Huge revenue, tiny expenses—that’s how you build an amazing gym.
But in the service business, we depend on people, and we want to reward and retain amazing staff members. So how do you balance the need for profitability with the need to take care of your people?
I’ll tell you—but first, here’s our September 2023 revenue leaderboard one more time:
With those numbers in mind, here’s a big question: How much better are they if these owners are minimizing expenses and getting huge ROI on the money they do spend?
If you look at your ratio of revenue to expenses, you might find some places where you can improve your profit margin—and you don’t always have to make cuts. In fact, you might discover that some reasonable investments generate huge rewards for you and your staff members.
This one is simple. Maybe you have two music subscriptions but only use one service. Cut the other and your profit margin goes up.
What if you messaged your accountant and said, “How can I make better use of your service?” Maybe the accountant responds with this: “If you get your monthly documents to me on the 15th every month instead of making me chase you until the 30th, you’ll only pay me for accounting, not hounding you.” Here, you’re not cutting anything; you’re just improving a process so you spend less.
What if you audited your facility and asked “where am I wasting space?” Maybe that room full of broken bumper plates and unused fitness machines can be cleared to make space for a small PT studio. In this example, you’re getting better ROI on your space, and you’re creating a place where your coaches can earn more money personally and bring more cash into the business.
High-Revenue, Low-Expense Gyms
When I review our revenue leaders, I always ask questions like this:
Who’s doing the most with the least? Who can stretch a small space or low headcount the furthest? Who’s crushing it in a tiny space or getting amazing ROI on expenses in a larger gym?
Here’s what high-revenue, lower-expense gyms have in common:
- They all started small and upgraded space later—or the owner started in a larger space but subleased a portion to cut expenses until the gym could afford to use all the space.
- They have good locations but none are paying retail-area rent.
- They have some revenue diversity, with 10-20 percent of revenue coming from personal training, nutrition coaching or some kind of specialty program.
- All spend time coaching or mentoring staff.
- All give their staff members opportunities to grow the pie for everyone (intrapreneurship).
- All are either in the Tinker Phase of entrepreneurship or just about to make that leap.
- All are either in our Top 10 for net owner benefit (how much they pay themselves) or very close.
What can you learn from the people with high revenue and low overhead?
That the combination is possible.
You don’t absolutely need a 30-station rig or 25,000 square feet of space or many of the “toys” you want to buy. Those things don’t attract clients, and they won’t make you more successful.
Grow after you’re successful instead of building and hoping.
Finally, don’t starve yourself by giving your staff a bigger slice of a small pie. Teach your staff how to grow the pie for everyone.