Increasing Revenue by Improving ARM & LEG - TwoBrain Business
Email #1
Money doesn’t solve every problem, Bryan, but it solves the money problems.
No matter how lean your operation is, how great your retention is and how hard you can work, at some point you’re going to need to earn money.
As your team grows, you’ll need to pay its members. As your client list grows, you’ll need more revenue to support your customers.
Adding more revenue is like adding more muscle to a body: It’s not the only requirement for a strong and fit business, but it’s a big part.
How do you make more money? There are 30,000 gurus out there willing to tell you. But I want to tell you the real answer. To get to the truth, we track gyms around the world, find out who’s actually generating more revenue and then share their methods with you.
Here’s how the top revenue producers did it:
“We’ve been seeing those numbers for a couple years. A lot of it is varied, slow and steady growth. Over the last 6-9 months, we’ve worked on retention. At other points we’ve worked on growing PT or membership base. We identified the bottlenecks and worked on those.”
“We added in system and accountability checks. We have four full-time coaches; each has retention responsibilities. Each has about 50-100 clients for which they’re responsible. Duties include providing accountability (very specific spreadsheet they use) and running reports to see low-attendance members. Every month, they do a check-in on each member. More closely following goal sessions, they have targets to meet. … We talk about any clients who cancel and review the actions taken to retain.”
“We hold a weekly meeting to talk about the member journey. … We’ve become more intentional in our marketing and make sure we are getting the right clients in the door.”
“We did increase our rate in classes—March. Professional development: In the last 18 months we have had a big refinement on our coaches. We meet weekly with our coaches, … talking about coaching, specifically—checklist, review all team announcements, review Bright Spots Friday, challenges. We review the ‘intrapreneurial plan’: ‘What can you work on in the next seven days?’ … We have a CSM who handles the client check-ins.”
“We have a kids program that is just a recurring monthly membership, marketing around the sports season—middle school and high school. One of the owners, two of his sons are on the football team, and that sold out the program. We also host ‘athlete team night’ in exchange for sponsorship. So this year we decided we would sponsor teams. (We provide) a team bonding experience—100% attendance. (We) paid them to have the logo on the banner, but … we expose them to the gym.”
“We set a goal across the gyms: $1 million revenue. We broke it down per month into $83,000: specialty PT, kids, nutrition, etc.—we have a target for each of the revenue streams. Example: 200+ group-class members, 21 PT sessions a week, 6 new fundamentals (on-ramps) weekly, 66 participants in the specialty seminars, 15 ongoing nutrition members, X number of kids. The coaches now can be very focused to reach the targets. Being very focused on targets has really helped us to home in on meeting the revenue targets. We know where we’re falling down.”
“When you break down there targets by revenue stream, none of the targets seem unattainable! … We use a whiteboard in the office for visual tracking (monthly) to keep it top of mind. Great team—I’m fortunate to have a top-notch GM.”
“At the new location, revenue went from $16,000 to $33,000—in six months we’ve doubled the revenue. We concentrated on the big three: PT, small group (yoga and Pilates and a mobility class) and nutrition.”
“We focused on the acronym I made up: 321 to a perfect class. Check in on three people by name, two touch points for each, one connection member to member. And this has driven our referrals. When someone refers, we do a gift to ‘surprise and delight’ them and take a photo for social media with the referrer and their referee. The client success manager (CSM) can spend around $50, with $100 max, and they can give something meaningful to the referee. A big driver of our revenue increases has been building a referral culture in the gym. Our mission is ‘using fitness to create personal connection.'”
“We diligently focused on generating current Google reviews. I ask five members per week and remind five that haven’t submitted anything. The gym performs well on organic search. We get 30-50 new leads/month from the organic Google marketing. I’ve experimented with paid ads but haven’t seen much traffic that way. I focus on keeping that steady and fresh. We have about 180 reviews at 4.5 stars. I pull a list of new members around 90 days, and as long as they come regularly, I’ll ask them from a Google review.
“To increase No Sweat Intro (NSI) availability we are trying to cross-train the CSMs on sales, making early morning and late evening and weekend availability for the NSIs. We have myself and three staff members doing sales/CSM duties. We’re testing something where the salesperson is also CSM in that they follow them though the sales to the rest of the client journey: ‘I met you at the NSI, and I’m going to make sure your first 90 days are great.’ We convert 80-90 percent on the NSIs. At the NSI, people regularly comment on how many reviews we have on Google. We have a really visible location. That’s the exposure to us, or they see the current Google review.”
Tomorrow, I’ll tell you about the difference between more revenue and more clients. Then on Wednesday I’ll share insight into “tipping points” for revenue in your business and explain why these points are so important.
Email #2
Bryan, if you could do one thing to generate more revenue, what would it be?
Almost every gym owner I ask says, "Get more clients!"
But that’s not the fastest, easiest, or smartest way to get more revenue.
Today, I’m going to show you why focusing on average revenue per member (ARM) is actually better than increasing your headcount.
Every Client Comes With Costs
In a service business, every new client costs you. You have to meet with them at intake. You have to pay a trainer to onboard them. You have to call them to keep them on track and follow up with them. You have to buy more equipment and increase your space. Your payroll goes up as you add clients—and this can actually kill gyms.
One old myth in the CrossFit space was that group training scaled better than 1:1 training. In theory, it’s true: One trainer working with 30 people nets the gym a higher return. But in practice, the concept failed.
Gyms went underwater when they leased space for 30, bought equipment for 30 and staffed for 30 but only had an average class attendance of seven.
Even in a karate dojo, where 1:30 is more common and practical, high churn means more marketing. So marketing costs scale up as the business ages.
While costs of production drop relative to client headcount in a product business—think shoes and software—that’s just not the case in service businesses. Coaches and gyms need constant client contact and support, so costs rise with every added client.
You can’t outrun your expenses by just increasing headcount; you have to increase revenue relative to the number of clients you have.
A gym with 300 clients and low rates will struggle to keep the doors open. A gym with 150 clients and a higher ARM can easily provide a $100,000 income to its owner and carry full-time and half-time staff members.
And when ARM goes up in that gym, it doesn’t come with additional expense. So the new revenue drops straight to the bottom line.
New Clients Leave, but ARM Sticks Around
Clients can come and go, but when you set your rates, they never go down. And we work hard to help gym owners increase length of engagement because ARM and LEG are multipliers of each other.
I’ve had hundreds of gym owners tell me, "My clients don’t pay much, but they stick around for 10 years!" That’s great—you’re making a difference in their lives. But if you’re martyring yourself to help them, that’s not fair, and it will become unsustainable at some point. Solid ARM sets you and your business up for long-term success.
In the end, large revenue numbers are generated when gyms have enough clients and high value per client.
And here’s what some of the gym owners on the leaderboard had to say about ARM:
"We sat down with each of the current clients and asked about goals, giving them solutions. ARM at [gym name] is $600."
"Find products for your customers. … This isn’t overselling. We know that people go outside our facility for different services that we don’t offer. Our first focus is on helping, getting solutions to their problems. Servicing PT, nutrition and group, being consistent with that, has helped us maintain our client base."
"Acquisition has also gone well, but we’ve turned our focus to servicing the members we have."
"We moved everybody to 2023 rates and didn’t have a lot of kickback. We do provide a lot of value, and the experience is unlike any other gym. There’s nowhere else on Earth that you can go to get the same experience. We have the full package, and that is hard to find."
"Our demographic is older—they are looking for function. Look at the population cohort of the Baby Boomers: more educated and affluent. It’s wise for gym owners to focus on this demographic.”
"We are a big gym, 300-plus members, so we’re trying to get ARM and LEG up."
If you want to bulk up your business, you need to work hard to increase ARM.