at a time, and the husbands are tipping me hugely.

 

As for the slow beer pourers:

 

“Here's $5 to bring me a full flat directly every time you see me coming.”

 

Done.

 

Next thing you know, while most were making $50 to $75 a game, I'm bringing in $475 in three-quarters of a football game.

 

This went on for a while, but my ex-girlfriend’s brother soon caught wind of what I was doing (I was probably flashing cash and bragging). The athletic director of McGill calls me into his office. I thought he was going to give me a job, to be honest.

 

‘This guy’s a genius. We should let him run all beer sales!’

 

He didn’t see it this way. Instead of investing in me, knowing I would help the university make money, he reprimanded me. His argument wasn’t based on the fear that I was going to get too many kids drunk—that argument I could have understood. His argument was I was going to be making more money than almost everyone working the game soon, and somehow this was a problem. He cut our commissions by 60%.

 

What do you think I did next?

I quit. So did everyone else that was actually working hard. (And we wonder why universities in Canada aren’t prosperous).

 

The lesson I learned from both this experience and from years as an engineer, is that in order to generate success and be profitable, incentives need to be aligned with all parties.

 

This isn’t happening in the fitness industry. Currently, our industry rewards slow beer pouring, so to speak. It means coaches don’t stick around in the industry for life because they’re not able to make a professional wage. It means clients don’t have a coach for life to look after their long term interests, and it means most gyms aren’t financially profitable.

 

I repeat, paying coaches by the hour rewards the wrong behavior. It rewards punching the clock. It doesn’t encourage coaches to go out in the world and generate business for your gym. It encourages them to come in and put on a great performance during the hour—showing off more than anything—and then they leave. When they’re not working, they’re not getting paid so they don’t do anything else.

 

Maybe some can have the right behaviors with the wrong incentives, but after a few years, it will file away all hope. One thing for certain: It doesn’t reward focusing on the long term success of the client, and that is the heart of the problem.

 

Why don’t we just pay them for the behaviors that we want instead?

Let’s reverse engineer this for a moment:

 

  • First, what behavior are we trying to encourage? What do we want for the client, the coach, and the business?

 

We want:

 

  • For the client: We want to get clients fit, keep them fit, and have them stick around for life so that they have a great life.
  • For the coach: We want coaches to be able to earn a professional wage doing what they’re passionate about—helping people get fit—and we want them to stick around for the duration of their career.
  • For the business: We want the business to turn a profit (minimum 20% profit for a healthy business), and ideally become a sellable asset one day, so you can retire and leave a legacy.

 

The best measurement of success here is Average Client Value (ACV) and churn (i.e. client retention). The higher the ACV and the lower the churn, the more success the client, the coach and the business will experience.

 

So how do we incentivize this?

Simple: Coaches should be paid based on gross revenue, and on clients sticking around. In the MadLab system, this means coaches are paid on a percentage of revenue basis, per client, for the lifetime of that client.

 

We think of compensation as a transfer of energy from coach to client. For a coach to affect a person’s life, it takes a certain amount of energy. The early fundamentals phase of a person’s training (in our system, fundamentals is one-on-one personal training) takes more energy from the coach, so the client pays a premium for the service ($65-$100 an hour and 18 PT sessions on average at most MadLab gyms) and the coach is compensated a percentage of revenue.

 

What percentage of revenue should you pay your coach?

It depends on how experienced and effective he/she is.

 

In our system, apprentice coaches start by shadowing mentor coaches. At this point, the apprentice usually doesn’t know how to charge $87 an hour for personal training or $300 a month for a hybrid membership, so he’s essentially a student. He shadows and learns and isn’t compensated yet.

 

Once he’s good enough that you can leave him with the client to teach the deadlift so you can at least go take a pee, you can start to give him a percentage of revenue. Once apprentices graduate from Junior level 1 (for the sake of brevity here, we will talk about the accredited coach development piece in another article), they begin making 20 percent of their clients’ gross revenue—30 percent if they find their own clients.

 

Graduation to the next level is always based on gross revenue and client retention.

 

Eventually, top coaches earn 50 percent of the revenue they generate, with the potential to earn 60 percent on other business they generate, such as any special programs they develop and off-hours personal training.

 

We have found this is the best way to keep clients (increases ACV, decreases churn)—to keep coaches around and earning upwards of $75,000 a year, and the best way to ensure the business earns a profit.

 

If you are in Southern California, I am giving a free MadLab 101 workshop at Fitessery on December 8, 2017

See more about: