Mike Warkentin (00:02):
Imagine paying yourself $16,000 to $38,000 U.S. per month for the last three months. Some gym owners are doing that, and we’re going to find out exactly how they did it today on “Run a Profitable Gym.” I’m your host, Mike Warkentin. Please hit “subscribe” so you don’t miss a show. We give away gold from the best gym owners in the world every single week, and you can literally improve your business if you listen and take one action after the show. So, dig in; please subscribe. Now, net owner benefit: It’s salary, dividends, and anything extra that your gym pays you. It’s a key metric. We track it over a three-month period, and we present one month so that we show sustainable numbers, not flash-in-the-pan, one-hit-wonder, massive dividend payments. These are sustainable regular numbers. And our March leaderboard went from 16,000 to 38,000 U.S. Darren Thornton is the owner of Defy Functional Fitness in Toronto. He’s been on the show before. He’s back because he made our leaderboard for March. And we’re going to dig into his numbers so he can tell you exactly how he did it. Darren, welcome from Toronto. How are you today?
Darren Thornton (00:59):
I’m good; thanks, Mike. How are you?
Mike Warkentin (01:01):
I’m great. I love, as I said before the show, reconnecting with people who have been on this show before because we get to see where you’ve been and where you’re going, and it’s always up, up, up, and it’s really exciting. So, I’m going to dig in and give you some questions here, and let’s help some gym owners. You ready?
Darren Thornton (01:15):
Absolutely.
Mike Warkentin (01:15):
Alright. So, before the show—I’m going to read the quote—you said this: “I’m only performing high-value roles, and a high average revenue per member gives me a better net owner benefit.” So, tell me: How have you created the time to focus on increasing average revenue per member? Because it’s really tough to do it when you’re scrubbing a toilet and there’s fires raging.
Darren Thornton (01:33):
Yeah, and I’ve been there, and I think like most people, I started a gym a similar way. I was a coach, I was a CrossFit coach, I was competing in CrossFit, and the goal was to always own a gym. And then when you do own the gym, you start to realize things are maybe not as simple as what it looks like from the coaching floor. So very, very quickly and early on I realized that I needed to get off the coaching floor. Obviously, we were also cleaning, as you mentioned, scrubbing toilets. We were doing all of these jobs, and I just realized that I actually quickly started to detest coaching purely because it took me away from doing the things that I knew my business needed to grow. Right? So, the goal really was: Can I make myself not needed in this business, and how do I go about that? And I don’t think it’s totally doable from 100%. You still have to perform these high value roles that we’re talking about, and that’s really being a CEO of a business. And if I introduce myself as “Oh, I’m CEO of Defy Wellness,” I think that people would have a different perspective than, “Oh, I’m a gym owner.”
Mike Warkentin (02:39):
They sure would.
Darren Thornton (02:41):
Right? And I don’t think that people kind of understand what needs to go into being a gym owner and really doing it properly. Being a CEO, you know, other goals were to create careers for coaches that I didn’t have the opportunity to have when I was a coach. So there needs to be somebody at the helm doing those jobs. So, it was really just starting the process of “How can we keep hiring good people?” which is so key to this, but I’ve also done it earlier than my metrics look like I could have done, right? So, I would sacrifice some growth to make sure we get the right person. Then when we find the right person or if the right person comes along at different points, I would try to get them in the business as quickly as possible and then really build things for them because it’s kind of hard to do it the other way around. Right.
Mike Warkentin (03:30):
And I’ll say that—you know, you said, “sacrificed growth.” What I’ll suggest is that you invested instead of sacrificing; you invested right there some money for a reward down the line because you are getting a great person who allows you to then climb up and do other stuff, right?
Darren Thornton (03:44):
Absolutely. Yeah. And it’s one of those things where if you keep doing all the things by yourself, there’s a limit to where you can grow, right? But if you have six people doing those things at the same time, then that limit becomes a lot bigger, and it allows everybody to get what Chris Cooper talks about a lot, “Let’s build that pie nice and big so everyone can have a nice big slice of it.” Right?
Mike Warkentin (04:08):
Was it hard to make that transition from “I’m a coach, and I teach the squad, and I’m at the 5 a.m. class” to “I’m a CEO, and I hire and grow the business”? How did you do that?
Darren Thornton (04:18):
I think I’ve always been entrepreneurial at heart. There’s a story from my parents’ wedding when I was like four years old. I was charging people to hang their coats up. So, I think I had a little bit of it in me and probably from my father. He’s always run his business since he was like 16 years old. So, there’s always been a little bit of that inside of me, but in terms of some of the skills, understanding how to hire people, getting caught up in “I don’t know how to do this,” so paralysis-by-analysis kind of thing. And you know, that’s where Two-Brain comes in where you have a mentor, and you can kind of just bounce those ideas off, speak to people who’ve done things in the past. There’s a ton of data within Two-Brain that we can always look at and see, which are really good ways to go. So, I think utilizing a little bit of what I think is a bit of an entrepreneurial spirit that I think you can definitely kindle, but it helps if you’ve got it inside you. And then also just looking at what other people have done, bouncing ideas off people and taking some of the industry best practices to get the best result.
Mike Warkentin (05:19):
So I’m going to ask you about a best practice: the value ladder exercise. Did you do it specifically, or was this something that you did that you didn’t know the name of it?
Darren Thornton (05:27):
Yeah, I think—look, I’ve been in Two-Brain now for six years. I’m not sure it was even called the value ladder back then.
Mike Warkentin (05:33):
Old school. Yeah.
Darren Thornton (05:34):
But it was more so just looking at the roles of “What can I pay somebody to do something where then I can do that higher value role to earn that money back that I would pay somebody?” right? So, if I can pay a cleaner 20, 30 bucks an hour, whatever that number is in your particular area, then how can I make two or three times that in the next hour. Is that cold calling people, calling hot leads, getting No Sweat Intros in? At some points that was delivering a personal training session because that was a better use of my time than cleaning the gym. And then as you just keep ascending up the ladder and you can keep finding—as we always go back to—getting good people, then you can look at “What are the next things?” So, I might spend an hour writing a blog post, which doesn’t necessarily give a direct ROI in that moment, but doing that for the last five years, every single week or two times a week or whatever, now we can start to see that trickling down. So, kind of thinking about these further down the line: What’s going to build the brand? What’s going to get our name out there? And trying to do those roles as opposed to the ones that I can hire people for.
Mike Warkentin (06:45):
So listeners, I’m going to lay out the value ladder for you. Darren just did it. I’m going to give you the bullet points, and if you take action on this right now and click out of this show, you will make more money. Here it is. Take your roles and tasks, everything you do in the entire day or the week and the month, and you just list them all: cleaner, coach, programmer, everything. Log how many hours that you spend in each role. Then from there, you’re just going to assign a dollar value, a fair market replacement cost, for those hours. So, like a cleaner: I spend five hours a week as a cleaner, I’m going to pay a cleaner $20 an hour, and my replacement cost then is going to be 200 bucks or whatever it was. Now you freed up 20 hours or whatever the number is.
Mike Warkentin (07:27):
In those 20 hours, can you find the way to invest your time and make more than you’re paying the cleaner so that you have some profit? Yes, you can. And Darren just said it. If I clean and I take an hour, and I pay someone $20 to clean for me, and I sell that hour at $75 for personal training, I now have a profit of $55, right? I’m ahead. That’s the principle. And you can apply this all throughout your business. It goes from coaching, programming, general managing—all of a sudden, you’re a CEO where you might work four hours a month overseeing your business and making about 30 grand from that business. That’s what our top gym owners are doing. So, if you take action on this right now, I won’t be mad if you click out of this show because that’s exactly what Darren did, and it does work. Darren, I’m going to ask you this: So now that we’ve talked about how you found the time to work on average revenue per member, what did you do to increase it? Because it’s great to say, “Oh, I’d like to drive up my average revenue per member.” What are the exact tactics you used to get your number way up high?
Darren Thornton (08:22):
Yeah, so I think we had a—last time I was on the podcast, we really dug deep into ARM, which I think was back in March last year, so March 2023. And it’s really just solving client’s problems, right? So, what problem does a client have? How can I solve that? So, for us, what we offer primarily is personal training, right? So that’s one-on-one personal training.
Mike Warkentin (08:47):
High value.
Darren Thornton (08:48):
And then that then rolls down into maybe two-on-one or three-on-one and eventually into some group classes as well. So, usually the best way to help someone with any of their goals is through one-on-one personal training. Now, and that’s the same with mentorship. That’s why we do one-on-one mentorship as opposed to big, large group mentorship because everybody has individual problems. Now when it comes to fitness, there might be a point where they get to a certain expertise, a certain level if you will, and the group program then makes more sense, right? And they can do that from a comradery standpoint, have people to work out with, that kind of stuff. So primarily we work on personal training, which is obviously a higher cost service than group training. We have nutrition coaching, which is—you know, we also do that very high level, very one-to-one very specific.
Darren Thornton (09:39):
We’re fortunate. My wife is a family physician who’s also our nutrition coach. So, in terms of expertise in that realm, there’s not very much that you can get better. So, we can charge a premium on that because we’re giving premium service. We also deliver specialty courses. So, I think in the early days of CrossFit gyms, you have mobility, weightlifting, group classes, gymnastics classes, and everything’s included in this umbrella membership of unlimited CrossFit, right? The problem is not everybody wants mobility, not everybody wants weightlifting, not everybody wants this. So, what we quickly did is realize, like, “Let’s give everybody what they want,” which is group training predominantly for us. We’re not a CrossFit gym, but we do strength and conditioning training. And then if you want to do weightlifting or you want to do gymnastics, then we can do specialty coach courses there, which we can then obviously charge for because the people who want it need it and they value it.
Mike Warkentin (10:31):
There’s your exercise listeners. If you’re still here, this is your second exercise: You take a look at your clients. “How can I solve problems for my clients faster?” Because speed is more valuable. So, if you’re just selling group fitness, you could probably solve that person’s problem. Think about a client who can’t do snatches or double-unders or muscle-ups or whatever it is. Could that client move faster towards the goal if that person worked one-on-one with you? Of course. Is that one-on-one service worth more? Yes. So, your first step might be to just say to a group class member, “Dude, I know you’re struggling with muscle ups. If you book a one-on-one session with me, I think we can make some huge progress. Cool?” He says, “Yes.” You tack on $75. You now have created a group class membership plus an additional one-on-one session; that’s called a hybrid membership in many circles.
Mike Warkentin (11:19):
You can now market this thing and say, “I’m selling one extra session, personal training, per month with your group membership.” Your ARM goes up. I’ve seen it in gyms. The ARM usually boosts from like say 160 to like 240, which is a huge, huge deal. And then the other thing that you might start looking at is your entire model for your business, just like Darren has and says, “You know what? I’m going to focus on personal training, nutrition. Those are both super, super valuable services and some group.” And group is the discount offering in that. There’s nothing wrong with it, but it’s not as fast; it’s not going to get results as fast as the other two combined. So, look at how you can solve problems for clients, put together packages in place so that they do it very quickly, and you’re going to make more money on that. That’s your second exercise. Darren, I got this one for you. Tell us a little bit about your business. You’ve given us a few things about what you’re focused on. You obviously know exactly what you’re selling to who. What else have you got? How much space, how many staff members? Give us the 411 on your business in Toronto.
Darren Thornton (12:14):
Yeah, so we have a 3,500 square foot space. We’re in sort of premium retail space, so we pay a lot for it, unfortunately. About 2,700 feet of that is training space. So that is our sort of group and personal training areas. We have five full-time coaches. One of those is our general manager. And something that I’ve done to be able to offer that professional service long term is we only hire full-time coaches. OK? So, we’ve never had part-time staff. And I kind of mentioned that earlier. We’ve kind of slowed growth down a little bit till we find that next full-time person because just from a consistency point of view, from a continuity point of view, making sure everyone understands our SOPs, everything like that, the full-timer, in my opinion, helps to deliver that higher level of service. Right? I also have a CSM, client success manager, who works remotely, and she really—probably one of the biggest things when we brought her on was one of the biggest sort of boosts in the business because she deals with every email of mine prior to me logging onto my emails.
Mike Warkentin (13:19):
Did she get mine from me yesterday?
Darren Thornton (13:22):
Yeah. Yeah. Well, she would have. Yeah. So yeah, my routine is I try not to log onto email until about 10 o’clock in the morning. It doesn’t always happen because the brain sometimes is going ahead of me, but if I can, she can put out all of those things that I don’t need to touch before I get there, which just means that my brain’s not full of all the different fires and whatever. And then if there’s anything that’s out of the ordinary, maybe we don’t have an SOP for it or whatever it is, that can then get pushed up to me, and this is something that was like a Dan Martell principle that I adopted pretty early when he spoke to us, I think, at one of the Summits potentially. So, and obviously from his book and everything, but that one has been really key.
Darren Thornton (14:02):
And then, yeah, so that’s the business. Five full-time coaches. One is our general manager. We have a client success manager as well who is remote. And then, our main sort of avatar is—we’re in a really good family neighborhood, so our avatar is really the family, right? It’s not a particular one person. It tends to work that we initially get the wife, the husband then joins, and then the kids in the kids’ program, right? So, we end up with pretty good 360 coverage of the local families, which was one of the reasons we actually put ourselves here.
Mike Warkentin (14:38):
That cuts down on marketing costs big time because you don’t have to look for clients if you just say, “Hey, would your spouse come in? Would your kid come in?” Right? Like, that’s just an easy way. So again, point three listeners, ask your clients, your current clients, if the people in their family could use your help too. And I guarantee you’ll find some clients out of that, and your marketing costs will go down. CSM—this is another huge point—client success manager takes care of retention and does all sorts of stuff to run the business better and keep clients longer. If you keep clients longer, your revenue goes up, and you make more as a gym owner. Client success managers are important roles, but they don’t need to be paid $100 an hour. You can find them for very reasonable prices, and you can give them a list of tasks to do.
Mike Warkentin (15:19):
Dan Martell at the Summit said something like this: I believe it was, “80% done by someone else is 100% effing awesome.” Of course he used the actual f-word there, but I’ll leave it out here for the podcast. Delegate some stuff. Create an SOP, give it away. You don’t have to answer every email. Some of them are just lame. And if it’s just like getting back to me and saying, “Yes, I can be on your podcast,” your CSM can do that by looking at your calendar. Darren doesn’t even have to check his email to get on the show. He just has to let his CSM do it, and then he has to show up on time. It works just like that. These are incredible principles. So, you’ve got a bunch to work on already. I want to ask you this one, Darren, I think I know the answer, but I’m going to ask anyway. How has your net owner benefit changed over time? Are we talking steady growth? Are we talking huge gains? How did it work?
Darren Thornton (15:58):
I kind of just had a number that I needed to make from the gym, being sort of relatively modest and then, all of a sudden, the business is generating a lot more revenue than we—basically I ever expected. So, over time there’s been some bigger jumps certainly. It’s not been quite linear; it’s been more like, “OK, this is what I needed.” And then, we’ve had a really big boost in business, whether we’ve hired a couple of coaches who’ve managed to take the business to the next level. And then that allowed me to go up to quite a significant salary jump.
Mike Warkentin (16:34):
Yeah. And there’s another gym owner on our leaderboard who—he answered some questions for a survey, and he said that his number’s very high, but he said that it could be higher. He chose to hire someone to buy back more of his time. And he said that kept his number where it was, rather than boosted it up. But he said the investment was a great thing for him. He wanted that time more than he needed the money. And so, he did that, and it worked out just fine for him. He was still on the leaderboard making a really, really great wage, but he made that call. And that’s the freedom that you have when your business is paying you a lot. You could choose, “Maybe I work four hours a month, and I hire someone to do everything else.” Maybe—you know, you have all this freedom. So, tell us, if you don’t mind, share anything you’re comfortable with. How do you pay yourself? Is it salary, dividends? What do you do? How does your structure work?
Darren Thornton (17:18):
Yeah, I think you mentioned salary, dividends, sort of benefits from the business. We do a mix of all three. And you know, I think one of the best things about being a business owner is getting benefits from the business that you can do legally, right? Obviously speak to your accountant. I’m definitely not qualified in that area, but if you can live through your business a little bit—you know, things that you are doing for the business that will benefit you and costs that you may have if you were just an employee of a company—then obviously use that, and that can help sort of boost your net owner benefit as well. But yeah, a little bit of all three is kind of what we do. We have standard salaries and then from there, we can take dividend injections and use it to invest or improve lifestyle.
Mike Warkentin (18:06):
Yeah. And so, wherever you’re listening, check your tax code, check with your accountant, figure out what’s legal, and then use every bit of that that you can. And it’s simple stuff. It could be just like maybe you pay yourself for business use of say maybe a home office that you use for nutrition coaching or maybe part of your cell phone bill gets paid by the company. Stuff like this. You buy a package of pens; you’re using them for the business—the business should pay for that, not you personally. Find out what the tax code allows. Stick to it of course, and then do it because you deserve the benefit of owning a business, and you put in the hard work; you should get the reward for that. So do check with an accountant if you have any questions because mistakes can be made here. Now you talked about—you said something interesting where you said you had goal numbers and you tried to hit them. I want to know how a mentor helps you do that. Chris has said many times—Chris Cooper, our founder—“You need a goal, you need a plan, and you need someone to hold you to the plan.” How did a mentor help you hit numbers that you wanted to hit?
Darren Thornton (19:01):
I really liked the concept within the mentorship program, which I’ve just been through myself, is the idea of the next best thing, right? What is the next best thing that we can do to grow the business? And the further you get along in business, the more shiny objects appear, right? You have more time to research these, you maybe have more capital to invest in these kinds of things. But at the end of the day, what is going to provide the next sort of best return as opposed to just following all these different directions? So, somebody who keeps you accountable to that plan, right? So, having an annual plan and working back from that, what you need to do each month, what you need to do each week, and really sticking on target and looking at “What does the long term look like?” So, the idea of a vivid vision sort of three years down the line. Once you’ve got those things on paper, unless there’s some dramatic change in circumstances, like, “How can we stick to that as much as possible?”
Mike Warkentin (20:05):
Was there anything just earth shattering that your mentor—and you’ve been here for six years, so I imagine you’ve had a few—was there anything earth shattering that a mentor gave you that just was a light bulb moment where you’re like, “Darren, dude, I’ve got to do this.”
Darren Thornton (20:18):
It’s been a steady process over a lot of time. Like, I wouldn’t say there’s—you know, I think that’s one thing why I’ve been in the program for so long is there are always evolving tactics. There’s always evolving knowledge. The business is evolving. So, my role a year ago is not the same as what it was now; two years prior to that, it was different again. So, what you need to learn and what you need to—the questions that you’re asking are changing. So, it’s been a steady period. I think, for me, the biggest—I wouldn’t say light bulb moment for me personally—but the biggest thing to our business was figuring out how to market, which, going through the Two-Brain marketing course very early on in the program was like we did two and a half times our revenue in one month.
Mike Warkentin (21:05):
Did you really? Wow.
Darren Thornton (21:06):
Because—yeah, we did—because even though we’re in a great location, and these weren’t massive numbers back then, don’t get me wrong, but we did two and a half times our revenue just from understanding how to put a Facebook ad out there, right? So, that was one of the things where if we’d have not done that, then maybe we wouldn’t have been here anymore, right? Because I did not have a marketing plan. I did not understand what to do back then. So yeah, that’s probably one of the biggest, like, “OK, this is where we need to go. We need to have these plans in place to bring in members,” right? We had a very rudimentary business plan, which was like, “What’s the minimum amount of members we can gain each month and show the bank that we can make money so that we can get a loan,” right? But in reality, there were a lot more hidden costs than I understood, so we needed to grow a lot quicker than that. And yeah, so that was one. But you know, in terms of having a mentor, the relationship with a mentor is evolving constantly. There are always new questions that we’re asking. There are always different roles that my role evolves into. So, there’s always different answers that are needed.
Mike Warkentin (22:09):
Yeah. And the reason I ask is because it’s tempting to look for these one-hit-wonder, big promises, “Oh, mightier sales by $20,000 in one month.” They’re almost always tied to something a little bit sketchy and a little bit shady and something maybe that just isn’t sustainable. And I would rather, as a business owner, see incremental, steady gains all the way up the chain than have one big jump and then be like, “I don’t know what to do now because I just gutted my business with paid in full discounts,” or something like that. So, I love the idea of steady incremental gains and the idea of “This is next, this is next, this is next,” and it’s a constant, constant building of momentum to the point even where Darren, you’re at what we call our Tinker level. For listeners, that’s our upper-level gym owners.
Mike Warkentin (22:46):
They now have freedom of time and money. They can figure out what else they want to do. It might be open another business, it might be start something completely different or a second gym. They could do whatever they want. So, what do they do? And we have mentors that help them get at that level too because the mistakes are more costly at this level. The rewards are greater, but the mistakes are also very costly. So, we have mentorship all the way through from the beginning, start of a gym, all the way through to elite level gym ownership. So, Darren, we’re going to shut this guy down. I want to ask you for advice for someone who’s out there. So, there’s a gym owner out there listening right now who isn’t earning as much as they want from a gym. What is step one to increasing their net owner benefit when they hit stop on this podcast?
Darren Thornton (23:24):
I think the first thing you’ve got to do is figure out how much you need to earn from your business. If that number comes to $70,000 a year, OK, perfect. What do I charge for my services, and how many members do I need to get my revenue to a number that’s going to allow me to take $70,000 a year, let’s say? And I think, for me, that’s step one because if you don’t know the numbers, then you’re going in blindly, right? You’re not aiming for anything. So, if you figure out, “OK, I can only get 100 members because I’m in a small town,” or whatever that is, how much do you need to charge for that to enable you? And then what value can you provide for that amount of money that you need to charge?
Darren Thornton (24:01):
So if it comes out you need to charge $400 a month, OK, that seems quite a large number for a standard CrossFit gym, but how can you provide maximum value to enable you to charge that? And then work backwards from there. That comes from an annual plan, which is a really good resource in the Two-Brain toolkit, which allows you to plug in those numbers. How much do you want to earn? What do you want to spend on education? All those kinds of things. And then it gives you your monthly sort of revenue targets. And then you can work backwards and plug in: Are you going to do retail order? Are you going to do everything? But for me, step one is just figure out what you need to earn.
Mike Warkentin (24:38):
Dig into your metrics. I never did that when I opened a gym. I just said, “I’m opening a gym. I’d like to get a bunch of members. I’d like to make some money.” That’s vague. And it turned out vague on my balance sheet. It didn’t go great. I got a mentor, we dug into exactly what was needed and how to get there, and things started to improve greatly. So, you’re going to need to work on some numbers. An invitation for you: If you want to start looking at these numbers and figuring out how you might improve them, book a call. There’s a link in the show notes. You can talk to someone who’s going to talk to you about your business and explain how a mentor can help you to get from where you are to what your goal is. And you might not even know what your goal is, but you can talk about it on that call. Darren, I want to thank you so much for being here today. This is—you know, I hope I get to talk to you in a year because every time I talk to you, I learn something new. So, thank you so much for your time.
Darren Thornton (25:21):
Yeah, thanks, Mike. Appreciate having me on.
Mike Warkentin (25:23):
We will definitely see Darren again. He is one of our leaders regularly on the leaderboards. We’ll probably see him again. This is “Run a Profitable Gym.” I’m your host Mike Warkentin. Again, we’ve given you a ton of super actionable stuff, simple things that you can do right now. I’d encourage you to click out of the show and do something right now to grow your business. But first hit “subscribe,” and check out this message from Chris Cooper.
Chris Cooper (25:43):
Hey, it’s Two-Brain founder Chris Cooper with a quick note. We created the Gym Owners United Facebook group to help you run a profitable gym. Thousands of gym owners, just like you have already joined. In the group, we share sound advice about the business of fitness every day. I answer questions, I run free webinars and I give away all kinds of great resources to help you grow your gym. I’d love to have you in that group. It’s Gym Owners United on Facebook, or go to gymownersunited.com to join. Do it today.
