“I’ll let people try my service for free, and then make it up on the back end.”
“I’ll pay my staff a salary and then pay myself when we’re profitable.”
“I’ll take some money out of the business when we reach 100 members.”
Entrepreneurs open a gym for all the right reasons: they want to help people. They want to share the gift of fitness. And they want to tear up the old myths about health and food. They’re passionate. And they’re usually generous to the point of hurting themselves.
They tell themselves that “leaders eat last” and that they’re “playing the long game”. They keep kicking their success down the road. And most never, ever catch up. I was that way too.
Here are some of the methods we teach to help owners get profitable NOW:
1. Profit First. Listen to the episode with Mike Michalowicz here. Paying yourself first means you’ll pay yourself, period. My favorite “profit first” analogy is the toothpaste tube. When the tube is new, you’re pretty loose with the paste. If you spill some, it’s no big deal. If you use more than you need, no problem. But at the end of the tube, you’re squeezing every last drop out. You’re rolling it up; folding it; pressing it against the sink. That’s how money works, too. If the rent is due, you’ll hustle to pay it. But if it’s your own pay on the line, you won’t. Pay yourself first, and you’ll always have the money.
2. The 4/9ths Model. Every staff person should generate 2.25x their pay. Instead of shouldering all the risk with a salary they might not even want, give your staff opportunity. Work always expands to fill the time you give it. The old industrial model of a 40-hour-week for a fixed check is demotivating; gets far less work accomplished; and caps your staff’s potential. It also puts your cash flow at risk. In short, it puts the owner LAST. In an owner-operator business, that can be deadly. Pay your staff 4/9ths on group classes, PT and specialty programs. Show them the opportunity to make more money. Slowly move other roles onto their plate, and pay them separately for those roles.
3. Collect up front, but pay your staff on delivery. Some owners sell personal training packages, and then immediately pay their trainers their share before service has been rendered. This is very demotivating, because the money will be spent long before the sessions run out. What happens when the trainer wants to take a vacation? They keep the money and the owner provides the service for free. What happens when the trainer does a bad job? The owner is forced to keep them around…at least until all of the sessions are fulfilled. What happens when the trainer leaves, or just stops showing up? It’s always the owner who gets caught. Collect from your clients in advance, but never pay ahead of delivery by your staff.
4. Build an annual plan. If you’ve been tracking your metrics, you’ll know where the peaks and valleys are in your business. Bridge those valleys with specialty programs, events, or other cash spikes. Use our free tool here.
5. Don’t be scared to carry a balance. Many gym owners think it’s wise to bring every credit card to zero every month; to buy things only with cash; to impoverish their business instead of carrying a loan balance. It’s not wise; it’s a starvation diet. Years ago, when my bank account hit rock-bottom, I was making maximal payments on my loans and paying off my credit card balance every month. Finally, when I couldn’t starve my family any more, I reached a point where I didn’t have enough money to cover payroll. I called the bank and asked them to refinance my little $15,000 loan. The loan officer said, “Yeah, sure. You’ve never done this before? Everyone does this!” I spread my loan balance out over 5 years, cut my payments in half, and breathed easier. Of course, I paid off the balance before it was due. But giving myself that little breathing room helped me sleep at night, be less distracted with my clients, and keep my staff paid on time. I needed that short-term win to get me through the bigger battles ahead. Read more about Good Debt and Bad Debt here.
6. Finally, remember that your business exists to serve your family first; your clients second; and your staff third. Read “How Much Suffering Is Enough?” here. You didn’t open a business to be a fundraiser for the government or Rogue or CrossFit HQ. You did not open a business to take a vow of poverty. You opened a business to eat. People who don’t own successful gyms often don’t understand this: your martyrdom doesn’t make your clients fitter. Your starvation doesn’t keep them around longer. You’re not helping anyone by working a 15-hour day, and you’re definitely hurting your family. Keep that perspective at all times.
Someday your ship will come in, right? You’ll just keep doing the things and doing the things and showing up, and somehow things will get better.
Wrong.
Nothing changes until you change. You tell it to your clients, and it applies to you too.
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