Hey, I’ve got some cash left in my operating account. And I have already given myself a raise. Can I use this money to make more money?
The month is over, you’ve got a little bit of money left. What do you do with it? My name is Chris Cooper. And today I’m gonna talk about the best ways to spend the money that you have to grow your business. A gym is a small business, and that means that you should spend your money on things that will give you a measurable return. The key word there is measurable. Every time you’re thinking about spending a dollar in your gym, you should be able to ask yourself how will spending this dollar now create $2 for me later. Obviously you are not concerned primarily with profit. You want to give everybody the best possible experience, but sometimes we go overboard and we do things that our clients don’t actually care about. And we could be investing money in things that they do care about or investing money in things that will help our family or help our gym grow or become more profitable or create other careers.
The point is that sometimes we buy stuff that doesn’t actually make a difference in our business because we just like new things or we think that we should buy it. So today I’m gonna answer a great question that came up from the public Facebook group, Gym Owners United. Now I don’t spend a lot of time in this group because it’s not a mentorship group and I wanna help our clients before anybody else. But I do pop in there once or twice a day just to see what’s going on and see if there’s any stuff that I can help out with, share resources or just offer some data. And this great question came up. Hey, I’ve got access to $5,000. Where do I invest it to see the greatest possible return? Is that new branding? Is it new equipment? Do I try and find a bigger space or do I pump it into marketing?
And it’s actually a very smart question to ask and I’m glad it came up. So first off, let’s start with the easy stuff. Expenses. Equipment is an expense. You cannot buy one more rower and say, OK, I’m gonna pay $1,800 for this rower, but it’s going to generate $3,600 in new revenue. Now, if you can do that, if you can say buying this new thing will directly create this new revenue, I can write it down. I can map you the path. I can draw you a picture of how it’s gonna work, then by all means that is a great investment. But if that path is murky, if the ROI is actually unclear, then just don’t do it. There’s better places to put your money. The next one is a more direct purchase where you can actually track the ROI. So let’s say that you’re talking about whey protein and you can spend a thousand dollars buying whey protein and you will make $1,500 selling that whey protein, then yes, that is a good investment because it will actually give you a provable ROI with a very clear path to ROI.
Now what makes that path murky with supplements is you’re not really sure that you’re gonna sell ’em, but if you create a presale, for example, and you get people to give either a credit card number and pay for stuff in advance, then yeah. Obviously spending the thousand to get $1,500 back is a good investment because there’s a clear path to ROI. So this clear path is really what it all comes down to. Too many gym owners especially make these bets. And it’s not really clear where the ROI is going to come from. And if you aren’t sure where the ROI is going to come from, then it’s probably not gonna come at all. So what they do and I’ve been super guilty of this is we buy a thousand dollars worth of t-shirts thinking like, OK, I’m gonna sell this eventually, somehow, or you buy two air bikes because clients are asking for air bikes, but you’re not really sure how that’s actually going to make you more money, right?
It’s just an expense. And so purchases for your gym should have a very clear path to ROI, one time. Expenses for your gym don’t have a path to ROI or it’s murky how that’s going to work. One great example here is like expanding your space. So some people are doing just fine in 5,000 square feet classes are starting to get filled. And so they think I need to double my space and we say, will doubling your space double your profit. And they say, well, I guess probably because, you know, I’ll double my expenses, but like, I’ll get twice as many clients and that’s gonna double my profit. The reality is that to double their profit, they don’t need to double their space. Maybe they need to add a thousand square feet or whatever, but they can actually make way more money by doing far simpler things than just adding more headcount in their gym.
So you have to look at what you’re spending money on and the goal that you’re trying to achieve. And can you draw a clear path from that spend to the outcome that you’re trying to get? Can you explain to me exactly how this purchase is going to get you that outcome that you want? Now let’s talk about investment and now obviously I have a dog in the fight here, but I’m telling you this as somebody who invests in mentorship a lot, I spend between 150 and $250,000 per year on mentorship, because I now know that mentorship is a compounding investment. That means that if we help you make a change one time, you will not go right back to where you were when you stop working with a mentor. Change that you do with a mentor compounds. So for example, let’s say that you have 50 clients paying you $100 per month.
If you can increase your RM by $5 per month, so every client is now paying you $105 per month. You will make an extra $3,000 over the next year. And that move will compound because you’re not gonna go backward. You’re not gonna start charging people less again when you stop working with a mentor. If you add 10 more clients at that new ARM, then those results will multiply each other. They will compound. And now the total value is $15,600 per year recurring. And if you calculate that out over the 30 years that you’re going to earn your gym, those two small moves are worth half a million dollars. And now if you increase LEG, length of engagement, then that is a multiplier also. So buying equipment is not an investment. It’s an expense, because it doesn’t compound. Advertising spend is a purchase, but it also doesn’t compound because your ads disappear when you stop paying for them. Mentorship as an investment, because its value compounds over time.
Now you can also determine the ROI of purchases like Facebook ads by looking at numbers from other people, right? You don’t have to test everything yourself. You don’t have to make your gym a Petri dish. So instead of spending $50 a day for two weeks on Facebook ads and then making a tweak and spending $50 a day on Facebook ads again and making a tweak and testing again, and then deciding after three months did this work for me, you can actually look at the results from other people and say, what is working for them right now on what spend? For example, my gym, Catalyst, spends a dollar 60 per day on ads. We have a waiting list. We cannot bring people in as fast as they want to sign up right now. We have a very high ARM. Our on-ramp program is over $500. It doesn’t matter.
We keep our ads running so that we don’t have to relearn the Facebook algorithm. But the ads that we run are exactly the ads that are in the Two-Brain Business Facebook program. I didn’t create those ads. I didn’t test them. I didn’t have to because we saw what was working at other gyms, bought the rights to their stuff and shared it with every other Two-Brain gym. And guess what? It works for them. You don’t have to be unique. You don’t have to do your own experiments. You don’t have to be an island. You can bridge to everybody else if you’re in a group like that. So I wanted to talk about this because it’s such a great question that came up in GOU. And occasionally I’ll see a question that’s so good that deserves a response that’s beyond the scope of Facebook and I wanna do a podcast about it. So coach, thanks so much for asking this great question. It took me a while to really understand the difference between a purchase and expense and an investment when I was a gym owner and really until I started getting involved with having a mentor, that’s when I started to see compounding results over time, hope it helps.
Two-Brain Radio airs twice a week with tips, tactics and stories from real gym owners who are building amazing businesses. Make sure you subscribe so you get it all. And now here’s Chris one more time.
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.