Average Cost & Revenue per Member Industry Averages Ep 141

Summary Notes


In a discussion about gym business profitability, the speakers, including the host from gym launch, analyze industry reports revealing that the cost of fulfilling a gym member is consistent across different sized facilities. The key differentiator in profit margins is the pricing strategy; successful gyms charge higher fees, resulting in significantly greater profits. The host emphasizes the detrimental impact of discounting on revenue and the importance of pricing in line with industry leaders to maximize profit. They advocate for a pricing model of $167 to $212 per month and highlight the potential for increased profit through additional services like hybrid coaching. The host concludes by stressing the importance of focusing on key performance indicators and strategic pricing over motivational content for business growth.

Summary Notes

Internet Connectivity and Restart of Discussion

  • Speaker A's internet connection was interrupted, prompting a restart of the conversation.
  • The topic of discussion is average cost and revenue per member in the fitness industry.

"So for whatever reason, my Internet cut out and we are starting back at the top."

This quote indicates that there was a technical issue which led to restarting the conversation, emphasizing the importance of a stable internet connection for uninterrupted discussions.

Analysis of Industry Reports

  • Speaker A reviewed industry reports from Zenplanner and Wodify to understand the fitness industry trends.
  • The reports provided insights into the financial aspects of fitness facilities of different sizes.

"And so I was looking over industry reports from Zenplaner and Wadify just to get kind of a bigger pulse on the industry and where it's moving and all that kind of stuff."

The quote shows Speaker A's intention to gain a comprehensive understanding of the fitness industry's direction and financial benchmarks by examining industry reports.

Cost of Fulfillment Across Facility Sizes

  • Zenplanner's report categorized facilities as small, medium, large, and leaders.
  • Cost of fulfillment was approximately the same across all categories.
  • The fixed nature of fulfillment costs is highlighted as significant.

"What was most interesting to me was the fact that the cost of fulfillment for all four of those categories was virtually the same."

Speaker A finds it noteworthy that despite the size differences among fitness facilities, the cost of fulfilling a member's needs remains consistent, which is a critical financial insight.

Impact of Pricing on Business Growth

  • The primary distinction between the facility categories was the amount they charged members.
  • Pricing was identified as the key lever for monetization and growth.

"And that should be the biggest indication of the growth lever on monetization that pricing has on the business."

This quote underscores the importance of pricing strategies in business growth, as it is pinpointed as the main factor differentiating the financial performance of the fitness facilities.

Relationship Between Price and Profit

  • Higher prices lead to higher profits, which in turn enable more investment in fulfillment and business longevity.
  • There is a correlation between facility size and profit margin.

"And because with higher prices, you have higher profit. And with higher profit, you can spend more money on fulfillment, you can stay in business longer."

Speaker A explains the positive cycle where higher prices increase profit margins, which allows for reinvestment into the business and ensures sustainability.

Profit Margins and Facility Size

  • Small gyms had the lowest profit margins, while leaders had significantly higher margins.
  • The profit margins increased progressively from small to medium to large gyms, with leaders having the most.

"Small gyms had the smallest amount of profit. Medium gyms had the medium amount of profit. Large gyms had larger amounts than the large, medium and small. And then the leaders had significantly more margin than the other three."

Speaker A details the direct relationship between the size of a gym and its profit margin, indicating that larger facilities and industry leaders tend to have higher profits.

Specific Revenue Figures

  • Speaker A provides rough average figures for cost and revenue per member for different sized gyms.
  • The incremental increase in charges per member as gym size increases is highlighted.

"And so if you looked at the prices, it was like, on average, I'm throwing rough numbers out, it was about 85 ish dollars to fulfill a member for small. And then they were charging about $109 per month on average, right, for the medium gyms, same cost, but they were charging $116 per member. And then the large gyms were charging, on average, $124 per member."

The quote presents approximate numbers that illustrate the pricing strategy of different sized gyms, showing that as gyms grow in size, they tend to charge more per member, which aligns with their increased profit margins.

Importance of Pricing in Profitability

  • Pricing strategies have a significant impact on profit margins.
  • A small increase in price per member can lead to a substantial increase in profit.
  • Industry leaders set prices significantly higher than smaller competitors, resulting in higher profits.
  • Leaders in the industry tend to avoid discounts, contrasting with struggling businesses that frequently offer them.
  • Data suggests that higher pricing correlates with being an industry leader and increased profitability.

"And it may not seem like much to add $10, but if you're making $24 versus $35 versus $45 per member, it makes a massive difference because you're talking about a 50% increase in how much profit is being taking home per month."

This quote explains the substantial impact that a seemingly small increase in pricing can have on profit margins, emphasizing the importance of pricing decisions in business profitability.

"And so the industry leaders, their cost, or how much they were charging per member was between 50%. It was 50% higher than everyone else."

This quote highlights the aggressive pricing strategy of industry leaders, charging significantly more than their competitors, which translates into higher profits.

"And so that extra 30, $40 per month that they're charging is all profit."

This quote underscores the direct relationship between increased pricing and profit, indicating that the additional amount charged by industry leaders is pure profit.

Pricing Strategy and Business Success

  • Effective pricing is crucial for business success, particularly in competitive markets.
  • Industry leaders achieve higher profits by setting prices well above the average.
  • Discounting is viewed negatively as it correlates with the businesses that struggle the most.
  • Adhering to data-driven pricing strategies can lead to profitability regardless of personal beliefs about market uniqueness.
  • Aspiring to be an industry leader involves adopting their pricing strategies, potentially charging $150 or more per member on average.

"That's why discounting is also so not good for your business."

This quote suggests that discounting can be detrimental to business success, as it is associated with companies that are not performing well.

"And the beautiful thing is that this is just the data, right? It doesn't care how you feel about it."

This quote emphasizes the objectivity of data in determining effective business strategies, suggesting that personal feelings or perceptions of market uniqueness should not override data-driven insights.

"If you want to be an industry leader, then do what the industry leaders do and charge, on average, $150 plus per member."

This quote presents a clear benchmark for businesses aiming to be industry leaders, advocating for the adoption of pricing strategies similar to those successful leaders.

Gym Launch Pricing Strategy

  • Gym Launch recommends pricing between $167 and $212 per month, which translates to $39 to $49 per week.
  • This pricing strategy is based on the value provided and the importance of paying attention to factors that drive business growth.

And so that's why for us at gym launch, we tell everyone that their pricing should be between 167 and 212 per month, which rolls out to $39 per week to $49 per week.

The quote highlights Gym Launch's advised pricing model for their clients, suggesting a specific price range per month to optimize revenue.

Engagement vs. Profitability Content

  • Content on motivation and perseverance receives high engagement but does not directly contribute to increased revenue.
  • Videos that focus on strategies for making more money garner less interest, despite their importance in driving business success.

And what's fascinating to me is that if I make a video about motivation, don't give up. Like, don't quit, whatever. We get tons of engagement, tons of likes, tons of comments and all that kind of stuff. Like, this is amazing. When I make the stuff that actually makes people more money, they're not interested, right?

The quote reflects the discrepancy between what content receives engagement versus what content is actually beneficial for a business's financial growth.

Importance of Key Performance Indicators (KPIs)

  • Businesses often fail to focus on KPIs that are crucial for growth and profitability.
  • Speaker A emphasizes the need to concentrate on business drivers rather than solely on engagement or motivational aspects.

It's because you're not paying attention to things that actually drive the business. The KPIs that matter.

The quote underscores the importance of focusing on KPIs for business success rather than just engaging content.

Cost Per Member Insight

  • Speaker A discovered that the cost per member across various businesses was almost identical, which was an important insight.
  • This realization provides a sense of certainty and relief in pricing strategy.

So the big takeaway for me here, probably the biggest one, was that the cost across all of them per member was basically identical.

The quote conveys a key observation that the cost per member is consistent across different businesses, which is significant for pricing decisions.

Business Growth Invitation

  • Gym Launch invites large business owners aiming for substantial growth to engage with their services.
  • The company offers consultations to help businesses scale to their desired financial targets.

Mosey Nation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we would love to talk to you.

The quote is a direct invitation for substantial business owners to consider Gym Launch's services for growth.

Control Over Profit Margins

  • Businesses have the autonomy to set their own prices, which directly affects their profit margins.
  • Speaker A points out the irony in business owners complaining about low payments when they have control over pricing.

And what's Funny is that we as business owners will complain that people don't pay us enough, and yet we're the ones who set the fucking price, right?

The quote emphasizes the power and responsibility business owners have in setting prices that determine their earnings.

Pricing and Profit Decision

  • The cost per member helps determine how much to charge to achieve desired profits.
  • Speaker A encourages business owners to decide their profit margins based on costs and personal income goals.

And so anyways, if you hear this and you're like, okay, this is how much it cost me per member, right? And how much do you want to make on top of that?

The quote suggests that understanding the cost per member is crucial for setting prices that align with profit objectives.

Financial Impact of Incremental Price Increases

  • Incremental price increases can have a significant impact on profit margins.
  • A seemingly small increase of $30 per month can double profits when broken down weekly.
  • Implementing such changes can be straightforward but have substantial effects on the bottom line.

And if you break that up on a weekly basis, you're looking at adding like $7 per week. Doesn't sound like a big increase, right? But that $7 per week doubles two x your profit doubles, right.

This quote highlights that a $7 weekly increase, which amounts to $30 monthly, can result in doubling profit, emphasizing the substantial impact of small incremental increases on profitability.

The Hybrid Model and Its Advantages

  • The hybrid model involves adding services such as one-on-one remote coaching.
  • Encouraging 30% of members to pay an additional $49 a week can substantially increase monthly revenue per member.
  • The hybrid model can potentially triple the profit per member from the base amount.

Because with hybrid, if you get 30% of the people to take you up on an extra $49 a week for one on one remote coaching that you can add on top of any facility, then that overall translates to $70 more per month.

The speaker is explaining the financial benefits of the hybrid model, where adding a service like one-on-one coaching can increase monthly revenue per member by $70, which is more than double the impact of the previously mentioned $30 increase.

The Importance of Understanding Business Math

  • Understanding the math behind business operations is crucial for profitability.
  • Engagement with financial details can differentiate between a profitable and a struggling business.
  • Motivational content is important for engagement, but financial strategies are what ultimately impact profit.

This was about math, which means it's borIng, right? It means the guys who dig this type of content are the ones who make the most money.

This quote underscores the importance of engaging with the mathematical aspect of business, suggesting that those who find value in understanding and applying financial data tend to be more successful in generating profit.

Encouragement to Apply Business Strategies

  • Speaker A encourages listeners to utilize the shared data and strategies to enhance their business profitability.
  • The emphasis is on practical application rather than just motivational rhetoric.
  • Speaker A signs off with a positive message, hoping listeners will implement the advice given.

Hope you guys use this and take this data and implement it in your business so you can make more money.

The speaker is concluding with a call to action, urging the audience to apply the financial strategies discussed to improve their business's profitability.

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