The one question gym owners love to ask other gym owners is:“How many members do you have?”This question often leads to assumptions about their business—the biggest and most common being whoever has more members is somehow more successful.Within the industry, the magic number that indicates a certain amount of preliminary success is 100 members.If you have at least 100 members, competitors will likely see that as a sign that you are doing something right, especially if it’s within your first year of business. If you have 300, they will assume your business has fully taken off and you’re doing more than well for yourself.Experienced gym owners, however, say this way of thinking is flawed. While you do need a certain number of members to have a successful business, it certainly isn’t the metric that’s going to determine your client or business success.So if you shouldn’t focus on setting a goal membership number, then what metrics do matter?
Average Client Value
ACV comes down to two simple concepts:
- How much can you charge your clients?
- How long do they stick around?
The higher the number, the better. This is true for both the business and for the client, as it means they value your gym enough to stick around and pay.Oddly enough, many gym owners I have asked don’t know the answer to the question “What’s your average client value?” because they have don’t know what their retention rates are. They just know how many current paying members they have, and if that number is 100 or more, then they’re doing pretty well.Before we talk about client retention, which is of course the second part in calculating a client’s annual client value, let’s consider monthly membership prices.Though all of the following numbers do depend on the market in which you live, here’s the price point for various types of memberships based on my conversations with dozens of different types of gyms:
- Group Class Membership: $120 to $190 per month (this number came from looking at 20 group exercise/CrossFit facilities in North America that offer predominantly group classes).
- Personal Training: $70 to $100 per hour or $800 to $1,500 per month (depending on the market and the individual trainer).
- Individual Program Design: $250-$350 a month (this number came from looking at 12 OPEX gyms in North America, who offer individual program design and monthly lifestyle consults with a consistent coach. That being said, I found others who charge $500 a month for individual program design).
- Hybrid Model: $250-$300 (this number came from looking at 12 MadLab Group gyms who offer hybrid gym memberships—meaning a combination of group classes and monthly personal training sessions or consults with a consistent coach).
- 100 clients at $120 a month = $12,000 revenue
- 60 clients at $200 a month = $12,000 revenue
- 12 (personal training clients) at $1,000 a month = $12,000 revenue
This shows that how many members a gym has is irrelevant unless you know what they’re charging each client. And it only makes sense that when it comes to membership goals—both short and long term—you should be more focused on increasing your ACV than bringing in more and more low-paying clients each month.Why?As a coach who has been in the industry for a decade, I have found it’s a lot easier to properly get to know and service 60 clients, for example, who are all paying $300 a month than it is to properly service 200 group class clients. Not only that, it’s considerably more time consuming to seek out dozens of brand new clients each month (not to mention, more exhausting for the coach to work with a new client than an experienced one).When relationships are stronger with a smaller group of clients, they’re more likely to stick around—as you’ll be giving them better service that is tailored to their individual needs—which ultimately builds more loyalty. This brings us to the other key to maintaining membership numbers at a level that allows the business to be successful: Client retention.
Like ACV, many gym owners don’t know what their churn rate is.Real simple: How many people came through your door and signed up (most likely for fundamentals) in 2018? How many of them are still there now? The higher this number, the higher your annual ACV will be.(It’s also important to note why people are leaving your gym. If you live in a transient city, where people move away as fast as they come in, your churn rate will be a little bit higher than in a more stable city where people plant themselves for life).Experienced gym owners say this:
- 80% is good client retention.
- 90% is great (However, I spoke to one OPEX gym owner who had 100 percent client retention in 2018).
Therefore, if 100 new clients came in in 2018 and only 50 of them were still around at the start of 2019, then it’s worth looking into why you aren’t keeping clients and how you can fix it.
When all is said and done, you’re running a business and a prerequisite to running a business is churning a profit. Therefore, your personal membership goals for your facility are hard to know unless you have a perfect understanding of your business and personal financial needs. This should also include profit goals.Successful gyms that have been around for awhile tend to strive to hit 15 to 25 percent profit. If they’re not making 15 percent profit, what’s the point in running a business, they say.If your goal is to pay yourself a professional wage and earn 15 to 20 percent business profit, the best way to figure out your membership goals is to work back from there.Super simple, right?If all of your annual expenses, your wage and 15 percent profit combined come to approximately $500,000, then that’s what you need to earn from your clients (assuming they’re the only source of income coming into the gym)?If clients are paying $150 a month for group classes, then you need 300 clients to earn $540,000. Compared to 150 hybrid or individual program design clients paying $300 a month to earn $540,000. Or perhaps, 45 personal training clients at $1,000 a month to earn $540,000.Remember that this is simplified and unexpected expenses often emerge in any business, but the general idea is simple—figuring out how many members you need isn’t as simple as “100 members means I’m well on my way, and 300 means I’m killing it!”The next time another gym owner asks you “How many members do you have,” (trust me, it’ll happen sooner than you think), reply with:“What’s your ACV?”“What’s your churn?"“How much profit did you earn last year?”