This week we welcome back Chris Cooper, a gym owner, author and the founder of the fitness business mentorship program Two Brain Business.
In this episode Chris tells us about how gyms were forced to rethink their business models during Covid-19, where fitness operators need to spend their time and money to be successful and he explains the secret behind why you should aim for 150 members when starting out.
Connect with Chris here.
Find out more about Two Brain Business here.
Take a look at their State of The Industry report here.
Check out this article on Robert Dunbar’s research that Chris mentions in the episode: https://www.bbc.com/future/article/20191001-dunbars-number-why-we-can-only-maintain-150-relationships
Episode Link
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Transcript
Kevin: How’s it going everyone? Welcome to the Fitness Founders Podcast. I’m Kevin Mannion, VP Marketing here at Glofox. This week we welcome back Chris Cooper, a gym owner, author, and founder of Two-Brain Business. In this episode, Chris tells us about how gyms are force to rethink their business model during COVID, where fitness operators need to spend their time and money to be successful, and he explains his formula for building a widely profitable gym. Let’s have a listen.
Chris Cooper, welcome back to the show.
Chris: Thanks a lot. I’m really happy to be here. I’ve really fun memories of the last time. We had a great discussion and I’m looking forward to another one.
Kevin: Yeah. Well, great to have you back, and I actually can’t believe it’s been so long. It was definitely a different world when we spoke last, so how have things been for you?
Chris: Very busy. I mean, you know the 2020 felt 30 years while it was going on. But looking back, it seems like the whole year went by in a day. We were really obviously involved in the gyms’ fights to stay open and stay viable during the lockdowns worldwide. We had some amazing results. We learned so fast. Got very little sleep, as I’m sure you did. We’re coming out the other side and we’re starting to see that that work bare fruit. I’m really excited to talk about what that looks like today and the blue ocean opportunity that exist for a lot of micro-gyms worldwide right now.
Kevin: Excellent. We’re looking forward to hearing all of this. Before we go into maybe the… I know you’ve got a lot of data and you’ve been putting out a pretty interesting industry report. At a highest level, the fighting and mentoring, and fighting for survival that you’ve been doing the past year. Maybe tell me a little bit about some of the things that went well and some of the things that you learned along the way.
Chris: Oh yeah, sure. The first thing that we found was that gyms had to pivot to online training. What happened was we work with gyms worldwide, and we have a couple of gyms in China. When the COVID virus started to spread, they were the first gyms that were shut down. And so we started working with them and just throwing things against the wall like can we run outdoor bootcamps, can we deliver the programming online. And then before we knew it, there were lockdowns happening in Italy, and then Germany, and by the time it reached Spain, and then France, we kind of had this working hypothesis of how do we keep gyms going. And then by the time it spread through the UK and the eastern seaboard of North America started to shut their gyms down, we had some good data. And so what we were able to do is say here is what works because we’ve been working on this problem for 3 and a half weeks already.
The first thing was you need to pivot online, but to just run your group class on Zoom wouldn’t cut it. The retention rate was not amazing. We knew people weren’t renewing. We didn’t know how bad that renewal rate would actually get. And so the gyms who only switched to running Zoom classes online retain only about 7% of their revenue, if they were close for 3 months or more. That’s pretty horrendous. The gyms that pivoted to delivering their programming online including maybe like one or two Zoom classes a day but getting in touch with every client at least every second day or so by using a video chat function, and then they adapted technology; they retained about 74% of their revenue even in the worst months. But the more important thing was we knew that reopening wouldn’t just be a matter of flipping the switch back on again. That you have to ramp up. And so the gyms that had pivoted online were able to reopen a lot faster, and they saw a surge of an average of 8% revenue when they did. Unfortunately, the gyms that got hit hardest because they didn’t have a plan were also the slowest to recover, and they’re probably the ones that needed the help the most, and a lot of those gyms are not coming back.
Now, the really amazing thing is that your clients, our clients, the micro-gym owners and trainers in the world. They’re pretty flexible. They could train or they could change their toolkit without changing their relationship with their client and without changing their actual service. And so the big chain gyms if you look in the States – Lifetime Fitness filed for bankruptcy, Gold’s Gym filed for bankruptcy, 24Hour Fitness they filed for bankruptcy. These gyms are going to take 6 years to recover according to The International Health, Racquet & Sportsclub Association (IHRSA). Well, micro-gyms were out of it. In places where gyms are allowed to reopen were mostly reopened. I’m in Canada, I can’t fully reopen but my gym is profitable right now. That created this huge blue ocean opportunity to meet new clients who can’t go back to these other gyms unfortunately. At the same time, there’s clients who are more aware of the value of fitness than ever before because COVID is a terrible thing. It made people really, really sick. But it mostly kill the people who had a comorbidity. They were overweight. They had another chronic healthcare problem. Things that gyms can actually help with. And so, the gyms that could pivot did. I mean, they are in for a huge growth opportunity I think in 2021.
Kevin: I think that sum things up really well. I definitely think that the connection between those gyms that were not just running the online classes but also keeping the connection going and finding other ways to keep the members accountable, to compliment the online was massive. The connection between those that did that well and how fast their recovery is also a really good point. I think the third thing around the… members as they are called. A lot of those around and looking today and tomorrow for a new place to go, so it’s definitely very interesting times for the industry.
Chris: It’s great. My favorite thing is that I think it prove to thousands of micro-gyms owner that their gym is not their product. That the relationship is their product. And maybe the tools have to change sometimes but that’s okay. The result is that a lot of gym owners came out of COVID and said, “I don’t need all of this.” I can use a smaller space. I can train some clients online sometimes. My gym, Catalyst, some of our clients are still training online all the time. A lot of our clients are still doing some of their workouts at home, and that never occurred to them before. Now it’s, I’m looking at my window, it’s snowing, the roads are kind of bad. They don’t have to drive 35 minutes to get to my gym. They can just contact our trainer and the trainer will say here’s exactly what I want you to do at home today. It’s amazing.
Kevin: Yeah. It’s a big change.
Chris: Yeah.
Kevin: It’s really interesting. The point that the relationship is the product again another seems obvious enough but it’s such a strong thing to keep in mind.
Chris: One thing I should mention here is like platforms like Glofox really allow the coach to leverage that relationship instead of selling access to a program. That’s something that we saw is that a lot of people had to change their gym management software on the spot because they quickly realize, wait a minute, this software that I’ve chosen is not actually serving my purpose here. It’s really fragile. If I want to build an anti-fragile business, I have to move to something like Glofox that let me do that.
Kevin: It’s true. Got to be able to keep track. Got to be able to get those messages out and keep that engagement going.
Chris: It’s so important. Yeah.
Kevin: Tell me, you have an 84-page state of the industry report covering 2020 and the move into 2021. Let’s maybe spend 5 or 10 minutes condensing that down. Tell me, what did you learn?
Chris: About 6 years ago, I was sitting at CrossFit headquarters in Santa Cruz. A lot of the CrossFit C Level Executives were there. At that time, they had C Level Executives. I said, “You don’t have to tell us how to run a business but if you could collect data and just give it to us then we could all make better decisions, the affiliates would stay around longer, etc.” And they said, “That’s a great idea. You should do it. Not us.” At first I was kind of like, no. And then I got into it, and I have a couple of false starts where I would spend like tens of thousands of dollars trying to figure it out and then just give up and start again. Finally, this year we published data from over 6500 gyms. We collected through our own database, through partner’s databases, and we hired an independent analyst, and then we basically analyzed all the data to give answers to the questions that most of us are asking.
Before this report, gym owners would say what should I charge and nobody knew the answer. Nobody could say this is the average, or this is the high end, or this is the low end even. That’s what we wanted to give people. We also wanted to do this from an unbiased perspective and so that meant bringing an external objective analyst who does this stuff for a living and letting him spend a few weeks with the data. And then he turned around and gave us this report, it was about 300 pages long. Our job as a mediety was to form these numbers into something that was coherent, wrap a story around them so that they would be easy to understand, and publish this guide.
When we published the 1st edition of the guide, we sent it to 800 gyms. Two-Brain has about 850 gyms now worldwide. We sent a hard copy to every one of them. And then I sat on it over Christmas, and I read the book every single day. I said, this is too important like we have to send this to everybody, and so we made it available for free on our site. If you go to twobrainbusiness.com/research, you can get this guide. I think it’s an amazing first effort. What’s happened that’s been really just beautiful is that since we’ve published the guide, a lot of people have approached us and said I want to be part of this next year, here’s my data. We’ve gone from the biggest most comprehensive dataset ever collected to a dataset 10x bigger than that for 2021.
Kevin: Exciting, so what did you learn?
Chris: A lot of stuff. First of all, most gyms aren’t charging enough. The problem is they can’t charge more because they’re not offering enough value. And that’s because the owner of the gym doesn’t understand what value is a lot of the time. That’s a problem that a mentor can solve. But basically, if you look at the data, what you’ll see is that more than 50% of gyms are charging less than $100 US per month, okay? Now, I’m not going to tell you what that means in the guide, but I will tell you right now if you’re charging less than $100/month, your business is not going to be successful because you are in a coaching business where you’re selling a relationship. When you’re trying to sell like a high volume of relationships in a coaching business, you’re going to have a lot of churn. And so while you might make some money in the first 2 maybe 3 years, at some point your churn is just going to outpace your marketing and sales. You’re going to jug through all of the clients that you bring in, all the amazing people that you want to help. You’ll go through them too fast to make a meaningful difference in their life, and one day you’ll turn around and say, “Oh my goodness, I don’t have enough people to make this space viable.”
The other problem with that model is, let’s say that I’m charging $90/month, I need 350 clients to make a descent living at this. Well, to accommodate that many clients, I need a huge space, right? A massive overhead, high expenses, a lot of staff help, and that’s just going to… There’s so many mistakes that I’m going to make while I’m chasing that modal. The really cool thing that came out of the data for us was the gyms that are doing the best, that are most resilient to black swan events like COVID who are actually providing the best consistent income to the owners, and the most meaningful career opportunities have about 150 members. I’ll come back to that in a moment.
Kevin: Before we you go too deep into that, I’m just very curious and maybe you’re going there anyway but the difference between gym charging $100/month and the one charging let’s call it $150 or $200, maybe your number is bigger, target wise but is it they are underselling what they are doing or they are not doing enough stuff?
Chris: The difference is 100% in the owner’s head. The owner is looking at their wallet, okay, and their saying, “Wow! I couldn’t pay more than $100 for CrossFit coaching every month.” And they’re thinking that their client is saying the same thing, most of the time. In 2/3 of gyms, their clients were making way more money than they are. They project their budget unto the client. If you’re in that position, even if you’re charging $150/month, that’s too low. You need to be charging about $205/month and up.
Now that doesn’t mean that your group class has to be $205. Your group class is like your budget option for people who can’t afford more 1-on-1 coaching, okay. But if you roll all of your services together, your average revenue per month should be about $205 or higher, okay. That’s really important. If you’re in that range of like $150… We could spend 5 hours talking about just this. But what you need to ask yourself is, “What can I sell that would be worth $205/month to my clients? Okay. And work backward from that number to build the value that you want to create. Don’t think about what will my clients pay. Definitely don’t think about what is the gym across the street charging. Think about what value can I create that’s worth $205/month.
Kevin: I guess the answer to that question in terms of is everybody’s answer to that question is slightly different or is there a formula to get to the $205?
Chris: Man, you’re good at this. Yes, everybody’s answer is slightly different. But in general, the most profitable gyms who have an average revenue per member per month of $205 are making about 70% of their revenue from group classes, about 20% of their revenue from personal training or nutrition or both, and about 10% from this tertiary revenue stream and that could be supplements. For me, that’s my kid’s program. It could be something that’s not really your focus but it’s just an easy win for your clients. I don’t mean an easy sale but I mean it’s the right thing to offer for your clients that will increase value in their life.
Kevin: Yeah. I think that was what I was getting at was how much of it is in the supplements space or let’s call it the retail space? How much of it is in the maybe nutrition or 1-on-1 space? I think that’s a good guide. Are there outliers there?
Chris: Yeah.
Kevin: What are some example outliers?
Chris: Yeah, so CrossFit Medis in Sweden is a great example of an outlier. They have 2 locations. I think he told me 320 clients. I could be wrong. It’s just north of 300 mostly sells groups. Well over 90% of their revenue is group based. Oscar and Carl are amazing coaches. They have a big staff. They’re very profitable. We publish a leaderboard every month, and quiet often they are in the Top 10 for profitability. There’s that model and that model can work.
On the other end of the spectrum, Aaron and Robin Meyer, they had a gym with 300 members. They weren’t really super profitable. They sold that gym. They went to a small group personal training model where they serve 4 people at a time. They went through the lockdown and did pretty well. Now, they’re, again, really, really profitable. Over 90%, I would say a 100% of their revenue comes from personal training and nutrition coaching.
There’s a lot of ways that you can do it. You don’t have to have a lot of revenue diversity. For me though, our mix at Catalyst is somewhere in the middle. So, about I would say 65% of our revenue comes from group programs, close to 30% comes from personal training, and 10% comes from nutrition coaching.
Kevin: One thing I’m really interested, even if you take group training, 6 or 8 or 10, whatever people in the class. Is there a range of price people are charging? I presume there is; a range of prices people are charging for that? What’s the difference between people charging at the lower end and people who charging at the higher end?
Chris: Well, what a pointed question. I can walk down any street in almost any town in America, and I would pass 2 micro-gyms, right. Maybe they’re not CrossFit gyms but they’re selling a similar service. They’re selling high intensity functional training, usually perform in a group environment. And if I look at those 2 gyms, I could not guess the price just by looking at them. What I would find if I call them is that one is charging $100 and one is charging $185. In fact, I’m going to use the specific example here. In Atlanta, 3 years ago, I was on a phone call with one of the original CrossFit affiliate owners in Atlanta. He told me, “You cannot charge more than $79 for CrossFit group classes in Atlanta because everybody keeps charging $5 less than the next guy.” It’s commoditized, his word. There’s downward price pressure. But then people like Miles Davis, Rick Thompson, Brandon Brigman, they opened their gyms and they started charging a lot more, and people started buying from them. And because they were charging more they could provide a better experience, and they could hire staff who got to do- provide the best experience, the experience they want to provide. If you look at their gym and you look at a gym charging $100, and you say, “What is the difference?” That difference might not be obvious but it’s all between the owner’s ears. It really starts with how much value can I provide.
Kevin: If you’re not selling the supplements, even if you’re not doing the nutrition, there’s a difference in money in your pocket based on your approach to how you do those group classes.
Chris: I mean, so my gym, you want to join Catalyst. It’s $185, okay. And there’s another Two-Brain gym a block away. I don’t remember his rates. But let’s say that his gym is $125. Am I going to get you 50% better results than Ryan? No. Am I going to get you the same results 50% faster? No. Why is Catalyst $185 and his is $125? Because it is. Also because we have 150 clients, and we don’t need anymore. But also, because we believe our service is worth that.
Kevin: But from the customer’s point of view there must be a differentiation there. If you’re not going to get them fitter in half the time and they didn’t just enjoy going and have a sense of community, there must be something there.
Chris: Yeah. The difference is probably the way we approach the client. Okay. 5 years ago, I would travel around for CrossFit a lot, and I would be sent all over the place to do stories. I would show up at a random CrossFit gym in a middle of wherever, Utah. I would sign a waiver and I would start the class. Nobody knew anything about me. Maybe they ask have you done this before, but usually not. And any new client coming in we get that same experience.
Now though, gyms that have a more prescriptive modal can basically name their price. I haven’t seen the ceiling. What happens in a prescriptive model is you come in and I do a motivational interview. We get to the real root of what it is that you’re trying to accomplish, and then I say the best prescription for you is this. I take on the role of trusted adviser. That is a very different role from group fitness coach. And that is a much more valuable role because what it means is, I can make you a prescription for 30 days, 90 days, whatever it is. At the end of 90 days, I’m going to measure your progress. If you didn’t make progress, I’m going to make you a new prescription, and our relationship is even more valuable because now I know what doesn’t work for you. But if I’m not in that trusted adviser role, all I’m doing is selling group classes. And it’s really up to you to figure it out whether it’s working or not. Maybe you should just try spin class, but it’s up to you to guess and that’s really where the value comes in.
The other side of that is that in these gyms that are just selling group classes; you come in, you do a free trial, and then do you want to sign up. There’s never an opportunity to explain value. The client has to come up with their own value. The only way they can do it is to compare your group class to somebody else’s and that’s where the commoditization of that comes in.
Kevin: Got it. Okay. I think what you’re saying is there’s a big difference between someone that I associate with, “Oh, I’ve spoken to them. They’ve learned a little bit about me and they have a plan for how I’m going to progress” versus somewhere where you walk in, walk out, do the class. And that’s creating a lot of value.
Chris: Yeah. I’ll give you an example. I’m a cyclist. I have a cycling coach. During COVID, in our effort to help gyms, I was getting maybe 4 and half hours of sleep per night for several months in a row. A normal cycling coach would say, “Okay, maybe we need to scale your programming back. Try this. Let me know how it goes.” My cycling coach said, “What do you need from me right now.” I said, “Honestly, dude, I know that I need to take 5 minutes in the morning and just meditate. I know that I need to stay on my diet. I need to try to get to 5 hours of sleep a night.” He said, “We got this.” And he texted me every single day, “Did you meditate today?” That’s what a coach does. That’s why a cycling coach can charge $500 a month with somebody that’s just selling me a cycling program. I would have cancelled.
Kevin: Got it. No, that makes a lot of sense. Okay, we’ll move on because we’ve got a lot to talk about. I want to get back to the 150 number.
Chris: Yes. I love it.
Kevin: But before we do that, it’s something that I never really talk to anyone about. It’s in your report, and what have you learned about what gyms are spending their money on.
Chris: Nobody has asked me that. I haven’t flip to that page on the report, but in general, I will speak. I can’t site the numbers from the study of 6500 gyms, so take this as an n equals one sample size. I spend my money on stupid stuff. I spend it on toys. Tonight, Dave Castro is going to announce 21.1 or whatever it is, the Open Workout. And there’s going to be something in that workout that I think I need more of that. A 27-pound dumbbell, I need 50. I mean, I can remember at the games one year. They had this Rogue thing called the Earthworm. I was like, “Woah, everybody’s going to buy that. I got to put my order in quick.” You know. I mean it was like blocks in a bag. So, there’s that.
The next thing is that, and this is more sad. I mean it is fun to make fun of myself but it’s sad when I look at gym owners they go out of business because they are spending their money on the wrong stuff. A lot of gym owners buy way more space than they need and it’s because they don’t have a model to work from. They think like, okay, my goal is get 300 people. What do I need to accommodate 300 people? Okay, well, that means I’m going to have 180 people a day. I’m going to run 6 classes of 30 people. If I’m going to run a class of 30 people I need 7,000 sq. ft. of space. I need two coaches on the floor so now I need a locker room for my coaches and I’m going to put a couch on there. Also, I’m going to have to work 15 hours a day so I’m going to make sure there is a lot of space. And also, I love coffee. I’m going to put a coffee bar at the front of this gym. Okay. And before long they got this 7,000 sq. ft. facility and now for the next three years their sole focus is fill the gym. Unfortunately, that leads to a very unhappy lifestyle. None of us signed up to the marketers. Some of us like it. Most don’t. But you have to spend all of your time marketing, marketing, marketing and it creates a downward spiral in a lot of cases.
About 50,000 fitness professionals quit the industry every single year. It’s not because they’ve lost their passion for helping people. It’s not because they don’t know enough about kinesiology or they are not good enough at teaching the second pull of the snatch. They leave the industry because they ran out of money. They don’t know how to get clients or they are spending money way too fast. You can bootstrap and be successful. You’re going to start with, I had 600 sq. ft. and make money. You don’t need to go big out of the game. But everybody they make wrong assumptions at opening.
Part of the reason that we are publishing this data right now is to give people clear goal post especially in cross fit, in micro gyms, in yoga studios, in pilates, and barre, and kickboxing, and MMA gyms. Nobody is saying build your practice on a 150 people, or 170, whatever that number is. We are starting to publish this now as targets and gyms are getting their own lot faster because they have a goal post.
Kevin: What areas are they, because I get the whole idea of being too big and maybe hiring too much, is there areas they are understanding?
Chris: Mentorship. The thing that I solve. It’s not a money problem in most cases. It’s, I don’t want to call it an ego problem, but it was an ego problem in my case. My first four years of owning a gym I thought I’m smart, I’m just going to figure this out on my own. I might have but I would have been bankrupt three times over I did. Eventually I found a mentor. He turned things around for me and now I’ve scaled from a nearly bankrupt gym to an 8-figure worldwide business just on what I learned from him in the first year. The key is nobody spend enough money on outside perspective. You can have this data that I’ve collected. It cost me a quarter million to put this guide together. You can have that for free. Okay. But please spend money paying somebody to look at your business objectively and telling you what to do instead of guessing.
Kevin: That’s okay. [unclear] Outside of that, I guess, I’m thinking things like marketing. Is there enough investment going in there?
Chris: For sure. Yeah.
Kevin: There is.
Chris: No, there is not enough. No, sorry. The challenge right now is that a lot of people have a mindset of if I build it they will come. I love CrossFit. When a CrossFit gym opened in my town, I drove across and banged on the windows until they let me in. But those people are gone. Every business needs to do some marketing. Right now you have the most powerful marketing tools that have ever been invented right at your fingertips. But because we don’t expect to spend money on marketing every dollar we spent you keep your finger on it as it crosses the counter.
We hear from a lot of gym owners, “I invested $100,000 in Facebook and I didn’t get a single client out of it.” The truth is that that’s just a bullet before the cannon ball. I’m not saying go out and spend $10,000 on Facebook marketing. I’m saying you can’t stop. You have to try something. You have to try it long enough to give it a decent shot. After three months you have to assess what is actually working, and then maybe you can try something new. When people say, “Oh, I spend money on Facebook marketing and it didn’t work.” What actually happened was that 10 people clicked on their ad and 3 people came into their gym and none signed up so Facebook didn’t work. It’s really like you have to look very closely at all of your metrics all the way through the funnel.
You’re absolutely right. People are not spending enough on marketing but even more importantly it’s not an investment for them. It’s a paper airplane into the sky. It’s like a note in the bottle. Where they really need to be investing is like marketing.
Kevin: Yeah. Okay, that’s true. That’s a very good point. But I think the main point is those easy customers that are going to drive across town, they are all gone. They are somewhere else. You got to find the ones that aren’t as actively searching. The only way to do that is to get more sophisticated and that involves probably a lot of learning.
Chris: That’s a great question.
Kevin: Okay. Well, let’s move and we’ll round it up. It wouldn’t keep you too much longer. But let’s talk about the 150. You’ve mentioned it a couple of times. Talk to me about the 150 and why people maybe right now don’t buy into this or why not everyone isn’t already into the 150 approach.
Chris: I think I learned about tribes and how humans congregate decades ago. When I got rid of contracts in my gym I knew that I had to get good at retention. And I said, who is really good at addicting people to their service. It turns out that all of those people were using behavioral science to figure it out. And so I started looking into behavioral science and that led me to Robin Dunbar and that led me to Dunbar’s number – a 150 humans together is a tribe. Naturally we can form about 150 relationships. I mean a real relationship. I remember your dog’s name, okay. Any more than that and you start to lose that connection. Now, some of us are better. I mean, I’ve seen research done on people who are successful politicians like Bill Clinton was estimated that he could maintain 200. I’m probably about 100. I’m not just that kind of thinker, but 150 is the average.
We’re saying start by building your business through 150 clients. Start by saying here is the kind of income that I want to earn, then you say how much do I need to charge 150 people to make that income. And then from there you can here is what I can afford to spend on space and equipment. What that gives you is a plan. It also teaches you like you have to keep this people around. 150 is where the process starts but you also need to know how much does each person has to pay on average. That’s $205 per month whether they pay you that for a class or for personal training, whatever, as long as it averages out to $205 you’re good.
The other key here is that you have to keep those people on average for 14 months. 14 months because you need to make a meaningful change in their life, but also because there are certain tipping points when it comes to retention. On average, and you can find this in the data too, if you can keep a person for 6 months you’re very likely to keep them for 9 months so it’s really important to keep them past that 6-month mark. You can keep them for a year, you’re very likely going to keep them for two years. It’s really critical. What we see is if you can keep a client around for about 14 months, you’re very likely to keep that client for 30 months. And that is long enough to change their life, 30 months. It’s also enough to keep you focused on them instead of replacing them. Getting new clients all the time. We’re saying the first goal is make $100,000 a year. The strategy is 150 clients, $205 average revenue per member in 14 months retention on average. Okay.
Kevin: What does that translate into losing per month? Generally in that setup how many are they… Maybe the math isn’t easy here but I’m sure you’ve done them already. Is that losing 10 people a month and replacing 10 or less or more?
Chris: It’s 5 generally. It’s losing 4 and getting 5. That’s basically outdoors.
Kevin: Yeah, so you can walk into any business they are in around 150. They are losing 17 or 10 or 15, and immediately you’re going to say, “Okay, this is what we need to fix.”
Chris: I mean, we generally look at six different areas of a business to decide what is most urgent or what the priorities are, but that’s a topic for another day. In general though most gyms either don’t have enough clients, or they are not charging enough, or they are not keeping those clients longer.
The other interesting thing that happens in a 150 clients is that your business model changes. You need way more space. You need a management layer of staff, and it’s because you can’t maintain these relationships anymore, “Okay, I need a couple of coaches. I need a general manager. I need an admin.” At that point you’re running a different business. So we start everybody with 150, $205, 14, work backward from that.
Kevin: Probably another figure that’s important is how long it takes to get the 150? Yeah, tell me how long it takes.
Chris: I don’t have data on that yet. That’s a great one. The thing is there’s 3 different cohorts that we could look at, right. There’s people who started as a personal trainer like me. They had amazing retention like 5 years retention. But they are also working a 14-hour a day. While it took us a long time to get to 150. Once we got there we stayed there. Then you’ve got people who opened up with group coaching. Maybe they ran a discount or a group coupon or something at the beginning and they zoomed up to 150 and then equivocally dropped to 70. And then they ran a New Year challenge and that, boom, right up to 120 again, and they dropped. This is the most common example that we actually see. And then you’ve got on the far end of the spectrum, you’ve got people who are cross fit famous. “Oh, I won the games back in 2009 and boom 300 people joined my gym. They are just going to do group. It’s great. Who cares if I lose 30 a month? I’m going to replace them. No big deal.” Until they can’t replace them and so the arc of success is different in each one of these cases. But in general what we find is you want to zoom to 50 quickly because the next strategy that you’re going to use is referral based marketing. You need some momentum to get there. But once you got 50, you can probably get 5 new clients a month just from referrals if you do it right. Those 5 clients have a strong bond and they strengthen the bond between the original client and the gym because they formed this kind of triad effect. And then that makes retention better which means you can grow up faster.
The key is not how many clients can you get at startup. It is how long can you keep clients around so that your gym is having a snowball effect instead of just pumping in one direction of the other.
Kevin: Got it. It does. And then in general you’re saying get to 50 it’s enough to let’s say stay live things and for one of a better word call yourself a real business and then start growing it gradually and sustainably to 150.
Chris: Yeah. I mean, there are people who make a great career with 50 clients. If you want to follow that model, you can. And online apps can even make your time scalable. My first year in business I made $45,000. I had 52 clients and it was all 1-on-1 personal training. You can do that in a tiny, tiny space. I had some good equipment. Nobody helping me though. They would write me checks and I walk them over to the bank. I had no systems, no automation going. You could probably scale that up to a few more clients now.
The problem is that if you will try to jump straight to 150, so they opened up their first location. I’m going to get 150 people in here. They don’t need to do that. What happens is they start to get strangled by their expenses and eventually they just run out of rope and they either close up too early or they spent three years running a business that doesn’t pay them.
Kevin: Okay. Well, time is precious here and I want to let you go. I’ve got a couple of last questions. But I think my last question on this topic is like online only. Is there a sustainable businesses there? Is that 150 customers? Is that 500 customers or what are your thoughts?
Chris: It’s a great question. We believe in data and right now there are… It’s hard to get clarity in online because there are a lot of people claiming they are crushing it online who are maybe not doing as probably as they say, or their definition of doing well is different from ours. The word that you said was sustainable and there doesn’t exist enough data to say this person is doing it really, really well. We’ve got a lot of irons in that fire. Obviously it’s like in my best interest to figure that out. We have a couple of coaches who do this on the side of their gym who are making good money at it. I’ve got one amazing example who has basically closes her bricks and mortar gym and she is just doing online and she is killing it. But she has been doing that for about six months. And so we’re going to keep tracking the data until we can conclusively say this is the model.
Kevin: Right. We’ll talk about it in six months’ time.
Chris: Yeah, wonderful. Alright.
Kevin: You have the answer.
Chris: Is that you get a good date.
Kevin: Yeah, looking forward to it. Okay, well then, last question before you have to go is what is the biggest lesson that you have learned in the past year?
Chris: Okay, I’m going to share it with you. It’s a strategy. The biggest lesson is that communication is more important than anything else. We’ve all learned it this year. It’s like what controls whether your gym is shutdown is not science. It’s not data. Nobody is calling the researcher and saying are we ready to open. It’s politics. It’s communication. I’ll stay out of the political discussion here right now because there is no winning that discussion. But the bottom-line is if you want to be successful you have to be good at communication no matter what your stance on anything.
I learned this model, I’ll be really quick here, I learned it from my mentor at the very start of lockdown. Tod was in Manhattan. He got COVID. He had to run his business with COVID. And this was like over a year ago. The model is called CALM. Every single day you need to wake up and practice the CALM model. That is Clarity, Assurance, Leadership, and Movement. Every single day especially in times of crisis. You have to provide your audience with clarity, assurance, leadership, and movement. Clarity – here’s how bad things are. Assurance – we’re going to make it out okay. Leadership – here’s how we are going to do it. Movement – watch me. No matter what else you do if you can do those four things every day, publish a blog post, podcast, video, stand in front of people, whatever that is, and provide clarity, assurance, leadership, and movement, they will follow you.
Our audience grew enormously through COVID. We had our best retention ever. People turn to us more for help than they ever did before. Our readership went up to over 50% of our daily emails on a list of 32,000 people because we are providing those four things. And if you can do that to your audience whether it’s not into 5 or 500, they will trust you more and more over time instead of drifting away.
Kevin: That’s a really good lesson, and I’m going to take it on board myself.
Chris: Wonderful.
Kevin: I’ll start practicing CALM immediately. I know it’s really good. Okay, Chris, before I let you go just tell people where they can find you online and how they can get in touch?
Chris: Yeah, twobrainbusiness.com. The only platform that I’m personally active on really is Facebook. But our media team is active on every platform including Clubhouse. If you go to twobrainbusiness.com there is such a huge variety of free tools. Our model is basically this. You download the free tools, you execute them, you make some money, and then you decide whether you want a mentor or not. We really want to prove our value before you decide to do anything with us. But you can book a free call anytime you want to and it’s all on twobrainbusiness.com.
Kevin: I highly recommend this business. It’s been a really great conversation, so Chris thank you so much.
Chris: Thanks man.
Kevin: Thank you. Thank you very much for coming on the show.
Chris: I love it. Thank you. Take care.
This podcast is brought to you by Glofox, a boutique fitness management software company. If you want to accelerate growth, work efficiently, and deliver a well-branded boutique customer experience then find us at glofox.com.
