The Hidden Costs of Business That No One Talks About

You're listening to the PT Profit podcast, episode number 264. Today we're discussing the hidden costs of business that no one talks about. Are you ready? Let's get started.

Hi, I'm Beverly Simpson, former fitness manager turned online personal training business owner. And this podcast is where smart fitness professionals, including trainers and clinicians, discover how to increase client performance and movement, package and position their products and services and get out of their own way so that they can increase their revenue to live a life that they love without sleazy sales. Welcome to the PT Profit Podcast.

What's up, coach? Thank you so much for pushing play on another episode of the PT Profit Podcast. I'm your host, Beverly Simpson, and if this is the first time you're hanging out with me today, welcome. I'm super pumped that you're here. Today we're really going to be unpacking the truth about understanding the math behind your six and seven figure business. The invisible components and the tangible components, the data that you need to know to make sure that you are, that they're actually working in the red in terms of profitability and they don't even realize it. And it's usually because they're operating from some unconscious or subconscious patterning in their mind and making decisions based on commodity. For example, a lot of people will decide their pricing model when they, they're first new to the space and they'll look out into the space and they'll say, okay, what are my colleagues doing? What are, what are some of the common prices that I'm seeing? They'll go look on Reddit and they'll search for what is an average personal trainer, what is an average physical therapist? And they'll start making, Then they'll start seeing, you know, what are my colleagues doing? And then they'll maybe go look at some local gyms, what are the, what are the area doing? And they'll start doing some quote unquote market research. And I get it. I know why people want to do that. Nobody wants to be, you know, out price the market space. Okay, so I understand, but that's pricing on commodity. And here's why. Number one, how do you know that the business models that you're basing your business on is profitable? How do you know that that is a model that actually works? And then number two, you are, what you're trying to do is potentially making price your differentiating factor from the people in the market space, which is just the fastest race to the bottom. You end up working harder, longer than trying to use your work ethic as the fastest way to get people results. And then it's just, it's just a really fast race to the bottom. Because when people pay, they pay attention. What ends up happening to a lot of people is in addition to working in the red, meaning their dollar for hour, not that what they charge, but what that dollar for hour is actually worth to them ends up being anywhere from $3 to maybe even less. And so when you do that, the reason why this is setting you up to fail is because as you start to scale, grow, in order to hit the revenue targets that you want to hit, you're going to need to hire help. And then what ends up happening is that your expenses far outweigh the profit margins. And so you're actually working in the red even as you grow and attain new clients. And so I'm going to show you how to really think about this. I'm going to show you how to look at this data and then I'm going to help you make some decisions on your pricing structure based on looking at the data. Okay, so if you've followed me for any amount of time, this might feel a little bit conflicting to you because in your mind you're like, but Beverly, you told me that we're not trading dollar for hours, so why do I need to work out what my hourly rate rate is? So what I want you to understand is that we're not deciding what is it that you're going to charge per hour. Because you're right, I definitely am not a fan of the dollar for our model. Yet the industry teaches you to do that. But that's a broken model. And what I'm about to break down is going to show you why that is a broken model. Because when you are trading dollar per hour, it is not taking into account the amount of effort it takes to go and drum up business. Grow your audience, find the prospects. It doesn't typically, usually take into account how much time and effort it takes you to fulfill with program creation, with client check ins. And what ends up happening to a lot of really well meaning coaches and smart coaches, experienced coaches as well as novice coaches, is that they're not taking into account what I like to call the bites, licks and tastes of business building. Because it's like death by a thousand paper cuts. Because those 10 minutes of check ins, they start to add up as you begin to grow what you can handle in terms of your, the capacity of your client load at 10 clients is going to be a hang of a Lot different when it's 100 clients. And so for me, what I have found to be the most effective is to get present to the truth, to, to your experience, to your knowled. So what do I mean by that is there are things that you're not going to be and be able to anticipate the, the challenges that you might face when you get to 100 clients that you just don't know until you know. Meaning until you have a hundred clients. There are some challenges we won't be able to anticipate and that's okay. But some of these challenges, the bites, licks and tastes of, of business building, you will be able to anticipate it meaning that if you're doing 10 minutes here or there for 10 clients that will look a hang lot different when that it's 100 clients because those add up. And so, and typically when we are deciding our hourly rate or session rate, which by the way insurances teaches you to do this, gyms teach you to do this. So it's not your fault that you do this. It's just important that we get present to it and change it because we cannot change what we can't see, what we don't know. We just don't know what we don't know. Okay. And so what I want you to understand and what I want you to get present to is how much of that time are you using that is just being leaked out because most people aren't present to it. And then what ends up happening is they will end up building. A business is broken and it's in my opinion it's a hang of a lot harder to fix something that's already in momentum, that's building. And I'm speaking from experience here. This is how I got into the if then continuum. I kept thinking, I kept burning and this is how I started working harder. We're grinding and I needed to clean this up and it basically took me to just stripping it all down and what it felt like at the time is starting over. Maybe out in the world it didn't look like that, but I was just in this perpetual state of, of as soon as I do this, then I'll, I'll do this. And it was just absolutely bonkers. I was, I was doing an agency, I was being a one man agency at the time meaning or one person agency at the time where I was just doing it all I was wanting to fulfill. I was like, you got, you want it? I you got it, you want it, you got it. And I was Trying to do all the things an agency would do. Now agencies are typically, they just have more horsepower. There are more people on the bus that are running it. And so I was trying to use my work ethic, I was trying to use my time, and I was trying to be a one person agency. And then I kept telling myself I was going to work out of that model as soon as I got X amount of people into the group. But here's what happened. My expenses started to grow, but my profit margin wasn't growing. And so then I just kept saying, all right, well then I'll just keep working harder. And so what ended up growing is I ended up growing my. I ended up using a much more expensive resource, which was my time, energy and effort. And I couldn't. And I. And the business started to break. So I had to start it all over essentially and really prioritize the time and the energy and the effort so that I could step into some overflow and watch the profit margins grow. So this is why I said there was some invisible components to this because, because part of that required me to step into, to valuing what I brought to the market space. When you undervalue what you bring to the market space, you end up potentially calling in clients who are not yet ready to commit to themselves. And so then what ends up happening is they don't do the work or they don't show up. And then you start feeling like, oh my gosh, maybe I'm just, it's not good. And then you start fueling this vicious cycle of I need my people to get results, but they're not showing up, I'm calling in the wrong people. And then you start feeling like, okay, well, I'll just work harder. You cannot want the goal more than your client, client. And so I had to clean some of that up. And then I had to value what I brought to the market space. So it required me to raise my rates for the same work that I was doing so that I could hire the people that needed to come in to fulfill on the promise of what I knew I was capable of. So the first thing that you're going to do is take that goal, okay? And then I want you to really think, so if it's 120k, take that goal. And then I want you to think about, well, what does, what, how many hours a week do I want to be working? Okay? And then once you know that, how many hours of, of vacation do I want? Okay, so then I want you to take that however many hours and weeks that you want to be. Want not required, but want to be working, divide those hours up by the goal, because that is. Or. And because that is your. What your hour of time is worth, not what you'll charge, but what it is worth. So now that you know what your hour of time is worth, now we need to look at how much time does it take you to create, to acquire, and to fulfill on a client per client per month. So I want you to take that. Okay. And I want you now to look at your current offerings. Meaning what are you charging? What are your packages? And if you're already not in this place of getting out of that dollar for our model, come and talk to me. We need to talk about it. So let's just, you know, start there. Next, we really just need to look at. Does the math make sense? Sense, meaning if you're charging $200 a month and it's costing you five hours of time, are you in the red? So if you are trying to hit $10,000, you need 50 clients. And if 50 clients cost you five hours of time per month, that's 250 hours, which means that you're working 62 hours a week, roughly, maybe even 63. So you have to start asking yourself, is that okay, Is that what I want my business to look like? And then I want you to think about it in terms of this. If I'm working 63 hours a week and I'm making, you know, that hits me 10k, and you're like, man, I can't do that. I really want it to be 30. Then can your profit margin handle adding another person? Chances are probably not. It means you're working in the red. Now we're looking at that. Okay, so now you have two options or two options for you to look at. We need to either raise our rates and. Or we need to remove the deliverables so that we can get more of our time back and have more of a profit margin. And so now the question becomes, well, Beverly, I can't do that. How can I do that? Well, this is the invisible components of, like, okay, well, let's take a look at that. What's causing you to say that? Do you value what you bring to the market space? And then people say, well, what is the bit? What is the profit margin that I want to have? Well, the truth is that in the Internet space, you could have a pretty, like, 60% profit margin, meaning that take your expenses, take the hours of time, and then put 60 on top of that. That's gonna have a huge cash flow for you that you could either put back into the business, that you could grow, that you could create legacy wealth, I mean, so on. There's just so much you could do. You want to be in 60 now. A lot of brick and mortars they usually operate. A good, healthy profit margin is a third 25 to 30% profit off the top line, meaning that all of your expenses are locked and loaded. Now, most businesses are not set up for this way. So we net you need to get present. So now the question becomes, okay, well, how do I get present to this? So first of all, you need to start taking a time audit. And I want you to look at all the tasks that you are doing, and I want you to look for the ways that you can maximize your leverage, which means what can you delegate, what can you automate, and what can you delete? And so here's what you need to do, and here's how you look at it. Look at all the tasks. And I want you to organize the tasks into what are $10 tasks, what are $100 tasks, what are $1,000 tasks, and what are $10,000 tasks? You, as the CEO, as the owner, as the strategy, as the person who actually creates the vision, steps into the vision and executes on the vision. You spending time on your offer is a $10,000 equipment creation task. I'm just going to tell you that right now because that time energy effort of you in creation of, of stepping into what's possible, stepping into what can I do to actually create and generate revenue that is going that time that you're spending could be responsible. The decisions you make are a direct reflection of what can be created, which is the $10,000 task. You making a decision could bring in anywhere from ten to hundred, multiple hundreds of thousands of dollars into your business. That is a highly profitable task that most people put on the back burner. Oh yeah, I'll create as soon as I'm finished doing my website. Then you practicing the skills of communicating the right offer to the right person at the right time is a highly valuable task, meaning it is specifically going to generate revenue into your business. And as a business.