4 Tactics to Maximize Margin Ep 186

In the latest Gym Secrets podcast, the host shares four billing strategies to increase profits for gym owners. The first tactic involves adding 99 cents to all prices, leveraging high transaction volumes to boost monthly revenue. The second emphasizes the importance of having backup payment methods on file to reduce churn and secure consistent income. The third strategy suggests switching from monthly to weekly billing cycles to capitalize on an extra billing period each year. Finally, the host recommends using ACH payments to lower processing fees, potentially saving thousands annually. Collectively, these small adjustments can significantly enhance a gym's bottom line.

• The Gym Secrets podcast focuses on strategies for acquiring and retaining customers, increasing customer spending, and sharing lessons learned from failures in the fitness industry.
• The host emphasizes the importance of small adjustments to increase revenue.

"Welcome to the Gym Secrets podcast, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons that we have learned along the way."

This quote introduces the purpose and content of the Gym Secrets podcast, which aims to provide insights into growing a fitness business.

• Speaker A highlights the personal benefit of adequate rest, equating a good night's sleep to feeling rejuvenated.

"I actually slept the longest I slept in a really long time and I feel like a newborn child anyways."

Speaker A shares a personal anecdote to emphasize the positive impact of rest, which could be an indirect reminder of its importance for productivity and well-being.

• A simple strategy to increase revenue is to add 99 cents to all memberships and purchases.
• The tactic leverages high transaction volume to create a significant increase in monthly revenue.

"Adding ninety nine cents to all of your memberships and purchases...you're doing hundreds of transactions a month...that just appears magically to you."

Speaker A suggests a minor price adjustment that can lead to a notable increase in revenue due to the cumulative effect over many transactions.

• Speaker A advises to price items ending in $.99 rather than $.97 to capitalize on multiple transactions.
• The speaker shares a personal experience where adjusting the price resulted in an additional $600 in revenue.

"I had signed up almost 200 people in a challenge, and I realized that by giving up those $3, I was giving up $600 for that month."

This quote illustrates a specific instance where Speaker A realized the financial impact of minor pricing adjustments, reinforcing the importance of the tactic.

• Standardizing prices can simplify billing and potentially mask minor price increases.
• Speaker A suggests using the tactic of standardization to introduce the price changes subtly.

"I'll bet you could probably even sneak it in and be like, hey, guys, just because I want to standardize everyone some people are kind of all over the place. To everyone, it's going to be 169 99."

Speaker A provides a strategy for implementing the price increase in a way that appears administrative rather than profit-driven, which could minimize customer pushback.

• Adding small amounts to each transaction can significantly increase annual revenue.
• This tactic does not require additional sales or products.
• It can add $7,200 a year to a gym owner's income, which is substantial considering the average gym owner's annual earnings.

"And just like that, you can generate extra $600 a month. Now, if you're like, Alex, I don't know why I would care about that. It's like, well, considering the average gym owner makes 30 grand a year, if you could add $7,200 a year to your paycheck by not adding anything, that sounds like that would be a good idea."

This quote highlights the benefit of incrementally increasing revenue through small additions to transactions, which can have a significant impact on the annual income of a gym owner.

• Ensuring backup payment methods are on file for customers.
• This strategy can halve the turnover rate from ten to five, leading to increased revenue.
• It simplifies the billing process and avoids operational changes to retain customers.
• By having backup cards, a gym could potentially save $850 a month from customers who might otherwise cancel.

"So make sure you get a backup card on the people who you are selling because it's just going to decrease your turn. So if you can decrease your turn from ten to five simply by having the card on file, you'll make way more money."

The quote explains how having a backup payment method can decrease customer turnover, which directly results in increased revenue without the need for complex operational changes.

• The podcast grows through listener recommendations, not through ads or sponsorships.
• The host requests listeners to share the podcast as a form of support and to help other entrepreneurs.

"The only way this grows is through word of mouth. And so I don't run ads, I don't do sponsorships, I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing."

This quote emphasizes the importance of word of mouth for the growth of the podcast and the host's reliance on listeners to share and promote the podcast organically.

• Switching from a weekly to a different billing cadence can be beneficial.
• The speaker implies that many do not adopt this tactic due to an aversion to difficult conversations or change.

"Number three is the one that I've said a zillion times over. And still people don't do it because they hate money or whatever. They hate having hard conversations. They hate change, is that if you switch from a weekly billing cadence"

This quote introduces the third billing tactic, which involves changing the billing cadence, and suggests that resistance to this tactic is due to a dislike of difficult conversations or change, rather than the tactic's ineffectiveness.

• Switching from monthly to weekly billing can result in an extra billing cycle per year.
• There are 13 four-week blocks in a year versus 12 monthly blocks, leading to one additional billing cycle.
• Many businesses have a mismatch between their payroll outflows and billing inflows, with 13 payrolls but only 12 inflows annually.
• Shifting to a weekly billing cycle can increase annual profits by approximately 7.8%.
• This increase is significant when the average business profit margin is around 12.5% per year.
• A high-level business professional at a mastermind was surprised that only 10% of attendees used weekly billing after understanding its benefits.

And dollars to donuts, most people actually do their payroll every other week, and yet they bill monthly. So what ends up happening is that by the end of the year, you had 13 payrolls and you had twelve inflows.

This quote highlights the common discrepancy between payroll frequency and billing frequency, which can lead to financial imbalance for a business.

So if you switch to that cadence, you're going to get another, whatever, 7.8% per year.

Switching to a weekly billing cadence can result in nearly an 8% increase in annual revenue, which is significant for profitability.

Like, it's kind of a no brainer, except I had a higher level business guy who showed up at one of our masterminds, and I asked, I said, who here is on the weekly billing cadence? And he said, he looked around after I had just given that explanation, and he saw that it was like 10% of the room.

The speaker expresses surprise that despite the clear financial benefits of weekly billing, only a small percentage of business professionals at the mastermind were utilizing it.

• Turning "sevens into nines" and obtaining backup cards can improve billing success.
• Using ACH (Automated Clearing House) for transactions can reduce processing fees compared to credit card transactions.
• For high-revenue businesses, even a 2% savings in processing fees can result in substantial monetary savings.
• The speaker's business, Jim Lynch, primarily uses ACH to save on processing fees.
• Small savings from various tactics can accumulate to a significant amount, e.g., $7,200 a year from the first tactic mentioned.

And this is a smaller one, you can also use ach. So if you've noticed, maybe you have or haven't noticed, but Jim lynch is actually almost exclusively run on Ach.

This quote explains that the speaker's business mainly uses ACH transactions to save on processing fees, demonstrating the practical application of this billing tactic.

So our clients know that we actually don't run a ton of credit cards. We run mostly ach, and we do that because there's lower processing fees.

The speaker emphasizes the preference for ACH over credit cards due to lower processing fees, which is a strategic decision to increase profitability.

And everything's relative, but it's still material. If you're doing a million dollars a year, 2% is 20 grand.

Highlighting the material impact of processing fee savings, the speaker quantifies the benefit for a business with a revenue of a million dollars a year, where a 2% saving equates to $20,000.

• Discusses the significant impact of small tactical changes on bottom-line revenue.
• Emphasizes how minor adjustments can lead to substantial increases in profit.
• Provides a calculation to illustrate the effect of these changes on annual revenue.
• Highlights the importance of discipline in financial management to retain the benefits of these tactics.

$10,000 a year from the second tactic. So now we're up 17. The third tactic gives us a whole nother month of billing, which would probably be about 20.

• This quote outlines the cumulative financial benefit of the first three tactics, totaling an additional $37,000 in revenue.

So now we're up 37,000. Okay. Just from these, just little changes, $37,000 that we just found. And that's all bottom line.

• The speaker emphasizes that the $37,000 increase is a direct addition to the bottom line, underscoring the value of small operational changes.

It's my point here is that these little bottom line tactics sound like small money. But the thing is that if you're making 12% and you make $37,000 more, then it's just like you making an extra 240.

• The speaker explains that a seemingly small amount of money can be equivalent to a much larger revenue when considering the profit margin.

Right, because 240, right, to get an 8th of that or whatever it is, eight times 37. So more, whatever, that would be 32. Anyways, 300 grand is what that would be the equivalent of making for you to get your 37.

• The speaker uses a comparison to demonstrate that an additional $37,000 in profit is akin to increasing total revenue by $300,000, assuming a 12% profit margin.

• Discusses the potential savings from optimizing payment processing methods.
• Explains how CRM gateways make money from processing payments, not just fees.
• Suggests that having a backup card or ACH on file can lead to significant savings.
• Highlights the difference in processing fees between CRM gateways and local payment processors.

So most people process through their CRM gateway. Typically most people don't know this either. Their CRM gateway is making the majority of their money on their processing, not on their fee.

• The quote reveals that CRM gateways primarily profit from payment processing rather than just the fees they charge, which is not commonly known.

The fee is sort of additive, but the majority of the money is made, and they have partnership deals on the actual processing where they're getting 1% back or one and a half percent back on your account.

• This quote provides specifics on the revenue model of CRM gateways, indicating they earn a percentage back from processing payments.

When normally, if you're a local business and you go to a business that just does payment processing, you might process for 50 basis points.

• The speaker compares CRM gateway fees to those of dedicated payment processors, suggesting local businesses can save on fees by choosing the latter.

Now, again, if you're looking at how much you make per year, 2%, and you're making 12%, normally it's just giving you another 20% pay raise.

• The speaker calculates the relative increase in profit margin that can be achieved by reducing payment processing fees, equating it to a significant pay raise.

• Advises on the importance of raising prices as a strategy to increase margins.
• Suggests that raising prices is a separate topic that could be elaborated on, but is not delved into during this conversation.
• Implies that price adjustments are among the many tactics that can be used to improve profitability.

I could really get into actually just raising your prices on things, but I won't for the time being. You should raise your prices, by the way, but that is it.

• The speaker briefly touches on the strategy of raising prices to increase margins but chooses not to expand on it at this moment, while still recommending it as an action.

• Stresses the necessity of discipline in managing newfound financial gains from tactical changes.
• Warns against the tendency to spend excess money without proper financial control.
• Links the success of implementing tactical changes to the personal characteristic of financial discipline.

And that's only if you have the discipline to not just blow money when you look at your account and see that you have money and then go spend it.

• This quote advises against impulsive spending upon seeing an increase in account balance, emphasizing the need for disciplined financial management.

So as long as you have that discipline, that character trait in place, then all of these tactics will make you more money and help your gym grow.

• The speaker concludes by asserting that discipline is essential for ensuring that the implemented tactics contribute to long-term financial growth and business success.