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Are Your Group Classes Costing You Money? Calculations and Solutions.

Are Your Group Classes Costing You Money? Calculations and Solutions.

Chris Cooper (00:00):
At Two-Brain Business, we have hard data on class size and gyms, and we know the ideal number of participants. So gym owners don’t need to guess anymore. You don’t have to try and figure out your culture or any other unmeasurable elements to figure out how big should your classes be. I’m Chris Cooper. This is “Run a Profitable Gym.” Today, I’ll tell you how many people should be in your classes. I’ll tell you how much each class is paying you, and I will give you a plan to address those sessions that are only attended by one or two people. What do you do with them? I’m also gonna give you proof from the largest data set in the microgym industry. So first, let’s start with data: real numbers on retention. There’s two primary metrics we want to track here. The first is called length of engagement or LEG.

Chris Cooper (00:50):
It’s a key business metric, and what we’re measuring is how long a client is likely to stay in your gym. The second metric is adherence. This is a key retention metric, and adherence asks “how often do clients show up in relation to the plans they’ve purchased?” So if they’ve purchased a plan for three times a week, how many times do they actually show up compared to what they’ve bought? Now, both long-term retention—LEG—and adherence are highest with one-on-one training. And this makes sense. A client has paid a premium to have an appointment with somebody, so they’re very likely to keep it. This one-on-one setting is also where clients make the fastest progress. So they have both the intrinsic and the extrinsic motivation to show up. But when you go to a two-on-one, three-on-one, four-on-one class, retention and adherence both drop.

Chris Cooper (01:48):
There’s a few reasons. In my experience, the added partner accountability effect is really offset by the partner conflict. So, for example, “Well, Coop, Sam is tied up at work, so we’ll just cancel our two-on-one training for both of us, and we’ll make it up next week.” So instead of one partner dragging the other one into the gym, one partner can actually drag the other person down or derail them. Now the numbers are consistent when you go from two to six, but then they go up. So a class of seven has the second-best retention and adherence rates after one-on-one training. Best retention: one on one. Second best: seven to one coach. The benefits of groups really start to show for the gym at about seven people, and that value doesn’t change much until you get to about 12. So retention and adherence, both are fairly high between seven and 12 people in your class, but then they drop at 13, and they absolutely plummet off a cliff after that.

Chris Cooper (02:49):
And the data makes sense when you think about it. Groups larger than about a dozen people can be fun, but people can also feel as if they’re a number. Like “nobody will miss me if I’m not here.” Or the coach’s attention might be split too many ways. So some participants don’t get the personal contact and connections that they need to stay around long term. If you think about it in your own gym, think about the clients who’ve been there the longest—five, six years. They probably started when your groups were small, and they had lots of one one-on-one attention. They had lots of relationship building, lots of one-on-one coaching from you. Now here’s one note on the data. This data is based on one coach per class, with participants doing variations of the same workout. So they’re doing CrossFit, but it’s scaled.

Chris Cooper (03:35):
They’re doing yoga, and they’re all doing the same moves, but they’re doing slightly different variations with blocks or straps or whatever. And adding a second coach might solve part of this problem, and adding a client success manager might improve the connection between classes. Part two: Some well-run gyms use semi-private training, and they have amazing retention when four clients do personalized programs at the same time. But this requires a really precise plan executed by a skilled coach who can give significant levels of personal attention to up to four clients at once. And successful semi-private programs are backed up by airtight, fully documented client journeys designed to maximize retention and adherence. So small differentiator here: a small group, poor retention. They’re all doing the same workout, slightly modified for each person. Semi-private: high retention. They’re all doing their own specific workout program, and they’re getting one-on-one attention, but the coach is going from you to me to the next person, too.

Chris Cooper (04:39):
So, in summary, the people who do personal training have the best retention rates. They stick around the longest, and they’re most likely to show up. If you’re doing group classes, try and keep your group classes in the seven-to-12 range for maximal retention. Now let’s talk about are group classes actually costing you money? Here’s how to find out. For a decade from 1998 to 2008, I coached people one on one, selling my attention for an hour at a time. I found CrossFit around 2007. And in 2008 we tried our first CrossFit trial group at Catalyst. It was free, you know, face palm, but I remember saying, “This is all I wanna do for the rest of my life. This is so much fun. It feels like when I’m doing workouts with my friends.” A year or two later, I had two locations. I showed up at 5 a.m. to mop the one location, and I would coach this tiny class of two people at 6 and then another tiny class of three people at 7.

Chris Cooper (05:40):
And then I would rush back to my personal-training studio. I’d keep coaching one on one until 4 p.m. and then go back to the CrossFit group-training gym. That whole time I was wondering why I was losing money. But it all comes down to simple math. So I’m gonna show you how to figure out exactly what your groups are paying you. So there’s eight steps to calculating the value of your group classes. Step 1 is to add up the total revenue that you receive from all group training each month. Step 2 is to divide that by the number of classes you run at your gym per month. That’s the average value of each class. Now go back to your total group training revenue. This is Step 3. Divide that by the number of people paying for group training. That’s your average revenue per person per class.

Chris Cooper (06:31):
That’s a really important number to know. Fourth, divide that number, revenue per person per class, by your average attendance. So how many times does the average client attend a group in a month? This will tell you the value of one person attending one class. Fifth, pull up your attendance tracking sheet and look at each group you run. So multiply the average attendance for each group by the average value of one single group training client. I’m gonna go through an example in a moment—don’t worry. But this will give you a specific value for each group. And then you compare that average value for each class against that of each class on your schedule. And then you’ll see what the average class drives in revenue, and which classes are pulling you up and which classes are actually pulling you down. And then you compare the average value of each class against your personal-training rate.

Chris Cooper (07:26):
And you can ask yourself if there any spots where you would make more money taking a one-on-one client instead of running a small class. Now, this last step, number eight, is kind of dangerous. You might not wanna do it. But compare the average value of each class against what you would be paid to work at McDonald’s. And maybe skip that step if that scares you. Some people are delivering classes for less than they would make driving an Uber or working at the drive-thru window. All right, so here’s our example. Let’s say that Sarah has a gym with a hundred clients, and she grosses $10,000 per month in group revenue only. She runs 40 classes a week, or 172 classes per month, which is 40 classes times 4.3 weeks in a month. That means her average revenue per class is $58.14. Now, Sarah’s average client, again pays a hundred bucks a month, and the average client attends about 15 classes a month.

Chris Cooper (08:20):
That means the average value of one person attending one class at Sarah’s gym is $6.67. Now her average group size is about eight or nine people. So spread out across all her groups, if she took a mean average, she’d have eight or nine people in each one. If Sarah runs a class for eight people, she makes $53.36 an hour in revenue. That’s not income. If the class has nine people, she makes $60.03 per hour. Now Sarah charges $65 per hour for personal training. So she needs to get 10 people in a class to earn $66.70 cents and beat her personal-training rate. That’s where it’s worth it. If fewer than 10 people show up for her class, she would actually make more by doing a one-on-one session in that same time. If 11 or more people show up for that class, Sarah makes more than 73 bucks per hour.

Chris Cooper (09:16):
Now keep in mind that our 2022 “State of the Industry” report revealed that the average group class attendance in a microgym is 6.6 people. Almost nobody in the data set is consistently running classes with an average of over 10 attendees all the time. So building your business on the target of running large classes all day is just not a good idea. A mentor could help Sarah solve this problem, and Sarah’s mentor might ask these questions and a few others. So first, what is the best use of Sarah’s time in any hour? For example, should she cancel her poorly attended 10-a.m. class and fill that spot with a high-value personal training client? And the answer is almost certainly yes. Second, how soon can we adjust her group rates to reflect the value of her coaching? So if her group rates go up by even 20 percent, then the number of people per class that she needs to make money goes down.

Chris Cooper (10:14):
Amazing. Third, how could she acquire more personal-training clients? And Two-Brain has an exact plan for this. Fourth, could she sell hybrid memberships to increase client value? Almost definitely. Fifth, could she start using semi-private training to generate more revenue per hour and give clients that personalized one-on-one service? Now, our mentors evaluate each situation carefully and then they present a step-by-step plan to each gym owner. That plan includes clear tactics and implementation plans, done-for-you assets, guidance, support, accountability. And in case you’re determined that you need to move or cancel some classes. I’m gonna tell you how to do that next—because the reality is that if you’re undercharging, then you’re working really, really hard to get a lot of people into a class that might actually cause your retention to dip. Look, if you need 13 people in a class or 14 people in a class to make your revenue target, you are entering into the territory of high churn.

Chris Cooper (11:20):
And if you compare what I said at the start of this episode, where retention starts to drop off at the 13th member, but you need more than 13 in a class, then you are running a model where you’re not gonna have amazing retention. The two numbers are conflicting with each other. So at this point, you’re actually better off to have fewer people per class or switch to semi-private or personal training and raise your average revenue per member up. Your retention will be better. You’ll have a more solid base. Am I saying that’s the case all the time—that you can’t make a good living with a group-training model? Of course you can make a good living with a group-training model. The key, though, is that after you crest that number of like 13 people in a group, you have to be able to afford a second coach or your retention is just gonna get worse and worse and worse.

Chris Cooper (12:14):
And to be able to afford that second coach, that means everybody in the group has to be paying more so that you can cover that expense. So whether you’re going for groups under 12 or groups over 12, your only play is to have high client value. And when Sarah is charging a hundred bucks in that example, she did not have high client value. And so she was caught either way. Either she has a small group size—which most do, under 10—and she doesn’t make any money on that group. So she can’t pay a coach. So she has to do it herself, and she winds up making a low income or she folds. That group with 30 people has horrible retention. She churns people out really quickly, has to turn to marketing to replace those people and gets burned out. You know, so it’s it charging your actual value or charging a high value for your service is really the most important point here.

Chris Cooper (13:09):
But this is how retention goes back and forth with client value and how even if you have a gym with 300 members and you’re running classes of 30 people, this is what can sink you. So, alright, what do you do with these classes that are under attended? Do you kill it or do you fill it? In almost every microgym, there’s one or two little tiny classes of one or two people that’s actually costing the gym money. Even if the class brings in a few bucks, it’s just not worth keeping. So let’s use an example based on the calculation from the previous part of this talk, right? Imagine a gym makes $6.67 per attendee in a class. So first, if the owner pays a coach to run that tiny class for one or two clients, the owner is actually losing money on the session.

Chris Cooper (13:57):
If the owner takes the class personally and coaches it themselves, then they’re skipping the opportunity to grow their gym. They’re selling their time very cheaply. They could be better using that hour to do marketing and sales or being mentored. And many times, the owner would actually be better working the morning shift at a local drive-thru or driving an Uber. Simply making a class time available on the schedule won’t fill the class. That old acorn of “if you build it, they will come,” it’s a total fantasy, but still, none of us gets this right the first time. So here’s how to set your schedule. You can click the link below and I’ve got another link for you to click about how to change your schedule after you set it, since none of us get it right the first time. You’re best off setting up your schedule based on when your best clients are available to come.

Chris Cooper (14:46):
And that might have something to do with your location. And then set it quarterly so that you can change this the calendar over time. All right? Remember, your greatest leverageable resource as an entrepreneur is your time. You can invest that time in a class that pays you 20 bucks or you can invest it into a personal-training client who pays you 70. You could also invest it into marketing or ordering supplies or designing T-shirts or tasting supplements or arguing on Facebook with other gym owners who are posting memes on Instagram. It’s your time and your choice, but knowing the value of how you spend that time is absolutely critical for your success. I’m Chris Cooper. This is “Run a Profitable Gym.” And if you want to ask questions about this or any episode, we have a free group called Gym Owners United. There’s over 7,000 gym owners in there. It’s a very friendly, very positive group. Nobody’s gonna try and sell you anything in that group. Nobody’s gonna call you out or say that your question is bad or dumb. We’ve removed all those people. Just go to gymownersunited.com. Jump in and grow your gym.

Thanks for listening!

Thanks for listening! Run a Profitable Gym airs twice a week, on Mondays and Thursdays. Be sure to subscribe for tips, tactics and insight from Chris Coooper, as well as interviews with the world’s top gym owners.

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