Profit & Partners

Wee doggies!

Is it just me, or is it summer AF? 😉

I’m getting super pumped to spend next week at the Jersey Shore.

Beach time, skeeball and seafood.

Wife, baby, dog, and friends!!

It’s our second year getting a shore house with MFF/ BFU business partner Michael Keeler, his husband, and a few other friends.

Keeler and I grew up together on the Jersey Shore. So it’s a great chance to go home and soak up nostalgic, seashore vibes.

Today’s email actually relates to having a partner in your gym.

Over the years, Keeler and I have done several podcasts on how to manage a partnership. And you should check them out.

But today I want to discuss cash monies.

Specifically, how does having two owners in a gym impact your profit goals?

First we have to consider the “normal” profit target assuming one owner.

(BTW if you want the full breakdown of what we recommend for expenses, rent factor, payroll percentage, etc.? Get free access to my webinar How Much Should a Gym Owner Make? HERE.)

At BFU, we recommend total non-owner expenses stay at 70% or lower.

In a larger gym where the owner is doing less, expenses may be slightly higher.

In a smaller gym where the owner is also most of the staff, they may be a lot lower.

For our purposes, we’ll assume a “typical” gym. The owner has perhaps 1-2 other full time trainers and 1-3 other people who help part time. In this typical gym, the owner is still on the floor 10-15 hours per week.

Let’s assume this typical gym makes $25k-$30k per month or $300k-$350k/year. In this scenario, with a “People Budget” of 40%, we’d expect to spend $120k-$140k all-in for non-owner staff. We can also expect the Total Owner Compensation to be around $100k-$120k.

Does that mean if there are TWO owners we just chop it in half?

Probably not.

Here’s why…

If there are TWO owners working in the business, you won’t need as much staff.

Owners are motivated by a different financial upside. So they’ll tend to have way more output than “normal” staff.

In this same hypothetical gym, let’s say we marked $120k towards total non-owner staff comp. Now that we have another owner full time in the business, perhaps we drop down to 1 full timer and 1 super part timer. Let’s use back of napkin math to say our “People Budget” is now $60k.

That leaves $60-$80k to add to the owner pot. So now we’re looking at $180k-$200k in Total Owner Compensation.

If we assume they split TOC 50/50, both owners make a bit less than in the first scenario. However, if it’s a good partnership, they have more freedom than they would without another owner in the business.

It’s a lot easier to take vacation when someone else who also owns the joint can hold down the fort. 😉

Not only that, but let’s scale up all these numbers by 33%.

Now we’re looking at:

$465k – Revenue
$80k – Non-Owner People Budget
$225k – Total Owner Compensation

… which puts us over $100k for both.

PLUS the benefits of having a partner and not going it alone.

To be clear, this email isn’t advocating you get a partner.

More often than not, this is a bad idea. Particularly if you’re doing it purely for emotional support and you have similar skills.

And a partnership is like a marriage. You need to REALLY know the person. If you enter lightly, it could explode. Which will have serious financial repercussions. To say nothing of the brain drain or emotional wreckage.

So if you DO have a partnership where you both work full time in the business?

Adjust your targets for Total Owner Compensation.

Martinis and oysters on the beach,

Mark