If you could do one thing to generate more revenue, what would it be?
Almost every gym owner I ask says, “Get more clients!”
But that’s not the fastest, easiest or smartest way to get more revenue.
Here, I’m going to show you why focusing on average revenue per member (ARM) is actually better than increasing your headcount.
Every Client Comes With Costs
In a service business, every new client costs you. You have to meet with them at intake. You have to pay a trainer to onboard them. You have to call them to keep them on track and follow up with them. You have to buy more equipment and increase your space. Your payroll goes up as you add clients—and this can actually kill gyms.
One old myth in the CrossFit space was that group training scaled better than 1:1 training. In theory, it’s true: One trainer working with 30 people nets the gym a higher return. But in practice, the concept failed.
Gyms went underwater when they leased space for 30, bought equipment for 30 and staffed for 30 but only had an average class attendance of seven.
Even in a karate dojo, where 1:30 is more common and practical, high churn means more marketing. So marketing costs scale up as the business ages.
While costs of production drop relative to client headcount in a product business—think shoes and software—that’s just not the case in service businesses. Coaches and gyms need constant client contact and support, so costs rise with every added client.
You can’t outrun your expenses by just increasing headcount; you have to increase revenue relative to the number of clients you have.
A gym with 300 clients and low rates will struggle to keep the doors open. A gym with 150 clients and a higher ARM can easily provide a $100,000 income to its owner and carry full-time and half-time staff members.
And when ARM goes up in that gym, it doesn’t come with additional expense. So the new revenue drops straight to the bottom line.
New Clients Leave but ARM Sticks Around
Clients can come and go, but when you set your rates, they never go down. And we work hard to help gym owners increase length of engagement because ARM and LEG are multipliers of each other.
I’ve had hundreds of gym owners tell me, “My clients don’t pay much, but they stick around for 10 years!” That’s great—you’re making a difference in their lives. But if you’re martyring yourself to help them, that’s not fair, and it will become unsustainable at some point. Solid ARM sets you and your business up for long-term success.
In the end, large revenue numbers are generated when gyms have enough clients and high value per client.
But don’t take my word for it: Let’s review what the top revenue earners on our most recent leaderboard said. Here they are again (these are monthly average revenues):
And here’s what some of the gym owners on the leaderboard had to say about ARM:
“We sat down with each of the current clients and asked about goals, giving them solutions. ARM at [gym name] is $600.”
“Find products for your customers. … This isn’t overselling. We know that people go outside our facility for different services that we don’t offer. Our first focus is on helping, getting solutions to their problems. Servicing PT, nutrition and group, being consistent with that, has helped us maintain our client base.”
“Acquisition has also gone well, but we’ve turned our focus to servicing the members we have.”
“We moved everybody to 2023 rates and didn’t have a lot of kickback. We do provide a lot of value, and the experience is unlike any other gym. There’s nowhere else on Earth that you can go to get the same experience. We have the full package, and that is hard to find.”
“Our demographic is older—they are looking for function. Look at the population cohort of the Baby Boomers: more educated and affluent. It’s wise for gym owners to focus on this demographic.”
“We are a big gym, 300-plus members, so we’re trying to get ARM and LEG up.”
If you want to bulk up your business, you need to work hard to increase ARM. We can help: We have a host of proven, data-backed tactics our clients use to measurably improve ARM. To find out more, book a call here.
