Andrew (00:02):
Today on Two-Brain Radio: the microgym model. And you might be surprised how it’s changed. Now, here’s Two-Brain founder, Chris Cooper.
Chris (00:09):
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Chris (00:34):
Hello everyone. It’s Chris Cooper here, Coop, and I’m coming to live from captivity in Northern Ontario in early 2021. And we’re back in lockdown again. It’s been a tough year for everybody, but we’ve just published the State of the Industry guide, which took us a year to get together. It was really about four years in the making and is the most comprehensive data set of micro gyms ever collected and published.
Chris (00:58):
If you’ve got one in your mailbox, rip it open. I’m sure you’re going to love going through it. If you don’t have a copy, you can go to Two-Brain business.com/research and get it to you. It costs us well over a quarter million to put this thing together, we’re giving it to you for free because we want this fresh start, this blank slate that coronavirus has given us in the microgym industry, we want to start that from truth. From bedrock data. And so we hired this objective analyst who doesn’t work for us to come in and take a look at the data and tell us what he thought. And then when we published the guide, I give you some thoughts on what the data suggested. So anything that you’ve ever asked, like, what is the average class price? What is the average membership?
Chris (01:38):
How much do you pay your coaches? How many classes do you run a day? It’s all in there and you can see where we’re starting from. Now. The picture is not rosy. It’s not everybody’s getting rich from a micro gym or anybody is really, but the picture does tell us where exactly we’re starting from and the picture tells another really compelling story. And that’s what I want to talk about today. When I was looking at some of the mean averages in that data some numbers really stuck out to me. And one of the averages pre COVID was 158 members is the mean average in a mixed modal interval training gym. So whether you own CrossFit or a bootcamp or an Orangetheory, whatever, this micro gym, the model is about 158 members. And that’s really interesting. And I can do, you know, several podcasts on that.
Chris (02:27):
I can write books about that, but this model that a lot of us are following to this point was shoot for 300 members, get enough space to accommodate 300 members, 10 or 20 of them should be like competitive athletes. And they should guide the rest. And you need above 10 coaches to serve 300 members and market market market. Don’t worry about retention. But the truth is that we are organized and we’ve evolved in tribes of about 150 people. And this has been true since we’ve been a species. We’re limited to 150, mostly through our ability to maintain social connection. Our brains have evolved to reach this point of 150 and maintain 150 social connections and remember the birthdays and important facts, about 150 people. And as our brains have evolved, so have our networks and our tribes and our clans. I was first introduced to this concept by one of Malcolm Gladwell’s books around the year 2000.
Chris (03:24):
He was talking about this anthropologist named Robin Dunbar from Scotland, and Dunbar’s famous number of 150. The thing is when I was looking at this data and I saw that the mean average number of clients in a gym was 158. It occurred to me that I have had so many conversations with gym owners over the years about how many clients they get to. And usually what happens is something like this. Chris, I get to about a hundred clients and then I drop back down to 80 and then I try something different with my marketing and I get to 105 and I drop back down to 80 again. And it’s never this case of like, I get to a hundred and I stay there and I’ve been there for five years. It’s more like I get to 105 and I dropped to 95.
Chris (04:08):
So at the end of this podcast, I’m going to give you some references to read. The most important reference is that dataset, but there’s also some great books like Tribal Leadership and The Tipping Point by Malcolm Gladwell and all of Robin Dunbar’s work on anthropology and how these tribes fit together. Today, though, I want to dig deeper into this model of 150. And I want to share with you the different steps to get to 150. I want to share with you some stories of my progress from zero to 150 clients up to 250 and back down again. I’ll give you some other examples of where people in the fitness industry have kind of followed this model without meaning to, but I’m also going to share with you why your marketing, your sales, your retention, your hiring, your management, your leadership, and your vision strategies are different at each stage in your journey.
Chris (05:03):
Now, some of you will recognize that this also tracks to my book, Founder, Farmer, Tinker Thief, and that the nature of our relationships really dictates what stage of business you’re in. So let’s get started. According to Dunbar, there are actually several stages of tribes. The first stage is from zero to five people. Now this is your very close family. OK? So this is like your parents and your brothers and sisters. This is what Dunbar would call your kin. And these are the people with the closest blood ties to you, the tightest bond, the people who would run into a burning building to save you. The next level of attachment or affinity is from the five to 15 people mark. So these are your in-laws. These are your cousins. These are your kind of extended family. These might be your best friend from college. It might be your roommate.
Chris (05:56):
You know, it might be your fiance or somebody very, very close to you. And then the third level from 15 to 50 is like your clan. So these are the people who are probably connected to you by blood. You know, step-brothers, in-laws, you know, a broader range array of cousins. These are the people that you travel with from one watering hole to another. These are the people that you would go into battle with. You know, there’s so many examples of 50 clients or 50 people in a tribe. And then the next layer of a tribe is 150. And these are the people with whom one leader can basically have some kind of social connection. And I’ll talk about the implications of that pretty soon. And also how important it is to have connections between people in the tribe to keep the tribe together.
Chris (06:41):
The interesting thing here is that this isn’t just ancient history. It’s not just like tribalism, but you actually see it in a lot of more modern communities. For example, some Amish sects split up at around 120 to 150 people because they find that if their group gets larger than 150, they kind of lose control of people at the fringes and people start slipping away. So every time their community reaches 120 to 150, they split. And, you know, some people go elsewhere and start their own community, and then they multiply it over and over and over time, they create this tribe of tribes, 150 groups interacting with, you know, another group of 150. The next stage is about 250. And then the stage after that is about 500. Now in his original work, Dunbar postulated that the group that came after 150 was about 500 connections.
Chris (07:38):
And these were like loose connections. And this was aided by inventions like the telephone and email. But since then he’s come back and said he thinks that there’s another kind of layer at 250. That’s really aided by social media. And we’ll talk about what that means too. And then after 500, the next layer is like 5,000, but we won’t really get to that size. What I want to do today is talk about how this maps to a career in the fitness industry, what considerations there are at each stage. I mentioned marketing. I mentioned sales, retention, strategies, management, mission, vision, media, all that stuff. I’m going to share examples from my own journey and some other people that you’ve heard about too. So let’s start with what I would call the vocational level, from zero to five people, and how you can start in the fitness business with zero people and get to the first five.
Chris (08:32):
So if you look at your first five clients like you would look at your closest social network, these clients are likely to already know you, like you and trust you. There’s a good case that somebody related to you will be one of your first five clients. This only poses a small problem, because sometimes it’s hard to ask your family for money. When I was starting out as a trainer, my mom wanted to sign up for personal training. I told her, you know, go with another trainer, the guy in the next training room, because I didn’t want to charge my mom money. And frankly, I didn’t want her to take up a space that I could fill with somebody who was paying me. Now, in hindsight, my mom would have loved to sign up and pay me money and feel like she was contributing to my career.
Chris (09:17):
It was my own mental block that prevented that. So your first five clients are going to be the people who are probably already connected to you. You could get them organically. When Jonathan Goodman was on this Radio show, he shared an organic post that you could share on Facebook to get your first five clients. And we spell that out for you in great detail in our ramp up program. But you can also go back and listen to Jon’s podcast episode. So you start off that way. You don’t need a space. At this point, you don’t need a home base. You can be the nomad. You can move around from client to client. So when I was getting my first five clients, three of them, I trained in the back parking lot behind the treadmill store where I worked. Two of them I would actually go to their home and visit them there.
Chris (09:59):
And you can be that flexible with your first five clients. It doesn’t matter because this is just your vocation. It’s not enough income to provide you with a regular job, or maybe you’re just getting started. And you’re about to build from there. By the way, as I record this, I am sitting in an old rocking chair in my garage, which is also my gym in front of a woodstove. So sometimes you’re going to hear cracks and pops coming out of the woodstove. And sorry about that. The next layer of affinity, your next biggest tribe. Your next step in the fitness industry is to get from five to 15 clients. Now, these next 10 are probably within one degree of separation from you, or maybe less. You probably know them already, or they probably know you. For me, I got my next 10 clients when I found a home base.
Chris (10:47):
So I was training people in their home. I was training people in parking lots, then the winter hit and I had to find a home base for them. And so I called around to local gyms to find one who would let me do personal training. When I moved to that gym, it was called Northern Lights. And I started doing some personal training in that gym. Some clients of that gym saw me operating, asked how they could hire me. And that’s where my next several clients came from. And so I built up a clientele of about a dozen in that space and I was still working it as a vocation. I still had my job at the treadmill store. I would train a client from six till seven in the morning, play hockey for an hour, go to the treadmill store for nine, train clients from six until nine at night, and then get home.
Chris (11:28):
You don’t necessarily have to do that. But at this stage, between five and 15 clients, you do have to establish some kind of home base. You no longer have time to go traveling around the city from home to home or field to field. The clients are going to have to come to you. And that’s an important distinction point. Up until the 15 client mark, you’re probably going to be working for somebody else or working out of their gym. You’re probably going to be doing mostly personal training and you should really be focused on building the highest value experience that you can. I don’t just mean be a good trainer who knows a lot. I mean, provide the client with what they actually need to succeed. Now, if a gym isn’t open near you, you could still get up to 15 clients just training them online.
Chris (12:11):
And a number of our experts in the Two-Brain Coaching online coaching course have done this. And what they did was they went from zero to five quickly. And then they went back to those five and said, you know, what service can I really provide you? And after a few iterations of that service, they locked onto what they found to be their best service, which could be habits coaching. It could be one-on-one training or programming. It could be nutrition, it’s probably some combination of those. And really at that point, they’re running their business completely online. Their common ground, their home base is probably software. So it might be Zoom. It’s more likely to be some kind of training platform like True Coach, for example, or SugarWOD, where you can do one-on-one training. It’s interesting though, that at this level, 15 clients, all of the relationship are still binary.
Chris (13:02):
It’s you and them. The clients probably don’t know one another yet, but that’s OK. It’s just important to bring that up, because that is an important part of getting from 15 to 50 clients. The next stage, from 15 to 50 clients is really where you go from being employed, a trainer at somebody else’s gym, to self-employed or you own a studio, something like that. So for me, this was the move from working at a studio to opening up my own studio. And what happened was that I was training people at the gym. The gym actually got shut down. I got a job working at a local training studio. I quit my job at the treadmill store so that I could spend all of my time growing my clientele. And I grew to about 30, 34 clients at this training studio realized that I still couldn’t make any money.
Chris (13:51):
So I rented my own space. I upgraded to my own home base. And that was the start of Catalyst in 2005. And so I took about 34 clients with me. I opened up as a personal training studio. I worked 13 hours a day. I was working at least until two o’clock, even on Saturdays. But I was making money, you know, and a lot of people at the 50 client level are actually very successful. If you have a small studio and it’s geared toward one-on-one training, it’s not really that difficult to make $50,000 a year at that. In fact, I made $45,000 right off the bat because I had to. And so I set up the entire business to pay me $900 a week. And that’s what it did. And that’s how I set my rates, et cetera. That’s how I chose my location, chose how much I could pay in rent, chose how much I could pay on a loan payment for equipment and all that stuff.
Chris (14:41):
It was geared to income. And there are still a lot of trainers out there who make a really great income at 50 clients or less by providing a very high value service and pricing so that they can hit their personal goals. At this level, though, between 15 and hitting 50, this is where you start to run into a ceiling on your time. So I said that I was working about 13 hours a day. The problem is that if you’re not training people in those 13 hours, then you’re not making money. And there are other things to do when you open up your studio, you know, there’s some billing to do. Obviously there’s some bookkeeping to do. The place has to be kept clean. When you control the home base, you immediately become a manager. So you have to hire other people. And that means you have to develop managerial skills.
Chris (15:31):
Now in our program, we teach you to hire the lowest value roles first. So you create checklists for cleaning. For example, you hire a cleaner for $12 an hour, but you can also hire part-time coaches to give you some backup. The key at this stage, though at around 50 people, when you’re operating in kind of a studio, is that everybody in your business has to either be generating the revenue that pays them times two, or they have to be creating time for you to generate that money. So for example, at 50 clients, you don’t hire a trainer and pay them out of profit to run group classes. You hire a cleaner who can free up an hour so that you can take another client, or you hire an admin person maybe to free up an hour, two hours every week, where you can take a couple of clients and you pay the admin $20 an hour, and you earn $70 an hour training clients.
Chris (16:26):
The only time you would take on another trainer is if you wanted to do something part-time. Now this trainer should generate the money that pays them times two or two and a half or even three. That means they should bring some kind of unique specialty or flavor into your program. They should not just be a clone of you. However, they should be friendly enough that your clients will accept them as a substitute for up to two weeks. So if you take vacation, if your child is born, if you get sick, if you get injured, you know, heaven forbid those last two, this person could step in without losing clients. And that usually means you’re hiring for personality and training for skill. And what we’ve found is that if you hire somebody with a slightly different method than you, or a different approach, it’s very easy to transfer your clients to them, but they’ll attract a different type of client to your service. This was me and we were going from 35 to 60 clients, it was Mike and I, and you know, in person we’re pretty different people, but our training style was identical.
Chris (17:26):
And our mannerisms and our character is identical. So it was very easy to trade clients back and forth. But we didn’t have a big diverse array of clients. We had a lot of clients who were young, males, and hockey players, and that was it. We didn’t have a lot of like weight loss clients. I think we had a few we had some professionals, but not a ton. We didn’t have a lot of women at all as clients. And we weren’t taking a lot of groups. We weren’t getting baseball players, basketball players, post rehab. We weren’t getting older people at all. You know, so we were pretty narrow in our specialization, but not on purpose. So at this level, as you’re trying to scale, you create this next jump, which is where you’re trying to go from 50, like a studio level to 150, which is what I would call a micro gym.
Chris (18:15):
And this is the level where a lot of us find ourselves getting stuck. This was certainly me. I opened my second location, and my studio footed the bills for that second location for years. I thought that I would immediately jump to a hundred, 150 clients by opening up a CrossFit gym. I didn’t, it almost bled me to death. What I eventually did was close down the studio and moved all my personal training clients into my CrossFit gym. And slowly started to grow that again. This is the toughest part really is going from 50 to 150, because now you’re talking to strangers. You’re not just banking on your personal relationships anymore. Let me back up one step. To go from zero to five is just asking people if they want to train with you. To go from five to 15, you need referral systems for marketing, right?
Chris (19:07):
Everybody, all of your clients has like one degree of separation from you. You’re already training your aunt, you might as well train your uncle, et cetera. To go from 15 to 50 clients, you’re still dealing with people who have heard of you. You know, they know of you. They like you. They trust you because you work with their friend or their colleague or their spouse. But you’re still doing referral marketing and some affinity marketing. So you might have to push for referrals or pull referrals to you one way or the other, but it’s still very organic and it’s still based on relationships. And it’s still just based on you asking. So we teach the actual strategy for this in our program. I walked through it in my last book, Gym Owners Handbook too. The real key to this marketing though, is that each one of these steps is additive.
Chris (19:55):
Referral marketing never goes away. Affinity marketing never goes away, no matter how big you get. It’s just that if you get really, really good at asking people and getting referrals and seeking ways to do affinity connections in the early days as you grow, you’ll be so much better at it later. And every new client that comes in that’s a stranger to you will bring you another four clients, if you’re good at getting referrals and affinity marketing. So I had to go back to that before we talked about the 150 client level, because a lot of gyms who are trying to jump from like 50 to 150 or a hundred to 150, they skip that step. They’re not getting referrals. They’re not doing any affinity marketing, they’re missing out on the most likely clients to join. And instead they’re spending all their time and energy trying to talk to strangers, and they’re doing that through like Facebook marketing.
Chris (20:48):
They think this is the easiest path, but it’s actually hardest path because what happens is you have to convince strangers to sign up, which means you have to be a better salesman or woman. And that means you have to create a more compelling offer. You have to get really good at advertising, which none of us are just naturally good at. And instead of turning to the people who are most likely to join, you turn to the people who are least likely to join. You get a high churn rate. And then that creates this flywheel effect of constantly getting new clients, losing clients, getting new clients, losing clients. And I think that’s driving retention rates down in gyms, which is what’s burning a lot of gym owners out. So if you’re good at the sales and marketing from the earliest stages of tribal gym building, you’re going to have easier time going from 50 to 150.
Chris (21:37):
Not because you’re going to get clients in the door faster, but because you’re going to keep the clients that you do get a lot longer. And then those clients will compound. So instead of taking six years, because you’re getting a client, losing a client, getting a client, losing a client, getting a client, getting a client, losing a client, it actually takes maybe two and a half, three years because every client is compounded and every client turns into two or three clients or even four, because you’re using referral systems. You’re using affinity marketing. When you go from 50 to 150, you’re going to need more help. You’re going to need a bigger home base. You’re going to need to own that home base, which doesn’t mean you have to own the building, but you’re going to have to sign like an actual lease. You’re going to have to have a common ground.
Chris (22:22):
That common ground can’t turn people off. I tcan’t turn them away. So you’re going to have to have a nicer home base. This is when you’re going to need showers. This is when location becomes a little bit more important. This is when you’re no longer dealing with the early adopters who will forgive the pirate flag and the chalk on the floor and no toilet paper anymore. Going from 50 to 150 is the hardest jump because you don’t have systems to scale yet, and you probably don’t have backup. So I want you to hire according to the value ladder, replace yourself in lower value roles first. Train your replacement. After you’ve already hired a cleaner, a bookkeeper, an admin, hire that person for personality, train them for skill, get them certified to work with one-on-one people first, get them certified to work with nutrition.
Chris (23:10):
Then put them in front of a group. Scale your time, track your effective hourly rate. And don’t dig into roles that are worth less value than what you’re currently making. And then your job really pivots to sales and marketing. At this point, you should be developing playbooks and standard operating procedures. You should be going through the process of systemizing everything and then optimizing everything and then automating everything so that you know that your service will be delivered at the same quality that you deliver it. And you should be able to replace yourself at any class at any time with a coach who will do a better job than you will. And that doesn’t mean hiring the most certified or, you know, the PhD candidate. It means hiring a happy person that your client will accept in your place. It means that at this point, you should start telling more client stories, reinforcing the connections between the tribe.
Chris (24:04):
Being very careful to introduce one member to another and forming triads. Now a triad is the greatest retention connection that you can make. From zero to five, from five to 15, from 15 to 50 clients, it’s probably still down to your connection with the client. The clients might bump into each other in the hallway going in and out of your studio. They might be in a small group together, going for a 5k run or riding their bikes together. But when you scale above 50, it’s really important that every client has at least one connection besides you at the gym. That connection could be you and a coach. It could be a coach nand another member. It could be you an another member. It could be you and your client success manager, whatever. There has to be a triad effect. Every client has to have two connections.
Chris (24:54):
One can be you or their coach. The other one should be like a member. So that’s really important to get in place too. And you have to manage those triads. You have to make sure that they happen, but if you do, then that’s the greatest retention strategy that you can come up with between 50 and 150.
Chris (25:10):
Hey guys, it’s Chris Cooper. Your members are buying supplements somewhere, so they should buy them from the person who cares about them the most: You. And you should work with my friends at Driven Nutrition. Jason Rule and the Driven team put customers first, every time they’ve got a ton of products with high margins and they’ll even train you so your retail program adds revenue to your business. Kirk Hendrickson from Iron Jungle CrossFit says Driven Nutrition has some of the best support I have seen from any company we’ve partnered with. To make more money with supplements and retail sales, visit drivennutrition.net.
Chris (25:44):
Now back to the show. The goal here of getting 150 clients is earning at least a hundred thousand dollars a year. At that point, you are an entrepreneur, you’ve got a sustainable income that you can continue to do forever. And so when we’re working with gym owners, we start with the number 150, and that’s how we determine what their prices should be or their ARM. If you’ve got a gym with 150 clients and an average revenue per member of about $205, you can make a hundred thousand dollars a year. Of course there are other variables here, but if you start with those numbers, then you can work backward to create basically a P and L that will tell you how much revenue you need, how much you should charge each client, how much you can afford to spend on loans and what you can sign a lease for and all that stuff.
Chris (26:33):
And you can actually download that business plan free from our site. We’ll put a link to that in the show notes. Starting with 150 is a fantastic target, and it’s not just the anthropology of human connection and tribalism that’s important. It also gives you a goal line and it gives you numbers that you can use to work backward. Here’s the challenge with that model right now. Because gyms started shooting for a high number of clients, they didn’t start with high value services. So most gyms aren’t charging enough. The average Two-Brain gym has an ARM, average revenue per member, of $176 per month. The average non Two-Brain gym has an average ARM of about $91 a month, just under half of what they need to be able to make a great living with 150 clients. The problem is that while 150 clients is like the reality high level for most gym owners, they’ve built their services around this idea that they’re going to eventually somehow get 300 clients.
Chris (27:36):
The problem as you’re about to hear is that when you go from 150 clients to 300 clients, you have to add layers of expenses like a management layer to get there, or you’ll never reach that point. And you’ll constantly be in flux with losing members to poor systems, losing trainers to go start their own gym, losing revenue and you know, just losing market base. And if you haven’t brought that into your business plan, then your business plan is just too broken to work. Number one, you’re probably never going to get to 300 members and you’re going to be losing money trying to get there. Number two is even if you do get to 300, you’re probably not going to last. And so it’s really important to start with 150 as a goal in a micro gym, then you decide what do I do next?
Chris (28:24):
So when you get to 150 clients and you’ve got good retention, and you can count on that base being about the same with minimal churn, you know, 120 out of 150 clients will still be here next year. That’s when you ask yourself, do I split the tribe into two locations or do I change my business model to try to get to 250 in my current location? Now this has been done. There are gyms who are doing 250, even maybe 300 clients in one location. That’s a very different business model. So the first thing that you need is some kind of management layer, because you’re going to be adding more coaches, more staff, you’re going to be coaching bigger classes in more space with more equipment. You have to have somebody who’s acting as a manager. And that person’s job is to maintain operational excellence. Their job is not sales and marketing.
Chris (29:18):
That’s still your job. From 150 to 250, that manager’s job is to make sure that every class starts on time, that every coach looks the same, that they behave at the same standard that the programming reflects your client base, that your marketing is like in place and consistent. And you’re getting the correct number of leads per month. And you’re tracking your KPIs. Also, the clients getting results. So you have to have somebody who’s dedicated to talking to clients one-on-one, measuring their progress and remapping the journey for them if they’re not getting the results that they need, that person should also be looking for referrals and doing affinity marketing. There’s another layer of management here, and this management layer really comes out of profit. So while it is possible to hit a 33% profit margin from zero to 150 clients, if you set up your business properly, it is very tough to do that over 150 clients, because you have to bring in management labor.
Chris (30:17):
And that’s another expense. Now, the gyms that don’t start off with a high profit margin, who get to this layer of 150 clients, the owners really tend to get burnt out because they can’t afford to hire a manager. They don’t have enough margin to do that or enough leeway in their earnings. So they have to be the manager, but at the same time, they also have to be the sales person. They also have to be the coach. And so the coaches aren’t being trained properly. So they have high coach turnover. The clients aren’t being onboarded properly or being selected properly or being retained properly, so they have high churn with their clients and they wind up spinning their wheels a lot instead of having a business model that’s made to succeed at that level. So your marketing also should change. At the 250 client goal,
Chris (31:05):
You’re going to be working with strangers. There’s no way you’re going to remember your client’s spouse and their dog’s name and stuff when you’ve got 250 clients. So you have to have some staff who are in charge of that. Marketing can also change. So you should still be looking at referral marketing. You should still be looking at affinity marketing. You should still be doing organic posts. However, at this point you’re really worried about lead gen. You need to be getting enough people into your funnel every month, converting those people into a membership that you can automatically replace the people who are quitting. With 250 members, even if you’ve got a turn rate of 5%, that means you’re losing 13 clients every single month. You have to replace that client and get a new client every two and a half days, or you’re going to lose ground.
Chris (31:53):
So at this stage, above 150 clients, you have to actually systemize your marketing and your sales to make sure that you’re getting enough clients. Up to this point, you don’t really have to have a system. From 50 to 150 clients, you might be doing some Facebook ads. You might be doing some organic outreach on social media platforms, whatever. But you can do that stuff yourself. At 150 clients. So you have to have a system. You might have to hire a salesperson. You might have to hire somebody to do your marketing, to make sure that you’re generating enough leads to maintain your base. And that’s another management layer expense. To get up to 500 clients, you have to pivot again. And at this stage, now you need a unique model because people are no longer talking to you. They don’t have a one-on-one relationship with you.
Chris (32:44):
They might have a triad in the gym between their coach and another member. They might have a triad between their coach and like a client success manager or whoever meets with them to do their goal reviews. And that could be your retention strategy, but at 500, they really have to be attached to your method or your brand. And this is really, really tricky. So I said that you have to have a unique model to get to 500. A unique model doesn’t mean that you have a service that is completely brand new. You can copy somebody else’s service and bring it to a new audience. You can take somebody else’s brand and bring it to a new location, a new audience. So for example, a lot of the early adopters of CrossFit opened the first CrossFit gym in a big city like Atlanta. And they found that they quickly got to 300 members and those were all early adopters, whatever, but it’s because they brought a unique model to a new audience.
Chris (33:43):
The downside of that is your model doesn’t stay unique for very long. So the second gym in Atlanta took a lot of those clients away. The third gym took, you know, clients who live nearby and the fourth. When you get to the 30th CrossFit gym in Atlanta, you don’t have a unique model at all anymore. And it’s actually an impediment to your growth. So at 500 clients, you have to develop your own strategy, your own model. You can borrow it from somewhere else. Absolutely. You can copy it and make it your own with unique audience. This works at earlier levels too, you know, when we started the Ignite Gym program, we took the CrossFit model and we used it with kids who had autism or kids who had a traumatic brain injury. And it worked incredibly well. And we combined that with tutoring or brain training or whatever the client needed.
Chris (34:35):
So you can do something like that. You don’t have to start from scratch. That’s my point. You can take a model that already exists somewhere else, and you can take one tiny step to the writer, to the left, make it unique enough. But what you need to do at that point is create an attachment between your client and a unique training model that they can’t get anywhere else. What you’ll notice as we talk about growth of clients from five to 15 to 50, to 150 to 250 to 500, is that this also parallels what I laid out in Founder, Farmer, Tinker, Thief, the strategies that you’ll use for growth from zero clients up to about 15, or maybe even 50, that looks a lot like founder phase. And if you use the strategies that I’ve just talked about to get from 15 to 50, to 150, that looks a lot like the farmer phase of entrepreneurship.
Chris (35:26):
And then when you’re at 150 and you’re thinking, do I split my tribe and do I open a second location? Or do I try to grow this location into 250? Well, that’s a lot like tinker phase. And finally, when you get to 500 clients and you’re building a unique model that’s going to replace you in the relationship with the client, that’s really like thief phase of entrepreneurship. It’s something that should outsurvive you, it’s your legacy. So that’s the theory behind all of this. This is anthropology, but this is also what the data supports. And if you look through the dataset and you say, where are people most profitable? It’s the gyms with 50 clients and it’s the gyms with 150 clients, but there are also gyms out there who are profitable above 250 clients. Absolutely. Should you use the same model as they have when you have 50 clients?
Chris (36:17):
No way. It’s a completely different business. And that’s the failing of a lot of gyms. They see these people with 300 clients and they say, well, I’m going to apply that to my gym when I have zero clients right now, when really you should be approaching each stage separately with different tactics that build on the stage before. A couple of examples, I’ll use myself and then I’ll use Greg Glassman as an example because he’s familiar to a lot of you. So first I started off with zero clients. When I decided I wanted to do some personal training, I got my first clients by producing some media, but also by talking to parents who wandered into the treadmill store. And so my first client was a soccer player who was going for a college scholarship. And my next two clients were direct referrals.
Chris (37:04):
It was kids on his team basically. Then, I got a couple of brothers and sisters of those kids who played different sports. That’s how I got to five. Around that time winter set in, I had to move to a gym. So this went from founder to like late founder. It became a vocation. And as I was training clients in this gym, I started to meet more clients who would ask what I was doing. There were two or three other personal trainers at that gym at the time. And some clients would be really attracted to them. They were all bodybuilders. The rest of the clients would be really attracted to me. I was not a bodybuilder. Maybe I was a bit more approachable. And so I got up to about 15 clients that way. Then the gym closed and I had to find a new home base.
Chris (37:49):
So I took a spot at a local personal training studio. The studio expanded while I was there. I started publishing my client stories online. I started publishing articles in a couple of local news newspapers. And I got up to about 34 clients at that studio. Wasn’t making enough money. I was, you know, late founder phase. I had no help. I could only trade my time for money. After working at 13 hours a day, I said, I gotta open a studio. I just can’t make enough money. So with 34 clients, I opened up Catalyst in 2005. I took a long, long, long, long, long time, a decade to scale that up to 150 clients, you could do it in about two years or a quarter of the time that it took me because I screwed up so many different ways. But gradually we worked up to 150 clients using group training.
Chris (38:39):
If I had it to do all over again, what I would have done is taken my personal training clients at my studio and started partnering them up or maybe training them in three people at a time, instead of one-on-one on one-on-one one-on-one back-to-back-to-back. I could have scaled faster. I could have made way more money without taking on more risk, but, you know, hindsight’s 20/20. When I got to 150 at Catalyst, we split a couple of our programs apart into two locations. We took Ignite downtown and sports training into a separate location too. And we ran with two locations for quite a while. Eventually we said, OK, we just don’t want to do this anymore. I bought Ignite, my partner shares out from him, sold that to somebody else as an entire unit and just focused on Catalyst. Of course, I was growing my mentorship practice at the time too.
Chris (39:32):
Now Catalyst has been as high as like 250 clients. For a couple of years it sat at 220. Now it’s at 150, almost exactly, but our AMN is the highest it’s ever been. And it’s, it’s getting really close to 300 right now. And this is honestly where I’m happiest. I have a GM that’s running the gym. I take them for lunch once a month. We talk about the metrics. When things are great that’s the only interaction that I have other than going there to use the InBody and work out when I want to. However, if I didn’t have Two-Brain and these other companies to run, I could easily step back into that gym, make a hundred thousand dollars a year and just be happy as a coach, you know, working about 20 hours a week and that person is alive and well in the dataset.
Chris (40:23):
Another person who’s alive and well in that dataset though, is the studio owner of 50 clients with a very high ARM, very long retention rate, and very low expenses who’s still making 50 to $70,000 a year. They’re just not taking the next step yet and they might not ever want to. And that’s OK. I also want to walk you through the progression of Greg Glassman as he’s shared it with me, but also more importantly, he’s published in the Journal. I don’t want to imply that Greg and I were best friends or anything like that. I have had enough conversations with them and I’ve read everything written about him or by him to understand kind of what his progress was. So from zero to five clients, and maybe even up to about 15, he was renting tiny spaces. And if you read the earliest articles of the Journal, you’ll hear these stories.
Chris (41:15):
You know, he’s renting 400 square feet in a dojo, or like the corner at a globo gym. And he was trying to gather clients from the clients of those gyms. He was in a vocation at that point. And when he got to about 35, 40 clients, he rented a little space in Santa Cruz. In the early Journal articles, you can see that space and he would get to about 50 clients and then wisely, he started pairing those people up to save time and make more money for his time. And then he would put three people together and then four, and in that little space in Santa Cruz, that’s where he also made his first hires. And I’m pretty sure it was Tony and Nicole who were his first. And he started scaling up into classes until that space was full. And then he actually donated the equipment from that space when he closed it to people in the military. But from there to scale up, he had to grow his network of coaches.
Chris (42:10):
And so he started working on like certifications and publishing stuff on crossfit.com. But when he started publishing crossfit.com, he was still very much the coach. He was in the gym, he was working with classes and athletes like Greg Amundsen. And, you know, Greg has shared a lot of stories with me from those early days when you’d have four or five people in a class and a tiny, tiny little space. And there’d be a lot of one-on-one connection between them and Greg. And that’s the key is that back then it was still this one-on-one connection until the groups got up to about six or seven people. And then each client would forge another connection with somebody else in the group, they would triad. And Greg is an amazing connector. He is one of these charismatic, extroverted people who can remember just the most obscure details about people.
Chris (43:06):
I’ll give you a great example of how Greg could have probably scaled to 150 clients just on his own and beyond. And around 2012, I was working at the CrossFit regionals for Canada East, and I was talking to a friend, Anthony Bainbridge, and Anthony was one of the first CrossFit affiliates in Canada. And Greg came in, he was the middle of the day, the place was packed and he just got swarmed and he had his entourage with him and he was slowly making his way through the crowd. Anthony was in the crowd and Greg sees him and he says, Hey, Anthony, how’s it going? How are things at CrossFit, Frederikton, how’s your mother. And you know, then a few moments later, he moved on to the next person and it was like he was shaking every hand in the place. But the remarkable thing was, Anthony turned to me right after.
Chris (43:53):
And he said, you know, I haven’t seen him in three years. And he remembered to ask about the health of Anthony’s mother three years later. And there are people like this in our midst who are just remarkable connectors who can build slightly larger interpersonal tribes based on these one-on-one relationships without creating these triads. I’ve heard that Bill Clinton was another one. But that’s not the case for you and I, and I’m going to give you a little test after I walk you through the rest of Greg’s journey. So from there, you know, he opened up, he got his tribe up to a certain level, and then a couple of trainers said, Hey, we love your model. We’ve it online on crossfit.com. We’d like to open up CrossFit North. And there’s a funny story that Greg tells better than I ever could about saying, wow, CrossFit North.
Chris (44:40):
That’s amazing. Maybe someday we could have like CrossFit East, CrossFit West, CrossFit South. We could have like five of these. And, so this CrossFit North person, Dave, I believe called him and said, you know, what would I have to pay to license your model? And Greg threw out a number and the guy paid it. And I think it was like 500 a year. But then from there, so you had these little tribes of, you know, up to 150 people growineg in these different areas. At that point, though, Greg had to pivot to create a relationship between each person and a model because he couldn’t have a personal relationship with everybody at three or four different gyms using the CrossFit method. So he had to put a name to it. He had to make something unique. He had to draw a circle around it.
Chris (45:29):
And, when crossfit.com came out, there were no real affiliates at that point. But slowly around 2003, 2004, people started licensing the name and this became the thing. And that’s what became the movement. So the movement fed the name and the name fed the movement and that created the model. And that’s really how CrossFit expanded beyond a tribe of 150 was a unique model. And I think a lot of longtime affiliate owners would tell stories of opening up the first gym in you name it, you know, Seattle, Washington, and they immediately have 200 early adopters and they’re super successful. And they’re thinking about opening another location. And then, you know, years later, the early adopters are gone and they’ve either succeeded by pivoting to a different type of tribe, or they’ve done something completely different. Anyway, so this is really interesting stuff.
Chris (46:24):
If you’re not interested in anthropology, if you’re not interested in sociology, that’s totally fine. Shoot for 150, it’s hard to go wrong when you base everything off the assumption that you’re going to have 150 clients. Building a business model, starting with 150 clients means that you know how much space that you’ll need, what kind of staff that you’ll need, you’ll know how much revenue you need and how much you should charge those people. What kind of services you should offer, probably. I’ve used the CrossFit example a lot here, but any mixed modal interval training gym works the same way. Any coaching business works the same way. If you have a nutrition coaching business, 150 clients is a great place to start. If you have an online coaching business, start with five, get to 15 and then 50 and see where you are. It’s a great model for any service-based business with a recurring membership base, because you can leverage your personal relationships with your clients as far as possible before shifting your model.
Chris (47:28):
It’s actually easier to be profitable at 33% with 150 clients than it is to be profitable at 15% with 500 clients. Some have done it. And over the next few weeks, few months, I’m going to be introducing some of these people to you on this podcast. I’ll be bringing these people into our groups to talk about how I built this. People with gyms of 50 clients who are super successful and gyms with 500 clients who are also super successful. Now that we have the data, we can hold all these people up to the magnifying glass of truth and say, how’d you do it. I’ll be bringing these people into our private tutoring groups. And I’ll be sharing a few of these stories on our podcast or on our blog. The key that I want you to take from this is not the specifics of what type of marketing should I use, not the fine details of who should I hire and what should I pay them?
Chris (48:23):
What I want you to take from this is that it is possible to have a successful dream life with a micro gym or a studio or any other kind of gym if you turn to the data, because the data proves it can happen. Thanks for listening to my ramblings, post ski, as my fire dies low here. I’m going to sign off, but if you have thoughts about this, I recommend you read Tribal Leadership, Robin Dunbar’s research, or even The Tipping Point by Malcolm Gladwell. And you can bet that I will be sharing more about this in the next year or so. Twobrainbusiness.com/research if you want to get that state of the industry guide, draw your own conclusions. If you agree, or you disagree, send me an email at chris@twobrainbusiness.com and I’ll get back to you. As long as you’re polite. Have a great year.
Andrew (49:12):
That was Chris Cooper on Two-Brain Radio. Please hit subscribe for more episodes. To get the State of the Industry Guide Chris talked about today for free, visit TwoBrainbusiness.com/research.
