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 Two-Brain 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.
Breaking It Down
Let’s make it simple: If you charge $200 per month and keep a client for one 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 $2,400.
If you keep the client for 10 years, your efforts were worth $24,000.
And the cost to acquire the client was the same in every case!
Learn to Retain Members
Here’s how we improve LEG through mentorship:
1. We clearly define roles. We want one person responsible for tracking clients. This gives the person a clear focus for a few hours every week.
2. We clearly define success. We measure success by increased LEG. Are you getting better at retention or not? If not, we give you follow-up actions.
3. We discuss industry gold standards. What are the best gyms in the world doing?
4. We map the client journey. What happens and when? Listen to our podcast about it here.
5. We set up automations along the client journey. These automations include flags, emails, actions, rewards, badging, etc. Really, all the talk about “10-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 but not the other half … .
6. We track LEG long term. We want to know your LEG score every single month. Some software platforms (like Wodify) are getting really good at this.
Dig Into Your Data
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 gyms: 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 ever!—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 measurements like ARM and LEG help 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.)