Gym owners should track coach pay as a percentage of revenue. Financially healthy gyms keep this at 25-45% of total revenue, with the most successful ones around 25% and netting 20-30% profit. If it exceeds 45%, cut classes, teach more yourself, or downsize space.
In today's tip, I wanted to go over a key performance indicator of coaches' percentage of pay compared to revenue. Or another way to say that is the percentage of team member expense to revenue. The idea being we take your coaches' pay or team member expense total, divide that by your total revenue, and we're looking at that percentage. When I was analyzing financially fit gyms for the book Profit First for Microgyms, there's a couple— there's 2 big numbers that I came out of with that analysis. One is you want that expense to be no more than 44 or 45% of of your total revenue. The financially fit gyms that I looked at, where their net income was 20%, 30% of their revenue, they actually had their team member expense as low as 25%. Now, please don't misunderstand me when I say this. I believe wholeheartedly in taking care of your people and being generous. At Insight Tax, I have One of the most generous compensation models for my team members. And we try our best at CrossFit GSL to be as generous with our coaches as we can. And I know that when it comes to the fitness industry, there are a couple parties in this space who provide business coaching and business mentoring that are completely ends of the spectrum from each other. And some of the parties like to talk bad about the other side of the party. The other party who has a different number. So whether you follow some sort of system that uses a 4/9 model, or whether you're following a system where you're trying to offer a full-time salary with benefits to your coaches, whatever that method is, the financially fit gyms are at least less than 45%, more likely closer to 25%. And so you really want to be in that range to make sure that you have the opportunity to stay in business for as long as possible. Because coaches, team member expense, that is one of your 2 largest expenses, rent being the other one. So make sure that's dialed in. If you're above 45% of revenue, you should Man, find someone to help you or make some actions or make some decisions on what you can do to lower that. Maybe if you're, if you're the owner but you're also a coach, maybe you need to pick up some more classes to get that immediate cost down. Maybe quite frankly you just don't have enough members for the size of space you're in. Maybe you have too many classes. Do you have certain classes that aren't being attended very regularly? Well, you're paying a coach to be there, you know, and maybe you can't afford to do that right now. So if you're not— if you're above 45%, yeah, take action. If you want some ideas, feel free to reach out to us. Look at us as a resource for you. If you enjoyed this tip, please share with others and As always, we would love it and be so honored if you would subscribe to our YouTube channel. We love working with the fitness industry. I believe you guys are superheroes. I don't say that lightly. Like, I get it, not cape and flying around and all that stuff, but you're saving humanity. People need your services, and we're just trying to help you get some tips to stay in business for as long as you possibly want, and hopefully forever. All right, have a good day. Bye.
