Three Business Models That Will Work in a CrossFit Affiliate

A picture of a functional fitness gym with the Two-Brain Radio logo on it.

Andrew (00:01):

Are you struggling as a CrossFit affiliate owner? If so, what business model are you following? It’s Two-Brain Radio and Chris Cooper is behind the mic to give you three data-backed models that can help you make a hundred thousand dollars a year.

Chris (00:14):

I never missed a paycheck in the fitness industry until I became a CrossFit affiliate. Hey guys, it’s Coop, and today I’m gonna tell you the flaw in my thinking when it came to building a CrossFit business, and it’s the same flaw that affects most other micro gyms. But before I do that, I want to give you the right answer. I wanna give you a tool that will help you grow your gym, but more importantly, define a model that works for you. We all got into fitness for the same reason, to help people, but we wanna run our businesses in different ways. And so in this free guide, there are three different models that are proven to work with data and experience from over 2000 gyms around the world. If you go to gymownersunited.com, you’ll be able to download this free guide, which is called how to make a hundred thousand dollars a year with 150 clients.

Chris (01:06):

And in that guide, you’ll find a couple things. First, three of the models broken down that you can follow. Second, a sample P and L, profit and loss document, but it’s really just a spreadsheet that you can plug numbers into. What if I charge more? What if I charge less? What if I have more clients? What if I have less? And that will show you how exactly these models can work for you. Heck, if you wanna put in your own data and try and prove us wrong or break the model, do that too. I encourage you to do it. So here’s first the mistake that I made. Like many, when I affiliated with CrossFit in 2008, I thought that the CrossFit business plan was the same as the CrossFit method. You coached really, really well. You corrected movement faults, you bumped fists and people paid you for it.

Chris (01:52):

But what I didn’t understand was that the method is not the model. So while CrossFit is really effective at producing unmatched fitness, there’s never been a proven this model for the affiliate. Simply doing the thing really well won’t make you successful as a gym owner. Early on, as a devout follower of the CrossFit method, I thought that I was the problem. That my gym was failing because I wasn’t intense enough, or I wasn’t certified highly enough, or I wasn’t following every video closely enough. Or I even had the sneaking suspicion that my box would do better if we won Regionals somehow. And we all fall into this trap, when we care about something, we wanna believe that when it all falls apart, it’s our fault because that means it’s up to us to fix it. And if we just try harder, then it will eventually work.

Chris (02:46):

But my mission is to make gym owners successful, not to make CrossFit home office successful, or the certifying body for Pilates instructors successful. We all took big risks to open our gyms and we deserve the truth. We deserve answers. We deserve data, not the bro culture of our certifying method or new leaderboards on the CrossFit Games site. So this resource that I’m giving to you took me nearly a decade to build, this resource is a guide to three different business working models for CrossFit affiliates, with a sample P and L so that you can figure out which is best for you. And you can get it in the show notes, or you can get it by going to gymownersunited.com. It’s taken me nearly a decade to build this, but it’s the thing that I needed when my CrossFit gym nearly bankrupted me back in 2008.

Chris (03:37):

So I’m gonna go through each of these models with you, and you can decide which suits your current lifestyle the best. First, where did the current CrossFit quote unquote model come from? Well, in 2006, there weren’t very many affiliates around. And so, there was also this vacuum of information out how to run CrossFit business because, you know, there was only a hundred or 200 maybe. And so there was some information sharing, but nobody was really ready to step forward and say like, yep, I got it figured out. Follow this model. Except for this guy named John Birch. Now John Birch came from a martial arts background and he was already coaching a lot of martial arts studios. And he partnered up with CrossFit LA, Andy Petranic, and they brought this martial arts model into CrossFit LA, right? So you had big classes.

Chris (04:32):

People were more choreographed really than getting like individual coaching. They had a high churn rate. They had a low signup rate of people coming in in the door, but they didn’t really need one because lead gen was so easy. They were in downtown LA. They were the only CrossFit, et cetera. Right. So now of course, you’ve got replication over the years because Glassman put John Birch on stage at the affiliate summit in 2006. And he talked about this model and people adopted it. And over time it just kind of became the dogma. This is how you do it. The interesting thing though, is that this is not how Greg did it. Greg started out doing one-on-one training and then he expanded to partnering his clients up. So he was doing one on two and then very small groups. And if you look at the size of the original CrossFit gym, I mean, there’s no way you would ever have more than about six people in there.

Chris (05:24):

If you want to hear Greg’s story, you can go to Two-Brain business.com/greg. And he’ll tell you about his model. He’ll tell you about the higher price that he charged at intake. He’ll tell you about charging more for nutrition coaching and all that stuff. So I don’t need to go into that here. What I do want to share with you are three models that do work. So the first model is big groups with lots of coaching for the owner, right? You’ve bought yourself a coaching job that you love to do. You love sharing CrossFit with people. Amazing. This model will work for that. Second. Coaching smaller groups and making about 30% of your revenue from personal training. This is usually a model that people adopt when they wanna bring on some help and they wanna make a meaningful career for one or two other people.

Chris (06:14):

And then the third model is smaller groups where the owner works less and it’s more stratified. So you’ve got a nutrition coach. You’ve got some personal trainers, you’ve got some group coaches. You might have another program. You know, focusing on kids, you might have a program focusing on seniors, something like that. And we call this a stratified model. So where do these models come from? They come from collecting data since about 2016. They come from the proof of thousands of gyms worldwide that have actually made it. They come from the gyms whose owners are now millionaires using one of these three models. And I’m gonna share these three with you. In the book, they’re called scenarios, but these are really like three different business models for owning and operate a successful micro gym. I’ve kept a couple data points the same. So in all three models, I use 150 clients.

Chris (07:06):

Why 150, because that is the average number of clients that is found in micro gyms. OK. The rest of it is really, varied depending on the model. OK. So model number one, you’ve got 150 clients. 95% of your revenue comes from group training. The only secondary revenue stream is the gym’s OnRamp program, which is $300. The gym charges an average membership rate of $150 per month. Now, I use that 150 as a mean average. So if you take all of your membership options and you divide them by the number of clients you have, that’s your average membership rate. OK? This gym also runs an event because gyms that focus more on big groups also tend to focus more on competitive aspects. And so they’ll run events, maybe fun ones that encourage participation, the intramural open, maybe competitive ones like throwdowns.

Chris (08:02):

  1. The key features of this model is that the owner is coaching most of the classes. The owner also does all of the admin, the cleaning and the social media tasks. The owner has one other coach doing on ramps and they coach around 25 classes a week earning $56,000 per year. The owner earns the same pay for coaching classes as the other coach does plus a salary of about $3,500 per month. And so at the end of the year, the owner collects about $90,000 in pay plus about $11,000 in profit. OK. Pros of this model are that there are very few staff to manage. I think, I mean, I don’t think I was alone. When I started a box, I didn’t really realize that I would have to become the manager of other humans, right? So this model is like a true owner operator model.

Chris (08:55):

You’re busy, you’re working a ton, but you’re doing what you love, you’re coaching. And you’re making a good living. The cons. This is the most fragile model. If the owner gets sick, they take a pay cut. If the owner gets busy, the marketing stalls out. The owner can’t take a holiday and will probably work a ton of hours forever until they change the model. And this might be the path for a young owner of a new gym, but it’s not sustainable for more than a couple of years. It was certainly my path when I opened up, I was so passionate about teaching CrossFit through the world and helping the world improve through fitness that I didn’t care if I was working an 80 hour work week, but eventually I started to miss my kids and I wanted to buy the more expensive cheese at the grocery store.

Chris (09:40):

So in this model, the owner would likely have to work around 60 hours a week to get everything done. If they’re efficient. I’m not efficient. So it was taking me about 80. OK. And you can download the spreadsheet as part of this guide. You’ll see it, all the numbers broken down for you. OK. Here’s the second model, again, 150 clients, but now 10% of your revenue comes from personal training or nutrition coaching, right? So note that that creates the additional burden of about 40 personal training sessions per month to fill. In this model, the owner coaches fewer classes, about 17 per week, but they also do admin. They do the client success management, right? They handle accountability and check-ins and lead nurture. And they also do the social media work, but they have more time to do those things too. That means there are 33 more classes and 10 personal training sessions per week to fill.

Chris (10:32):

So the gym owner probably has two other coaches helping out, at least one of those will be full-time and one will be part-time for owner compensation. The owner earns the class rate for all the classes that they teach, but they also earn a salary of 5,500 per month. So at the end of the year, the owner collects $99,000 in pay plus 5,400 in profit. As long as they run their business lean. The pros of this model are that staffing is tight, but it offers enough flexibility for team members to cover for one another. That’s why I love it. Like I can run tight, but I can’t run without any parachute at all. This is probably a perfect day scenario for a lot of micro gym owners in their first few years of business, right? They’re coaching two to three classes a day.

Chris (11:19):

So they’ve still got lots of energy. They can work three to four more hours on the business. After they’re done working in the business, seven or eight hours a day, they’re done and they still have time to work out. The other pro is that more personal training will also aid retention. So the owner can spend less time on marketing. Now, most gyms coming into Two-Brain, whether they’re CrossFit or something else, they start out with model one and then they move to model two. And that’s what shifts them dramatically from barely breaking even, or even losing a bit of money to making about a hundred thousand dollars per year. The cons of this model are that the owner is still doing a ton of work and most entrepreneurs struggle to stay focused. So three to four hours on the business can quickly become five or six, especially when you’re trying to learn 50 different things at once, like how to do Facebook marketing and what should I post on Instagram?

Chris (12:14):

Right? Part of the mentor’s job by the way, is to keep you focused and have you doing only the things that make a difference as proven by data, instead of doing 50 random things in your time at the gym. The other con to this model is that owners have to possess a very diverse skillset. They have to learn sales and marketing, have to learn about client care and retention. They have to learn a little bit of accounting and they have to learn lead nurture and all the other admin work. And some owners might not like that. The thing is though, you have to learn it. You have to do it yourself for a little while, even if you intend to replace yourself later. Right? So I remember going through this phase, I was starting to feel good. I had my weekends off again. I wasn’t missing my kids at bedtime anymore.

Chris (12:59):

I was making more money than I ever had, but the downside was that I was still managing people, learning sales and marketing. And I didn’t really enjoy that stuff back then. Now you can get this spreadsheet with the template and see all of the numbers and exactly how this breaks down in this free guide too. OK. So again, gymwnersunited.com, you can download this free guide. It’ll tell you exactly what to do according to these three models, you can shift the models. You can see exactly how your alterations or changes will change things for you in the end. The third scenario is 150 clients, but now 70% of your revenue comes from group classes. 20% comes from secondary revenue streams. So that’s personal training and nutrition usually, and 10% comes from tertiary revenue streams, like kids programs, selling supplements, selling other retail stuff.

Chris (13:52):

Maybe you’ve got like a legends program and you’re more stratified, right? You’ve got a more diverse business model. This could also include online coaching by the way. So in this scenario, the owner coach is about 17 classes per week, still, right? You’re not completely out of coaching yet, unless you really want to be. The thing is that for most of us, we want to coach, but we find our selves burned out and not enjoying coaching because we’re distracted by all the other crap. I can’t tell you how many times I was working with a client trying to pay attention to what they were saying, trying to be fully engaged in the session, trying to be energetic. And all I can think about is like that other person at the back of the room owes me money, and I need to collect it. Also in this scenario, the owner has not hired a general manager yet, but they do pay $2,000 per month for non coaching roles.

Chris (14:44):

So this could be like an admin. It could be a client success manager. It could be a social media person. OK. They’ve got some low value roles off their plate. It’s probably a cleaner. The owner also pays about 65,000 per year for class coaches and 42,000 per year for nutrition, PT, and specialty coaching. So there’s some great opportunity for others to make some income on your platform. Coaches are paid $30 per class, plus benefits and four ninths of secondary revenue streams like personal training. It’s really important to note here that the average pay for a CrossFit class is $22 worldwide. That’s a mean average, and there’s a slight difference between the median and the mean, but for all intents and purposes, we’re paying coaches 20% more than the average here. And they can build on top of that with personal training too. The owner compensation goes like this.

Chris (15:39):

The owner earns the class rate for all classes, right? When they’re doing the job of a coach, they’re paid as a coach plus a salary of 5,500 per month. And the owner collects 99,000 in pay plus 4,700 in profit at the end of the year. So scenario three, doesn’t earn them a ton more money than scenario two, but it saves them a ton of time because they’ve got somebody doing the stuff they don’t like. The admin, the lead nurture, social media posting, creating content, stuff like that for about $2,000 a month. The pros of this model, you’ve got diverse revenue streams, and that means less agility and a greater opportunity for your staff to make a career. This makes the owner more replaceable and actually creates a slightly greater margin for error. If you screw up and your marketing doesn’t work this month, you’re going to be OK.

Chris (16:28):

When clients take a break or they cancel from this model, other revenue streams can quickly close the gap. The best gyms in the world don’t have 10 revenue streams, but they usually have about three. This model also has greater retention than a class only model. And it tends to attract higher value clients for higher ticket services. And coaches’ wages are variable, right? That coaches earn more by growing the pie for everyone else. So it’s very hard to go into the hole or lose money with this model. There are some cons though, the cons are that the gym owner isn’t coaching as much. And if you got into this because you wanna coach 30 hours a week, then the second model might be better for you than this third model. The other cons are that the gym owner does have to manage more and that’s not a perfect day scenario for everybody.

Chris (17:18):

Also the gym systems have to be tight so that every single decision doesn’t come back to the owner every single day, you need playbooks. You need sales binders, right? You need to give people a way to make decisions without asking you all the time. And finally the gym must operate according to a set of rules, instead of allowing the owner to negotiate prices and rules with everyone, or offer different discounts. If you do that, it will undermine any of these models. Now these are three models. You can use any of these three as your starting point. You can add coaches, you can add clients, you can take coaches away. You can take clients away. You can raise your rates. You can increase your retention. You can improve on these models, but without a model to start from, you’re really kind of starting from nothing, right?

Chris (18:09):

The problem with a completely blank slate is you’ve got lots of room for creativity, but you have no boundaries. You have no guidelines telling you even in which direction to start, right? And this is a problem. There are such a thing as positive constraints and starting with a model like this allows you to get really, really good at operating a business. And then you can decide, well, I wanna change this one thing and do it slightly differently. I wanna add open gym access. Great. Once your model is proven and you’re making money, do that, you know, start with the basics and get really, really good at them. So why am I talking more about this than I ever have have? Well, a few weeks ago, the CrossFit APN staff approached us about partnering up and maybe being part of the affiliate partner network.

Chris (18:57):

And we pursued the conversation for a couple of weeks, but we were unable to overcome the resistance from some of the staff to give affiliates a working model. Now, this has been a decade long conversation between me and HQ, but this one example sums it all up for me. About 2018, I was visiting CrossFit. And during those years I would show up about twice a year, have conversations about business and what we were telling affiliates. And, you know, it would really go nowhere. But we were sitting outside in this cafe and the CEO of CrossFits there, Jeff Cain, the COO Bruce is there. And they’re asking me questions about affiliates because you know, they wanted to help. Absolutely. And I said, you know, the number one thing that you guys can do is just collect data from everybody. It’s not that hard. If you went to all of the payment processors and said, we want data, they would be eager to collaborate with you.

Chris (19:55):

If you did a survey of all affiliates, the data would be less, you know, precise, but you’d have something, right. And that’s all you’ve gotta do is collect this data and show it to us. You don’t have to tell us what to do with it. You don’t have to tell us how to run a business. You don’t have to take responsibility for our success or failure. Just tell us the numbers. And they said, Chris, that’s a great idea. We are never going to do it, but you should. And I walked away from that discussion first depressed, and then really just fired up like, OK, you know, I’m in this position now. I have the trust of a lot of affiliates. I have the trust of HQ at the time. Maybe it is up to me to build this thing. And so now we eventually walked away from this discussion with current home office, at least for the time being, because I now fervently believe that I can help CrossFit affiliates of which I am still one more from the outside than from the inside.

Chris (20:55):

So if you wanna improve your business, you should look at others who are doing what you want to do. Use them as a model, do what they’re doing. I’m lucky enough to have over 800 gyms in Two-Brain. Their wins are what guide the stuff that we publish to you, right? The truth. Not stories from my bros or unproven models from guys who wanna make a quick buck while their own gym can’t even pay them enough to survive. This is data. We publish our data. So even if you don’t use these models, you can still look at our data, which is valid and audited, and you can make up your own model. Start there. If that’s too broad, too hard, you don’t have the bandwidth to do it. Cuz you’re busy. Start with one of these three models, follow those models, follow our free content, learn how to apply the lessons from that content into these models.

Chris (21:44):

And if you want help and clarity and guidance and support making the tough changes. That’s when you turn to mentorship. What’s really important here is that while 12,000 people will listen to this podcast and another five will watch our video on this topic. And you know, 35,000 will read about it on our email list. Most of those people will not buy anything from me, including maybe you and that’s OK. I hope that you find a mentor because making these changes are gonna be really, really tough, but they’re a lot easier if you have a clear target. If you have a model to work from, you can build really, really fast. If you’re all on an island or just getting opinions from a random Facebook group, you’re gonna build slower. Number one, you won’t have clarity on what you should do right now, or even next. Number two, you wanna have targets to aim for. Number three, you’re gonna make some mistakes. The reason I’m publishing this stuff is because this is exactly what I needed in 2008 and nobody else could publish it then. And nobody else is publishing it now. I hope it helps and grow a gym, save lives. I hope this makes the process easier.

Andrew (23:04):

For more advice from Coop on Two-Brain Radio, don’t forget to subscribe. Now. Here’s Chris one more time.

Chris (23:11):

Thanks for listening to Two-Brain Radio. If you aren’t in the Gym Owners United group on Facebook, this is my personal invitation to join. It’s the only public Facebook group that I participate in. And I’m there all the time with tips, tactics, and free resources. I’d love to network with you and help you grow your business. Join Gym Owners United on Facebook.

 

Thanks for listening!

On Monday, Two-Brain Radio presents marketing tips and success stories. Chris Cooper delivers the best of the business world on Two-Brain Radio every Thursday. 

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