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Gym Owners: How Do You Measure Your Success?

Craig “Patty” Patterson
Guest Contributor
Business, CrossFit

Two gym owners meet for the first time. Gym owner A asks gym owner B: “How many members do you have?” Gym owner B replies: “Around 120. You?” “We just hit 150,” replies gym owner A, preening with confidence.

 

All over the world, gym owners do this: They drop the question, “How many members do you have,” assuming the answer tells them something about the success, or lack of success, of their business. I’m here to tell you this question is irrelevant. If you’re still asking it, you’re thinking like a 19-year-old, who thinks the coolest kid in class is the one with the biggest bench.

 

“How many members do you have,” tells you nothing about the business’ profit margin, nothing about client or coach retention, nothing about average client value (ACV) or total coach pay. Yet everywhere I turn, I hear gym owners striving to hit what they perceive to be new milestones—be it 100, 150, 200 members—their thinking being, ‘If I just get another 30 members, I’ll start making money finally!’

 

So how should you measure your success?

 

Let’s define success first for all parties involved in the business, in other words, what does success mean for the client? The coach? The business?

 

What is a successful client?

A successful client is someone who sticks around. Thus, client success should be measured in two ways:

 

1. Client retention (churn)

2. Average client value (ACV)  (How much are they paying you?)

 

Again, this is really simple, people are paying you a bunch of money and not leaving. Good, right?

 

Good numbers to strive for here are 20% annual churn. Great is less than 10%, and 5% is sublime. We have had years in Vancouver, where I have been running my gyms for many years, where we lost just 4%), and an ACV of $275/month (which includes one PT/6 weeks + unlimited classes membership).

 

What is a successful coach?

Similarly, a successful coach sticks around and earns a professional wage. Coach success should be measured by:

 

1. How long have they been in the industry (and at your gym)?

2. How much are they getting paid (as well as dollars per coach hour)?

 

If you have coaches earning more than $75,000 year, they’re probably pretty successful and will likely stick around for years to come. If they’re having to work 60-plus hours a week to earn a professional wage—or they aren’t able to make a good living at all—chances are they won’t stick around for 25 years.

 

Our top 5 coaches averaged $74,400 in take home pay before taxes, working an average of 33 hours per week at an average of $47/hour, with 4 weeks of semi-paid vacation. Our top coach made $104,000 in 2017.

 

What is a successful business?

What is your EBITA (earnings before interest, taxes, and amortization)? In other words, profit! Business success should be measured by:

 

1. Profit

2. What did you (the owner) pay yourself last year?

 

In this industry, most independent gym owners earn $0 profit. The biggest reason why is because the owner works so many hours that even if they paid themselves $15 an hour, there’s nothing left over.

 

This is most evident by the surveys Zen Planner has done on many segments of the industry. In the financial survey of affiliate gyms, there wasn’t even a line item for Owner Pay. There also were no line items for:

 

  - GM pay

  - Marketing manager pay

  - Mentor coach pay

 

Once you know how to measure success, it becomes much easier to make business decisions. Whenever you’re making a decision, you need to factor in how that decision will affect the client, the coach, and the business? Let's take a couple of typical examples of what owners do to drive business: the challenge and more group classes.

 

Should I run a  6-week on-ramp or fitness challenge?

 

Consider:

 

• How will it affect client churn rates? (Group OnRamps traditionally churn 70% after one year).

 

• How will it affect coach pay? 

 

•How will it affect Coach retention? 

 

•How will affect average client value?

 

Should I pay my coaches $25 an hour to coach a group class?

 

If this means they’ll need to coach 60 group classes a week to make a half decent wage, then the answer is, once again, no.

 

Oh, and the next time you run into a new gym owner and you’re tempted to ask him how many members he has, shift your thinking and ask him what is his average client value and churn rates are instead. If he even has an answer to those questions, my guess is he has a decently successful business that’s moving in the right direction.