You run a gym, but you’re thinking about starting another business. It’s not easy, but it can be done. Today on Two-Brain Radio, Chris Cooper talks to Denny Lehr, a gym owner and the owner of Caffeine & Kilos. Brew a cup of joe, hit subscribe and enjoy the show.
If you own a business, you probably have ideas for another business. And you might be to tempted to act on those ideas, but you should be cautious because splitting your attention can sometimes sink the boat. Today, my guest is Danny Lehr. Danny owns Caffeine & Kilos. You’ve probably heard of him. And he started the company way back when he was going full on running his CrossFit, gym, CrossFit Excel. And so I wanted to talk to Danny about how he managed both, how he grew both at the same time and how he managed to grow both without torpedoing both by splitting his attention. Operating and growing two businesses at the same time is actually pretty rare. Most of the time, I would say 80% of the time, people who start a secondary business while they’re trying to get their gym going fail. And usually when they fail, unfortunately it’s not just in their new t-shirt company or software app or their social media company. They usually kill both businesses. So today Danny’s gonna tell us how he did it, how he’s doing it right now, what’s next for the gym and what’s next for Caffeine & Kilos. He also shares some amazing advice that will help you, even if it’s your sole dream to just run the gym and do nothing else. You should really listen to Danny here, because if he can do it with two things, he can help you do it with one. Danny Lehr, welcome to Two-Brain Radio.
Hey, how’s it going?
Things are great, man. I’m really excited to chat with you and I know this won’t be on video, but I did come on the call wearing a Caffeine & Kilos hat.
A full brim.
The full brim. That’s probably my favorite part about the 2018 CrossFit Games, unless that was 2017. So today we’re gonna talk about starting a gym and then starting another brand, the Caffeine & Kilos and how you’ve managed to grow both at the same time. Why don’t we start with, like, what led you to owning a gym in the first place?
Yeah, so I was going to school to be a PE teacher and that was one of those things where I just always felt really passionate about that, about working out and feeling good, always playing sports and kind of knowing the impact of sports and fitness on sports. And so then I was working at a gym on the side and then I’d start getting to CrossFit and that, you know, that’s kind of, and this is back in 2007, so there weren’t a whole lot of affiliates around. And then it’s 2008, I’m teaching PE and I’m like looking now, OK, well, who else is doing CrossFit around here? Like it went from just kind of doing it on my own or with my one buddy who introduced me to it. So what I’m gonna see is like, there’s gotta be somewhere, there’s gotta be someone.
And I found there’s a brand new affiliate popped up in a town that’s like 20 minutes away and they just started. So I go out there and that guy actually was a PE teacher as well at a different high school in the same town. And so we worked out together a few times and then it just kind of, became, you know, obvious. I told him, I said, man, I wanna be a part of this, you know. And he said, OK, well, I’m really glad because like he had just gone from his garage into his first building. And he said, well, at that time he was coaching all of the classes and they were only, I think there wereclasses three days, three classes a day, maybe three or four days a week. And he was doing all of ’em and working this other job and had kids and said, Hey, I need help. Like, let’s do this thing. And so I kind of, he had a partner wasn’t doing much. And so I was able to buy in right there atthe very start of it, kind of when he first got into that building out of his garage.
And you guys have been partners ever since.
Well, so then right around that same time, there was another guy who had some experience in business and he was all in too. And so really became the three of us. And we did that then in 2015 around there, we had a coach who was, he’s very good. And it’s one of those things CrossFit’s all he ever wanted to do is coach CrossFit. And he had been doing that since right outta high school for us. It had been three or four years. And, he really wanted it. We were considering, you know, he’s maybe come in like a 10%, something like that. And then some things happened with my other two business partners where they both, it was just time for them to get out, to get out of the business in general. And so, when that happened, then we basically just me and that other trainer, buddy, we just kind of went in then. So buddy, he ended up coming in at like 40% and then I just upped my third to 60%. And it’s been the two of us then from, I believe it’s 2015 or 2016. Until now.
That’s great, man. I mean, that’s actually a super, super long time to own a gym at all. Let alone, you know, making you one of the longest standing CrossFit gyms still around.
Yeah. It’s been a lot of fun, definitely challenges. But that’s part of the fun. Right.
So when did you come up with the Caffeine & Kilos brnad? Like what was it originally?
Originally? It was just an event. I was competing in weightlifting, in Olympic weightlifting and a guy I kind of knew through there. We weren’t even really friends, just kind of acquaintances. We saw each other at the same weightlifting meets. He calls me and I don’t even know how he had my number. I think he had to call someone to get my number type thing. Hey, I got this idea. You know, there’s no money in weightlifting at all. I wanna do a weightlifting meet and get the best lifters in the country or in the world to come out and do this weightlifting meet. Like, what is that like, how can we do that? Like, I feel like you are the person who could help put that together. And, you know, I’m not really sure exactly why he thought I was someone to help with that.
I was lifting at a relatively high level and kind of tied in with some of the good weightlifters. I think that was part of it. But I said, yeah, let’s that sounds great. Like, OK, what if we have, there’s no audience, right? For like national meets, it’s just other competitors and maybe your mom, if she lives close enough to drive. And, that was really it. I said, OK, if we get a big cash prize, then I think we could get, you know, we could get some people out here. And so we put that together. We got a sponsor for a cash prize and said, OK, now where do we get an audience from? Well, we both own CrossFit affiliates. Let’s have a CrossFit style competition, during the day. And then we’ll do an invite only session for weightlifting at the end of the day.
And then the CrossFiters, they’ll all be there. Like we’re gonna get a room full of people together who know what, you know, the snatch and clean and jerk are. And, also then the entrance fees from that competition can help pay for the venue. And this whole thing can kind of work all these pieces kind of fit together. So we were, that was the plan. And we said, OK, we should make some shirts for the event. And around that same time, he made some little silly post about, it was like a make your own shirt thing, said my life and had a picture of a coffee mug and a person lifting weights. And then he’s just posted, like on Facebook said, Hey, I’m gonna make one of these for myself. Does anybody else want one? Let me know. And there was this overwhelming response, right?
Like hundreds of people like saying they want one also, so thought that’s interesting. There’s definitely something there. So he had a friend who was doing CrossFit with him and the guy had a little startup, you know, like streetwear brand and just kind of said, Hey man, what do you think about like, you know, helping us with us a shirt or something. Right. And they start talking about that. And then we realized that it wasn’t two ideas. It was actually the same idea that the competition is the Caffeine & Kilos invitational. And we’re gonna make these, the shirt, you know, caffeine kilos on the shirt, cuz it resonates with people, the idea of, you know, drinking coffee, lifting weights, getting fired up, you know, exercise, that whole scene. And it’s just, there’s such a long and strong relationship between, you know, caffeine and exercise and coffee specifically and working out, it goes back, you know, long times like the old Arnold movies, like Arnold’s drinking a cup of coffee on his way to the gym.
You know, it’s always kind of been that. And there’s so much, you know, research and everything about the benefits of caffeine and exercise and that whole deal. So we got the shirts made and said, well, we should sell some coffee too, if we’re gonna do it. And so we reached out to a, so we started calling roasters and telling em our vision, Hey, here’s the thing we’re doing. It’s fitness though. Like we make coffee, organic, all natural. I could have a little higher caffeine if you can, but still has to taste good. Right. All that tuff. And a lot of ’em just kinda like, yeah, yeah, yeah. And the one guy here in Sacramento was all pumped up. He’s like, man, this is great. Everyone always calls or whatever, and says, I want you to make the best tasting coffee.
But like how many times can you do that? Right. He’s like, but this is fun. Cause there’s a different angle on it. There’s something to think about and focus on nd do that. So we started, went out and met with him and tasted a bunch of his coffee and had a great relationship. And he still does all of our blending and roasting and everything today. So we had the coffee and the shirts and we started selling those before the competition even happened. And it just, the sales just really kind of just right out the gate kind of took off.
So when you say sales, was it in the beginning, was it more revenue kind of coming from the event or was it the coffee? I can remember swinging by your booth and you know, so I get a hat, I carefully carry it on the airplane all the way home to Canada. And my wife was like, what do they sell? And I’m like, hats, you know, I think you were already outta coffee, maybe.
Yeah. So we first started, we started an online store, started doing that, but that first event, what it really turned into was kind of a launch party for this thing. And it was great. It worked great. We got lifters from all over the country. They flew out, they lifted, there’s some big lifts, things like borderline, you know, close to American records and stuff like that. An it was a lot of fun and we were able to pay out these cash prizes, these guys, and then we sold, you know, merchandise there and use the proceeds from that event to do another run. Right. And that’s really what we did for a long time is we basically just dumped every dollar from Caffeine & Kilos back into more inventory. And, you know, the system’s kind of building it up. So I think for about, probably about a year, from when we first started Caffeine & Kilos, it bootstrapped the whole way. And that first year, I think we didn’t take a paycheck at all. We just kept putting every dollar back in, in order to yeah, grow the site, grow the brand, able to buy when you’re bootstrapping and you have an inventory business, that does take a lot of capital. So we do that and then, just kept going from there.
And so today, what does the business look like? Are you mostly shipping coffee or like, is it large percentage of the business merch?
Yeah. That’s interesting. So it’s a lot of both how, how it kinda works is our number one SKU. Like our most popular product is coffee, is our coffee the month. And that’s a lot of fun because every month it’s a different blend from a different region from around the world, different roast levels. And we kind of try and, work the flavor profiles to be seasonal. So like around Christmas it’ll be, you know, different coffee that makes you think of Christmas stuff, right. Like hazelnut and chocolatey stuff in the summer it’ll or spring, it’ll be more, you know, like more lighter, fruity blend type stuff. Right. And so that’s our most popular product by far. It’s like, it’s fun. People like getting a different blend every month. And, so that’s what we sell, more of that single SKU than anything else. But on net we sell more apparel than we do coffee. Right. So, cause there’s a lot more options, different SKUs, different things. Right. So we have multiple different t-shirt designs. You go to men’s shirts, women’s shirts, socks, all that type of stuff. Right. So we sell more apparel than coffee, but our number one product is coffee.
Got it. Yeah. I mean, I don’t know who wouldn’t want your stuff, you know, if they’re listening to this podcast, they probably love both weights and coffee. So, I know that was it for me. Right. And like, I don’t know anything about this company, but I do like both of those things a lot. So, yeah. That’s cool. And is your primary audience still gym owners or is it like people from gyms and how do they hear about you?
Yeah, just CrossFitters, weightlifters, powerlifters. That’s it’s really, you see it too. You’ll see it in a, you know, like a globo gym setting type of a thing. Occasionally, people just, you know, anyone who likes getting after it. Right. And that’s we talk about now more too, that, you know, it’s about that healthy, active lifestyle, right? Like if you’re all about like working out, enjoy that healthy, active lifestyle, like getting after it, you know, like that that’s really it. And people find out about us, you know, it’s funny, like looking at our traffic and something that’s good, but also challenging is that when we track all of our traffic and everything, like our number one source of traffic is just organic Google searches or direct hits. And so it’s people, what I take from that is people see someone wearing it, right.
You’re in the gym and someone in the gym is wearing it or you’re out whatever. And that’s part of our whole philosophy with the apparel is that it looks good in and out of the gym. Right. It’s something you wear in the gym and you can move in, it breathes really well, all that, but also you could wear it to out to lunch or to your niece’s birthday party or whatever. And it’s not some, you know, corny saying from a gym shirt or it’s not like a dry fit shirt that just like never smells the same after the first wear, you know? So people just see it around and then just go andgo and look us up, you know?
And so all of your sales come through your own store or do you have like affiliates and partners, retailing your stuff for you?
So we do, we have a few, we have some wholesale accounts, mostly international for online and then affiliates can absolutely sell our stuff we have. Cause we have a collagen that’s, really good. Like that was one of the things when we were talking about doing a collagen it’s like, what do we use? Right. Like, well, I put collagen in my first cup of coffee every morning cuz all the, the benefits, you know? but I don’t wanna just make another one and be another me too product. Right. Like if it’s not, it has to be as good or better than what I’m taking otherwise what’s the point. And so we worked with manufacturer and we actually have this, it it’s all grass fed bovine collagen. That’s like mixes, great. It’s we would do this test sometimes. Like, does this have collagen?
We’d make one with and one without people would test and try and guess, cause like bad collagen. I dunno what the language the show is. OK. You know, they like don’t mix that great, they’ll clump or they’ll make the coffee, like almost, thick, like snotty consistency. But ours isn’t like that at all. Like it’s thin, you won’t wouldn’t even know it’s in there if you didn’t like mix it in yourself. Right. So that’s something that I know moves really well at my gym. and that’s probably our, we have that. We also have a caffeine only product, clearly caffeine, which same thing. It’s like a pre-workout, but without all the, like it’s just caffeine, natural flavors. Right. Cause some people say, Hey, you know, like I just don’t like coffee and I don’t necessarily understand that.
But I do know that there’s some things that I don’t like. So, I was OK, what can we do that kind of, you know, maybe something for them, but they also like don’t wanna drink a freaking bang energy drink or just take a preworkout off the shelf and, and, you know, from GNC or whatever and who knows what’s what’s in there. Like I wanna feel good when I’m working out. I don’t necessarily wanna be itchy. Right. So those are kind of the two, supplements we have outside of just the coffee and the apparel and those actually both those things go well in affiliates. And then one more thing that we do sell in gyms is, thumb tape. Like we just make really good, like thumb tape, finger tape, like it’s flexible, easy to tear all that type of stuff. So.
OK, man. So just to, I’ve got a bunch of questions about like building a brand while you’re also building your gym brand, because it seems like back then when you guys got started, a lot of people had other ideas for things, you know, to sell back to CrossFitters or CrossFit gyms or whatever. And most of those are gone. So the first time I ever encountered Caffeine & Kilos, you know, you’re walking around the Games vendor area, and there’s 20 people with t-shirt booths. And you think like, how are these people paying to be here? It’s 10,000 bucks or whatever to be there, like how much product do they actually have to sell? And so the next year you’d go back and it would be a different 20, except you guys were always there. Right. So how did you manage to kind of stand the test of time and how did you build this brand while also owning your gym?
Well, one thing is you mentioned early on in that you said all these people are trying to sell stuff to CrossFitters. Right. And that’s never been how we’ve seen ourselves or how we’ve gone about anything we do. So one thing that really makes Caffeine & Kilos different is we are our market, right. So I own this gym. I’ve been doing CrossFit since 2007. I competed in Olympic weightlifting. Right. My business partner, Dean, he went to a CrossFit gym for eight years. Now he has a CrossFit gym, his girl, his wife does CrossFit. Right. And so he competed in weightlifting at a national level, even for a while. So like, so it’s not about like, what are we gonna sell to these people? It’s more of like, what do we like and what do we know?
What do our friends like, what are we into? Right. And so that’s been a big part of it. The whole time is like, it’s not trying to push something down on people. It’s not, without like totally naming somebody. It’s not like this massive supplement company who starts a label that they think sounds like something CrossFiters would like, and then try and sell it to them. Right. We’re part of the community. We are the community. Right. And so we’re just making stuff that we actually like and that other people appreciate also. And then with the, you know, how do you do it with the gym and all that other stuff is a lot of that’s, you know, systems and people, you know, and so having, having other people that, you know, that you try us and that do a good job and making sure that everything’s kind of systemized to where, you know, everyone knows what’s expected, so everyone’s on the same page.
So, you know, specifically, and then you just kind of know what your role is and doing those things. So in the gym, day to day, I don’t have a lot of interaction with the gym as for the background. I mean, I do, like, I go to the class, like I attend classes at my gym. Right. My wife attends classes at the gym. But then there’s a handful of tasks that I’ll do for there. But mostly my activity in the gym is I meet with the different people that are responsible for different parts of the gym. So for example, we have one of our coaches is in charge of the gym retail stuff. Right. And s we stay in communication and she runs that, right. So if we need to order whatever, more fitaid or charge people’s accounts for something, she does that.
We have someone who she’s been a member for a really long time. They’re really good friends of ours and she does the entire administration side. So if someone has a problem with their account, needs to update their credit card, whatever, like that goes to her. So like tthe info at CrossFit Excel email, like I don’t even really, I just delete ’em because I know she’s got that all handled. She handles all those things then, and she needs something from me then she’ll ask, you know, and then my business partner and I, we, you know, we meet once a week specifically just for, you know, gym stuff and talk about what’s going on at the gym and what needs, you know, attention or help oor all that type of thing. So, you know, all the, and again, with the systems, like we know if we do these things, then, you know, that will put the gym in a good position, same thing.
The guy who’s in charge of all of our intake for new members and that type of thing. We meet with him once a week, say, OK, like, how’d this last week go, how many leads did we have out of those leads? How many intros did you do? And then how many people do sign up from those intros, you know,and kind of go over that whole process and everything, and make sure that he’s on the same page with that. So that’s kind of how it’s, I’ve been able to split time and amongst the two businesses,
When you were just getting going, Danny, were you full-time at the gym then? Like, how did you make time to build this other brand?
Yes, no. So I was still teaching PE when the gym came up and then, and in fact, I was still teaching PE in 2013 when Caffeine & Kilos started, it just took off right away. And, when that happened, I was like, all right, like, this is, it was over the summer. We were playing this, the invitational, all that first meet. And that happened in September. And then it was like going. So I was working, you know, from 5:00 AM until I had to leave to go to school. And then we had a baby at the same time. It was a mess and then I’d come home. And, after dinner I would basically just work until 10 o’clock at night. And it’s just not so sustainable. Right. Like for a short, short time. Sure. Like that’ part of starting a business.
It’s part of doing something new, it’s part of, you know, and you’re excited and you don’t mind doing it because it’s exciting and it’s new and you’re trying to get these things squared away. Right. But then it’s like, OK, well, I, this isn’t sustainable. I need to spend time with my wife and my baby. So that’s when I stopped teaching. So then I stopped teaching after Caffeine & Kilos had been going on for about a year or so. And then that was actually probably what was one of the best things happened in the gym, because then what’s going on is, I said, OK, well, this is it. Like, if I’m doing this, I need to like, figure out what I’m doing and I need to learn about business.
And I learn about, you know, kind of really get into this more. It goes from, we always ran the gym as a business. It was never run like a hobby, but there’s definitely things lacking as far as systems in place and doing kind of the right way and analyzing why we’re doing things more when it’s, when you’re have another full-time job and you’re doing the gym on the side. you know, it’s just generally the type of efforts or the things you concentrate on might be a little different. Right. So I said, OK, I need to figure this out. And so I just started reading a ton, so I, or like getting into it, like it, I gotta learn, like, I gotta figure out like how business works. I gotta figure out like how to, you know, lead employees and how systems fall into place and all that.
So I started basically, then I spent that extra time for about another year, just studying, while doing the business stuff, you know? So, yeah, so when I stopped teaching all the time, and then all the things through Caffeine & Kilos, like learning, it’s a completely different type of business, you know, being retail and compared to a service based business, but just all the learnings from that so much carries over. And so the gym really has kind of thrived, a lot more since that happened and KA Cafffeine & Kilos has as well.
So would you say that starting Caffeine & Kilos has had a net positive effect on your gym then? Or do the two still sometimes compete for brain space?
I mean, there’s no question that the two compete for brain space occasionally. I really try for that not to be the case. There’s also no question though that Caffeine & Kilos has been nothing but beneficial for the gym. That’s for sure. Just from the standpoint of, again, like just filling, like I’m in this position where I have to figure this out and learn these things and systems and people, like I mentioned before, you know, if I was the one that was responsible for changing somebody’s credit card on file or putting someone’s membership on hold or taking it off hold, those tasks would, then I’d be doing that and that’d be taking brain space, you know, away from, what’s our next like marketing plan gonna be, or if I was the one trying to plan events, we do frequent events at the gym, like once a month or more, if I was the one planning events at the gym, one, they would be totally or not nearly as good as they are with the people that are planning them now.
And then two, like that’d be, you know, a whole different, a whole different thing. So, yeah, they definitely both pull attention. But I’ve kind of, I’ve got my schedule in a certain way tto where on certain days and certain times there’s dedicated times for different things to kind of help regulate that.
You said that you can work nearly full-time on Caffeine & Kilos now because of the systems and processes that you built in the gym, did starting Caffeine & Kilos have a forcing function there. Like, did you find that you had to do that stuff because you were so busy with Caffeine & Kilos?
Absolutely. I mean, that’s a big, that’s definitely a big part of it also then it’s funny, it’s one of those things where, you know, it happens once. And then you’re like, oh man, this is great. Like this person’sbetter at that particular job than I was. And they’re the one doing it. It’s like, that thing is more successful than it would’ve been if I was doing it on my own. And so then it more than makes up for the person doing it. Right. And so then you just, OK, well, where else does this apply? Right. like, where else do you know, do I need either a system and then a person to operate that system? Like, where else does that need to happen? And so that definitely had a huge impact.
One thing that I’m picking up that you’re really saying over and over that, I’m not sure a lot of people do it this way. And I certainly did it backward at first is you think of the system and then you find the right person to fulfill that system instead of I’ve got this amazing person, what job can I make up for them? Has it always been that way with you? Or did you kind of start it the other way too?
Well, I think there can be a time for both. Right. But I think that, yeah, in general hiring somebody on and then, or, or yeah, hiring someone to run something without knowing the best way should we run, or at least at that time, a good way to run it, could be a problem. Right. So generally it kind of happens. We still kind of do this most of the time is that, if we have something that we want, that we wanna launch or we wanna do differently or whatever, like I’ll kind of take on that role and I will do that role for a period of weeks or over a month or whatever. And then we can hire somebody to step in there and take over. Right. And then it’s like, OK, here is what I learned.
Like now you know about everything I know about this now it’s your job to make it better. Right. So you wanna hire someone who’s better at that task than you are. But also go have, ’em go into a blind and then you have no idea what’s happening. Then what happens if they, you know, they get sick and they can’t do the job for a while or they move away. And it’s like, if you don’t have any sort of knowledge or just baseline knowledge of kind of that task, what it entails, then you’re in a rough spot with that too. Cuz there’s no one to kind of pick up the slack. I have done it the other way and with some success, whereas I had the idea for a arm, like another arm of the business of the gym.
And, but it was a big undertaking, like this thing, like this would be a full-time job if I were to like take this on, but I really wanna do it. So I hired the person, I got the person I really wanted, and said, Hey, like here’s the vision? Here’s the thing. You know, I need someone to basically take on this whole thing from scratch and like make this thing work, you know? But usually if it’s functions of the business, not essentially like a whole nother arm of the business, I like to get the systems in place first and then plug someone in.
I definitely think that’s probably the best way to do it. Who do you have working for you at Caffeine & Kilos now, just to kinda shift our attention back to that company, I’d like to get a sense of the size of this. Yeah,
Go ahead. So we’re actually a pretty small team we have, I think it’s so we have myself, and then my business partner, Dean, he handles a lot of the graphics and he’s in charge of like all design, the look of everything we do essentially, right. Branding and everything. We then have a marketing associate that runs the social media and, you know, emails and that type of stuff. And then we have, really community support, the person handles all customer service stuff, but then also other things as far as like, you know, brand ambassadors or athletes and just kind of anything that has to do with the community as a whole, that individual handles, we have an admin who does all the, you know, the info at type of stuff. And then also product ordering and just kind of those administrative tasks. And then we have a couple guys on the warehouse who are handling all the orders and packageing and everything.
love this whole inventory mode. It’s so interesting. probably because it terrifies me so much. So you’ve gotta maintain a warehouse right now for product. You’ve gotta maintain staff to move that product around. How big is the organization? I don’t mean head count. I mean like how much product are you moving and stuff.
Oh, so we do approximately two to 3000 orders a month. And that varies kind of up and down seasonally or different things have going on or what different, you know, seasons of the business, but right around there.
That’s really incredible, man. Congrats.
Yeah. Thanks. Right now we’re on a pretty good trajectory too. We’re working on, been ratcheting up here recently and it’s been going well.
So what’s coming next then.
I mean, right, now we basically it was funny with, the topic nobody likes to talk about, but with COVID stuff, you know, it was like for a period of years, those two years or so, it was like, all right, like what do we need to, you’re in survival mode to a degree, right? Like your head’s down. And you’re just like, how can, like, what can we do? How can we make this work? What’s going on? Like, you know, how can we get our, you know, the subscription business up more? How can we do this? How can we serve people differently here or there? What areas do we see are lacking that we think we can help in and that type of thing. And there, you know, so, and it worked right. Like we made it through everything was good.
And then at the end of last year, we’re like, OK, now I think we need to kind of like pull our head outta the sand and look around, like, what are our margins actually look like? Right. Like, are we selling anything that we’re actually losing money on? Right. Like maybe not as far as like, you know, business 1 0 1, right. Buy for one, sell for two, like maybe we’re doing that. But then there’s also all these things, inventory businesses, like, operating expenses, right? So like there is the box that the package goes in, there’s the labor that’s associated with it. There’s the lease the warehouse space, there’s, you know, shipping of product into the warehouse. And then, you know, when someone buys something, they pay shipping, but is that how much of that is subsidized by us or not, and like all these different things.
And so when you take all that stuff into account, you know, not just the gross margin, but the net margin, the actual profit on each productis a lot smaller percentage of the sale price. Right. So after two years of like, whatever it takes, we need to get this, like, keep these sales running through, then you look up and you go OK. Yeah. There’s some things like actually every time we sell this particular sweatshirt, we actually lose money. Right. Like, yeah. We bought it for one sold for two, but it cost us a dollar 10. In the meantime, we like, we end up like that. Right. And those types of things. And so we had to readjust some pricing structures. We readjusted the way we purchased inventory on the financial side of things. Different things like that.
We just kind of stepped back, OK, what employees do we think, we didn’t lower anyone’s pay, but like who would benefit from some like incentive base, pay structures, right. That would maybe encourage them some more. And so just different things like that, where we just kind of on the back end spent, you know, three months basically just reworking our pricing system, our ordering systems, all these different things like that. And so then coming into this year into 2022, we feel good about everything we know. OK. We know every single sale we make is profitable sale, which is important. We know kind of what those numbers look like as far as like customer acquisition oor, you know, lifetime values and different, different things like that. And so really, it’s just kind of, now that we have all those things squared away, now we can get back into, a little more also this thing too, like advertising, like what ads are we buying that we think are profitable, but are they for sure. And is there a better way to do that? Right. So we kind of looked at more of, OK, yes. We wanna do some things. We wanna make sure that we have controlled inputs, you know, things that we kind of have more control over with that.
Yeah. That’s all great stuff, man. And you know, just if you’re gonna add something to that list, because there are a lot of gym owners out there, CrossFit and non CrossFit who see an opportunity to serve their community better. Maybe they’re not happy with their gym software and they launch, you know, they start coding their own payment processor or sure. They think they’ve got a better way to do t-shirts. What advice would you give to them?
I would say the first thing is that you would, you need to make sure that, when you first start, it may seem like an easy thing or like a fun thing or whatever. Step back and say, OK, is this one, going to be financially worth it to where I could pay somebody else to do the job or do the work I’m doing on it down the road. And then two, do you like it, right? Like, do you like, cause all of those things, they always seem like a fun project that, OK. Yeah. That’s gonna be great. I’m gonna take on this project, but then it’s like, you know, look two years down the road, like what does this actually look like two years down the road? You know, is this something that you, that is going to make a difference in the business?
Or is this something that, you know, two years down, maybe right now, it only makes a percent difference. but two years down the road, is it gonna make a 50% difference or is it still only gonna be a 5% difference? Cause if it’s only a 5% difference now, and two years down the road, it’s still only gonna be a 5% difference. Then I think you need to like step back and like take a little reassessment. Is this something that, you know, actually I should spend my time on oor would I be better off doing the thing that I know works, right. It’s so easy to chase down these shiny pennies. Right. But if you have the thing that, you know, works, like do do that thing. And at Excel, we’ve expanded the program quite a bit over time to have like different offerings.
But you know, a lot of times I try not to not take on too much at once. You know, like the CrossFit program’s our bread and butter. Like that thing just goes and we, there’s not a single yoga studio in town and like turns out stretching is good for you. And so we opened a yoga studio in the facility, but we did it right. We didn’t just say, oh, we have a class on Saturdays. Did that for a while. And then we said, you know, it could be self-containing. It could be anywhere in the world essentially. And it could, it needs to be able to run independently and profitably on its own. Right. We can’t be subsidizing this thing. So we did that. But then while that was getting up and running for the first year we did that, we added nothing else new.
Right. So it’s like, you get this thing going and until it is a proven winner, you know, you don’t do anything else. You either you run until you either scrap it or until it’s successful. And then after about a year and it was self-sustaining and it’s not taking money away from anything else it’s producing its own revenue. Now I say, OK, what else, you know, do we want to take on, we don’t have a nutrition program? Well, we should reach out to HSN and work on getting a, you know, we had one that was kind of like our own, you know, but it was kind of half baked and didn’t have all the systems there and the amount of stuff that, that didn’t need that it would really need for it to flouris wasn’t there. So anyways, then we maybe take on that thing, but always while taking on these projects back of the mind, there’s always the two questions, right?
Like the amount of time and effort going into this, if I put that same time and effort into the main thing, would it be making more revenue and be more successful than this side thing anyway. Right. And then the other thing is like, you know, are we sure that we want to continue to do this? Right? And so that’s really the big thing there. Just kind of making sure that it’s so easy to like spin your wheels to see something that sounds great. And to like start chasing that thing down, but then it’s like, well, yeah, man. But if you’d have spent, if you’d have taken those 10 hours and that thousand dollars, and just put that into growing your base program, you are probably better off.
Very true. And I think a lot of people miss that, one mentor of mine, Dan Martel said, the reason that most people start the second brand is because they’re just at deep down, not confident that the first brand is gonna make it. And so I like this idea of yours, of, you know, make sure that it’s making money before, moving on to the next thing. Where did you learn that Danny?
Trying to do too much at once.
Yeah. And it, you know, and that’s, I don’t, you know, and I honestly, I could probably better about it in a few things I’m thinking of right now, but you know, it’s just that whole idea of, you know, if you have something that’s working, and it’s going great. And we wanna do this yoga studio. And it’s like, OK. And that’s great. But if, you know, the simple fact is like, it just can’t eat every dollar profit from the gym. Like you can’t just be dumping money into this thing forever. So you have to have a, OK. We know what that program needs to make for it to be self sustainable. Then we know what it needs to make to, you know, be profitable.
And then you give it a timeline. All right. We got one year, like in one year, if this thing’s not at least paying for itself or is or profitable, then, then we gotta cut bait and do something else. Right. Becausit’s so easy to, sunk cost fallacy, right? Like we put all this time and effort into it. It’s like, yeah. But if it’s not, you know, making money, retail’s a great example. We didn’t do retail at the gym. Or we did like at a small scale, like, you know, you sell some fit aids and some shirts every now and then, but that was kind of it. Cause it’s kind of painting the ass sometimes. And, and then, that was actually the, after the yoga studio, that was the next project we took on said, OK, well I think that we know that this can be profitable.
it just can’t be profitable if I’m the one in charge of it. Right. cause I’m not gonna put the time and energy and effort into it that it needs. And so that was the kind of thing. OK. We have this coach who was, she’s passionate about it. She’s always like trying to, she always wants us to do more things or to get, Hey, we should sell this or we should do that. Or we should, you know, every time I’m like, yeah, maybe, but like I’m not dealing with it. Like it’s not worth my time, you know? And then we realize, well, maybe it’s worth your time. Right? Like obviously we pay her for handling that. But for me it would be taking time away from other things. Right. So anyways, that’s the, it’s really just learned to, and honestly also, you know, it’s probably from, I really do study, like I read 30 to whatever, 30 to 50 books a year and half or three quarters of those re business books or that type of thing. So I’m always trying to pick up things wherever I can.
So knowing that the actual value of your time is really a helpful filter for you when you’re deciding what to do next to.
For me, like, it’s basically,I got a pretty busy schedule and part of that busy schedule is time, with my kids and time at the dinner table with my family and I, you know, that’s the filter too. It’s like, not only if I do this, that’ll take that could possibly take away from like other work it could, but I don’t know. I’m pretty good about that. If I have some, like if there’s something I need to get done, it gets done. Like, I don’t just like, I don’t put off tasks that I’m responsible for, but what’s easy to put off is like time with your family and time doing the other things you like and enjoy and, you know, screw that, right? Like that’s, talk about important things and what’s going on. It’s like, no, like I’m gonna be home at, you know, at dinner time and I’m gonna sit at the table with my family for dinner and you know, I’m gonna take my kids to gymnastics and I’m going to take ’em to soccer practice and, you know, like those things are important to me.
And so it’s OK if I take on this other task. Not only I know the value of my time as far as wwith business, but you know, the value of my time with, my kids, my family. Right.
So how do you set up your week to kind of get that integration and get everything?
Yeah, so, Tuesday, Wednesday, Thursday, I come to the Caffeine & Kilos warehouse. And then Friday through Monday, I just work from home or from the gym or whatever. So like on Mondays I have, a couple, I have three, three or so meetings, with people at the gym at Excel. And then on, and then, yeah, Tuesday, Wednesday, Thursday, I’m up at Caffeine & Kilos’ warehouse. I do my meetings here, my stuff here. And then the rest of the time, I just kind of do things ffor both whatever kind of needs, mostly for Caffeine & Kilos. Most of my stuff is those meetings, or just kind of some, one off things once a month, we have a meeting with all of our coaches. so that gets everyone on the same page. And then day to day, I get up early.
Like I wake up at before five o’clock. So that way I can be, I’m like showered. I’m like sitting at my computer working at five 30. or so, before six o’clock and I work until, until about seven when the kids get up. Right. And tthat hour or two hours, one or two hours in the morning, you know, I get more done during that time a lot of times than I do all day. Right. If you do the most important thing you gotta do that day, get it done then. So then, you know, the kids get up at seven. I help ’em get ready for school. That type of stuff take ’em, drop ’em off at school and then go about my day. That’s gonna be, you know, either going to the gym and working from there or working from home or coming up to Caffeine & Kilos or, or whatever it is.
- That’s, great, man. So most of the people listening to this podcast are gym owners. And, how can they get involved with your brand?
Yeah, I mean, Caffeine & Kilos, we do a couple things that are a lot of fun. I mean, one, if you’re interested in doing some of the retail stuff, just email@example.com, like all spelled out Caffeine and Kilos, we could help you out with that. another thing is if you are doing, if you’re having some sort of event or competition or, let us know, we actually love doing that type of stuff. Like, especially owning an affiliate. I know like you’re holding an event, you’re just trying to get prize packs together. It’s kind of a pain in the sometimes. so if you just reach out to firstname.lastname@example.org, we’ll send you out prize packs for your competition. we send out like whatever a whole will set stack of, gift cards for winners, and different stuff. We also have like this like competition bundles that if you’re host, if you’re running competition, like we’ll actually send you like these 30% off codes.
So anyone competing in your event, they can get these competition bundles a lot cheaper. so anyway, that’s, that’s the main thing. Yeah. So email email@example.com. If you’re having an event, competition, it could be what, whatever type of event you’re running, maybe a Christmas party and you got like baskets or something people can win, then yeah, reach out, love to help you. And one tip is events, right? Like that’s excuse for people to bring their friends to the gym, right? Like that’s probably the most responsible for Excel growth is like once a month we have some sort of event and our Christmas party is a party. Right. And we have a pinata, you know? And so, and we filled a pinata with different stuff. There’s whatever, some shoe laces, a gift card to the gym for like a month free. and we’ll put some of those caffeine kilos gift cards in there. That’s made me think of it. And then of course, like some of the mini airplane bottles of booze you put in there, cause it’s an adult pinata. And, anyway, it’s a really good time. so yeah, that’s just a, an example of a way, like maybe it’s not a, but you know, if there’s some way that we could still help you out and still kind of contribute to get people excited and, and have people just be pumped to, to be at your stuff, to be at the gym,
That’s really, really generous of you, Danny. Thank you. And thanks for sharing your story. I think anybody who’s tried to run a gym and start a second business, knows just how much of a unicorn you are to be running both successfully. So we really appreciate it.
Yeah, man, it’s a lot, but it’s a lot of fun, you know, I said like four times, but systems and people like that’s the, I can’t tell you how much I appreciate everyone that works, works with me and you know, we’re all on the same page.
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