“How many members does your gym have?”
I lost track of how many times affiliate gym owners or coaches asked me this question when I was at the 10-year CrossFit Affiliate Gathering in Whistler, B.C. earlier this fall. In fact, it’s the number one question I have overhead heard gym owners ask each other in the last 10 years.
And although we don’t talk about it, we know the answer we give comes with assumptions about how successful we are:
50 members means you must be doing it all wrong. 100 members means you’re kind of, sort of doing things well. 150 means you’re on a good track. 300-plus and true respect ensues.
Though how many members a gym has seems like an obvious way to measure success, after a decade in the industry, where I have spoken with hundreds of gym owners—and in my experience working with the MadLab Group, a business group for gym owners—I have learned the answer to the question ‘How many members do you have?’ tells me literally nothing about business success.
Let’s reverse engineer this for a second and consider what we mean by success.
It’s safe to assume if you’re a gym owner, you want all parties to be successful: the client, the coach and the business. So what does a successful client look like? Coach? Business?
If the client is paying you a lot of money for a high value service and is sticking around for years, they are probably having success. If they weren’t, they’d leave the gym, right?
Same goes for the coach: If the coach is sticking around coaching at your gym for years, they are probably happy with their job. And for this to happen, they need to be making enough money. Thus, coach success can essentially be measured by annual coach pay. (Have you ever had a coach earn $100,000 and then quit?)
Though you likely didn’t get into the gym business for the money, logically you’re not going to stay open long if you’re losing money. Thus, business success is that simple: Are you making a profit?
(Perhaps we can also measure success by the lifestyle you have: Are you burnt out or are you working a manageable number of hours? Are you able to take time off and go on vacation? But again, these things come down to profit, because if your gym is churning a profit, chances are it’s because your clients are sticking around, your coaches are sticking around, you’re probably less stressed out, less overworked and have a pretty good lifestyle).
In light of the above, four more important metrics than ‘How many members do you have?’ include:
1. What’s your average client value (ACV)?
This can be broken into two parts:
- Annual client value: How much money are clients paying you each month/year?
- Lifetime client value: How much money are your clients paying you during their entire stay at your gym? The better your client retention, the higher this number will be, of course.
2. What’s your client retention rate? (churn rate)
How many people are coming in? How many are still there at the end of the year?
While you also have to factor in why people leave your gym (for example, if you live in a transient city where people are packing up and leaving the city all the time, it’s going to be hard to have a 90 percent retention rate), but in general a good number to strive for is 80 percent retention.
3. How much money are your coaches making?
The first question here comes down to developing full-time coaches. If a gym owner doesn’t have the ability to develop a full-time coach, this question becomes irrelevant.
If the gym does have full-time coaches, are they making a decent living? Are they making even close to a professional wage (i.e. $75,000 + a year).
Taking it a step further, it’s also worth knowing what their average hourly wage is. If the coach has to spend 40 on-floor coaching hours per week to earn a good living, chances are he won’t last long. But if the coach can earn a living working a sustainable 20-25 hours a week on the floor (plus likely another 10-15 off-floor hours for various other duties), chances are they will stick around.
4. What is your profit?
After you factor in all of your various expenses, what is your real profit? A good number to strive for here is 20 percent profit.
Other than for bragging rights, why is it so important for gym owners to know these numbers?
If you know the answers to the above four questions, then you can start to make more informed business decisions, instead of experimenting through trial and error like so many of us do.
For example: If you discover running a 6-week challenge leads to 70 percent churn rate, but one-on-one personal training for fundamentals leads to higher client retention, then it becomes a no-brainer: Ditch the 6-week challenge and embrace personal training for fundamentals.
So, the next time a gym owner asks you how many members you have, ask them how many full-time coaches they have making a professional wage. Ask them about their ACV and their churn rate from the previous year.
If they even know the answers to those questions, my guess is they’re probably pretty successful.
Editor’s note: This article is an op-ed. The views expressed herein and in the video are the author’s and don’t necessarily reflect the views of BarBend. Claims, assertions, opinions, and quotes have been sourced exclusively by the author.