Gym Profitable? Here’s Exactly What to Do Next


Chris (00:00):

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Chris (01:10):

Hey everybody, Chris Cooper here. And today, we’re going to be talking about building the next level.

Chris (01:16):

After a pretty rough year in the fitness industry, a lot of microgyms are rebounding faster than the big chains, faster than the franchisees, faster than anybody else. You’re making some money now and that’s awesome. You’re not scared of shutdowns anymore. Good. You’ve lived through the worst thing that can really happen to your business. You’ve got decent retention and you’ve got a solid client headcount. That’s awesome. And in fact, maybe you did our diagnostic to figure out which phase of business you’re in and you see an opportunity to move to the next phase of entrepreneurship. And that’s great. And you’re wondering what now, what do I do next? When you have a successful gym business, it’s easy to look around and feel alone. Very few microgym owners make it to the point where you are now, where you’re thinking about the next gym, the next big idea or whatever. The number is growing.

Chris (02:08):

Thanks to things like our growth program. Very few models exist to help gym owners scale beyond one gym. So what are your options? Do you buy a second location? Do you buy out a competitor? Do you double the size of your current gym? Do you sell a new service to your existing audience? Do you buy your building or another building like a rental property? Do you buy Bitcoin? Do you invest in something else? What do you do? There are dozens of options. So today I’m going to talk to you about the next steps in your entrepreneurial journey, because if I know you and I think I do, you’re not done yet. You’re an entrepreneur now and entrepreneurs build. So let’s get started before I get into some of the options. I want to talk about the phases of the entrepreneurial journey. These are from my book, “Founder, Farmer, Tinker, Thief,” and those are the names of the four phases in the founder phase.

Chris (03:01):

You’ve bought yourself a job and you’re just trying to make a living. You’re really self-employed more than a business owner. You’re maybe doing a personal trainer job out of your own studio, or even working as a subcontractor for somebody else, but you’re really responsible for generating your own income. In the farmer phase, you scale to the point where you need help. You need a team. And so now you have to level up from being a practitioner to being a leader and a manager and guiding other people and creating opportunities for them and growing the pie in the tinker phase. What you’ve done now is you’ve created a solid income. So you’re earning a hundred thousand dollars a year, at least. And you’re thinking about what’s next for me? How do I scale this business from giving me a hundred thousand dollars a year to a million, up to a million?

Chris (03:52):

Do I open multiple locations, et cetera. And then the fourth phase is the thief phase. When you’re really concerned about your legacy and creating impact in your local community mostly or maybe worldwide. But that’s really where you’re the kind of Robin Hood figure where you are moving wealth into something that benefits everybody around you. OK. So today, most of our talk is going to be focused on people who are in the farmer phase entering the tinker phase, or who are already finding themselves in the tinker phase now facing a lot of choices with money and time that they maybe didn’t have before and they have money or time to spend, but they don’t have money or time to waste. And so instead of thinking like, wow, I can do all these things and then trying to do them all, I’m going to help you stop from sliding backward first.

Chris (04:41):

Then we’re going to talk about some of these big opportunities and how to build the next level. So the first thing is you want to make sure that you’re not going to slide backward, that your current success isn’t short-lived. There is a surge happening right now. People are joining gyms who have never joined gyms before, and COVID has created this sense of urgency that’s resulted in a revenue spike between eight and 30% in the first few months after a gym reopens, following a shutdown. But the biggest mistake gym owners can make is thinking that this is going to be a winner forever, or that their current strategy is going to work forever. The key to long-term success as an entrepreneur isn’t just constant forward motion. The key is to stop backward motion, go forward, and then don’t slip backward. All business is cyclical. Sometimes you’ll grow.

Chris (05:32):

Sometimes you’ll shrink. The key is to grow as much as possible when you’re in a growth phase and then to minimize shrinkage when you aren’t. So two steps forward, one step back and then three steps forward, one step back, and then five steps forward. And then one step back. For example, it was pretty hard to grow during COVID shutdowns. So we had gym owners focus on minimizing shrinkage. They cut costs, they renegotiated their rent, and they kept as many clients as possible by adjusting their services. When their gyms reopened, they were ready for growth. And the average gym saw an immediate surge of eight to 30%. Most entrepreneurs, especially in the fitness industry, can find a bit of success pretty easily. Every few years or so, one great idea emerges that can get you some new clients fast, and we’ve reported on some of them on this podcast.

Chris (06:25):

For example, if you dig back far enough, you’ll find a new you challenge which was successful for a while. Before that there was like check-ins for charity. And that did help a little bit with people who are unfamiliar with advertising and then six week challenges followed that. And then Facebook ads and then Instagram ads. And now Tik Tok, et cetera. All of these marketing strategies can be successful, but not forever. And who they’re successful for depends on your stage of entrepreneurship. There are always new ideas appearing on the horizon, like high-ticket coaching. And most of them work for a while, but the key is to take the progress you make and then keep that progress and then find the next thing instead of slipping backward when your current strategy begins to fail. Many gym owners started running one of these promotions that I just mentioned. They saw some quick wins, and then they got over confident in the long-term viability of their gyms.

Chris (07:20):

Some went all in on one strategy and it actually killed their gyms. So here’s how to stop sliding backward. Before we talk about how to build forward, number one, re-invest your wins. Why do the most successful people in the world have mentors? Because they’re always looking for the next level. They want to talk with people who have been there already. Number two, watch your data. The first time you use a new marketing strategy, record everything you can, your set rate, your show, rate, your close rate, your conversion rate, and your length of engagement for new members. The second time you use this strategy, compare all those numbers. Are you getting fewer leads the second time around? Are the leads colder? Is it harder to sell them? Are you paying more to acquire a client the second time around? Is your retention dropping the second time or not?

Chris (08:12):

If any of these numbers are going down, then you’re using a short-term strategy. Use it while it works, milk it for all it’s worth, but then be ready to replace it. Third, press the save game button. Capture this moment in time, record all of your processes, standard operating procedures, prices, et cetera, get it all on paper. Replace yourself with an operations manual, make your business turnkey. In times of crisis, we fall to our level of preparation. Get your business out of your head. And it’s like pressing save game on your gym. And you’ll also buy yourself the time to determine what the next strategy is going to be. Number four, hire a manager. You need someone else to oversee daily gym operations so you’re free to build the next phase. You can’t open a second location if you’re still coaching classes at the first a second location. It doesn’t just double your workload.

Chris (09:07):

It actually quadruples your workload. Number five, don’t repeat mistakes. The manager that you hire to run your first location is going to make a few mistakes and that’s OK. As long as the manager doesn’t repeat them. So audit your processes and plans every six months, record what worked and what didn’t. And when somebody screws up, including you, document the error so it’s not repeated. Number six, mentor your staff. It took you years of making mistakes and reading books and listening to podcasts like this, and probably getting some coaching or mentorship to grow as a leader. All of that experience and knowledge doesn’t automatically pass to the next person in line. If you don’t mentor people, you’ll be pulled back into gym problems over and over again. You have to teach them everything that you know. Number seven, make yourself antifragile. Adopt systems that will allow you to pivot in the event of another business closure.

Chris (10:08):

Keep your online programs ready, move to a prescriptive model and make sure nutritionc oaching is a big part of your service. Number eight finally, and I’m waving my hands over my head as I say this, you need to keep your hands out of the machine. I’m a product guy. So I get it. It’s very tempting and easy to keep tweaking your training product, micro-managing your staff and finding mistakes and fixing them. This is the triage trap of business and it stops you from growing. You can’t drive the car with your hood open. Now, if you follow these steps, you’ll stop that two steps forward, two steps back dance that prevents most entrepreneurs from succeeding at a higher level. Instead you’ll create a ratchet effect of forward progress long term.

Chris (10:53):

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Chris (11:19):

So let’s talk about now what assets you can use to grow. When you’re deciding, what do I want to do now? I’ve got a little bit of freedom of money. I’ve got more than I need, and I’ve got a little bit of time and I feel successful. What do I take? Let’s talk about making that decision based on the levers that you have to pull to grow toward the next step. Now, I just told you that the first key to climbing the mountain was to minimize slippage. Rock climbers use the three points of contact rule. They put their left hand and both feet on a stable ground before they reach out with their right arm.

Chris (11:54):

OK? So we’re ready to talk about moving up, but as we do this, as you’re testing new things, you need to test only one thing at a time. If you try to open a new location while you’re trying to launch this new soft drink, while you’re trying to buy an air B and B over in the mountains, while you’re trying to write a book, none of those four things will happen. You have to test one thing at a time and go all in. This is why our tinker program at Two-Brain is arranged in 90-day sprints. Tinkers can stay focused without distraction on one thing for 90 days. If you go longer than 90 days, people tend to get tempted by all these other big ideas. And if you go shorter than 90 days, well, you won’t have enough time to accomplish a goal.

Chris (12:38):

The best thing that you can do is to decide, I’m going to focus on this one venture for the next 90 days. I’m going to go all in. I’m going to push everything back on my calendar to just focus on this one thing and we’ll see how it goes. After 90 days, I’ll evaluate, maybe I keep going on this same thing. Maybe I scrap it and move to something else, but you cannot build multiple things at one time. So let’s talk about your assets. What will you leverage to build the next phase of your business? You have three, you have your audience, the people who know you like you and trust you. You have your cash, your reserves, and you have your time. All of these things can be reinvested into the next level of entrepreneurship. So the first thing you want to do is look for activities that generate cash with the least possible effort.

Chris (13:28):

You don’t want to start from scratch with a brand-new idea. Leverage the audience you already have, or the cash that’s currently at your disposal. These are the easy ones. So let’s start with your audience. How do you leverage your audience? Which is your greatest asset, by the way. My mentor, Todd Herman, once told me that if you know how to build an audience, you’ll never go hungry. And I’ll add to that. If your audience is high affinity, meaning you love them and they love you back, you have a lot of trust and you know what they need, and you can offer that to them. And it’s a win for everybody when you do. So. Here’s how to leverage your existing audience. Number one, help people solve a larger problem or a different problem. So if everyone at your gym also needs nutrition help, launch a nutrition business.

Chris (14:17):

This is a tiny example. A larger one might be childcare or health insurance, or coffee. Solve the problem that the greatest number of people in your gym have, not necessarily the problem you want them to have, not necessarily the problem that you have, but the problem that they have, and you need to ask them so that you’re sure. For example, you might think I’m just going to add a coffee bar to my gym. Well, maybe buying coffee isn’t the biggest problem that your people have. And so you’ll wind up hiring some part-time staff, paying a wage for them to sit behind the coffee desk all morning and losing money on it. This really does happen. It happens quite a bit. Smoothie bars. Don’t get me started smoothie bars in most gyms, unless you have a couple of thousand clients and you’re seeing a few hundred of those clients a day, a smoothie bar is probably going to lose you money and cost you a ton of time.

Chris (15:12):

The second way to leverage your audience is to look for the option or the idea that takes the least amount of your time. So for example, adding a rentable asset, like a float tank or an infrared sauna requires cash investment, but it doesn’t require time. You just set it up once and then you charge for its use. Conversely, a coffee bar requires a lot of time for a very, very small return. Third, help someone from your team open a second location. Create an investor, maybe that’s you, license your brand and then mentor them to success. So for example, instead of losing a coach and they go open their own gym and they become a competitor, you can say, I’d like you to open up my second location. Maybe you’re going to give them a share of the business. Maybe you’re just going to pay them a wage.

Chris (16:02):

It depends if they’re an intrapreneur or an entrepreneur, and you know, that’s what’s going to do it for them. You become the investor basically. And the fourth way to leverage your audience is to invest in a client who wants to open a business. Now be very careful with this one. The client probably doesn’t see the hard parts of entrepreneurship. And if the venture fails, you will lose a friend. I’ve had to learn this lesson many times and each time it’s been very painful, but I’ve also seen it work. And there are mentors on our team who have invested in their clients’ businesses through their gym. There are other gym owners in Two-Brain who have done it, too. And what they do is they take their business experience and knowledge and they mentor the business owner. Maybe they invest some cash too, but they take a share of that business and that’s how they become an investor.

Chris (16:49):

And that’s how they leverage their audience. Now, your second greatest asset behind your audience is your cash. Here’s how you leverage your cash. Number one, invest in long-term cashflow like buying buildings and then renting them to others. Instead of flipping them, these could be commercial buildings for your business, or they could be other businesses, or it could be rental properties like Airbnb. They could even be residential. And there’s a great podcast with Jeff Smith where he talks about why he invested in residential properties, but a lot of tinkers buy Airbnb. They use it three months of the year for themselves, and they rent it out the rest of the time. The other way to leverage your cash is to invest in other people’s businesses like through the stock market or buying index funds or, you know, investing in a life insurance fund that buys shares of other people’s businesses, OK.

Chris (17:40):

To invest in other people’s businesses, you don’t necessarily have to go buy a share of their business and take an ownership control. Buying stocks is really investing in other people’s businesses. You’re buying a tiny share. Right? One thing that I will know here though, is that people tend to see the stock market and particularly index funds as like a safer investment. But if you look at the return on, you know, my own business versus the stock market, I mean, the ROI on investing in Catalyst has been like 12,000x what I originally put into it, where if I had made that same investment, $16,000 in 2005 in the stock market right now, I might have about $40,000. So don’t be scared to invest in yourself, but know what investing in yourself actually means. Investing in yourself as an entrepreneur means getting a mentor and a coach and becoming a better entrepreneur, investing in your business

Chris (18:36):

a lot of the time, doesn’t see the big ROI that you saw from start-up. The third asset that you have is time. Now this time can be your greatest asset. If you’re a great entrepreneur, you’ve been mentored and you’ve had coaches and you know exactly what to do, and you’ve developed your CEO skills, time can be your greatest asset because with time you can build an audience and with time you can generate cash. But for most entrepreneurs, time is actually not their biggest asset because they’re busy all the time. They’re not growing their business. They’re working in their business instead of on their business. And they just haven’t matured into that tinker phase yet. And that’s OK. That’s all of us. So here’s how to maximally leverage your time. Number one, do the effective hourly rate calculation. So add up all the hours

Chris (19:26):

you work in a month and divide that by what you’re paid. We call that net owner benefit. But what you’ll get here is your effective hourly rate, which is like how much your business pays you to be its owner or the CEO. So if you’re in Two-Brain, you can work through this exercise step by step in the value ladder exercise on the Growth ToolKit. There’s a workbook for it. The second thing that you can do to maximize your leverage with time is to buy yourself time. You can hire somebody to replace you in the lowest value role. If you hire a front desk person for $11 per hour, you can’t tell me that you can’t create $11 per hour in new revenue for your business with that hour that you just bought yourself. Right? The third thing you can do is set up a 90 day sprint to work solely in a higher value role.

Chris (20:15):

How many new clients can you gain in 90 days, if you only work on marketing, well, your guess is as good as mine, but it should be at least five, right? If you didn’t have all these other distractions and you knew what to do, and you had a process to follow, could you get five new clients in the next 90 days? I think you could. The fourth way to leverage your time is to stay focused on this new project until it can run without you. So you do the marketing, you do the marketing, you do the marketing. Then you write down what you did and you teach it to somebody else. And then you teach them, teach them, teach. And then you mentor them until they’re doing it as well as you do. And then finally, leave deep tracks that a staff person can take it over.

Chris (20:55):

Now, before I get into how to level up your staff, I want to tell you about our Two-Brain tinker program. The tinker program is for entrepreneurs who have made their first business successful. And they’re starting to think about the next phase of their ascension. So in our tinker program, we bring in speakers to help you optimize your time, teach you to lead better, help you mentor your team, build cashflow assets, duplicate your first business, and serve more people. We have specialists who come into the group, Jeff Smith and I are the mentors in the group. We have coaches in the group to hold you accountable. For example, Chris Voss came in last week and taught us negotiation. The week before that, we had a sales expert giving us some new instructions on how to upgrade our no sweat intros. Before that we had an organic Facebook marketing specialist, but we also have scaling specialists and legacy specialists and CFOs come in and talk.

Chris (21:46):

It’s an amazing program. We work in groups with other high-level entrepreneurs who are at the same stage, and sometimes they’re already at the multi-million dollar mark. We meet in person and we meet online and we travel to do interesting stuff. So you have levers that can produce growth. They are your audience, your money and your time, but the fulcrum on which all of these levers pivot is your people. It’s your team. You have to be around the right people, also in your mentorship practice. And you have to follow the right people. And I mean, receiving mentorship, not just reading books. So when you get to this phase, knowledge is not enough anymore. You have to immerse yourself in success to get further. Now let’s talk about how to level up your staff and fire them up instead of firing them out of your business.

Chris (22:35):

Because if you want to climb higher, you have to assemble a team, right? Nobody soloes Mount Everest. So you’ve done the hard labor of leadership by this point. You’ve taken big risks. You’ve missed your paychecks. You’ve read a book every two weeks for the last five years. You’ve been at work before the sun rose and after the sunset too many times to count, but your staff hasn’t. You have fired clients. You’ve fired friends. You’ve interviewed people and said no to opportunities. You set your rates and you stuck by them. You wrote a playbook and you made rules for a reason and everything that you do has a reason and you’ve enforced it. But your staff hasn’t done that. When you hire people to replace you in any roles, you have to remember that they are beginners. Now they’ll learn faster than you did because you’ll teach them, but they still have to learn them.

Chris (23:25):

You do not get to pass off your knowledge and experience just mentally without thinking about it by osmosis, that doesn’t happen. It’s a hard lesson to remember, but if you fail to leave deep tracks for your staff to follow, you’ll always be their supervisor. They won’t like it. And neither will you. So here’s how to mentor your staff to grow your business without you there. Number one, give them a paint by numbers picture, not a blank canvas. You don’t want them to tear things down or try to like reinvent your business. That’s not their job. They’re not the inventor. You are. So give them a staff playbook, a set of standard operating procedures, a sales binder, a dress code. In other words, give them guidelines. Number two, give them a north star. Write out your vision for the gym. When staff encounter this, a new challenge or something for which there is no standard operating procedure, they can look at this north star and say, yep, here’s what Chris would do or here’s what Sally would do.

Chris (24:27):

Now you have point A, your standard operating procedures and point B your vision and your job is to mentor them, to get from point A to point B. So here are the steps to mentoring your staff. Number one, teach them. Here’s why we do it this way. And the why is really important. They need to understand that you’re doing things this way for a reason, you didn’t just make it up and now you’re just being rigid. Number two, isolate problems. So dig deep and get to the root of each barrier to growth. For example, if somebody is supposed to be replacing you in the sales role and their close rate is really low, you need to ask them why. And it could be that maybe they couldn’t afford your rates themselves, or maybe they think that you’re overcharging or maybe they think that you should be giving away your service for free, but you have to dig deep and get to the root of each barrier.

Chris (25:18):

If you want to grow each individual on your staff. Third, you can ask them how they would solve the problem. So you can ask them for three alternatives. Now, if all three are different from your way, gently steer them toward the right answer, but make sure you’re encouraging them enough to make suggestions next time. So for example, we got this problem. People are leaving at eight o’clock and they’re not putting their stuff away. And then the nine o’clock group comes in and we have to waste the first five minutes setting up again. How would you solve the problem? Ask for three alternatives, you know, pick the best one. There’s a great idea. And guide them to choose that one. Fourth. If the problem that the staff person is bringing up is a people problem, and it almost always is, role-play the solution with them.

Chris (26:05):

So, Hey, Chris, man, I talk to people. They don’t want to refer their friends. We’re doing goal reviews. I say, how can I help your spouse? How can I help your coworkers? How can I help the other parents on the hockey team? And they always say, no, I’m good. You need to role play the solution with them. So you be the client, let them be the coach and you practice. And then you switch roles and you practice. Then you switch back and you practice again. Just as you need to get reps on the air squat, you need to get reps in every situation in your business. Number five, give them a deadline and ask for a report. So instead of just saying, OK, it’s your job to this business. You need to say, we need five clients. Here are our strategies. Here is where you go to find the tactics.

Chris (26:51):

You know, the step-by-step guides that will get us these five clients. In 30 days, we will have another meeting and we will talk about the five clients. And did we get them, or did we not? Number six, run through an after action report. If the problem was solved, well, record the solution in your playbook for next time. If it wasn’t, ask how it could have been approached better. So, Hey, Jimmy, when we were running that event last weekend, you know, we had this problem where somebody fainted, I’ve never seen that before. Never even thought of it, but I love the way that you handled it. Can you write down exactly what you did so that I can add it to our playbook and everybody will do it that way from now on. Mentorship isn’t all about solving problems. It’s really about growth, but it almost always starts with solving some current problems.

Chris (27:37):

Eventually every good mentor moves clients from fighting fires to feeling on fire. And that’s what I want you to do with your staff. So here’s how to light the match. Number one, issue one growth challenge. Jimmy, I want you to get three clients a 10-pound deadlift PR in the next month. OK. Second. Isolate solutions. Ask your staff for three ways that they could do that. How can you get people? How can you get these three people to get a 10 pound deadlift PR in August? Number three, role-play the solution. If it’s a people solution. And again, it’s almost always a people solution. Coach me through it, coach me through my deadlift, find some ways that you could improve it and get me a 10 pound PR. Number for a give them the tools that they need to be successful and a deadline as well as a clear metric for success.

Chris (28:26):

Three people, 10 pounds in their deadlift is a great metric. Improve fitness through constantly very functional movement at high intensity is not a clear metric. Number five, create an after action report. If the strategy worked, celebrate, then record the solution in your playbook and plan to repeat it monthly, quarterly or annually, put it on your calendar to start slowly, building a plan for growth. Mentoring your staff is a lot like mentoring gym owners. You have to start with a triage, but as they gain confidence, move quickly to growth strategies. Gather these little wins together, set clear targets, hold them accountable. Celebrate wins every time you meet and record lessons too. Watch your metrics improve. Reaching tinker phase, capitalizing on your new opportunities. It requires delegation. That doesn’t mean abdication. Your gym still exists. Someone else can run it autonomously, but only with mentorship. The GM of my gym has a Two-Brain mentor, not me.

Chris (29:26):

My staff is in the Two-Brain team training program. They all have mentors because when they grow, so does my gym. And when my gym is growing, I’m not tempted to stick my fingers in the machine. And I can focus on these bigger opportunities in front of me. Congratulations on making it this far. Most entrepreneurs never do. Most entrepreneurs buy themselves a job and they stick in that self-employed status for 30 years, they try to sell it. They find out that they haven’t created an asset worth selling and they just kind of retire, completely exhausted, wiped out in the worst shape of their lives. And maybe with not enough money to retire on. You’re different. You have opportunities. Congratulations. Your next step is it feels easier, but it’s a really critical one. What will you do with this opportunity? That’s what will happen to you in the future. Thanks for listening.


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