Reopening The Right Way Ep 206



In the Gym Secrets podcast, the host discusses the financial considerations and strategies for gym owners reopening post-COVID. He emphasizes the importance of adapting pricing models to reflect reduced capacity limits, ensuring profitability by maintaining a minimum 80% gross margin on services. The host advises against resuming old pricing structures and encourages reading the "Gym Launch Secrets" book for guidance on optimizing profit levers. He also suggests practical changes like adjusting billing cycles and session lengths, and reassessing the use of space and equipment to increase efficiency and value to clients. The host underlines the unique opportunity presented by the pandemic to reset business models and improve financial health.

Summary Notes

Financial Viability of Reopening Gyms Post-COVID

  • Reopening a gym doesn't guarantee profitability due to capacity restrictions.
  • Different states have varying guidelines on the percentage of capacity or the number of people allowed.
  • Profit models for gyms are typically not designed for limited large group training.
  • Charging per session may not be financially viable with a reduced number of participants.
  • The cost of providing a service must reflect the limited capacity to maintain profitability.

"So even though you get permission to open back up, it doesn't mean that you're necessarily to have the profit to be able to do so."

"If you're only able to have ten people per session at your facility, that would include you and probably one other person. So now you're down to eight."

These quotes emphasize the challenge gyms face in becoming profitable when reopening with limited capacity. The reduced number of participants directly affects the revenue per session.

Pricing Strategy in Response to Capacity Limitations

  • Adjust pricing to the service level that can be offered with the capacity restrictions.
  • Consider the maximum number of clients that can be serviced per day when setting prices.
  • Supply and demand may be favorable for gyms as clients are eager to return, allowing for higher prices.
  • The price increase should reflect the exclusivity and limited availability of gym services.

"So if you're having a one on eight scenario, then you need to charge 300 or $400 a month for that service."

This quote suggests a pricing strategy where gyms should charge more per client due to the exclusivity of the service in a one-on-eight scenario, ensuring financial viability.

Supply and Demand Dynamics

  • The eagerness of clients to return to the gym can create a favorable supply-demand curve.
  • Gyms can leverage the high demand and limited supply to justify increased pricing.
  • The pricing should align with the value and scarcity of the service being provided.

"The people who will want to come back are going to be itching to come back. Not everyone is going to come back, but the people who do want to come back desperately want to come back."

This quote highlights the high demand from gym-goers who are eager to return, suggesting that gyms can capitalize on this demand to set higher prices.

Adjusting Gym Business Models Post-COVID

  • It's crucial to adjust the business model to the current reality of gym operations.
  • The pricing should be adapted to ensure that the gym can still operate profitably under new constraints.
  • Reassessing the business model involves considering the value of the service and the cost of delivering it with limited capacity.

"You need to adjust your price to reflect the level of service being provided, not just letting people back in at their old price because it doesn't make monetary sense."

This quote stresses the importance of reevaluating the pricing strategy to align with the reduced capacity and to ensure the gym's services are still financially viable.

Utilizing Gym Launch Secrets for Profitable Reopening

  • The Gym Launch Secrets book provides strategies for adjusting profit levers before reopening.
  • Reading the book can help gym owners understand how to make monetary sense of their operations post-COVID.

"Now what I'm going to do is talk about the second piece, which is, how do I know when it makes monetary sense? So one of the things in the gym launch secrets book in section two, which is the profit levers, which I would highly encourage you to read before you reopen because it'll allow you to fix everyt"

This quote introduces the Gym Launch Secrets book as a resource for gym owners to consult for guidance on financial strategies when considering reopening their businesses.

Opportunity for Gym Owners to Revamp Business Models

  • Current societal changes allow gym owners to modify their business models.
  • Gym owners can reset their price points, operating hours, and session capacities.
  • This is a unique chance to optimize gym profitability and facility capacity.

This is one of the biggest opportunities of all time for people who own a gym, because right now, society is giving you permission to change all these things in your gym at once and then restart the right way with the right price points, the right hours, the right amount of people per session, all of those things done right so that you can maximize the profit and the capacity of your facility.

The quote emphasizes the unprecedented opportunity for gym owners to overhaul their business strategies to increase profits and optimize their facilities' capacities due to societal shifts.

Importance of Reading Business Guidance Material

  • Reading business-related materials can provide essential insights for gym owners.
  • "Gym on Secrets" book is recommended, particularly section two.

Please take 35 minutes and read section two of the gym on Secrets book. It's free plus shipping. Go read it.

This quote suggests that the "Gym on Secrets" book contains valuable advice for gym owners, and the speaker urges listeners to invest time in reading it to improve their business operations.

Maintaining High Gross Margins

  • Aim for at least an 80% gross margin on gym services.
  • Small percentage changes in margins can significantly impact profitability.
  • The speaker's rule of thumb is a minimum of 80% gross margin, but higher is encouraged.

You want to make sure that you're making an 80% gross margin, minimum on your services. All right? This has been a rule of thumb that we've used at gym launch forever.

The quote establishes a benchmark for financial health in gym businesses, stating that maintaining an 80% gross margin is crucial for profitability.

The Impact of Margin Percentage Points

  • Each percentage point in gross margin can make a substantial difference in profit.
  • Increasing margins from 75% to 83% can nearly double the profit.

Every percentage point makes an enormous difference. So let me give you an example. If the average gym is running on twelve and a half percent margins per year, all right, that's the average gym. If you go from 75% to 83% margins, then you added 8% to your bottom line.

This quote explains the significant impact that small increases in gross margin percentages can have on a gym's bottom line, using an example to illustrate the potential for increased profitability.

Calculating Service Capacity Based on Financials

  • Determine the number of sessions a gym can offer based on current revenue and costs.
  • Example provided with a hypothetical gym with $10,000 monthly revenue and an 80% gross margin.
  • Service fulfillment costs should not exceed 20% of revenue.
  • Breakdown of how to calculate weekly session capacity.

So if you have, let's say, 150 customers before this, and then you reach out to all of them and only 100 want to come back, cool. So let's say those hundred who have said, yes, I want to come back, you can bill my card now, all right, are billing at $100 a month... So that's $10,000 a month, month of recurring revenue that you have built in.

The quote provides a scenario for calculating the number of sessions a gym can offer by using the example of a gym with a specific number of returning customers and a set monthly billing rate.

Reality-Based Business Planning

  • Gym owners should plan based on actual revenue, not future promises.
  • The speaker urges listeners to ground their business strategies in reality.

Don't go off of promises. I'm begging you. Go off of reality.

This quote advises gym owners to make business decisions based on concrete financial figures rather than speculative or promised future income.

Call to Action for Show Support

  • The speaker humorously encourages returning listeners to rate and review the show.
  • The support from listeners is highly valued by the speaker.

Hey, if you're a return listener and you have not rated or reviewed the show, I want you to know that you should feel absolutely terrible about yourself and everything else in the world. I'm kidding. But it would mean the absolute world to me if you guys would go ahead and do that.

The quote is a lighthearted plea for listeners to show their support for the show by leaving a rating or review, emphasizing its importance to the speaker.

Podcast Growth Strategy

  • The growth of the podcast is dependent on word-of-mouth promotion.
  • The host is encouraging listeners to take action to help spread the word about the podcast.
  • The call to action is for listeners to share the podcast with others.

"the only way that podcast grows through word of mouth, and this is you joining hands with me and helping as many entrepreneurs as we possibly can, because no one is coming to save us. It's just us."

The quote emphasizes the importance of listener engagement in the growth of the podcast and the collective effort required to reach more entrepreneurs.

Business Planning and Profitability

  • Emphasizes the importance of being realistic in business planning by only counting actual revenue.
  • Suggests starting the billing process to see actual numbers and then scheduling accordingly.
  • Advises to downgrade previous earnings estimates by the amount of cancellations plus an additional 10% to be conservative.

"Go only off of reality. Go off of what goes through."

This quote stresses the need to base business decisions on real, confirmed financial transactions rather than expectations or promises.

"If you can't, then you're going to have to downgrade your estimation by how much you were making before, with all of the cancellations included, and then drop another 10%, just in case."

The speaker provides a strategy for adjusting financial projections to account for cancellations and potential further revenue drops.

Operational Efficiency and Cost Management

  • Discusses how to calculate the number of sessions needed to cover costs and achieve a target gross margin.
  • Outlines a process for allocating sessions throughout the week to meet financial goals.
  • Highlights the goal of maintaining at least an 80% gross margin for profitability.
  • Advises against increasing overhead to accommodate all clients, as it can permanently damage profit margins.

"And so just like that, you can get your payroll, and you can get your business to a point where you have an 80% gross margin or higher, right?"

The quote explains how to structure a business to maintain a high gross margin, which is crucial for profitability.

"Start as little as you can. Start with two sessions a day, start with 90% margins."

The speaker suggests beginning with a minimal operational setup to maximize profit margins and then scaling up cautiously.

Strategic Response to Covid-19

  • Encourages taking advantage of the situation created by Covid-19 to make positive changes in the business.
  • Suggests using this time as an opportunity to reset and improve the business model.
  • Recommends cutting sessions with poor attendance to increase profit margins.

"And I just want everyone thank Covid. Sure. There are things that you probably wish didn't happen, okay? But take what you can, right?"

The speaker is acknowledging the challenges posed by Covid-19 but also encourages listeners to find opportunities for improvement amidst the crisis.

Service Offering Changes

  • Businesses should transition from offering unlimited services to providing services two or three times a week.
  • This change increases business capacity by doubling or tripling the number of clients that can be served.

"One, you need to switch from unlimited to two or three times a week is your main offer."

This quote emphasizes the recommendation to limit service offerings to increase capacity.

Billing Cadence Adjustment

  • The billing cycle should be adjusted to a weekly, biweekly, or every four weeks (28 days) to increase annual revenue.
  • Changing to a 28-day billing cycle results in 13 billing periods per year instead of 12, leading to an almost 8% increase in top-line revenue.
  • This can significantly improve profit margins.

"Now, it doesn't have to actually be weekly, but it has to be on a weekly, biweekly or every four week cadence."

The speaker is advising on the importance of the frequency of billing cycles to maximize revenue.

"Because if you do it on every 28 days, you're going to get 13 billings a year instead of twelve, which means you get an extra almost 8% in top line revenue for the same amount of service."

This quote details the financial benefits of adjusting the billing cycle to a 28-day period.

Pricing Strategy

  • Pricing should be adjusted to reflect the value of the service provided.
  • As the number of sessions is limited and becomes more personalized, the perceived value increases, allowing for higher pricing.
  • The speaker's minimum pricing recommendation is $167, translating to a weekly rate of $39 at the bare minimum.
  • Pricing can be set higher based on the service level, with examples provided for weekly rates of $49, $59, or $69.

"So unlimited to two to three times a week, you're going to switch to a billing cadence of weekly, biweekly or 28 day cycles."

The speaker is summarizing the recommended changes to service offerings and billing cadence.

"That's my minimum. Bare minimum. Bare, bare, bare, bare, bare minimum. Which works out to $39 a week, all right? Bare minimum."

This quote provides the speaker's minimum pricing recommendation based on the new service structure.

Operational Efficiency

  • To improve efficiency, businesses should consider removing exercises that consume too much space and are not cost-effective.
  • Session lengths should be reduced from 60 to 45 minutes to increase capacity and reduce payroll expenses.
  • These operational changes can lead to higher profitability.

"Beyond that, if you typically have exercises that you use that you wanted to get rid of because they take too much space up and they eat too much square footage, this is the time to get rid of those things and take them out of the programming."

This quote suggests optimizing the use of space by eliminating less efficient exercises.

"In terms of your sessions, instead of being 60 minutes, cut them to 45, all right? It'll also increase your capacity and decrease your payroll."

The speaker is advising on reducing session lengths to improve operational efficiency.

Trusting the Math

  • The speaker emphasizes the importance of relying on mathematical calculations to ensure profitability.
  • By following the proposed changes, businesses can provide more value to customers and achieve growth.
  • Trusting the math ensures that the business model is sustainable and profitable.

"Every person who goes in and tries to increase the amount of sessions they're doing, keep the pricing the same and then have more individualized service that they're going to do is going to go out, right. The math doesn't support it."

The quote warns against increasing sessions without adjusting pricing, as it is not sustainable according to the math.

Marketing and Communication

  • The speaker hints at a future video about marketing and sales strategies.
  • A book is mentioned that includes a template letter to communicate the changes to customers.
  • The book is available for free at a given website and also for purchase on Amazon, with a request for reviews.

"So that's part one of how to reopen the right way is structure everything properly. I'll probably make another video on how to market and sell before that, but right now, make sure to get this stuff right."

This quote introduces the concept of a multi-part strategy, with the current focus on structuring the business properly.

"If you get the book, there's a letter inside the book on how to communicate the changes. You can literally copy it. Go for it. It's my gift to you."

The speaker is offering a resource to help communicate changes to customers, emphasizing its availability and ease of use.

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