Your culture is the sum of your 1:1 relationships.
Your gym culture is the sum of your 1:1 relationships with your clients.
Your staff culture is the sum of your 1:1 relationships with your staff.
Your “culture” is not how often your clients visit a bar together. It’s not how long they stick around after a workout, or even what they’ll wear to get bonus points in the Open. Your culture is relationships, and every relationship is 1:1.
You measure your culture by the LEG (Length of Engagement) of your clients. Great culture keeps clients longer.
In the Founder Phase, your culture is the sum of your relationships between yourself and your clients. You’re delivering your service yourself; if you build trust and empathy with your clients, you have a good culture.
A good relationship is a balance between friendship and objectivity. Your clients are not your friends, but your relationship must be friendly. You must stay professionally distant enough to charge money for your service; you must stay close enough to demonstrate your care. It’s not easy.
In the Farmer Phase, your culture is determined by your clients’ relationships with your team, and your team’s relationships with you.
Your team must understand your vision (we call this “The Owner’s Intent”.) They must also know that you care about their career and have a plan in place for them (we use the Career Roadmap exercise in TwoBrain.) They must see the horizon and know they can achieve their career goals on your platform.
Then your team must deliver 1:1 relationships with your clients the same way you would. This is the most challenging part of being a Farmer: handing over the responsibility for client relationships. Every staff person will have different personalities, strengths, and weaknesses. For example, one might be incredible at creating workouts for clients; but might not have a strong sense of empathy. Or one might be creative but not quite organized enough. For this reason, we always build a safety net into the Farmer Phase: we add a Client Success Manager role for 2-4 hours per week.
In the Tinker Phase, your clients’ relationship should be with your brand. This means they have to align with your company’s values and vision. Now you have six relationships to manage:
Your client’s relationship with your staff
Your client’s relationship with your brand
Your staff’s relationship with their manager
Your staff’s relationship with your brand
Your relationship with your direct reports
Your relationship with your brand.
In the Tinker Phase, we tell entrepreneurs to build a managerial layer (usually a COO or General Manager; a CFO; and a CSO, or Sales Lead.) These should be the owner’s three direct reports. In turn, they translate the owner’s intent, vision and mission with staff. Good Tinkers should be removed from daily operations, but still available to staff who have unique situations. For example, the CEO shouldn’t be the one with the key to the supplies cabinet, but should still be available to listen to a staff member with concerns about their career.
The Tinker must clearly define their brand’s values. She must answer questions like:
“How does our service fulfill our goal?”
“What will we NOT do?”
“Who is our perfect client?”
“What is the perfect delivery of our service?”
“How far will we go to solve a customer’s complaint?”
She must also define the language and behavior used by the brand. For example, the Tinker must have:
A Quality Control or Evaluation process
A Style Guide for brand media
It seems like the Tinker is too far removed from client interactions to influence company culture. But that’s not true: the Tinker’s role is to define and teach the company culture to their key staff, who reinforce the culture by tracking client and staff relationships.
At this level, companies must track LEG as a measure of their client-facing culture; and they must track length of employment as a measure of corporate culture. Many businesses make wild guesses about “employee culture”, adding pinball machines and free breakfast cereal. But they fail to measure the effect of their action on employee retention. That means they’re not taking their culture seriously; they’re just trying to be as cool as Google.
Like everything else in your business, culture is measurable. That means, no matter how poor your current culture, you can improve it. The key is to focus on one relationship at a time and measure your progress.
Maybe monthly pub crawls DO build a better culture in your business. It’s possible! But unless you’re tracking LEG, you’ll never know what’s actually helping your business.
By Anastasia Bennett, TwoBrain Mentor
Imagine you are driving a car and the dashboard stops working – what are you going to do? Stop and fix it, right? It’s pretty crazy how many business owners are driving their business without their dashboard working.
As a business owner, it’s your duty to understand your business’ financial position. You must use numbers to analyze what you need to work on, and what to develop to help your business thrive. You must get reporting and analysis reports on a monthly basis. If you don’t know where your business is going, you might end up somewhere entirely unplanned.
It’s surprisingly common that business owners don’t know how to translate reporting into real life. Good news! It’s not that hard and we are here to help you.
Accounting and financials do not have to be complicated and can be explained in simple language.
The most important reports that you need to track and understand are:
- Profit & Loss statement
- Balance sheet
- Cash flow
Profit & Loss
Your profit and loss statement is an accounting report that shows your income and expenses — and whether you made a profit or loss — over the financial year. It may also be known as an income statement.
There are lots of things that don’t show in the profit and loss report, things like:
- Debt repayment
- Loan repayment
- Lease on your car
- Tax payments
These things are covered by one of the following.
The balance sheet is a more detailed accounting report that shows what you own and what you owe at the time of the report. It’s the ‘snapshot’ of your business’ financial position.
Do you ever ask yourself where all money goes? Sometimes you look at your Profit and Loss and its showing that you made a profit but there is no cash in the bank!
Cashflow is money coming in, money going out and how much of it you have left in the bank at the end. Having a healthy cash flow means you are able to pay all bills when they are due.
Your Profit and Loss statement might be showing a profit even when there’s no money in the bank. That’s why we need to track cash flow as well.
A cash flow forecast is like a fuel gauge on your dashboard: it shows how much fuel you have and how far you can go before you have to get a refill. By the way, your savings account should have 2 months’ worth of expenses in it. If 2 months is a bit of stretch, try to start with 1 month and work your way up from there.
A cash flow statement should mean a lot to a business owner, because it shows how much money you had at the start of the month, how much you had at the end of that month, and what you did with the difference.
Here is how to track your cashflow every month. Get this information from your bank account:
- Starting balance
- Plus Income
- Less Expenses (including wages)
- Less personal drawings (wages to yourself through drawings and not payroll)
- Less Tax Payments
- Less Loan repayments
- End Balance
Financial statements can do more than report of the health of your business.
They can help you to see :
- what’s performing smoothly
- where you need to focus
- risks and opportunities
- potential nasty surprises
There are a few equations and ratios that are very helpful for making decisions within your business.
Knowing how to read financial reporting and being able to do bank reconciliations is beneficial if you need to reach out to the lenders or investors for your business or if you decide to buy a house or a building for your business. It’s also important for avoiding overtaxation. Ignorance costs you money. Overpaying taxes is the penalty for ignorance.
Numbers to track :
- Profit Margins
Your profit margin should be at least 10% after your wages are paid. Or, in the Profit First model, your profit margin should be 33% including your wages or drawings as the owner.
Expenses including staff wages and fixed costs $6,000
If you took $4,000 as drawings then your profit is zero
If your aim is to make 10% profit margin after your personal distributions then 10% of sales would be $1,000.
So , $4,000 less $1,000 = $3,000
Which means that you should only be taking home $3,000 for that month.
I can’t stress enough how important it is to understand your financial reporting. If you are not confident with your own abilities, hire someone who can do it for you and report to you monthly!
We recommend InciteTax, but if you choose to use someone local, that’s fine. Just get your dashboard fixed!
Demographic data is lying to you.
In 2005, the average family income in Sault Ste. Marie was just over $85,000 per year. Thirteen years later, it’s slightly less than $64,500. Yet Catalyst’s gross revenue has increased 600% in that time. How can that be possible?
Because average is irrelevant.
The problem with demographic data is that we only think about the mean. The mean is what you calculate when you put all possible options into a pot, and then divide by the number of original options. For example, if you add 5 plus 14 plus 20 and divide by 3, you’ll get 13. 13 is the mean average of 5, 14, and 20…but it’s not actually the same as any of those. 13 is not 14. 13 is definitely not 20. And 13 isn’t even close to 5.
Why is this important?
Because on hundreds of free calls with gym owner, I’ve heard one of these:
“We live in the poorest state in America…”
“No one around here will pay that rate…”
…It’s always true. And it’s never important. Usually it’s an excuse.
You sell a high-value service. That means it’s not for everyone. The average family in the Sault might not be able to afford Catalyst…not unless their health is a huge priority. But the highest-earning 20% sure can. They’re still here.
In fact, if you looked at a modal distribution of my city’s earnings average, you’d see a bunch of families earning over $150,000 per year; many families earning around $75,000 per year; and many families who really need financial help. I do a lot to help people who need help, but they’re not my client. I’m charitable, but my business isn’t a charity. I don’t set my rates based on “the average”, because my service isn’t average.
I also don’t try to target “soccer moms” or “old people”. I try to target Kelly. And Rob. And then I try to target Sam.
People don’t come to Catalyst for average reasons. Their reasons are unique to them. So I ask, “How can I help your dad?” and then I offer to help their dad.
Our groups are not average groups. Our groups are an assembly of individuals training together. We’re CrossFit coaches, not choreographers. We explain how the workout will benefit them today; then we tell them how they’ll achieve that result with the thrusters or burpees or whatever. We don’t just address the group average; we coach the individual.
The key to good business is knowing exactly who your client is, and what they want. That will help you know exactly who your next client is likely to be, and why they’ll come to you. It will help you decide what to charge them for your personal attention. It will help you change your question from “Who will pay $200 per month for CrossFit in my town?” to “What service is worth $200 per month to Rob?”
By Anastasia Bennett, TwoBrain Mentor
Why should you evaluate your staff?
“The goal needs to be to get the team right, get them moving in the right direction, and get them to see where they are making mistakes and where they are succeeding.”
― Daniel Coyle, The Culture Code: The Secrets of Highly Successful Groups
Regular evaluations during the year will help your staff have a clear understanding of how they measure up against their targets and standards.
The purpose of evaluating your staff is to give them an opportunity to grow.
Evaluation and constructive feedback is a gateway for improvement. Don’t wait until your staff do something wrong. Conduct your evaluations every 3-6 months, and schedule them in advance.
We teach consistency and evaluating your staff should be part of it. If you are consistent with your evaluations, there won’t be any surprises for your team. If you wait until they’ve done something wrong, that’s unfair to everyone. Be proactive, rather than reactive.
Evaluation sessions are a great way to acknowledge performance achievements as well. It will help your staff to feel safe and secure, It will build a stronger culture within your workplace.
“Group performance depends on behavior that communicates one powerful overarching idea: We are safe and connected.”
― Daniel Coyle, The Culture Code: The Secrets of Highly Successful Groups
It is very important to keep your feedback informative, positive and constructive. Coyle recommended using this line in your delivery:
“I’m giving you these comments because I have very high expectations and I know that you can reach them.”
Celebrate great performances in public: praise a staff person in front of your team. Give them visible rewards and tangible experiences. make sure everyone receives praise for their specific actions, instead of general “good job team!” posts. Team posts are the bare minimum; individual praise for specific traits or actions is much more powerful. Brag them up!
As a leader you should learn to have positive conversations and achieve good outcomes: active listening, creative thinking, asking critical questions, exploring concerns and interests, and constructive conversations.
Evaluations are a great tool for you to become a better leader, designer and successful business owner.
Here is a free sample of a Coach Evaluation for you to download.
When we teach metrics to business owners, we keep it simple.
Two of the metrics we teach in The Incubator are ARM (average revenue per member per month) and LEG (length of engagement). These are TwoBrain terms, but their simplicity is making them popular with others, so you’ll see them on software platforms and dashboards everywhere soon.
ARM is really a measure of sales and marketing. LEG is really a measure of your operations.
Each is a multiplier of the other. Amazing operations with no sales? You’re multiplying by zero.
Great marketing with low prices and poor retention? Zero. Failure.
We work VERY hard on sales and marketing. But our specialty is retention, and good retention isn’t about birthday cards and automated emails. Good retention is about systems.
What’s at stake here? An extra $45,000 per year for you, without attracting one. single. extra. client. or taking on one. more. dollar. of. cost.
But let’s make it simple: If you charge $200 per month, and keep a client for 1 month, then your marketing efforts were worth $200.
If you keep that same client for two months, your efforts were worth $400.
If you keep that same client for a year, your efforts were worth $2400.
If you keep them for ten years, your efforts were worth $24,000.
And the cost to acquire them was the same in EVERY CASE!
Here’s how we improve LEG through mentorship:
- Clear definition of roles. We want ONE person responsible for tracking clients. This gives that person a clear focus, for a few hours every week.
- Clear definition of success. We measure success by increased LEG. Are you getting better at retention, or not? If not, we give you followup actions.
- Gold standards discussion. What are the best gyms in the world doing?
- Mapping the client journey. What happens, and when? Listen to our podcast about it here.
- Setting up automations (flags, emails, actions, rewards, badging) along the client journey. Really, all the talk about “ten year gifts” and “sending birthday cards” is irrelevant without a system behind it. Those are all good ideas, but start at #1 to make sure you can do them consistently. Imagine sending half your clients a birthday card or PR text, and not the other half…
- Tracking LEG long-term. We want to know your LEG score every single month. Some software platforms (like Wodify) are getting really good at this.
We work 1:1 with around 500 clients from every continent in the world. We can’t visit every business in person. But using metrics like LEG gives us critical, unbiased insight into their gym: if their retention score is low, we know there’s an operational problem.
Every one of us thinks our gym is nearly perfect. We think our systems are amazing, that our clients “get us”, and that we’re building some kind of emotional bank account with them. That’s a fantasy. If your service is bad, your clients will leave. And they should.
We’re blind to operational problems because we think our kid is the most handsome in school.
“Every girl should love you, schmoopie! You’re mommy’s handsome boy!”
That’s why we need objective data, like LEG. And we need to track it over time to see the effect of our changes. Because we’re also totally enamored with our own ideas: when we start something new, it’s the best idea everrrrr, and we tell everyone about it.
“My baby’s got a new haircut! Everyone else is jealous of you, snugglemonster!”
But is the new idea having any real effect? Unless we’re measuring LEG over time, we don’t know.
Objective measurement like ARM and LEG helps your mentor remove personal bias from your business and give you clarity. It helps us prescribe action and build your profit. Sales are fun, but (don’t do it Chris) without retention (resist!) you won’t have a (he’s gonna do it!) LEG to stand on. (groan.)
Episode 132– Pebble
How you do anything is how you do everything.
In other words, consistency > everything else.
We can talk ourselves into anything. We’re masters of justification. We tell ourselves, “I can live with it” when we encounter small problems in our lives, and in our business. We avoid hard conversations because we fear the downside. We allow people to take advantage of our goodwill because, on balance, the relationship is slightly more positive than negative. But sooner or later, these little “pebbles” cause us to walk with a limp. We compensate for the bad habits of others. We shift our schedule around to cover. We stay at the gym to “make sure” a coach shows up on time instead of making sure they always show up on time.
After awhile, we just become accustomed to the limp. But others notice, and the more we compensate the more long-term damage we do to ourselves, until eventually we need surgical action to repair our problem.
Worse, in the service industry, we think no one notices our limp; that it’s our own private sacrifice. But they do. We think, “Clients won’t care if I jump into class and exercise with them instead of coaching them.” But they do. We tell ourselves, “My staff will know that they should take the garbage out when they leave tonight.” But they don’t. We’re willfully blind to the service we’re offering, and believe our clients will see past the overfilled garbage cans, past the never-answered phone, past the bad language of our 7pm coach…they won’t. They see our limp.
When problems grow to become crises, are they too late to fix? No. Pricing errors, even carried for ten years, can be corrected. We have the best surgeons in the world at TwoBrain. But that doesn’t mean it’s going to be easy, or painless. You’ll still probably require some rehabilitation, and we’ll be there for you when you do. But it’s SO much simpler to remove the pebbles in your shoe instead of waiting for a hip replacement.
In this episode, I share a half-dozen pebbles that I’ve removed at Catalyst over the years. Then I give you a few tips on taking action to identify and remove your own.
Some listeners might dislike the overall message here. Some might really dislike one of my decisions in particular. They’ll say “It’s my gym, and I’ll do what I want!” And it’s true: they own their gym. But it’s really their CLIENT’S gym. And if there’s a pebble in your client’s shoe, they won’t stand it for long.
Some of the Pebbles I’ve Removed (and How I Did It):
- Allowing “gym dogs”
- Giving discounts
- Selling access instead of coaching
- Offering each client an inconsistent experience
- Free trials
What areas of your gym need improvement? How are you doing as an entrepreneur? Take our test at www.twobrain.com/test and find out!
Then, with your mentor, identify the pebbles within your business and create a plan to start removing them from your life. The best way to get started is to start right away! The anticipation of removing the pebbles is often worse than actually doing so and because of this you need to get started right now.
2:17 – Ask yourself the important questions, What is my Pebble?
5:40 – Entrepreneurs are meant to get people away from saying maybe
6:29 – What pebbles did I incur when I started my CrossFit gym, Catalyst
7:47 – Why I don’t allow gym pets at Catalyst
11:03 – Is offering discounts to new or existing clients a good idea?
14:03 – Why I no longer sell Open Gym
18:43 – The importance of treating each of your clients with consistency
21:12 – Why I no longer do free trials
25:20 – How to determine the pebble in your shoe and maximize your gyms potential
26:34 – How to begin to start removing pebbles from your life and business
29:38 – Two Brain Stories with John Franklin