Salaries are really about risk.
If you pay your staff salaries, you bear all the risk for their performance. You’re incentivizing them to show up. It’s a fragile model, because it limits their upside and puts them at high risk when cash is tight.
The alternative is Intrapreneurship: If staff create value for your business, they’ll be truly irreplaceable.
Every staff person should generate at least 2.5x what they’re paid or create the time for someone else to do it for them.
Get our free “Intrapreneurship 101 Guide” here.
You can use the Intrapreneurship model to give your staff the freedom to earn money without a ceiling and without the time-cost of becoming an entrepreneur. You shield them from risk and give them a high-leverage opportunity: They use your platform and your audience to deliver their excellent coaching.
But when you have around 150 clients, you might want to make your first salaried hire: a general manager. This is someone who’s responsible for maintaining the excellent delivery of your service while you focus on growing your gym.
When people receive a salary, they also carry the burden of responsibility. The salary creates some time flexibility but also time risk: A salaried person must be willing to solve problems instead of report problems.
For example, if a staff member is going to answer the phone in the middle of the night, rush to the gym to meet the plumber and stop the flood, then that’s worth a salary because that person is taking responsibility for solving problems and is no longer constrained by a checklist or schedule.
In other words, the GM is not trading money for time anymore; now the person is trading money for responsibility. In return, by paying a salary, you, the owner, take on the burden of risk: You pay the salary whether the business is profitable or not. That means the salaried person gets paid even if you don’t.
Should You Pay a Salary in Your Gym?
Right now, in the COVID Crisis, few gyms should take the risk of paying a salary. Gyms in the middle of a shutdown, or even those making a large pivot, should reorganize to meet the new service they’re offering.
In “normal” times, the biggest errors gym owners make with salaries are really about abdication (I’ve made this mistake twice myself).
The owner thinks, “I hate doing sales! I’ll delegate this.”
Or, “This coach needs to earn more money! I’ll provide some cleaning/admin/bookkeeping/management/sales/etc. work to fill the schedule.”
So the owner pays a salary to buy 40 hours of the person’s time and then tries to backfill those hours with a hodgepodge of little tasks. But it rarely works because each of those roles requires a unique skill set, and work expands to fill the time allotted to it. If the person you put in charge of your billing software doesn’t understand it well, it will take him or her 10 hours every week to generate reports.
This is the true risk of salaries: You’re incentivizing people to show up and do work they don’t like slowly. And then, of course, the coach is often bad at those things. So the owner loses the manager and the best coach.
Most gyms are owner-operator businesses. You can hire people to replace yourself in low-value roles, and you can hire to replace yourself as coach. But these are all hourly jobs until you reach 150 clients. Then you require a “management layer” of staff, and that manager carries the burden of responsibility.
Until you’ve reached that point, the only salaried person in your gym should be you.