Advice for New Gym Owners: The #1 Mistake to Avoid
Why overpaying trainers early can quietly break your gym’s finances—and how to fix it before it’s too late
Here’s the most common mistake I see new gym owners make.
WARNING: It’s not easy to fix. But you have to fix it if you want your gym to function.
You see, many-a-new gym owner are excited to right the wrongs visited upon them by cruel and unfeeling bosses. This is admirable!
BUT it often leads to overcorrections. So in spite of the megastresses of running a business, their personal take home income is less than when they had a job. Eek.
The Core Issue: New gym owners often overpay trainers as a percentage of revenue.
It’s not uncommon to see payouts that are as high as 70% of the revenue collected in a given session.
This only leaves 30% TOTAL left over to pay all other fixed and variable expenses like rent, marketing, facility needs… AND YOUR pay.
A related issue: we tend to undercharge members when we open up a gym. We want to price as competitively as we can. Because we’re new to gym ownership and nervous about sales. These issues compound.
Before I offer solves, let’s talk about how this breaks down in a financially healthy training gym…
We suggest independent gyms shoot for:
- 60-70% total expenses
- 30-40% left over
The 30-40% is used to pay you, save for profit, pay taxes, and generally have breathing room. Leaner gyms can do even better than this. And you may target a smaller percentage if you’re doing very high revenues and are optimizing for time.
Regardless, we need to keep payroll low enough to afford the other inevitable expenses of running a training gym.
So what should we target for payroll? Depending on your model, healthy training gyms do best when direct cost of service –– the payout to coaches for facilitating sessions –– is no more than 20-30% total. This target percentage includes benefits and payroll taxes; which means the actual hourly or salary rate to fulfill a session for healthy gyms is closer to 18-25% of the average revenue collected.
SIDE NOTE: While you can and should figure out what this works out to on an hourly basis, you should double check these numbers against your monthly revenue and your monthly payroll.
If your gym is smaller and you have almost no admin staff and your ONLY staff expense is the trainers, you can go a bit higher. In that situation, you could go as high as 40% total (including benefits and payroll taxes).
But this only leaves you with 20-30% leftover for everything else. Rent alone is typically 10-15%, and credit card processing fees are usually 3-4%. So we’re looking at 13-18% for JUST those two expenses. That’s why 30% is a better goal for most gyms.
Looking at this on a monthly basis:
If you’re making $30k/mo with some group model, your ideal trainer costs should be $6k per month.
At 40 hours per week of training or classes, this works out to $35-$38 per hour. This is one full time coach around $55k per year for 30/hours on the floor, and one part time role. These numbers will work in most markets. And they leave plenty left over for you to have some admin help, pay rent, spend money on marketing and education, and make a decent living.
(Want to pay your staff more? Raise your prices.)
So now that we realize we overpaid… NOW WHAT?
Real Talk: It’s VERY hard to fix if your team is now anchored to the higher pay rates.
Here’s your play:
1) Raise Rates, Keep Current Pay Static
The easiest path is to raise prices and keep your current trainers’ pay at their current hourly take home. This may still require some explanation, but so long as their net hourly income doesn’t go down, you won’t get much pushback.
(Need help raising your rates? I did a whole video on that very topic HERE.)
2) Adjust Pay Rates for New Hires
When you bring in new trainers, bring them in at payouts that actually work for your business.
Don’t pay them as a cut of revenue. Pay them at an hourly rate that’s fair and competitive in relation to fitness studios.
This isn’t an immediate fix, but over time, it can help right the ship and get your payroll percentage into a more reasonable place.
3) Consider Pay Adjustments As a Last Resort
You CAN reduce pay for your trainers in emergencies. But this should be avoided at all costs, and only when necessary.
If you do need to go that route, you have to handle it very sensitively. Explain the WHY, and be prepared to lose coaches. You’ll also have to monitor for “quiet quitting,” as your coaches may not have another obvious option, but may be deflated by the pay decrease and lose their twinkle.
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At the end of the day, financial benchmarks are just guides. So long as you’re making a fair take home income for the stress and hours of running a business, you’re welcome to divvy up your expenses however you like. YOU get to decide what that means for you, both as a percentage of revenue AND as absolute dollars in your market and situation.
Furthermore, we’re in the service business: investing more generously in your humans is ALWAYS better than investing more generously in non-people expenses like premium facility toilet paper.
But if you’re working 80 hours a week and stressed about your own personal expenses…
You can’t do this sustainably.
And the only way to fix that is to grow your revenues AND adjust expenses.
Always believing in you,
Mark
PS: We help gym owners fix this kind of issue every day.
Both with the tactics (what do do) and coaching on the mindset (managing your feelings).
To learn more about how we can help, you can book a free brainstorm call HERE.