Experts Weigh in on How to Improve Important Business Analytics
Part 1 of this series laid out the metrics gym owners should be tracking, while Part 2 dove into what kinds of numbers they should strive to achieve for long-term business health.
This final piece unpacks the how: What can gym owners do to improve:
- Average Clients Value (ACV) or average revenue per member (ARM)
- Client retention
- Profit
Average Client Value
The easiest way to increase average client value is to offer more than a group class membership.
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- “Is the vast majority — 90 percent — of your revenue coming from class-based memberships? If so, there’s an opportunity to add revenue streams,” said Cody Sunkel from the popular gym management software company Zen Planner. He listed nutrition programs, personal training, paid specialty clinics and retail as four potential avenues.
- “You can only fit so many people into a class, and especially right now with COVID, so offering personal training during non-peak times, and nutrition services, is really a no-brainer,” said Brendan Rice, the CMO of the gym management platform Wodify.
- Chris Cooper, the owner of Two-Brain Business, added: “To improve (average revenue per member) you have to improve your value to your clients.” You can do this by “increasing the number of problems you solve,” he said. This could mean nutrition coaching, mindset coaching, kids coaching, or sports specific coaching, for example, or by “increasing the attention you give,” such as through one-on-one personal training or small group coaching.
Finally, Audrey Patterson, a mentor with the Madlab Group, a business education company, has worked with dozens of gym owners who have had great success increasing their average client value by introducing hybrid memberships. This means each client does both group classes and some personal training with their personal coach. Some clients meet with their coach for one-on-one training once a week, others once every month or every six weeks.
- Gyms who have moved to this model have quickly been able to increase their ACV by an additional $25 to $50 a month minimum, depending on the market, she said.
A second thing to consider is how many discounts you’re giving away, Sunkel said.
- “Many gyms don’t realize how heavily they discount their services. Grandfathered pricing can cripple gyms as their costs rise. If discounting has gotten out of hand, it might be time to create a plan to right-size your membership dues,” he said.
Client Retention
To improve client LEG (length of engagement), “you have to change clients’ behavior,” Cooper explained.
- One key to this is to increase one-on-one attention in the client’s first seven weeks at your gym. Cooper also recommends hosting client goal review meetings every three to six months “to reevaluate their progress and make new prescriptions…Help them actually reach their goals. Not your goals, and not CrossFit’s goals,” he added.
Sunkel and Patterson agree: The first 100 days of a client’s journey are key.
- “Teach new members to swim before you throw them in the deep end,” Sunkel said. In other words, “prepare them to confidently join group classes with an onramp protocol.”
- From Patterson’s experience working with gyms, she has learned that the more one-on-one personal training clients do in the early weeks prior to eventually joining group classes, and the more money they spend, the longer they stick around. “It comes down to building a trusting relationship with a coach. You can’t do this in a group class. Personal training is required. The PT-first model makes all the difference in client retention,”Patterson said.
Secondly, paying coaches a percentage of revenue on each of their clients for the lifetime of that client, as opposed to by the hour, is also a huge part of the client retention equation, Patterson reiterated, as it incentivizes the coach to keep their clients by servicing them more effectively.
- “It’s the easiest way to ensure all parties—the coach, the client and the business—win,” she said.
FInally, Rice said the simplest way to improve retention comes down to performance tracking.
- “Getting members to track their performance directly correlates to member retention. We have proved this over and over. Our data shows that athletes who track their performances are three times more likely to keep their memberships,” he said.
Profit
Cooper recommends gym owners read the book Profit First by Mike Michalowicz. One of the concepts in the book is for the owner to pay themselves a salary instead of taking what’s leftover.
- “If you pay yourself first, you’ll control what you make. If you pay yourself what’s left over, you’ll be fed last and probably make nothing,” Cooper said.
Sunkel agrees: “I personally recommend that every gym owner assigns themselves a reasonable salary and adds it to their personnel budget. Profits left over after gym owners pay themselves their salary can be bonused back to themselves as additional income, reinvested into the business, or set off to the side as a rainy-day fund for the gym,” he said.
In terms of actionable items, Sunkel reiterated the importance of increasing and “maximizing” average client value.
- “Serving members is your biggest cost drain. They require space, equipment, and coaches. The more members you serve, the higher your costs will need to be. A low ACV will keep you in a perpetual low-to-no profit zone, while a high ACV will maximize profit margins,” he said.
Second, “be efficient with your space,” he said.
- “Before you think about increasing space or signing a lease for a space that you’ll grow into, consider how many more athletes you can serve in your current space. Can you adjust your schedule to squeeze in another class each day? Can you run multiple classes at the same time without bumping into one another? Increase your members per square foot as much as you can before it starts to negatively impact the member experience,” he explained.
Rice’s advice: “Build a modern website that is designed to convert new leads.”
- “Here’s a useful test for gym owners: Pull up your homepage on your phone. Hand it to a friend — and without saying anything — ask them to become a customer. Be sure that you time the process and don’t answer any questions along the way. Can they sign up easily with just a few clicks or did they get confused?” Rice offered.
- “There’s a reason franchise gyms like F45 are designed with these playbooks and templates. They’re designed to bring in new leads. CrossFit gyms’ websites aren’t usually designed this way,” he added.
Final Advice: Always keep the eye on the prize — the client.
- Cooper put it this way: “Gyms should think of themselves as coaching businesses and adopt the prescriptive model: Learn about the client, make the best prescription for them at the time, deliver the prescription, and measure the result. Then repeat every three to six months, depending on where the client is on their client journey,” he said.
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