Why is average revenue per member (ARM) so important?
Because it’s an incredible force multiplier in a service business.
Here’s your mental exercise for today: Take your current ARM and double it.
Now ask yourself this question: What if every new client came into your business at that rate?
What would that do for your business—and your life?
And just in case you’re skeptical about the “double it” exercise, you should know that our Top 10 gym owners for ARM scored between $430 and $800 in December 2023.
So large ARM numbers are possible.
High ARM at Ground Level
Most microgyms are a long way away from $400 ARM. Some charge less than $100 per member per month. Others sell group training for about $165—the average monthly price in our “2023 State of the Industry” report.
Let’s put that into perspective:
If you get 10 clients at $165 a month, the No. 10 gym on our leaderboard can make more with just four clients.
Think about acquiring 10 clients:
- You must get a bunch of leads—perhaps by spending money on marketing or time and effort on referral networks—and you must convince some of them to book free consultations.
- You must get the people who book appointments to keep them (not all will).
- You must close 10 sales—and if you aren’t great in the sales office, you might need 20 or 30 appointments to do that. That’s a lot of time—and even if you go 10 for 10, you must spend valuable time in the sales office.
- You must onboard 10 new clients.
- You must work very hard to get the 10 new clients past the 90-day mark, when they are most at risk of leaving.
Ten new members also require more “stuff.” If you’re bulking up your client count, you’ll need more space and staff, and other expenses increase as well. Toilet paper is just one that provides a good example, but you can factor in chalk, retention “gifts,” increased wear and tear on equipment, and so on.
Member Count, Entrepreneurial Skills and Profit
Let’s go further: If a gym with $427 ARM needs 100 members to be very profitable—this is a random number used as an example only—a gym with $165 ARM needs about 258 to reach the same gross—but remember that more clients mean more staff, space, equipment, etc.
And here’s the deal breaker for me: Gyms with over 150 clients are almost always the gyms with the worst retention rates. It’s an extremely fragile model.
Gyms with lots of clients require top-tier owners, large teams and impeccable systems to run well. Many entrepreneurs just don’t have the skills to manage huge staffs and hundreds of clients.
Some Two-Brain mentees have a lot of members and work very hard to develop the skills needed to retain and manage them, but our data shows the average gym has about 159 members.
If you’re targeting a huge number of members, you’re going to fight an uphill battle. In reality, you’ll be better off maximizing value for about 150 members than chasing 300. Or you’ll be better off targeting 150 high-value members first, then deciding if you want to pursue larger numbers.
The good news: We’ve proven that you can make $100,000 a year if you have 150 members who pay $205 a month. Those are great first targets. If you hit them, you’ll make a good living, and you can make your next move from a position of strength.
Maybe your gym is running well and your systems are primed for more members. You can take that path if you want.
Or maybe you want to deliver more value and earn more with the same number of members. If that’s the case, drive your ARM up—150 members at $240 a person is $36,000 gross per month, or $432,000 a year! With a 33 percent profit margin—another good target—an owner can earn way more than $100,000 from that gross.
Why did I pick $240 for the example above? It’s the average group membership price—$165—plus one PT session at the average rate in our study—$75.
Could you sell 150 PT sessions a month to your current clients? What about 30 to start?
Deliver Value to Clients!
Remember: ARM isn’t about gouging or artificially driving up prices.
It’s about delivering value.
Your A+ coaching in a group setting is worth more than $150. What if you tack on a PT session and nutrition coaching? Or a kids membership for a family member?
If you can solve a client’s problems, you deserve to be paid for that service. So find the problems, create amazing solutions and boost your ARM!