Let’s talk about the most common mistake I see new gym owners make…
REAL TALK: This one is a DOOZY. It comes from a wonderful place. And it’s hard as hell to back your way out of.
You see, many-a-new gym owner are excited for the chance to right the wrongs visited upon them by cruel and unfeeling bosses. This is admirable!
BUT this often leads to overcorrections. So in spite of the megastresses of running a business, their personal take home income is less than when they had a job. Eek!
The Core Issue: New gym owners often overpay trainers as a percentage of revenue.
It’s not uncommon to see payouts that are as high as 70% of the revenue collected in a given session. YIKES!
This only leaves 30% TOTAL left over to pay all other fixed and variable expenses like rent, marketing, facility needs… AND YOUR pay.
A related issue: we tend to undercharge members when we open up a gym. We want to price as competitively as we can. Because we’re new to gym ownership and nervous about sales. These issues compound.
Before I offer solves, let’s talk about how this breaks down in a financially healthy training gym…
Based on the Profit First standards, we shoot for 65% total expenses, with 35% left over to pay you, save for profit, pay taxes, and generally have breathing room. Sometimes smaller gyms can do better than this. And you may target a smaller percentage if you’re doing very high revenues.
Regardless, it becomes clear that we need to keep payroll low enough to afford the other inevitable expenses of running a training gym.
So what should we target for payroll? Depending on your model, healthy training gyms do best when direct cost of service –– the payout to coaches for facilitating sessions –– is no more than 20-30% total (including benefits and payroll taxes).
If your gym is smaller and you have almost no admin staff and your ONLY staff expense is the trainers, you can go a bit higher. In that situation, you could go as high as 45% total (including benefits and payroll taxes).
SIDE NOTE: While you can and should figure out what this works out to on an hourly basis, you should double check these numbers against your monthly revenue and your monthly payroll.
So if you’re making $30k/mo with some group model, your ideal trainer costs should be $6k per month. At 40 hours per week of training or classes, this works out to $35-$38 per hour. This is one full time coach around $55k per year for 30/hours on the floor, and one part time role. These numbers will work in a lot of markets. And they leave plenty left over for you to have some admin help, pay rent, spend money on marketing and education, and make a decent living.
I realize these numbers seem like a middlingly small payout for personal training. I get that. But this is part of why it’s hard to have one-on-one as your core service offering without other revenue streams.
One-on-one can serve its place. But to make sense financially, you need to pay based on the going rate for hourly training services, NOT as a percentage of revenue. If you charge an appropriate premium, the numbers can work.
You know what doesn’t work? Charging $75 an hour and paying out the coach $55 an hour.
So now that we realize we overpaid… NOW WHAT?
Real Talk: It’s VERY hard to fix if your team is now anchored to the higher pay rates
1) The easiest path is to raise prices and keep your current trainers’ pay at their current hourly take home. This may still require some explanation, but so long as their net hourly income doesn’t go down, you won’t get much pushback.
(Need help raising your rates? I did a whole video on that very topic HERE.)
2) When you bring in new trainers, bring them in at payouts that actually work for your business.
Don’t pay them as a cut of revenue. Pay them at an hourly rate that’s fair and competitive in relation to fitness studios.
This isn’t an immediate fix, but over time, it can help right the ship and get your payroll percentage into a more reasonable place.
3) You CAN reduce pay for your trainers in emergencies. But this should be avoided at all costs, and only when necessary.
If you do need to go that route, you have to handle it very sensitively, explain the WHY, and be prepared to lose coaches. You’ll also have to monitor for “quiet quitting,” as your coaches may not have another obvious option, but may be deflated by the pay decrease and lose their twinkle.
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At the end of the day, financial benchmarks are just guides. So long as you’re making a fair take home income for the stress and hours of running a business, you’re welcome to divvy up your expenses however you like. YOU get to decide what that means for you, both as a percentage of revenue AND as absolute dollars in your market and situation.
Furthermore, we’re in the service business: investing more generously in your humans is ALWAYS better than investing more generously in non-people expenses like premium facility toilet paper.
But if you’re working 80 hours a week and stressed about your own personal expenses, you can’t do this sustainably. And the only way to fix that is to grow your revenues AND adjust expenses.
Always believing in you,
PS: Here are four ways to get more BFU in your life:
- Learn more about our coaching group The Unicorn Society HERE.
- Subscribe to our Business for Unicorns podcast HERE.
- Subscribe to my YouTube channel HERE.
- Pick up a copy of my (new!) book HERE.
PPS Speaking of “more BFU,” have you checked out my YouTube channel lately?
To see my latest video, click the thumbnail below.
