What to do When Subletting to a Physical Therapist in your Space

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So to get instant access to your free copy, click the link below in the show notes. Do it right now Hey, Pete. So we’ve got a, we’ve got a fun topic today. You were mentioning that you had someone in your office hours that was asking about having physical therapy in the space, and you pointed out that you’re now 10 years into having physical therapy in your space, and I’m barely six months into having it in mine.

So I’m like, I’m personally really curious about this, of like what lessons have you learned over that time and what would you do differently? So maybe you can tee us up of how do you look at this, solving this problem for other gym owners. I like this topic. Can we start by saying it’s not necessarily a problem, it’s an [00:02:00] opportunity.

It’s a- Yeah, fair point … it’s a really healthy way to add cash flow with a logically adjacent service offering. So it’s not… I’ve joked in the past, I used to go to this breakfast place in Connecticut near my, my mother-in-law’s home, and across the street I’d sit in, I’d sit in one of the booths, and I’d look out the window, and there was a nail salon a- across the street that, I shit you not, had a sticker on the window that said, “We rent bounce houses,” with an exclamation point.

And- Wait, the breakfast place did? Across the street from the breakfast place. Oh. A nail salon that rented bounce houses. Now- Okay … this is either extreme laziness, like a bounce house rental company went out of business and the nail people came in and were like, “Screw it, I can’t find a razor blade to scratch that shit off the window.”

Or they actually rent bounce houses. But the, the point is, these illogical or not logical alternative service offerings only serve to hurt your credibility, but [00:03:00] this is not one of those. This is… It completely makes sense. PT and a training space, one- Yeah … one feeds the other. It’s just great. So I don’t see it as a problem.

It’s a great opportunity. It is a great- Yes … way to have improved the credibility of CSP as a whole over the last 10 years. It makes us more of a one-stop shop for a lot of our users. It just, for lack of a better term, makes the business sticky. So I love this concept, and I think that in some ways, a six-month-old version of it is obviously different from the 10-year-old version of it.

But along the way, I’ve learned a lot about the partnership, the dynamics internally of how we manage these things, two different teams. I’ve learned a lot about the financial metrics of it, negotiating leases, agreements of that nature. I have relocated my business and simultaneously relocated a PT clinic, and renegotiated and extended a lease because of it.

So there’s [00:04:00] no way we can do this justice in 15 minutes on a broad scale, but I definitely have thoughts Let’s get specifically into people who are starting to do this. They’re mapping- Yeah … the framework of introducing this to their space in the next six to 12 months. That sound good? That, yeah, that’s exactly where I actually wanted to start, so it’s perfect.

Okay, perfect. Tell me about yours. I’m interested in hearing about your six, six-month-old operation. Yeah. We– but maybe I could frame this lit with, I suspect part of this is dependent on what you’re looking to accomplish. And one of the things, we have an extra room in our space. We’ve got more space than we need in our gym.

It’s just the way, the nature of our lease that it would cost us more money to get a smaller space, and I’m like, “Let’s just keep what we got.” And it was serendipitous because my friend, who’s a really good athletic therapist and sold her clinic, but sh- she was commuting an hour and a half to get to, to be an employee at the clinic that she then sold to new owners, was like, “I want space more local.”

And she’s, “I want part-time.” And I’m like, [00:05:00] “I’m super flexible. I basically have an extra office. For $1,000, I can make it super nice.” And we’ve set it up that, one, we have a lot of trust, so I know she’s really good. I’ve personally been going to her for my myriad of colorful injuries for eight years now.

And two, we’re both cool with a really hands-off split. It’s her own booking software. It’s her own billing software. I trust her that she’s like, “Hey, here’s what I invoiced at the end of the month.” And we’re like, “Cool. Here’s our invoice for 25% of that,” or however we set it up that way. We do a 25/75 split.

We don’t do any supplies. We don’t wash any towels. We don’t provide acupuncture needles. We don’t do… If she wants to get a plant, she gets it. We’ve made the space nice, and if there’s something she really needs, we’ll help. But we’ve intentionally set it off to be relatively hands-off, because one of the things I was optimizing for in this was The best opportunity at my gym still continues to be just go get more clients into one of our two flagship offerings.

This is awesome for clients, and I [00:06:00] agree with everything you said, and we still have more room to increase capacity in the gym, so I didn’t want something that was gonna require, you know, five hours a week of management. It’s– we gave her a key to the gym. She can come in. She just lets her know, us know what her hours are.

So we’ve made it really hands-off, but then have good integration across her and the coaches just from being on the same page. Every coach got free treatment, how to talk about each other’s services, et cetera. She’s probably getting more businesses out of it than we are, but we are also getting a split for everyone we send her, so it works out, and we trust that she’s, does an exceptional job and is encouraging people to exercise and rehab, not the other way around.

So just so I understand, your revenue share agreement is based on top-line dollars? Correct. You– I don’t wanna put you in a weird spot, but it sounds like you’re really winning. This is a good agreement. It’s funny. She’s owned her own clinic, so when we negotiated, I’m like, “What’s normal if you owned a clinic?”

And she’s, “When I owned the clinic, I did a 60/40 split, but I included this and this.” And I’m like, “I really don’t wanna go buy a washing machine to do towels [00:07:00] and all that stuff. Like, how much is that worth to you?” And we get 25% off the top and, but the trade-off is I knew we were gonna feed her more clients because her practice is, it’s in Oakville, which is not in Guelph.

It’s an hour and a half away. So I knew there was gonna be this give and take, but we’re actually relatively on par with a lot of places like this. It’s possible she could get another split somewhere else that’s a little bit better, but she’s also part-time. She does 20 hours a week, so there is a ceiling on how much either of us are gonna earn from this.

Yeah. Okay. I don’t think there’s any reason for us to dive into the concept of renegotiating your agreement ’cause I think it’s fair and equitable. For me, I think one thing I would like to point back at is how important it is that you fully vetted this person. This- I vetted the shit out of them. I cannot emphasize that enough.

Exactly. And so an agreement of this nature only works because the trust already existed, and you knew you had a culture fit, and you had already done the quality control homework. [00:08:00] And so yours is, for lack of a better term, a little bit of a unicorn It doesn’t, it’s not a complete outlier though, because if there’s one thing that the collective we at BFU have talked about over the years, it’s building out your network and making sure people like this therapist exist in your network.

Maybe not in your building, but if everybody is practicing all the things we talk about internally, then you know who the PT is or the manual therapist or orthopedic, whoever it is that you’re referring out to, you’ve done a lot of this homework. So it’s not crazy that you found this. It’s just important to note that the trust involved in saying, “Hey, I’m gonna take 25 cents on every dollar you tell me you collected.

Don’t worry about opening the books. I trust you.” That’s- It’s- … that’s not normal everywhere. To be fair, it’s possible she actually sends us a report. I’m just not involved in that process. My GM runs the show with that. A- and honestly, it sounds like it’s, it’s revenue that you want, but you don’t necessarily need, so you don’t need to be a psychopath about it.

There’s a [00:09:00] good healthy dynamic in place right now. 100%. And there’s been some places where I’m like, “You might wanna consider a little bit of area off for this and this.” She’s like, “Yeah, I don’t really want to.” I’m like, “Cool. It’s your business.” Yep, yep. Okay. So I’m cur- So next thing- I’m curious about yours at a high level.

They’re very different. Mine is a flat monthly rental fee. I don’t look at their books. We have an agreement on what the space is worth to us. We have explicit language on how their monthly cost structure changes should their team expand. Mm. That’s, that’s one place that I think that a lot of people who do this miss an opportunity to get specific in the language of their agreement.

It’s so easy to say, “Hey, we’ve got this room,” or, “At Lean Strong, we got this room. It would be cool if we rented it to a PT.” And your PT has an agreement that’s favorable with you. I think that there’s a lot of upside there for her, especially if she manages her overhead, and she isn’t crazy about buying all the plants you talked about and all the extra stuff, like, and she just runs- There’s-

a really clean operation. There’s tons of- [00:10:00] There’s almo- there’s almost no extra stuff. Her margin is 3% for credit card fees, and then it’s split to us, and the rest is her. Exactly. So if she keeps doing that well, conceivably she’s gonna say, “The other place is no longer for me. I like this place. I’ll be here in a closer to full time.”

Which in my experience That’s how it started. In our space, Move Strong Physical Therapy was Andrew Millet, and he was in here and he was… He said, “I’m gonna be here for X number of hours a week. I think I could build something.” And then that became closer to 30, closer to 40. It became a full-time thing, and next thing he’s making a hire.

And if you don’t have language in your agreement about what changes, you’re a gym owner would suddenly double the usage of resources and a, a head full of resentment every time you watch that first employee walk in the door and you’re like, “What the hell? Their rent didn’t change. How did I not think this one through?”

And- So you… So if I’m hearing you right, if I can interrupt, you’ve got a, you’ve got a flat rate with it costs X or Y dollars more [00:11:00] per person, but you don’t look at their books. They’re running their own business. Correct. Obviously you’ve got good referral. Do you do a, if they get one of the athletes from CSP, do you get a bonus for that, or just keep it real simple flat rate?

No, we do not do any sort of referral. We refer relentlessly back and forth in each direction, but there is no, “I gave you this, you owe me that.” Because honestly, I don’t I want, obviously this is transactional, but if we’re gonna walk around and tell everybody that every decision we make is what’s in the best interest of the athlete, belaboring the point on referral bonuses and making things transactional and how we hand business back and forth doesn’t celebrate the spirit of that agreement.

Yeah. And so I lean more into the law of reciprocity. If Andrew sends me two leads this week, I’m gonna find a way to get two back, because I don’t feel comfortable being the one who’s getting the lopsided end of this deal. Yeah. And I get the impression he operates the same way. [00:12:00] And so- Well, I love that. I…

The reason I ask, I’ve had people ask that, “What if we get this?” or, “What do I get that?” And it’s, I think it’s just a little bit too nickel and dime-y. If it’s the right person, neither of you are gonna be able to look back at the end of the year and be like, “But I gave you two more referrals. You might have made $50 more than me.”

Just don’t worry about it. Exactly. And look, y- I know you’ve got one son. I have two of them, and they live in this world of fairness. Everything needs to be exactly balanced. If I grab a handful of Oreos out of a bag and I put them in front of one of them, the other one will be like, “Hey, I gotta count those before we grab my handful.”

And- Oh … it’s obnoxious . And I’m sp- That is obnoxious … and I spend my whole life just dividing things in half and making sure that everybody feels like we did right by them. And- Oh, my God. The, the last thing you need to do is to do that at work. Oh, my God. Exactly. It has taken me even further away from that mindset.

I deal with it enough at home. I’m not doing this at work. No, Andrew, I don’t wanna see your books. I trust you. You say you’re doing this at this time, this, great. We’re on the same page. This [00:13:00] is a partnership. If your business wins, my business wins. Yeah. And if your business fails, mine looks like shit, so let’s get it together.

Yeah. And so to, to circle back, ’cause I know we’re a little tight on time today. You did mention one thing about having a room to rent. That’s kinda how this starts for all of us. I’ve got a room. Yeah. When we started, we said, “Hey, Andrew, we’ve got a room that we could rent.” He very smartly said, “Do I have to rent the room?”

And I was like, “What do you mean?” He’s like, “To me, the environment is the thing.” He’s like, “I wanna do PT for athletes, performance training-minded PT. I wanna be in the energy of the gym training.” And so we rented him a footprint, but we were like, “You can put one of your PT tables right over at that spot.

It can live there.” And for a period, he didn’t have an off-the-training-floor private space. We had kinda a community office that he was allowed to use if he was having delicate conversations or someone needed to change or things like that, but he wanted to be in the chaos. And I say this [00:14:00] because Almost every, every gym owner that has a PT renting from them in this capacity, their PTs bleed into the training floor more and more to the point where you almost can’t tell who’s a strength coach and who is a physical therapist.

Mm-hmm. If you walk into my gym not knowing who the staff is, you very well may see a PT standing next to an ANCORE doing some sort of cable-related treatment, and it looks like someone’s getting personal trained, and that’s how it’s designed. They’re supposed to blend together and peacefully coexist.

But I would be careful if you are a gym owner who has this idea that you’re gonna bring in a PT, they’re gonna rent that room, and they’re never gonna leave it, because- … they definitely use the resources. They definitely spill into the space. I definitely find myself occasionally frustratedly walking up to their space and being like, “There are my five-pound dumbbells.

What the hell, guys?” Yeah. And that’s just the way it’s gonna go. There’s always gonna be some give and take in [00:15:00] that sense, but don’t make the mistake of assuming that they’re gonna close that door and always stay in their nice little 12-by-12 office, and you’re just gonna collect your rent check, because that’s not how the space is ultimately gonna be used unless you explicitly put that in the language of the agreement that you’re not allowed in my gym.

In which case I’d say, what’s the point in paying a premium in rent to be in the gym if you can’t use it? Yeah, that’s a really good point. E- even though we do things completely differently, I’m noticing a lot of overlap that maybe I can highlight these points for anyone else thinking about doing this.

First, we’re both on the same page with you gotta vet your people. Now, I don’t expect everyone you bring into your space to be your personal physical therapist who you saw for eight years, like I was in that boat. But you have a network of people. Maybe don’t pitch the person who you don’t know. Maybe reach out to the people of, “Hey, we’re thinking about doing this thing.

Any chance you’re interested in it?” Second thing I’m noticing is even though we both do basically polar opposite j- in terms of a financial agreement here, I reverse engineered the split from what I thought was reasonable. We had that conversation. “So if you’re fully maxed out, it’s gonna be about blah.

[00:16:00] This is about what this space is worth to me.” And we found a middle ground there. Ended up being about 25% based on hours. I expect if she were to go full time and double her hours, she’d probably talk me down from percentage, and I would probably agree to that. But you did the same thing. Here’s what’s worth to me.

And the third thing I’m hearing is like there is like a manage your expectation piece here. You’re not going to find someone who’s like, “Hey, rent this room from me and it’s gonna be passive income.” I’m doing air quotes ’cause that doesn’t exist. You’re not gonna find somebody who isn’t going to be on the floor.

Ours is coming in and out. She’s using rollers. It’s whatever. But there’s this element of like neither of us really wanna nickel and dime the other person, nor do you wanna nickel and dime your person because you know at the end of the day in the big picture, it’s always gonna be a win, not just financial, but appearance and optics for the business of having like, damn, you got this really good person in your space, and it is one-stop shop, and it can go back and forth, and now they can easily be like, “Hey, coach, here’s the thing.

Let’s tweak the training program.” I don’t know how you put a value on that. Yeah. [00:17:00] May- my takeaway on that to build off that concept is maybe the advice is don’t open a gym for the first time with a PT in it. Don’t build this into your initial plan, because the way that you vet is you accumulate … I- if you don’t have your own PT, I’m lucky enough, I hasn’t, haven’t had physical therapy.

But if you work long enough, you work with enough athletes that have had PT or come to you fresh off of completion of a PT prescription, and if you’re good at what you do in this space, you ask all those questions. Tell me about your inju- injury history. Tell me about what you were recently addressing with your physical therapist.

Did you like your physical therapist? What did they do particularly well? What made you sad to run out of insurance coverage for that PT? Why are you disappointed that you’re not with them right now and you had to fall into line with us ’cause we don’t charge as much? How can we blend the two? Would you be okay with introducing me to your PT?

I would love to meet them. At which point there’s a whole other [00:18:00] SOP on how we open that dialogue and how we kiss some ass and build some relationships and start facilitating a referral network between the two. Another podcast for another time. But the point is, your community can and will do the vetting for you if you’re open for long enough.

But don’t make the mistake of taking the if you build it, they will come approach to this, and map out your business plan for your S&C facility with your fully cranking PT clinic, with your nutrition offering over here, and the manual therapist will be in this room. Like, all of those things are only gonna serve to get in the way of each other if you haven’t established the client roster that’s gonna help you find the professionals that deliver those ancillary goods.

I could not agree more, Zed. All right, then let’s kill it there. I thought you recapped it nicely before I went on my rant. No, that was great. Thanks for your time, Pete. This was really good. Good chatting, Ben. Maybe we should come back and do that whole opening the conversation with Zed PT about [00:19:00] networking on a future episode.

I’m down. Let’s do it. Talk to you soon. All right. Talk soon. See ya.