March
28
2016

Episode 23: How To Raise Your Rates

By Chris 0

shannan

You should be able to make a great living from 150 clients.

The “low-rate, high-volume” approach doesn’t work. Every week, I get on a phone call with a gym owner who sums up their failing business this way:

“I just need more clients.” Usually, they don’t.

As strong gyms begin to absorb weak ones, owners on the cusp of success are finding their way to our mentorship at an increasing rate. In many cases, one of the first orders of business is to increase rates and eliminate discounts.

Usually, the gym owner is nervous about raising rates. Sometimes they realize it has to be done to save their business; these are the lucky ones, because the burden of choice has been removed from them. But with the strategy I’ll outline below, the process is NEVER as bad as they think, and usually results in a large immediate gain.

Shannan Garcia purchased Adamant CrossFit when the gym was at a low point. It had a great community, led by a charismatic coach…but wasn’t even breaking even. Her plan was to wait a few months, then gradually raise rates. But we decided the change presented the perfect opportunity to make the business sustainable. So over the course of a weekend, Shannan implemented a multi-part strategy to make the gym sustainable long-term.

You’ll see the outline of that strategy below. But first, listen to Shannan’s story, and ask yourself, “What do I really have to lose?”

Rate Increase Template

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Here’s the strategy:

  1. Calculate how much each member SHOULD be paying to create your “perfect day.” Base this calculation off 150 members. More isn’t better.
  2. Determine a date for the change. You’ll want to give members about 10 days’ notice: enough to be forewarned, too little to ruminate. Note: if you have a cancellation policy larger than 10 days, you have to provide longer notice than the cancellation period. And if someone’s on a long-term contract, you have to honor that rate. Good luck.
  3. Post about the change on your blog; share on your FB page; email to all members. Eliminate any possibility that a member won’t find out. Use the template below (mentoring clients customize this process with me, of course.) Delete this post after the change occurs so future members don’t see it.
  4. Email the “worst offenders” personally. There should be fewer than ten here. Follow the same template, but add a dollar value: “Your discount has resulted in a savings of $830 per year, or $4150 since we moved out of my garage…”

Now, the tough part: overcoming YOUR fear.

Most of the awkwardness, resistance and anger you’re picturing in your clientele is really just you projecting fear onto them. So we’ll use Stoic philosophy to imagine the worst-case scenario.

  1. Calculate projected gross revenues if everyone in your gym moves to the new price without discounts. Let’s say it’s going to be 100 clients X $150 = $15000.
  2. Subtract your current gross revenues from that projection. Let’s say it’s 100 clients X an ARM of $125 currently ($12500 total.) The difference is $2500/month.
  3. Divide that difference by the new membership rate. This will tell you how many clients you can lose and still make the same income (with fewer coaching hours, probably.) $2500/$150 (the new rate) = 16 clients, for example.
  4. Walk through your client list. Can you identify 16 clients who will DEFINITELY quit when the rates go up? If not, you’re crazy not to do this, especially if your business isn’t providing you with a good living. Prepare yourself to lose those clients (but you probably won’t.)
  5. Hit “send.”
  6. Call your mentor every few hours with updates.

Over the last three months, I’ve been through this with six different gyms. The process gets more refined every time, but NEVER comes close to reaching the “acceptable limits” for attrition. Usually (as in Shannan’s case,) 1-2 members will drag their heels because they’re scared of change, and might even quit. Some might return. But keep this in mind: the clients, coaches and gym required to get you to “perfect day” is probably not the same one that got you to this point.

Every gym is different; that’s why we do one-on-one mentoring instead of selling the same “system” to everyone. But if you really want to DIY, this template will take you a LONG way.

If you want help, there’s RampUp.

And seminars!

Recorded on March 25, 2016.

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