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Every Single Thing You Need to Know to Increase Rates at Your Gym

A photo of Two-Brain mentor Greg Strauch and the title "how to raise rates at your gym."

Mike Warkentin (00:02):
Raising rates. If you own a gym, you’re almost certainly going to have to increase prices at some point. But how do you do without losing all your clients? Well, a battle-tested plan exists, and it’s been used by gym owners around the world with great success. In fact, my guest today has personally helped almost 100 gym owners stabilize their businesses without generating floods of cancellations. I’m Mike Warkentin, and today on “Run a Profitable Gym,” former gym owner and longtime Two-Brain mentor Greg Strauch is here to help talk to you about rate increases. Before we go further, please hit “subscribe” wherever you’re watching or listening so you don’t miss an episode just like this. And now, welcome to one of our most experienced mentors, Greg Strauch. Greg, how are you today?

Greg Strauch (00:38):
I’m good, Mike. Thanks for having me on.

Mike Warkentin (00:40):
I am pumped up. You’ve taught me everything I know about podcasting as the original host of this show, and it’s great to have you back. I can’t wait to talk about rate increases with you.

Greg Strauch (00:48):
I’m excited. I’m excited to be back, and you’ve done a great job. I love, I love all the episodes. I listen and watch even on YouTube, the shorts. So, I appreciate it.

Mike Warkentin (00:58):
Well, we connect in person in Chicago every year, but it’s nice to see you on the show. We’re going to get right into it. Now, the Two-Brain Summit is a great place to meet up, but this is the best we can do right now. Here’s the thing. You have done, Coop told me, almost 100 rate increases with mentees over the years. Is that—do you know the actual number, and what year did you start as a mentor?

Greg Strauch (01:18):
Yeah, so, it’s been a while. It’s been a long road, which I’ve enjoyed every second of it, but as of right now, I’m sitting right around 81 gyms that I’ve taken through the process of price increases. And I’ve been a mentor since—it was January of 2018 is actually when I started officially as a mentor. A few months before that, going through mentor training and all that. So, a little over a little over six years now.

Mike Warkentin (01:42):
Six years and over 80 gym owners crushing rate increases. So, like every one of those gym owners has been making more money from the time you do that rate increase and living a better life. So, who better than you to help people talk about getting this job done? We’re going to get into the essential elements of rate increases, and we’ll talk about that in detail. But first, why are rate increases inevitable as a gym owner? Like, talk about—like, when I set my original rates, I’m like, “It’s $150 for life.” Why is that not a good plan?

Greg Strauch (02:08):
So, there’s a few different things that come into play when it comes down to it being inevitable for a gym owner to make a rate increase. Really, the part that always kind of gets every gym owner is they always start out looking at, when they open their gym, they’re trying to do the right thing, they’re trying to provide a service and a value, but they don’t understand when it comes down to what their true value is. So, they undervalue themselves. They start looking around at other neighboring gyms, even if it’s not the same model, and they start saying, “OK, what is that gym doing? And I’m going to do the same, or I’m going to be a little bit under it,” or whatever it is. Even if it’s a globo gym model where it’s just you’re giving access to people.

Greg Strauch (02:44):
So, people really undervalue themselves when they open their gyms or even when they buy a gym that doesn’t have the same cost to it or the same value that maybe another gym down the street does that’s been around is just as longer, even longer. So, they really undervalue themselves as really the biggest portion in the service. And on top of that, when gym owners start looking at what their perfect day looks like, they start realizing my perfect day includes a lot of different things that are maybe outside of the gym that cost money: vacations. Maybe they like to take their family and do stuff together, so that’s going to be a little bit more expensive. And they don’t realize that gap from where they currently are to what they want to be. And when we start going through perfect day and realizing how much revenue that’s going to take, also how much time off, if you’re going to hire other people to take on roles in the gym, they don’t realize that they’re going to need revenue to be generated for that. So, they see that gap and they go, “OK, how do I fix this gap?” And usually, like I said, it’s due to that first reason of undervaluing themselves and the service. And they have to build that back up and build that gap.

Mike Warkentin (03:52):
Yeah. And my story, the brief version is that I looked at, in 2011, got a physical space. I looked at the other gyms in the area and I said, “Ah, they offer more classes, and they have a bit more equipment. I’ll under—you know, I’ll price myself under their prices by a bit.” I set the rate at 150, and my plan was to staff every class myself and not pay myself. And I realized as I was burning out, that I wasn’t taking in in enough revenue to hire anyone. And in 2013, I knew that my rates were too low already. I actually put a rate increase in my software and never did anything about it. That decision cost me well over $100,000. And it wasn’t until I started working with the Two-Brain mentor that we did a rate increase and stabilized the business. So, I lost a ton of money over a bunch of years by doing exactly what you just said. So, you’re not making that up. Inflation: Is that a concern too?

Greg Strauch (04:37):
Inflation can definitely be a concern, especially over time, especially what we’ve had recently over the past few years. But in the beginning, when you start out and you’re bootstrapping your business, or maybe you got a small loan and you’re trying to build, you don’t realize how fast inflation affects you. Even when I opened my gym in 2014, 2015, 2016, I didn’t realize that inflation was still going. I understood what it was. Just didn’t—you didn’t feel it the same way you do after, like post-COVID. So, that definitely comes into a big play when it comes down to that pricing model. And I think what I’ve seen as successful, which I know we’re going to talk about, we’re going to jump into it a little bit later, but I’ve even, when gym owners do their price increase, I remind them that, “Hey, this should be an annual increase that you put into your agreements that from now on, and it’s for inflation.”

Greg Strauch (05:25):
So, percentage of whatever you want, 8%, 6%, if you want to do a scale from like zero to 10% that way every year, it just automatically happens, and you don’t have to go through the same process. Everyone signs the agreement, and it just automatically effects. And I can give credit to actually, Kaleda, a former mentor on the team. She was the one on a call with the mentors that actually brought that up. And I, as a gym owner still at the time, said, “Why aren’t I doing that? I need to be doing that.” So, I took her advice and I put it into play. And every gym owner I work with, they say, “Let’s not have to have this feeling again where you’re sending out this letter and all the steps that go into it.” And I mean, I think we all make the same mistake again in the beginning. Like you said, I did the same thing. Only difference was I didn’t have any gyms to compare outside of globo gyms in my town.

Mike Warkentin (06:10):
You made it up though.

Greg Strauch (06:11):
Yep. So, I had to make something up, and it was way lower than it ever should have been.

Mike Warkentin (06:16):
Yeah. And it costs you for years. It costs your family, and it ultimately costs your clients if you can’t raise the rates because the gym goes under, and no one wants that. Talk to me. Let’s go into the big mistake. So, let’s just help people out there cross off some stuff right now. Like, let’s talk about the “never ever do this stuff” list. When you’re going with a rate increase, what’s on there?

Greg Strauch (06:34):
So, the biggest thing I’m going to say right now, for gym owners is if you do a rate increase that’s maybe massive, such as—and we’ll go off percentages because I don’t want to throw out just numbers; everyone’s going to be different, different places—but anything over 15%, that’s a big reaction you’re going to get. And what we’ve seen, I mean, after the gyms that I’ve mentored and countless gyms across Two-Brain community, we’ve seen anything over 15% is going to cause more negative consequences than you are ready for or even the mentor’s ready for. So, what I’ve seen, you need more of a stepwise approach when it comes down to anything over 15% if you’re doing that. But really the other part of that above 15% is you got to make sure you have people in the community, that your market’s willing to pay for it.

Greg Strauch (07:20):
I mean, if I’m in a town of maybe 200 people, having a rate of $500 a person probably isn’t going to work. But if I had $500 a person and I live downtown Chicago, well that’s doable. That’s more doable. So, having a market that can sustain it is really the beginning. And in the Two-Brain, throughout what we’ve built and the timeline, we stated, like, “You want to have about 20 clients on that new rate before you send anything out, before you talk to anyone,” which is usually the next biggest mistake. And it’s not that they purposely mean to do it. I had a gym that I worked with, he followed everything in line. We were ready to go for the rate increase. We had the staff ready to go. We had the email ready to go; everyone was prepared.

Greg Strauch (08:05):
And he sat down with some of the clients that were going to raise close to that 15 mark. And when he sat down with them, they were OK with it. They understood, and they had their son’s wrestling match that they went to. So, they went to the wrestling match afterwards. He explained to them, please don’t talk to anybody about this. Keep it between you, because I want to have the firsthand of telling everyone, which is the proper way of doing it. Well, they went to the wrestling meet, and they were talking. Well, a few clients from the gym had their children at the wrestling meet too, so a few seats down, they overheard them talking about this. And of course, that then turns into a wildfire of everyone, and the gym owner wasn’t able to send the email out when they wanted to. Instead, we had to hit the send button much sooner.

Greg Strauch (08:46):
So, that’s another part is we want to let everyone know at the same time. Staff, you want to let know beforehand. And the other big mistake that I’ve seen is the communication side of things. Not communicating to those members to explain, “Hey, here’s”—not sending out an email, not sitting down with the staff. The communication portion is massive, but you don’t want to take it too far either, which is why when mentors on the Two-Brain team lead someone through a rate increase. We don’t want them to overexplain why they’re doing this. We have a standard that’s been tested over and over again. I have yet to see it not work. It works. As long as you follow the timeline, you follow everything as the mentor, and you make sure the person is completely ready because it is a little nerve wracking.

Greg Strauch (09:31):
You are sending something out that may get a negative response from people. And that’s where the mentor comes into play. You have somebody in your corner when that goes out. So, those are the big mistakes that I’ve seen is raising it too high, not knowing that you have the right market for the new rate that you’re going to, not letting people or letting people know before everyone knows—we want everyone to know outside of the staff; we want everyone to know at the same time—and then not communicating or over communicating when they do communicate.

Mike Warkentin (10:00):
Yeah. And that stuff is very common because left to your own devices, you’re going to make a lot of those mistakes because it’s so common to just overexplain something. I wanted to tell people all the reasons why I needed a rate increase, and I had this endless email there, and it’s not needed, right? It sounded very offensive. It wasn’t great. And I ran it by the mentor, and he said, “Dude, just use the script that we have for clients.” And I said, “Oh,” and I did that, and it worked just fine. In fact, members said to me, “I’m really glad you raised rates. We don’t want you to go away.” So, it works really well. If you’re a Two-Brain client, your mentor can point you to the raising rates resources in our toolkit.

Mike Warkentin (10:38):
There are tons of things in there. You’ve got scripts, templates, timelines, checklists, everything. And then your mentor will help you do the math, do your analysis and figure out exactly what to do. And like Greg said, he’s done this 80 times, and it works. These things that we’ve tested are not just made up, random things. They are tested, they work, they’ve been revised, and they’re great. So, if you are a Two-Brain client, you have access to that stuff. If you’re not a Two-Brain client and you think about a rate increase, I’ll tell you this: Mentorship can be paid for by doing a rate increase. And then you get access to all the other Two-Brain stuff as well. So, if you’re thinking about that, book a call, link in the show notes, and you can talk to someone about how we can help you fix your gym, including a rate increase. So, Greg, you hit on some of this stuff, but we’re going to dig into it. Essential elements of a rate increase, and I’ll throw this one out and then you go on with your list. Mine is get help if you do not know what you’re doing and have an exact plan. And some people can figure it out. Most can’t. I couldn’t. Get help because a real good plan is out there, and you can use that with success. What have you got on your list for essentials?

Greg Strauch (11:38):
So, I 100% back that. I think—and like I said in the beginning or when I said earlier when you have have a rate increase that you need to put in play, having someone that has gone through it, that has done it multiple times with other gyms, that has done it with their gym, that has experience with it, is a lot easier to get through it, when you know you have somebody in your corner, than trying to do it on your own. And I’m not saying that no one, you can’t do it. You can do it on your own. It’s going to be very nerve wracking. You’re going to lose a lot of sleep. You’re going to think everyone is staring at you when you walk into the gym. You’re going to think your staff is upset because you did this to their members.

Greg Strauch (12:17):
Because they take, hopefully, accountability in the gym and take ownership. But it’s really nice to have somebody. And I’ll tell you, when I first did my first rate increase, it was before Two-Brain. I was on my two-week annual tour in the Reserves. I was actually in Germany at the time. The only way I had communication was through Slack and email on my computer. So, I sent out an email that we were raising rates. I did not notify my staff. I did not follow the protocol that we’d built out throughout this time and all of the points that we hit on in this “elements of having success with a rate increase.” And because of that, I did all the wrong things. And I learned very quickly what not to do and how to do it. I didn’t have conversations with people that were increasing the most, those kinds of things. So, it’s been very methodically built out since then, and me joining the team and being a mentee of Two-Brain and then becoming a mentor. I’ve seen the steps work every single time. So, getting back to your original question, the first thing is of course, getting a mentor. Get a mentor, get somebody that’s been through this; it’s going to get you through it faster. They’re going to make sure you don’t make the same mistakes.

Mike Warkentin (13:26):
And they’ll make sure you do it, right? Yeah. Like that’s the other thing is that I put this stuff in place, and I actually randomly hit on a pretty good number for rate increase. I just didn’t do it. I needed someone to say, “Dude, pull the trigger,” and I didn’t have that, and that accountability that you mentors provide is so essential. If I had had that, I would be up literally six figures. OK, go ahead to hit your next point. But like if you had told me that, I would’ve been up money.

Greg Strauch (13:48):
Yeah. Me and you both. So, once you have that in place and we’ve said, “OK, we need to do a rate increase,” the first thing I would definitely do is we need to calculate what the rate needs to be. That’s going to be going up a few different things. Perfect day, what your expenses are, making sure within certain percentages. I mean, we talk about the 44% for staff and that with 22 to fixed costs and 33 as a profit margin/keeping money. Especially during COVID, I think a lot of people didn’t realize they needed some money in Reserves. But we need to calculate and have a real discussion on “What do the rates need to be?” And hopefully that’s not a huge gap. You’re not charging $50 a month for someone, and now we got to go to 300. But we want to calculate “What do those current rates need to be?” Then we can also—

Mike Warkentin (14:34):
This is a spreadsheet, not a magic eight ball. OK? So, we’re actually doing math here. It’s not hard math, but it has to be math and data, not whimsical, “pull it out of the air” stuff like I did.

Greg Strauch (14:43):
Yeah, same. Yes, exactly. So, once we do that, the other point that we’re going to put into place is that gap that we talked about earlier for where gym owners want to be, where the business owner wants to be and where they currently are, and that’s that missed revenue. So, almost saying, “Hey, just so you know, because you’ve been doing it this way, you’ve been giving away X amount of money.” That is a pain point for a lot of people. When I tell a gym owner, you’ve give away about three grand every month, that hurts. That’s another full-time possible coach depending on where you’re at. Like that’s a lot of revenue. I mean, $36,000 a year, you could do whatever you want with if you were just charging everyone the right rate.

Greg Strauch (15:24):
So, that pain point allows us to really create a focus on what happens next. And that is we need to make sure again, that market is sustainable. So, now we say, “Alright, let’s get 20 clients sold at that new rate.” That shows the market can sustain it. You have 20 people that are paying the new rate. It also makes you have another—not only did we focus in on “What are you losing every month, or what are you giving away?,” but now we’re focusing on, “You have 20 clients in the gym that are paying that current rate.” That tells you and fortifies that this is the right decision. So, once we do that, the next thing is going to be we want to make sure that we have everything out there for the current rates. So, updating your website or anywhere else your rates are currently at—we want to make sure this is the updated rate.

Greg Strauch (16:11):
What I used to do, and what I’ve told gym owners is if you’re going to change the rates, and you have your current rates on there, make it the “2024 3 Classes a Week Package” or whatever package you guys have with memberships, but I would call it whatever the year is. That way you just know where it’s at, and you can always update it as needed. But that would update the rate. Then from there, we need to pick a date. So, we have a timeline. This is—when we’re determining this stuff out, this is going to take a little bit of time for you and the mentor to make sure we plan it, but that’s about 90 days out. We calculate it. Within 60 days, we want to make sure we’re getting those sales. Between 60 and 30 days out, we want to make sure we have those sales of the 20 people in there.

Greg Strauch (16:49):
If gyms take a little bit longer to get them, that’s fine. We can talk about that, of extending this as needed, but then about 30 days out, we have a plan in place. We have a date of when we’re going to launch this. We have the email or the letter finalized between you and the mentor to make sure you’re not, as I said, overexplaining yourself: “Well, my kids want to get into this private school, and I need a new truck, and I want to pay for this coach to go on vacation.” Like, again, stuff that is not—most people don’t want to hear it. It’s short and to the point. And I think if you look back or if people are looking back at previous emails from other companies that have sent out rate increases—Netflix, perfect example. They don’t say all the reasons why they’re doing it. They just say, “This is when it’s going to happen.” And it lets people know—it gets down to the facts a lot faster. And that’s part of that template we have within the Two-Brain modules. And that’s where we look at that and say, “Hey, fill this out, exactly—” Fill in the blank. Almost like a mad-lib. “Fill in the blank. Put your information in there. It’s ready to go. And this is the email we’re going to send.” Not four pages of an email.

Mike Warkentin (17:57):
I drafted that. We cut it down; it worked really well. The simple work one works better. I can confirm that.

Greg Strauch (18:02):
I can multiple times on me, along with, like I said, 81 gyms that I’ve worked with doing this. And so, now we have the letter. Now we need to identify the high risk clients, meaning the clients that could possibly be hitting that 15% mark. If you have a few that are over it, you and the mentor can work on making a stepwise model of how they increase maybe over six months. If it’s a big increase, maybe over a year or even possibly multi-year, unfortunately. But sitting down and saying, “OK, who are my high-risk people?” The other part of that too, and I learned this from a previous mentor—Josh Price actually talked about it a long time ago—that when you identify those people that are the highest risk, you realize that it’s actually not as bad as you think.

Greg Strauch (18:43):
If all those high-risk people leave, was it enough to bring the revenue down? And that’s where that gap, that missed revenue we talked about earlier, really takes into effect. If we’re increasing rates to whatever the number is going to be, we can calculate that revenue missed based upon the current clients we have and say “OK, under the new rate,” and say, “Alright, if you lose 12 people right now, you are going to still be at the same amount of money, but you have 12 less people you have to make sure they get into class and the equipment they use and the wear and tear on the facilities.” So, it’s still, you’re still making the same amount of money, but 12 less people. “Do you think out of these high-risk people, 12 of them are going to leave?” And the answer 95% of the time is no. Some people, gym owners, maybe don’t know their members as well as they hoped they would. So, they don’t really know. And that’s that other 5%, I would say, that don’t know. But we still navigate through it.

Mike Warkentin (19:35):
And this is all in a spreadsheet. I’m just going to tell listeners, like we literally have a PDF where you just fill in the boxes, and it’s like, “Put this number in this box, multiply it by this, do this, this, this, this,” and then you get this number, and you can say, “If all my at-risk clients leave, it costs me this, but my rate increase brings in this. The difference, I’m still ahead.” And then you do that analysis and the thing that you often find is the ones who are going to leave are the ones you don’t like or kind of don’t want. And I don’t mean that in a negative way, I just mean that they’re complaining a lot. They’re probably on the fence. They’re going to leave no matter what, like something will trigger them to leave. The rate increase just happens to be the thing. But you’ve already sold stuff at the new price. You already have new members in play, you’ve got this whole revenue thing spiraling up and that PDF alone teaches you this is worth it. So, listeners, know this resources out there for you. Greg, keep rolling.

Greg Strauch (20:25):
And with the price increase, there are two versions when people leave too. Do you have the people who aren’t on the—they may be people who usually complain about there’s not the right toilet paper in the bathroom. There’s not Kool-Aid or what is it? I think—

Mike Warkentin (20:40):
Prime? I don’t know.

Greg Strauch (20:41):
I think it’s coming out of the drinking fountain. This “Mr. Deeds” old movie with Adam Sandler. Like, they’re going to complain about a lot of things. The clients who are paying you the most money—my PT clients were always the best clients. They never complained about anything when—I had to literally pull answers out of them because they said, “Everything’s great. I wouldn’t change anything.” And those were my seed clients. They were perfect clients for us. But it also does another thing, which is it does give the people who maybe are great people, they just realize that they can’t afford the service anymore. Not that they don’t want to, not that they’re a good client, it’s just outpriced them. I had a few like that—two of my members, awesome people, but it happens sometimes. And the thing is, you have to realize where you’re trying to go and what you’re trying to do for you. Your staff, your family, your kids, your kids’ kids maybe, if you’re building a legacy side of this.

Greg Strauch (21:28):
It’s unfortunate, but it does happen too. And you have to be OK with that. But that’s where a mentor gets to talk with you because they’ve had the same thing. I’ve had it happen. All the other mentors on the team have lost clients who are great clients too. It’s just they couldn’t physically afford it. They’re stuck in a very closed budget. And that’s what it is. And they can’t extend themselves. They can’t work extra hours; they can’t do other things, but that’s OK. That just means they’re getting off the bus and maybe they get a different job in the future where it pays them more and they come back. There’s nothing wrong with that either. So, it allows for that to, but the majority of time it’s going to be the clients who are just complaining about everything, and they don’t want to do extra.

Greg Strauch (22:06):
They don’t want to do a specialty program. They don’t want to do PT with you. They don’t want to book a goal review with you. And I’ve had that happen too, which is unfortunate, but it is what it is. So, the high-risk clients that we have, we’ve determined them. Once we determine them, we want to book a conversation with those high-risk clients. Usually, you can do like a goal review with them, something like that where you want to sit down and have a face-to-face conversation is always going to be best. Having said that, when you have those conversations, we want to just book them for now. At that point, we want to book a meeting with the staff. We want the staff to know what exactly going through this is. And sometimes, and I’ll say in my personal experience with this, when I had some staff members who maybe just didn’t understand it. They didn’t understand: “Why are we doing a price increase?”

Greg Strauch (22:52):
“What’s the purpose of it? Everything’s going great. Why do we want to rock the boat?” And I explained to them, “We’re giving discounts to certain groups of people.” And this is how I did it. And anyone out there that wants to take this and do it in their way, they can. But throughout the Two-Brain community, every client I’ve gone through, I’ve explained this story, and that is: I sat down with my staff, I booked a meeting, I sat down with them, and I said, “Alright, I want you to list every job out there. Every job that’s important to your day-to-day life.” And so, they started going through it, they started thinking about it, and they’re like, “What do you mean?” I’m like, “Well, like a police officer. Important to your day to life. You want to have safety, right? So, let’s put them up there, doctor, nurses, teachers.” We went through the whole list, and I was like, “Come on, that can’t be it. I know you guys order Amazon. So, the Amazon guy or girl has got to be on that list somewhere.”

Mike Warkentin (23:38):
Butcher, baker, construction worker for my roads, everything.

Greg Strauch (23:40):
Yeah. And then I said, “OK, now of all these names—these are very important jobs—which one’s the most important?” And they looked and they said, “Well, maybe, maybe doctor.” And I said, “No, no, no. Most important to your day-to-day life. You live day to day. Which one of these is the most important?” I know personally my wife would say the Amazon person because we get Amazon almost every day, but the nice thing about the staff—or the thing about this was the staff couldn’t pick one. And I said, “So,” and this is why I do it this way, and I tell mentees to do it this way if they want to, when they sit down with staff and say, “OK, so who are we to be the judge and jury on who deserves a discount and who doesn’t? Because we have people who are picking up shifts.”

Greg Strauch (24:21):
“They work as waitresses or waiters. They’re trying to make extra hours, and they’re jumping into every program we have. And we have other people that make much more money that show up in that brand new Mercedes or BMW that only do three days a week, and they’re never going to pay another dime to make themselves better to get to their goals faster or to get to their goals in general. So, who are we to judge?” And all of them went, “Hmm, you’re right.” And I said, “OK, so instead, we’re making it the same for every single person that’s here. Everyone will pay the same rate for the same service that you guys offer to them. And it’s amazing service. And if I could charge them a million dollars a month, I would, but I can’t. Because the market won’t handle it. But I would love to because you guys deserve it.”

Greg Strauch (25:00):
“You’re amazing coaches; you’re pushing yourselves.” And they all agreed. So, always do it that way to make sure that they understand. Because when you could break it down, people don’t want to be the judge on that. They don’t want to say—they think they want to say who deserves it, but when they realize a lot of the amazing members that they have there aren’t doing those jobs, but they feel like that person probably deserves more of a discount than this other person who is making way more money than them and working less time and jumping into the gym and not doing everything. But so, that’s where I—nobody wants to be that, so that’s why I talk about it. So, once we sit down with the staff and we make sure that they’re good, we also meet with the clients and let them know that it has to stay in house.

Greg Strauch (25:37):
We don’t want to talk about it with clients yet. If you are friends with clients outside of the gym, please don’t bring this up because we want to let everyone know at the same time. Because that’s what they deserve. They deserve that notice all at the same time. Nobody deserves the nova sooner outside of a few people. And these are our highest risk clients, meaning the people who are probably going to leave or who are usually jumping up the most—it’s usually the same. And in those instances, then the gym owner wants to sit down with those high-risk clients. They want to have this conversation. Now again, you hit on it earlier: We got you. Want to know what to say? Great. We have it built out in the modules verbatim. It’s a PDF. You can download and literally go step by step.

Greg Strauch (26:14):
You can literally read from it if you wanted to. Even if you’re having this conversation in front of them, that’s—again, in person, because it’s very step by step: letting them know what’s going on, asking them how they’re going to feel with how this is going, and reiterating that tough conversation. So, again, template is already built out. Very simple to use. Every gym owner I’ve worked with uses it, and it makes the process so much simpler because that is a nerve-wracking thing. You got to tell people they’re going to—“You’re paying more money now.” And as a gym owner that’s a little nerve wracking. I understand it. I had to do the same thing. I didn’t, unluckily at the time, I didn’t have this template. I didn’t have everything this way when I did it the very first time.

Greg Strauch (26:51):
So, we sit down with them; we make sure that everyone is understanding, depending on how far the rate increase, letting them know, “Please keep this confidential until we send this out.” But as you noticed earlier in what I told you with that story that I had, we have the letter ready to go. Outside of putting the emails in there and hitting the button “send,” you have it ready to go in case something happens. A member talks to a coach and the coach says, “Oh yeah, we’re doing a price increase. And everyone goes, “Oh, I wasn’t supposed to say that.” And in those situations, that’s what has to happen. But the communication between you and the mentor has to be very active at this point. When you’re ready to go, we’ve talked to the members, we’ve talked to the coaches, or excuse me, vice versa.

Greg Strauch (27:35):
You talk to the coaches, then the members, then we’re ready to hit the go button on the launch. We send that out. Now most—I guess another mistake, and I wouldn’t put this with all the main ones, but a sub mistake that kind of happens sometimes is people send the email out: “I want to let everyone know 60 days prior to it taking effect.” That’s like having a Band-Aid on, and I would say probably one of those really sticky Band-Aids that never comes off, and you’re just slowly pulling it. For 60 days, you have to feel like you have a target on your back. Not beneficial for you, your stress, your family, your sleep, your recovery, your workouts. So, what we suggest is doing it closer to whatever your cancellation policy is, unless it’s a longer part of time, which then we say 14 days or less—I would even say even 10 days.

Greg Strauch (28:24):
10 days allows you just enough time to rip the Band-Aid off and get it in place and not have to worry. If you have a 30-day cancellation policy, you can still do it within those. In between 14 and 10—I usually say 10 though with majority of clients to get it put in place and go. So, 10 days—you send it; you have 10 days now. And during that time, the first 72 hours are going to be—your heart’s pumping. You’re freaking out; you haven’t gotten an email back yet, which means everyone’s bunching together, and they’re going to leave. And that’s where the mentor comes into play. If a mentor wants to be super successful with any gym that, and any one of the Two-Brain mentors, the biggest thing I can say is make sure lines of communication are open for those first 72 hours minimum.

Greg Strauch (29:08):
They got to know. And I tell every mentee, “I need an update every hour and then through the first 24, not when you’re sleeping, of course, but after that maybe every two to three hours—update of what negative responses, but also what positive responses.” Because that’s the thing that nobody ever measures when they send this email out. You’re going to have a ton of positive reinforcement from your members saying, “I’m happy to pay the new rate. I’m so excited for you guys. This is the gym definitely needs this.” And then members who are paying the new rate are saying, “Oh, I’m so happy to hear that everyone’s going to be on the same rate for the same service.” Like they’re going to repeat the things that you know, but you never thought anyone’s going to send you an email about. And so that’s going to happen too.

Greg Strauch (29:49):
The positive side will happen with it. But I say about 72 hours. And then from there we can kind of extend how often you communicate more of, “Hey, if, if there’s a fire that gets put into place, let us know. If there’s an issue, let me know.” And I try to—I even get to the point where I say, “Hey, give me a call. Here’s my number. Give me a call if needed because we want to stay in front of any fires that do come up and be reactive as fast as possible to make sure we put those out.” And the mentors not only have been trained but have gone through this personally in their gyms, and then as they start as a mentor, they’ve taken mentees through this process. So, be patient, but also as soon as something comes up, ask questions.

Greg Strauch (30:30):
If you don’t know how to respond to an email from a member, send it over, forward it to your mentor and then shoot them a message, say, “Hey, I sent you an email. This is what it’s about.” That way they can help you through the process, and then be excited about what you’re going to be doing in the future. Excuse me. Be excited about how you’re going to help all these new members and the gym and your family and everything with what you’re doing because you see value in it. You have clients who already see value in it, and they’re going to continue seeing value. So, it’s hard to do it when you’re going through it, but I promise you when you come out the other side, you realize truly what that missing revenue was like for a new staff member, for your family, for whatever else is coming up. If you took out loans from during COVID, they can pay them off faster. So, it’s well worth doing the process and making sure you have somebody in your corner throughout that time.

Mike Warkentin (31:21):
I’m going to highlight one thing you said, Greg. Removing discounts is a rate increase. Even if you bring all the people up to one standard rate, that’s an increase, and that’s going to save a lot of gyms because we know discounts kill gyms, and that’s just a fact. We have the data on that. I’m going to put link to the show in the show notes to an article that Chris Cooper’s written about that. If you just eliminate discounts, that’s a big step forward at the very least. And you maybe aren’t even increasing your total rate. But you can start with that. Now, Greg, I got to ask you this one: 81 people you’ve put through a rate increase. Have any of them just crashed and burned and lost their home and their house and their gym and their business?

Greg Strauch (31:56):
Not one. Never had one.

Mike Warkentin (31:57):
Not one of 81 over the last six years?

Greg Strauch (31:59):
No sir. Not one.

Mike Warkentin (32:01):
So, if you’re listening out there and you’re thinking about this, what makes you different than the 81 people that Greg has worked with in the hundreds around the world? Probably nothing. It’s probably just the inability to take action. And I was just like you; I did not take action. 2013, those rate increases, they’re still in my system. We’ve now implemented them, but they were sitting there, and they’re still tagged “2013 Rate Increase,” and I never put them in place until a mentor helped me do it. So, that accountability is key. Talk to me about a success story, Greg. So, in your 81, is there one—we can name names or no names, whatever you like—is there someone who just rushed this and just like “rocket ship” after this?


Greg Strauch (32:35):
So, have a few, there’s a few different success stories I would say, and I’ll kind of tell you two different versions of them. I had one mentor who had about 300 members and a majority of them, when they looked the new rates and they calculate, they realized the current rates are going to go well above that 15%. So, we said, “OK, how do we navigate through this?” And we realized that we could do a step model, where they increased every few months. It was about every 60 days; they would go up a little bit more, a little bit more. Each of those high-risk members who they did have, they sat down with every single one of them. This process took a lot longer because of how many members they had and the higher risk. They sat down with all of them.

Greg Strauch (33:16):
All of them were good outside of a few, probably about five. We put it in place. He sent it out. Nobody canceled their membership, not one out of 300. All of them stayed at the gym. All of them, even the people who he thought, the people who were upset or seemed upset, figured it out a way to get through it, figured out a way to budget. They didn’t go to maybe Starbucks as much, or I’m in Colorado, so Dutch Bros is the big one here and Oregon, a few other places. So, they were able to figure that out, and that was really amazing. Now I’ll also say the other side, and I want to hit on one point that you brought up earlier, and that was that discounts are rate increases. When we removed discounts—that’s coming from a guy that was seven and a half years active-duty military within SOCOM and AFSOC.

Greg Strauch (33:59):
So, Air Force Special Operations Command. Coming from a guy who loves the military. I am military. I’m still reservist. I’m almost at 18 years right now, even in the Reserve. So, that’s coming from a guy who is very into the military and offered a military discount right out the gate. When I was active duty and opened the gym, of course I did that, and I removed those too because I didn’t want someone to feel like somebody else—even though the military, yes, they do amazing thing, and I’m still in it—it doesn’t mean that they deserve it better than somebody who maybe couldn’t join the military, couldn’t be a doctor, didn’t have the same opportunities, but they’re working so hard in their day-to-day job to make more money, to be able to do the things that they want within the gym, extra programs, nutrition, those things.

Greg Strauch (34:41):
So, don’t be afraid of that either. Don’t feel like—this is coming from a military person: I give you permission that if you want to remove a military discount, do it. It’s OK. People aren’t going to be totally upset. The military—we’ll be fine. They’ll be OK. They will pay the new rates. I did that in my gym, and of course I had a good majority because we were outside of the military base and they all—nobody left. Everyone was understanding. The other side I wanted to bring up with success stories is as a gym owner, when you’re still trying to navigate that, of figuring out that gap of where you are and where you want to be, which can change. Your perfect day can change. I’ll tell you when I did my first call with my very first mentor, Danny Brown, I told her that. She said, “What’s your perfect day?”

Greg Strauch (35:22):
Because we used to do that in incubator a long time ago on the very first call. And she said, “What’s your perfect day?” And I said, “Honestly, it’s working at the gym in the morning, coaching some classes here and there and then mentoring gym owners around the world. Doing what you’re doing. I want to do that one day.” And she says, “Really?” And I was like, “Yeah, seriously.” And that was my goal, which is—now I’m doing it. I’ve been doing it for over six years now. So, this is what I enjoy. But sometimes you get to a point where you realize, “OK, I need to—my perfect day has changed, and we need to raise rates because I need to do this. I want to provide maybe for a full-time GM or head coach or multiple full-time.”

Greg Strauch (35:56):
“I want to pay healthcare for them or vacation time or some of the other things that you see in other businesses.” And you got to raise rates. And you almost do it in a way of saying, “Hey, I got too many members in the gym right now. My equipment’s getting used faster than I want it to. I’m buying more equipment every month even, and I want to slow that down, so I’m sending out a rate increase so that I can provide more income for those things I want to do in the future, and if a few people leave, that’s perfectly OK.” And I did this in my gym. I raised rates purposely to get rid of maybe—like, I think GE did it with their employees. They cut the last 10%, the bottom 10% every year. They got rid of the 10% who were doing the worst when it came down to their KPIs so that they always kept the highest-level, the higher-level people who are doing the most production, who are doing great jobs.

Greg Strauch (36:42):
And they wanted to keep them and incentivize them by keeping them around. So, I said, “OK, I’m going to do this rate increase purposely to get rid of a few clients.” The lower ones who are, again, complaining about the toilet paper and how we don’t offer a class on Sundays and how we don’t offer this or that. I said, “OK, let’s do this. It’ll provide more income. I can set other stuff aside, do more for the staff, provide maybe some revenue to be able to send them to extra certifications or whatever.” And it’s a success, but not success. But I would do that. And nobody would leave. They’d all stick around. They’d all stay, and I wasn’t intending to do that. And it wasn’t like it was a very small $3 increase. I mean, it was 10 to $15 each. And everyone stuck around. And I’m like, “Well, that’s successful, but not what I intended.” So, those are some of the success stories I’ve seen. And that’s not just me; that’s multiple gyms that have had that happen because it’s sometimes needed for you to be able to see, “OK, this is the gap that I’m still facing that is now my new perfect day.” Because your perfect day can change. It doesn’t have to be like mine.

Mike Warkentin (37:44):
So, 300 members, and I’m going to like—the rate increase was probably more than 10 bucks, but even if it was 10 bucks, that’s $3,000 right away. And that drops right to your bottom line because your rent didn’t go up. None of that stuff happened. You just get that money, right? Like do you recall what the rate increase was? The monetary one on that one?

Greg Strauch (38:04):
I believe it was about—it was going to be $20 and $25 per person. A few of them were much more, closer to like $60 for the very high risk. Again, they were paying, as we all know, we always call it the grandfathered rates, right? The ones who we had in the very beginning. “No, you’re never going to go up. You’re always going to be at this $60 a month.” So, some of those went up dramatically, which is why we had to create a model where they increased slowly over—again, a mentor will work through it, so you don’t lose them. You don’t go overnight. The huge, the large amount, but slowly over a few months even possibly a few years if needed, where they slowly increase, and they get up to that same rate. So, everyone’s on the same rate. But yeah, I think it was in between $20 and $25 for that gym, which that right there, I mean, with 300 people, that’s six grand, a little over six grand.

Mike Warkentin (38:51):
It’s business changing money, right? And you can that as profit, you can reinvest, there’s all these things you do with it. But long story short, that business is stable. I’ll give you one quick story. And this was—I interviewed a client who did a rate increase. His mentor helped him refocus his business and put a new model in place. So, instead of just doing group classes, he had a situation where he was doing—group classes was his focus with a bit of PT on the side. And he realized the PT side was supporting the group side. and it kept going like that. And it was just limping along. He decided to focus completely differently on more PT and small groups as opposed to group classes. And now his small groups are much more valuable, and he was able to put a much more significant rate increase in place, but he justified it; the value was there for these clients.

Mike Warkentin (39:37):
And so the mentor helped him change his business model to support what he wanted to do. And so that’s also where the mentor comes in. It’s not just raising rates on group clients; you can do that, but sometimes it’s analyzing your business and saying, “Are you even selling the right thing? Can we sell something different and better that has more value?” And we did that in this case. You can watch this video on YouTube and great success for  a great gym owner who’s running a very cool business with a different model than he was a year ago. So, that’s another thing that you guys can do. So, Greg, we’re going to wrap this up. Here’s the deal: You’ve laid out literally everything that you would do for a rate increase. You can literally take this show, take notes, and then put it into place. Why should someone work with you as opposed to just doing it on their own?

Greg Strauch (40:21):
Again, the biggest reason I would say is that having someone who’s done something, that’s what a mentor’s here to do. A mentor’s not going to tell you about all these amazing things that are possible with your gym and how you can bring goat yoga in and how it’s going to make you a millionaire and all these things; they’re going to tell you about the experiences that they’ve had, the experiences they’ve gone through, and the experiences within the Two-Brain community that have been successful and being able to work through that. So, having a mentor, whether it’s me or anyone else on the team is amazing, which they do a great job of making sure that you get fit with the right mentor, that you’re not getting fit with somebody that maybe collides with your personality or your gym model—if you’re trying to do something and maybe that mentor is only worked with CrossFit gyms and you’re trying to do a gym that is goat yoga.

Greg Strauch (41:04):
I’ll just put that out there since I said it earlier. It’s going to be someone who you would rather—who has been in the yoga industry. So, pairing you up with somebody like that, and personality is key, and they do a phenomenal job of it. But what I would say is getting a mentor is super important to have because you have somebody who understands it. As an entrepreneur, as somebody that owns a business who’s created it from an idea or taken—bought a gym, let’s say, that maybe isn’t where they want it to be. You have somebody who’s been through it, who knows it, who understands it, who can make sure you move faster. Through the rate increase, get it done, get onto the next things. As you said, change the business model if it’s better, which I’ve had the same thing actually happen with one of my mentees. You want to have somebody who is, who has been through it, who has gone through it with other mentees—that they understand each step because it’s very lonely at the top of the mountain as an entrepreneur and business owner, and having somebody sitting there who’s got your back that says, “Don’t worry.” I’m from Chicago, so I’ll say that when you have the Scotty Pippin to the Michael Jordan, it’s a better team.

Mike Warkentin (42:10):
There you go. It’s an expert plan by an experienced mentor who can provide accountability to make sure that you do it. And we have all these resources to make it go smoothly. Greg has done this 81 times. It has never gone badly. If you want to talk about this book a call, link in the show notes. Greg, thanks so much for doing all this for us.

Greg Strauch (42:29):
Mike. Thank you for having me. I always love when I get the chance to get back on here even for short bit, long bit, doesn’t matter; I enjoy it, so thank you.

Mike Warkentin (42:36):
I love it. Yeah. Thank you for your time. That was Greg Strauch. This is “Run a Profitable Gym,” the world’s best gym owners and mentors come on here every week to tell you exactly how to make your business better for free. Please subscribe so you don’t miss another show. And now here’s Chris Cooper with a final message.

Chris Cooper (42:51):
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.

Thanks for listening!

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