Episode 309

Stop Paying Yourself Last with Ben Pickard

In this episode, Ben Pickard joins me to talk about why you should stop paying yourself last.

[00:00:00] Hello, my friend on today’s episode, I’m back with Ben Pickard and we are talking about how so many of you as gym owners are just uncomfortable talking about making money as a gym owner. So this is now the second episode we’re going to do about building personal wealth as a gym owner. We’re going to help you understand the.

Processes you have to have in place as a gym owner to make sure that you are squeezing the appropriate amount of money and value out of your business to make sure that you are growing wealthier as you grow wiser as a gym owner. So if you struggle to really make money as a gym owner and make sure that money is running into your personal pocket, this is a great episode for you.

If you haven’t listened to our first one yet, go back and listen to episode three Oh four, um, how to build personal wealth as a gym owner, then come back to this one and we continue with some really great. Tips. We want you to be rich. My friends want you to do good and make money. So if you want that to keep on listening,[00:01:00]

welcome to the business for unicorns podcast, where we help gym owners unleash the full potential of their business. I’m your host, Michael Keeler. Join me each week for actionable advice. Expert insights and the inside scoop on what it really takes to level up your gym. Get ready to unlock your potential and become a real unicorn in the fitness industry.

Let’s begin.

Hello, fitness, business nerds. What’s up? Welcome to another episode of the business for unicorns podcast. I’m stoked to be back with Ben again. What’s up, my friend. How are you? Hello. Hello. I’m good. How are you doing? Good. Good. I’m so excited to jump in to talk about creating personal wealth for gym owners, kind of part two, because we started this conversation in a previous episode and I want to continue today to help make all of our listeners richer.

That’s my plan today. Everyone listening to this podcast, we’re going to make you more rich, but before we do, I just want to give a quick shout out to the fact that [00:02:00] we’re doing some great content over on the Instagram these days, but if y’all have not followed us on the gram. Do I age myself by calling it the gram?

I’m doing it anyway. I don’t know what the kids are saying. We’re not, we’re on the tick tock too, I think, but we’re really crushing on the grams. I really want to encourage you to go over to the gram. I’m going to keep saying it now and go follow us. Cause there is some great tips on there. There’s great stuff putting up.

By by Pete, we have clips from this podcast. We have other fantastic content on there that I’m really proud of. I think we’re just doing a really great job putting out really useful stuff on a regular basis. So go follow us on the, on, on the gram link down below in the show notes. Let’s dive in and make you all more rich.

So Ben, let’s just cover this topic. Big picture, obviously everyone wants to be rich. Everyone wants to build personal wealth so they can be comfortable in life or maybe even extravagant. But can you just talk a little bit about what’s been your relationship as a gym owner to using your gym as a way to build personal wealth?

Yeah, absolutely. It’s the funny question where it’s the thing that everybody wants to do, but [00:03:00] it’s also like the thing that most people feel a little bit icky about asking people for money and that type of thing. So the hot take overview on this is you need to generate revenue in your business. You need to then allocate that revenue and give every dollar a job, so to speak, which we’ll talk more about.

You need to pay your fucking self. You should make some money from this, don’t be making less than minimum wage. And then last but not least is you need to keep as much money as possible being. Via ethical tax strategy is probably the best way to say it. Yeah, exactly. I love that you started there because I think so often this is like a taboo topic for gym owners.

Like part of the reason they started the business was yes, to make an impact, help clients live happier, healthier, stronger, longer lives. Like all of that really matters. And he should be paid well for your time. If you’re having that positive impact on the world and your community and your clients and your team, you should be paid well for the surface, for the impact you’re putting out there in the world.

And I think talking about [00:04:00] paying yourself, I just hope isn’t taboo for all of you, dear listeners. I hope that you will dive in and actively talk about when appropriate. You wanting to make money as a gym owner. I think that’s a really good thing. We encourage our unicorn side of members to do it all the time.

And to Ben’s point, there’s some really simple steps we’re going to go through that’ll help you maximize the amount you can leverage from your gym. Before we do that, I just want to give a quick shout out. We did a previous episode of this podcast where we went through what we think is step one, which is really taking your financial temperature.

So go back and take a look at that. That was, I’ll tell you right now. It was episode 304 of the podcast. It was called how to build personal wealth as a gym owner. Go listen to that first, because I do think we go through four really important questions to figure out where you are now, where you want to go and how to define that gap.

Once you’re clear on that gap, you can move into some of the strategies we’re going to talk about today as Ben already outlined them. Let’s dive into the first one. Ben, you said the first step here in terms of managing your gym in a way that makes sure that you can pay yourself well is [00:05:00] to create revenue.

Talk through this first one, which is seems pretty obvious, but it has to happen. Yeah, part of me wants to say no more, go make some money. But let’s talk a little bit more about what that actually looks like. Because if everyone knew the answer to that, the world would be a much different place. We wouldn’t have jobs.

Yeah, that’s true. We’d never have an employee because everyone’s just so busy making money. So yeah, like really, as we all know, driving revenue in your business is mostly a function of the marketing and sales department, as I air quote this for the Audio only listeners here, and it’s having multiple different irons and irons in the fire or poles in the water, depending on what type of marketing analogies you like to use that are not just done incredibly consistently.

I’m going to say that again, incredibly consistently posting on social media once or sending one email a month. Not going to move the needle, but you’re doing it incredibly consistently. And you’re also leveling up your skillset as this. Now I know there’s probably someone out there. Who’s the 1 percent who’s I came from a marketing [00:06:00] and sales background.

And then I opened a gym. Maybe you don’t need to level up your skillset, but for the rest of us, who. Almost always came from a fitness background first and then had to be self taught business, marketing, sales, money, just to acknowledge that’s probably the weakest tool in your toolbox. And you probably should learn a little bit less time spent about squatting and training and a little bit more time about what.

What is a good, what are the poles I should have in the water? What’s the right frequency for those poles? And most importantly, how do I level up my fishing game? I think it’s a great analogy. And I think it’s what you’re outlining here, Ben is like, y’all need systems. Y’all need systems to consistently be marketing and selling.

And so often you’re just winging it, trying a little of this, trying a little of that. And you’re like, Oh, I tried a little of that. It didn’t work. You didn’t do enough of it consistently enough for it to have an impact. So of course it didn’t work, right? But if you really want to drive. Personal wealth as a result of being a gym owner, it starts with being consistently able to generate revenue and that requires systems.

And again, the word that [00:07:00] Ben keeps using, I want to iterate here is consistent. It’s almost less important, which strategy you pick, then you do it really well. If you do almost anything consistently enough again and again, almost anything can move the needle if it’s like a decent strategy and you do it well enough.

So I think we can’t overstate how much, um, just the consistent effort in marketing makes a big difference. Yeah. And step two with that is when you do all those good marketing things, you really need to have consistent sales systems, big surprise, which is if we’re going to draw the line in the sand here, everything from a robust lead followup process, whether it’s through like DMS, email, phone call, et cetera, text messages.

To then having a really robust like strategy session or consultation process as well. It can’t just be someone raises their hand and be like, Hey, I want to know more about your gym. And you’re like, cool, here’s a pricing. Let me know if you want to join. And I say that kind of tongue in cheek, knowing that there’s people out there who are doing that.

It’s, and it’s not just follow up to make people [00:08:00] buy. Cause what the reason finances quick aside here, really important to me is. If you get this stuff in order, it allows you to do a better job for your community. So as much as we were joking at the beginning about make you rich, we want to do that, but let’s get you rich by making a difference in the world and all the systems that are going to help make drive revenue in their business to make you money are also going to give a way better experience for everyone you work with team.

Members, everybody, yeah, it’s not just money for money’s sake, right? Like when you create a positive impact for your employees and for your clients and for your community, the money will come, the money will come because you are adding value to their lives and the way to add value to the most people’s lives and have a really great system to get in front of strangers on a regular basis, which is great marketing and then great sales to help them get out of their own way and.

Accept the help you’re willing to offer. So that’s really step one is to create a revenue in the business without the revenue, there’s really no money to do anything with and the rest of this conversation doesn’t matter. So let’s just assume they got that then they got some revenue [00:09:00] to work with. Then what?

The next step is allocated. And we’re obviously huge fans of the profit first approach. Mike Michalowicz, there’s two books, profit first and profit first for micro gyms. The way I think of this is you want to give your dollars a job. It’s not just a. collective vat of dollars that you pull from until it hopefully doesn’t dry up.

It’s how do you make sure that the dollars you’re making are going to the right places to support your team, to support reinvesting in the business, to support, you know, your client life cycle and your client experience through. memorable and powerful gifts that show your appreciation for their time with you.

So you need to make sure those dollars are given a place to go. So the easiest way to think about this is you have an expense bucket and that expense bucket is broken down into people and non people. So typically your people expenses, meaning all humans who have a function in the business, excluding owners or owner can, you can spend anywhere [00:10:00] from 25 up to 40 percent of revenue on people.

So for every dollar you come in up to 40 cents goes to your team. The second half of that is your non people expenses, and your non people expenses are typically in the 20 to 35 percent range. Now the caveat here is although 40 plus 35 is 75 percent, your total expenses really shouldn’t exceed 70 percent of your revenue.

So every dollar you make you’re spending about 70 cents on like people and non people and we’re going to talk about the other categories later So i’m trying to stop myself from jumping ahead here enough now There are some caveats here as well that maybe you’ve got the best Training team in the country and your people expenses are like 44 That’s okay Not the end of the world.

Just make sure that your non people expenses are proportionately less. Yeah. And sometimes this, sorry, go ahead. I was just gonna say, I just want to underscore that because some of y’all, you can’t have crazy expensive rent and pay your [00:11:00] people the most money they could make in your market. You just can’t do both.

There has to be some give and take to keep, as Ben said, the total amount you’re spending on people and non people to be less than seven, 70, 70%. It’s gotta be less than seven cents on the dollar, 70 cents on the dollar for every dollar that comes in. And so there’s gotta be give and take. And if your rent’s and you know that, then you’re not going to be able to go over 40 percent with what you pay your people, but if your rent’s crazy, or you have to make a shitload of revenue.

Yeah, but even still, it’s just, you’re going to have to make so much revenue to pull money out of the business. At that point, you’re setting yourself to play a game. That’s too hard to win. Just don’t right. Just, but you also on the flip side, if you got a crazy good rent deal and your rent is super low percentage.

And your utilities are low and all that, then, then maybe you can afford to pay your people a little bit more, right? That’s okay, right? But I just wanted to say that you can’t have it all You can’t spend the most on everything and still expect to squeeze profit out of your business Exactly. That’s a [00:12:00] really good point.

I appreciate you mentioning that Michael because the other the other point I was thinking in addition to that is Sometimes when you’re looking at your expenses and let’s say your people are expenses are a little bit high I’m not suggesting we all should go fire a team member by any stretch, but sometimes it’s a wake up call to be like, Oh, am I spending my time in the right places?

Cause if you need to spend over 40 percent of expenses on people, plus you’re either not doing a whole lot of work in the business, or you’re working an absolute ton, it might be time to do a time audit to see, are you pulling the most important levers that you could be pulling? Yeah, I think it’s a really great point.

Let’s keep going. So we got step one, which is create some revenue, create some actually money in the business. Step two is allocate that money, put it in specific piggy banks to spend. And you gave the analogy here of all the expenses should be like up to 40 percent on people and up to kind of 35 percent on non people, 70 percent total ideal for total expenses.

But then what about you as a gym owner? [00:13:00] Conveniently, there’s 30 percent missing from your total here, so we’re going to talk about that. So the third step is you need to pay yourself. And there’s, this is where it can get a little bit complicated, so I’m going to do my best to keep it as simple as possible because we already, even on this podcast, we have.

American and Canadian with different tax systems of different pay structures. And I know that’s only two countries on the planet. It’s complicated in different countries. Yeah, exactly. So you can think of your pay in basically three different buckets of that 30%. Some of that money is going to be your regular recurring salary.

Now, whether you’re on salary or dividends or distributions or Whatever it’s called, it’s your regular pay for doing the main functions that you do in the business. And that’ll vary, but usually that’s about 10 percent or a little bit higher of revenue. In addition to that, you’re also going to have some profit and we want to see profit be at least 10, if not 20 percent plus, [00:14:00] and some of that profit is going to go to you on an incremental basis, such as paying yourself out a profit share quarterly, according to profit first, some of that profit is going to go towards reinvesting in the business, whether it’s driving more leads or improving systems, hiring team members, and then some of that profit can also be used to pay taxes because obviously, unless you live in A tax free country like the Cayman Islands, the government needs to get paid.

Then the third way, in addition to your regular salary, your share of the profit, piece number three for your pay is owner perks. So those are the things that you can do by any ethical things that you can run through the business, that the business can use before tax dollars. And that’ll, we’ll talk more about that in step four, but That kind of gives you the breakdown of step three.

You’re not just pulling every dollar out of the business. You’re also not pulling no dollars out of the business when it comes to paying yourself. You’re finding a way with your accountant to have a regular recurring salary to cover your cost of living that ideally is at a fair market [00:15:00] value for the work you do.

You should be getting some profit from the business, which I think of as the business rewarding you for taking on the risks of entrepreneurship. And the business is going to pay for some stuff for you because. You took on some risks and there’s some things that maybe you don’t need to carry two different cell phones.

Just have the business carry the one. I think it’s a really great summary, Ben. So right to recap here, step three is just all about paying yourself that extra 30 percent that’s left over after expenses. It goes to the US uncle Sam and, and the three categories Ben gave here is like some basically salary where you’re.

Your amount that you pay yourself to do your job, profit or profit distributions, and then perks, money that you pass through the business and you pay for things with pretext dollars that are for you. In some cases, it’s cell phones, it’s internet access, it’s portion of your rent for an at home office, those kinds of things that you can legally and ethically pass through.

So that’s step three. There’s one more step. Let’s just jump right to it. What’s the fourth thing they have to do, Ben? Yeah, the fourth step is keeping [00:16:00] as much of the money that’s left over as you can. And for the sake of this podcast, we’re going to keep this from the business side of things. In, um, personal wealth podcast number three, we’ll talk about the personal side of things.

This is just the business side, but now you need to figure out how to keep money. So one of the important things as we talked about using owner perks is using before tax dollars to pay for things. So I’ll use a example here so you can follow along. Let’s say the business tax rate is 25%. So that means for every dollar of profit you retain in the business at the end of the year, that didn’t get taken out as expenses or owner’s pay, you had to give 25 cents to your country’s version of Uncle Sam.

So that means if you need to spend 100 on your cell phone bill, you actually needed to make more than 100 because there was some tax that came off. You probably need to make closer to 125. But if you use before tax dollars, that 100 cell phone bill is only 100. So another way to think of this is by putting things through the business, [00:17:00] whatever your pers whatever your tax rate is, that is the percentage on sale.

That thing is, and I don’t know about you, but if I saw something on sale for 25 percent off that I probably needed to get, I’d be definitely buying it. It is a massive savings. Now I do want to say the obvious thing here, which is don’t run everything through your business. I don’t know any company, any countries where you can pay your personal mortgage with your business.

There’s some things that are like an absolute no go, which is why talk to your accountant, but there’s a lot of things like. In Canada, whatever percentage your home office is of your square footage of your house, let’s say it’s 10%, you can write off 10 percent of your interest, 10 percent of your utilities, 10 percent of every house expense.

You already have a house. Yeah, you already need some of these stuff if you need a new computer for work using pre tax dollars Can save you literally hundreds of dollars on this So it used business dollars because they’re before tax to save money on the things that you needed anyways That of course are legal within your tax Jurisdiction or [00:18:00] country.

Yeah. I think that’s really important. And listeners, I know I probably said this at the opening of this episode and I’ll say it again. Listen, we’re not, we’re not, this is not legal advice. This is not financial advice. We’re just telling you what we see really works for most gym owners, which is again, to recap the four steps is you got to have revenue or else nothing else matters.

You need to be cautious about what you spend and put money in specific buckets or piggy banks like the profit first model to make sure you’re spending wisely. You got to pay yourself. And all those ways we talked about paying yourself, then you got to make sure you’re keeping as much money in the business as possible by using those pre tax dollars and not overpaying an overdue amount.

No, what’s the word? Too much. Not paying too much to your government. We want to pay some, right? I like paying taxes. I believe in paying taxes. I like that my taxes go to doing all kinds of things like bridges and roads and helping people who need it. And I don’t want to pay too much. I don’t want to pay too much.

I want to use the laws to my advantage to, to pay, to pay an amount that is fair. [00:19:00] And there’s lots of debate we can all have about that on probably some other podcasts. But on this podcast, we trust you’re going to do what’s like legal and ethical for you and use a local professional to help you understand where those lines are for yourself.

I know there’s probably more to say, and we can probably, we’ll probably do another podcast. goes more into, okay, once you have that money personally, what do you do with the money? Once it’s in your own personal accounts is probably a good place for us to go next, but given everything we’ve covered so far, anything else you want to say about driving personal wealth as a gym owner?

Yeah, I do. There’s, and this gets a little bit more philosophical, so I’ll keep this brief. Let it out. Like it makes me. Feel immense happiness that we are in an industry where the thing we sell actually has the potential to change someone’s lives. We’re not selling, you know, at the far end of the bad spectrum, we’re not fucking scamming people out of shit.

Um, but we’re also not just like selling useless junk that people don’t [00:20:00] need more of. Um, and I’m not judging any other industries out there cause they clearly have a customer base, but we’re selling a thing that more and more people on the planet are needing more and more to put it. So it makes me incredibly happy that we’re in this industry changing lives and being paid to do so.

And if you want your gym to be able to continue to change lives and live your mission and create real careers for your team, I think we have an obligation as gym owners to get our financial shit together so that we can continue to be here, not just tomorrow, but our gyms are better next year and the year after that.

And the things that we’re doing and our offerings are serving more people at a greater level. I’m aware there’s a. Probably geographic cap for most of us that one gym probably isn’t going to take over the world and become the next apple or tesla or google But we have the potential to make a really big impact and if money’s been icky for you or it feels grimy or even us Even just you have whatever that is feelings about it I want to really encourage you to lean in because the [00:21:00] success of your business kind of depends on it But more importantly, the success of your community depends on it.

And don’t let this be the thing that holds you back, that you go to business because you manage your finances poorly and we’re just afraid of it, because you can change some lives. We want to support you in changing those lives. So please do it. Yeah. Beautifully said, my friend. We’ll end the podcast there.

Nothing more to add. Um, thanks so much for listening, my friends. I hope you found this podcast valuable. If you have to leave us a five star review everywhere you listen. And then, like I said, go follow us on the Instagram and share it with all of your fitness friends so they can follow us and find this podcast as well.

Thanks for a great conversation, Ben. See you on the next one. Thank you. Talk soon.