Raising rates on members can be scary. In fact, it was so terrifying that I almost ran my business into debt before a mentor helped me raise my rates with assistance, I was able to stabilize my business without losing all my members. The Two Brain Playbook works, but you don't have to take my word for it. Today , I run a profitable gym.
I've got a gym owner here who's gonna share the details of his recent rate increase with you. I'm Mike Worthington . This is Run A Profitable Gym . Please hit subscribe so you don't miss a show. We crank these out twice a week and we give away the cheat codes for gym ownership so you don't make the mistakes that I made. And you find out the best practices from the industry. So please hit subscribe.
Now direct from Franklin, Tennessee. We have Tim Rainer , who owns Fit one Five that I love that name. Tim, tell me what's the one five come from?
It's uh, our area code. It's 6 1 5. There you go. And so we , we took it small logo 6 1 5 and big ones fit one five .
Nice. It , uh, it rolls off the tongue. I think it's such a great name. I am pumped , uh, to dig into this with you because I love hearing about gym owners that stabilize their businesses and it's such a scary thing that I think we can help some people , uh, maybe not be so nervous about fixing their businesses. Are you ready to go?
Yeah, absolutely.
Alright , so you've done several increases, I think it's about four now at this point. Set the stage for me, like how was your business doing and what made you do a rate increase in the first place, like your very first ones?
Yeah, so we, our gym started out pretty well. We, we took out no debt and then we paid cash for everything. And we kind of committed ourself to paying just a minimum amount every month. But what we realized was early on we tried to do group classes, like large group classes because as every gym owner wants to do, when you start the gym, you want to help as many people as you can.
And so what we started to realize was we are, we come from a background of personal training and we opened a gym to do large group training. And so we also know nothing about marketing. You know, we know nothing about all of the things that run a business, but we just were really good trainers and what we realized was we were doing what we thought was good, but we weren't making what we expected to.
And that's tough, right? Because you're putting in a lot of hours and you're just trying to like, make things work. So we, we kind of have two, two buckets, right? We have personal training revenue, and then we had large group classes. And what we were realizing is that every year that we were open, our personal training revenue was going up and our large group classes staying the same we're going down.
And so when we opened, we maybe started at like 75% group training revenue, 25 personal. But then every year it just started to flip more. And even at this point it's probably 75% personal training and 25% small group training.
So the way that we looked at the first couple rate increases was, well , our personal training revenue is good, but our group class revenue is bad, so let's just do a rate increase on this because we need to get this up because right now we're losing money, paying out coaches, but we make our margins on personal training.
And it's, it's kind of like this cyclical thinking where it's like, well, we don't wanna raise our personal training rates because that's a lot of money, so let's just raise the ones that aren't making money in that aspect.
And it just, it just kept being the same, you know, I mean, you raise 50 people for a group class, $10, and it's still only $500 a month and you could sign up a twice a week client and get more than that. So it's, it's not, it's helpful and you know, you're grateful for the extra revenue, but it doesn't fix the issue.
Okay. I'm sorry, I wanna interrupt. You did three increases, correct? Yeah . You're good . And you three , what were the , do you remember what the numbers were, what you went from?
So we started at 180 9 and then we went to 1 99, we went to 2 0 9. And so we just kept bumping up group classes by $10 every year.
When you did that, how did it go? How did the members receive that? How did you implement it and like what happened?
Yeah, I think that that's something that you learn too, is you basically, you have to have a reason for this. And like our reasoning and the numbers behind it weren't, weren't super sound. So it's just kind of like, oh, we're just, the , the common thing you hear is, well everyone increases their price so we should too. And that's like a really bad reason to do it, you know?
And they went, okay, you know, we, we never had anyone that's totally lost it and they understand the value behind it and, but it just didn't fundamentally change our business. So then it's like, why are we just increasing to increase if it's not improving our margins? And if it's like our business is still growing on the training side, but the group class side is, it's not making a dent in our margins as owners.
And did you do these three increases , uh, like every year for three years? Or how did you space them out?
Yeah, it was every year.
Okay. And you said you did them without the help of a mentor, correct?
Just totally on a whim.
Yeah. And was it scary, like when you thought about the first one, were you just like, this is terrifying? 'cause for me, when I even thought about it, it was terrifying.
Yeah, the first couple you , you really overthink it. You're like, oh man, this is like, it's gonna be, it's gonna be bad. And like it's uh , it's like that stoic philosophy. Like if, if you worry about it and it happens, you've just worried twice, like why suffer? So we we're talking about it like, man, we gotta raise our rates.
And it's like months at a time and then finally it's like, okay guys, I'm announcing it now. And you send that email out or message a communication, you're just waiting and then nothing typically ever happens so you're like, okay, I'm good. And then by the second one it's like more clear, more concise, like, hey, it's gonna happen. So it gets easier.
But yeah, the first couple times you're just like holding your breath waiting for it.
Yeah. And you didn't solve the problem so you didn't lose your members, but you didn't solve the problem where you said it didn't really move the needle for the gym. And your story is very similar to what Chris Cooper had. His is slightly different than that. He had two different gyms where he had a, a group class gym and a personal training studio that was basically propping up the group class gym.
It sounds like you had the same situation right inside one gym where you've got the one revenue stream that's doing really well and the other one that's kind of not doing so great. And I'm gonna guess in your group classes, 'cause this is what happened to me, you probably had like three or four people show up and you were basically doing person training in a group class. Is that right?
Yeah, and that's, that's what the mentor Tim Caputo really helped us with is figuring out it . It's not a rate problem that we were dealing with. It's a fundamental offering and business problem that we were dealing with.
And so this is a really interesting aspect because there are things where you can do with a mentor's help just a rate increase on your existing products. And you can say, my group classes are priced at one 40 and they need to be 205. I need to add more value in and I need to do this properly, I need to raise those rates. And you can just do that.
Or in other cases a mentor will look at the business model and this is like every business is unique. So the mentor will look, take, look at your metrics, figure out what you need to do and then start looking at that model. And business models, we have a whole mess of them. We tailor them to each individual business. So it's not just rubber stamp one size fits all , it's how do we make this business better?
So I wanna get into how you did it and you've got an interesting situation, but it's not that dissimilar from everybody else who wanted to run big group classes, couldn't because it's really hard to do that. But you had a great personal training stream. So talk to me about how Tim decided exactly what to do with your model and this most recent rate increase. This was January, you did this, correct? Yep . And it was
A big one. Everything in January? Yeah. Yeah, it
Was , okay , gimme the details, let's roll.
So the biggest problem that that we have, I don't even know that's in our area, it's really probably just our business is that we have offerings on two different ends. We have a group class offering at 200 a month and we have personal training at, at the time 89 an hour. So for most people that's seven 12 a month.
And so you have 200 and you have nearing a thousand with some people training three or four times a week. And those are, it is just drastic. And the biggest thing that we had found is that yes, you know, some of the small group , some of the large 200 a month will add on nutrition coaching or training or other services, but it still takes time, right? And it still doesn't fix the fundamental issue.
And so the other thing is that when you look at adding an on-ramp to your business, it's really tough because you're going from personal training and someone that is working one-on-one and has a budget for 700 to a thousand dollars a month. And then if you're doing a true on-ramp, they should be going into the group class and now all of a sudden you're cutting that revenue from a thousand dollars to 200.
And that's tough because then not only does the member say, well, I'm paying for me and I want to keep paying for me and my goals and my time and convenience, but I don't really trust a $200 a month product when I'm getting your time exclusively for four or five times cost . And the way that that had went is our training revenue just kept increasing because there's a lot of value to it.
And that's something that we personally service incredibly well. And we have great SOPs and great people and coaches that, you know , make people feel like this is working for them and their goals.
And with the group classes, we kept finding that we were at that price point competing with the Orange series and burn bootcamps and the other services that honestly we will never be as good as because they just have the community, it's built for it. Everyone that comes in there does that product offering.
And so really it's, are you competing with other franchises at their price point and even CrossFit too, or are you personal training and you're kind of like a unicorn, you just do really great and people start to understand and know and refer their friends for it. And so we looked at those two different options, right? No one in PT wants to drop down the group, you're competing.
And what we've done historically is raise rates based on our feelings of I don't want to charge my training clients more money because this person's paying seven, $800 and if I lose that person then I've now lost 8,000 a year, but I might increase them by $80 a month. So is it worth it? Probably not. Which in reality, it is worth it because even if you lost someone, you could still pick someone up for more, right?
Just, just talking realistically. So what we looked at and Tim looked at with us is we need to make our offerings truer to personal training, which is the niche that we're going towards and our revenue's going towards. So the way we did it is based off data and historically it was on feelings. So on the data side of it, I love the transition literally.
Yeah. And so on the data side of it, we also at the time in January had a, we resigned our lease, which if no one tells you it is very expensive to resign a lease and renegotiate it. And so we went up by about $6 a square foot, which for 3,300 square foot is substantial, you know, $20,000 or so. And that's immediately, if we don't raise them , we're just going to take that loss.
So on the training side of it, this was the first time we'd ever raised rates and we went from 89 to 99 an hour. And on that side of it, we do about 350 training sessions a month at the time. And so the $10 increase literally on the numbers was $3,500 increase a month. So our, our operating expenses, our rent and our operating expenses went up about $1,600 a month.
And then if we go off a four nights model for service, that's gonna be about $1,500 a month. So there's 3,100 of the 3,500, and then of the extra 400, that's essentially your taxes, your merchant fees, et cetera. So even at a $10 increase for 350 sessions a month, our margins are not any better. But we get to pay our coaches more and we get to cover our bills and be more comfortable.
And I'm just gonna jump in and just say listeners, if you don't know what the four nines model is, the short version you pay coaches 44% of gross revenue and the gym keeps the rest, which is allocated between profit and operations and and fixed operating costs. Keep going .
Yeah . And so then that fixed our issue on the rate increase for resigning a lease, the cost of doing business, which is unfortunately high, especially in our area. And so the other issue was with our coaches, our trainers we're paying them out 45 to $60 an hour for personal training. But then on the group side of it, we can only afford to pay about 25 an hour.
And the way that it's gonna work out is just if a , if a trainer can do a training session versus a group, it's just not going to work. Right?
This happens to everyone. It's so common.
Yeah. And so it just doesn't make sense for them to be like, Hey, you're gonna take five or six group classes because I don't want to do it and I can take a training client when they go, well what if I want to take one? So on the numbers side of it, we needed to look at how do we get our group classes to match the payout of personal training.
Realistically, we can't, we can't just add 50 people to group classes in our space. It's not gonna work. And historically we haven't done it, so why would we do it now? So what we needed to do instead was look at the price point and work backwards from how we need to pay people out and how many people that looks like.
And so off of a four nines model and off of just paying trainers what they deserve to be paid, that was $350 a month. And so then we go from branding that is group class or larger group class to small group personal training.
And in a lot of ways our members are looking at it from, yes, it's a price increase, but now instead of who's gonna show up for the class it goes to this is the class and these six to eight people are , who's getting worked on with a personal trainer,
I gotta point something out here. This is like this listeners is the main point of the show, figured out what you wanted to make. Then you went backwards and said, how can I provide the value and service that justifies that rate? Then you did it. Like, yeah , people don't do that normally. I sat there, I'm like, I did what you did. And I said, oh , I'll just tack 10 bucks on or whatever. It doesn't work like that.
If you wanna figure out how actually run your business, you gotta figure out what you wanna make, what do you need to earn? What covers your bills, how do you make it happen? Then you start working backwards and saying, how can I provide the value that justifies this?
And for you, it wasn't group classes at $400 a month, it was small training classes where people are getting way more attention at a much better rate for everyone and they're happier. 'cause you said your clients wanna get that attention, you are happier because you're getting the money and you just backfilled all the value. Is that how it worked? If I got that right?
Yeah, it went, it went pretty well. And I think the only reason that we could justify that is because when our members approach us, we have data that backs it up and we have, well, this is where we're going to and this is why. But if we were to just take that number and like, Hey, here you go. Like it's increased $150, then all of a sudden everyone's like, whoa, what , what is the difference?
So it came down to understanding why and the value behind it and how we're paying our trainers understanding, you know, the benefits and communicating that to them and knowing too, like at this point we don't have to keep trying to source these members that are just looking for other options anyway. And we can focus more on these people for less.
Yeah, and let's just , I'll just note here that our men , our mentors have a plan and it doesn't include gigantic rate increases for the most part. Like in , in certain cases, if a gym is just dying and there's no way to save it, but going for a larger increase, maybe that has to happen. Those situations are rare.
What what's more common is for our mentors to plan out if it has to be a large fix, a stepwise increase so that you don't shock people all the way. But again, this is tailored to the business, the individual business, sometimes it's just a 7% increase to cover inflation and things like that.
Other times, if a business is a real trouble, you might need to go 25%, but it might have to happen in two steps or something like that. But know that like there is a specific plan and our mentors have the data and the tactics to know exactly how to execute it and to make the numbers work according to what you need to make and not lose your clients . So I gotta ask you about that.
How did you communicate this value to your clients and did you lose any?
Yeah, so we, we basically sent out an email to everyone, just very clear, concise, now overthinking. Mm-Hmm , Hey, this is the reason why this is changing. These are some of the numbers behind it. Again, very brief, if you have questions, concerns, talk to us directly, we're, we're happy to answer it. We lost shockingly few, maybe two or three people.
And honestly of those couple people, I, I kind of say like, if, if you're gonna raise a rate and someone leaves because of that, immediately they were probably looking for a way out anyway. They sure
Were. Yep .
Just realistically , um, because you know, we can make it work for them. And so yeah, I , it went fairly well. And then on, you know, the one side of it is kind of what I was thinking of is there's this dichotomy of like being a gym owner and it's how can I help everyone? And then at some point it's like, I can't help everyone because I'm focused on these people.
And especially raising rates from that much, it immediately rules out people with a lower budget and you can't really work with them as much. So it's tough. But on the business side of it, you also need to look at, well, if I increase by this amount, what percent of people can I lose? And it is unfortunate, but it's true.
So it's like, well, if we go from 30 people and I increase by this much now I can still have 20 and I can lose 10 and I can have the same revenue for less people.
We actually have this whole thing laid out client or uh , listeners, mentors help people go through it. And you actually go through your client list and it's like, green check marks are staying no matter what. And you know, yellow check marks are like, I'm not quite sure Red xs are probably gonna leave no matter what. And you do the math.
If I lose these eight red check marks, but my rates more than cover that, that's great because I am making more money. And everyone who comes in now comes in at a new rate that's sustainable for the business. Everything works. So again, this is not just like whimsical throw stuff in the air like I was doing in 2013. This is like documented spreadsheets, tactics, do the analysis.
And it almost always works out perfectly because the owners know these clients are fine, these ones are maybe okay, and I can convince 'em on the value. These ones are gone no matter what. You do the math and then you make smart increases.
Do you remember some of the language that you said, and I know that you said the email was brief, but I'm curious, what did you say to when you're like a , a model shift is a big deal where you're no ru longer running, you know, these group classes, you're going to like a small tra small group training model at a higher rate. Do you remember what you said by chance in
The rate increase, it's , it's essentially, hey, you know, this is , this is great news. We have resigned our lease, right? Sustain unfortunately sustainable Business that comes with a major increase in cost of doing business. Um, it's just, you know, we haven't really increased our rates, we haven't increased our rates on training in three years and the group classes are $10 a year.
So haven't really increased dramatically, but it's like it's time for a dramatic increase and this is the reason why. Let us know if you have questions, concerns, et cetera.
As far as the group specifically, which I've sure most people are more interested in, it's essentially, hey, we're we're taking this product and now we are going to small group personal training and instead of like looking for people to just come in and just do the workout and leave, our trainers are now going to get paid more.
And I did mention our trainers will be getting paid extra now to, you know, keep up with what they deserve to be paid. And I think that that goes a long way too because then people are like, oh, my trainer is making more, not like this money's going right to their pockets because that's hardly ever true. And then it just, you know, now we're going to focus all in on you six and this is the cost of that there .
It's so now we're not sourcing
That's the value.
Yeah. Scarcity and value all drives a price.
Yeah, like what you said there said there, and again, listeners, we have our mentors help our clients write these letters and we don't go into like the graphic endless details of justification of being defensive. There is a playbook for how we roll these things out. We know the language, keep it simple and direct and you build the value.
And what you said there is we're focusing on building a sustainable gym that you guys can come to for the next 20 years as opposed to a rickety ship that's gonna sink in a week. We're paying our coaches more because they're amazing and they are now focused on fewer of you to get better results faster. And the rates are going up a hundred percent . Yeah, the rates are going up, right?
And like people are like, well it makes sense. I'm getting better results, my coaches are paid better. There's like, pan over if you don't mind to your gym for a sec, people to check this out. Uh, can you just turn the camera again and show people the what you got going on there? It's a sweet space. Sure. Right? Like it looks, look , look at that. That's awesome. What a clean looking place it looks pro.
Try to be clean. And then we got this , what you , we gotta park out here we're attached to. So yeah, you know, it's, we , we try to put everything into the clients truly. So, and
You built the value and that's the key. And again, it's not just like whimsical, it is actually a system and we know how to tell people how to build value. Think about this. If you're listening, if your rates are low and you know it, the cost of mentorship would be more than paid for by a solid rate increase that gets you where you need to be.
Think about that and you can book a call on our show notes later on if you wanna talk to someone about that. When you sent this letter out, big rate increase against your fourth one. So you've done, you've had some experience, but this is a big one and a model shift where your hand sweaty, how did this go?
Yeah, but I think that we were mostly, I think that the, the biggest thing that our mentor, Tim has brought us is, is confidence. You know, I , I think that a mentor's role is to make sure that like your short term habits, your business lines up with the long-term vision of where you're going.
And for, for him it's like we're telling him, you know, month after month, man, this part just isn't working our business and this part isn't working and I'm not gonna build an on-ramp for training at this cost to just put people in group. And, and even for him, you know, his business is very similar to ours and, and it just is like something's not adding up.
And so at some point it goes, okay, we need to build efficiencies, we need to change this. And now it's like everything that you go through on the on-ramp for two Brain , when we first started, it didn't make sense to us. And now it's like, it makes sense if someone comes in, you're doing personal training so that we can get to build a relationship.
We can work on you and your goals and now you can keep that or we can transition you to small group personal training, which is still a much higher level of accountability than group. And so everything just makes more sense now.
Yeah. And when client listeners, when you come into Two Brain , you're gonna come in and you're gonna get a whole bunch of foundational stuff. And some of it's gonna seem tedious, right? Like creating business systems isn't the sexiest thing in the world, but everything that you're doing is creating the foundation for a business that's gonna last for 30 years.
Pay you at least a hundred grand a year and let you live the life that you want. So some of the stuff there, you're gotta do some work, get your hands dirty, but you're gonna push through it really quickly. It doesn't take that long to do it. And the intro program is set up to give you a bunch of quick wins so that you are actually making better money right away.
And part of that is coming from structuring your offer and your pricing that is addressed, helping you market and get clients. So that stuff all happens right on intake. Now, how essential Tim is a mentor in this process.
We, we wouldn't have done so many things that are at this point. You just look and you're like, I should have done this years ago. And we, like, for the record, we had a great gym , we have a great gym and we were profitable every year, but there were just things missing and there were things that , like my wife and I, we try to control too much, like cleaning.
We didn't hire a cleaner and the first month we were with Tim , he's like, hire a cleaner and we haven't looked back since you
Just took the rubber gloves off and walked, Hey , I love
It . Yeah . And like, we were like, man, should we do this? And he's like, do it right now. And it's just like some of those little like votes of confidence of like, yes, do this. Like everything is telling you, but your brain just emotionally is like, Nope. Like it's gonna look like crap, four's not gonna be clean.
And then it's like, it, you're just, you're illogical when you are an owner operator in the business and you're focused on it and you care about it. And having a mentor that's looking at these things like, no, look, this is what you should do.
It's, it's the extra vote of confidence to be like, okay, I'm in the right direction, this is my next step and am I doing the things that are gonna line up long term with where we're going
Drop the mop and sell some PT Tim. Right? That's kinda what happened . Seriously .
Seriously. Yeah. Yeah.
So as we close this guy out, if a gym owner's thinking about RA raising rates, 'cause there's someone listening right now and they're like, they know that their business is in trouble and they need to raise their rates, but they don't know what to do. What do you, what's your advice?
Well, immediately you need to break down your business and you need to see exactly where you're at. And you need to make a plan to go backwards in reverse engineer to be where you wanna be , right? That's, that's step one. And a lot of times businesses have different inefficiencies, like staff turnover, not getting enough members.
I mean the, the simple six right arm, leg, ROI , headcount, et cetera , kind of explain what's wrong with your business and you need to look there and see what do I need to make and how do I go backwards from it? But really, I mean, I tell people more and more like we're in the business of coaching, hire a coach. Education is free. You can find everything you'd ever want on the internet.
And if you could do that, you wouldn't need someone like two Brain to tell you what to do and how to do it. Coaching is expensive, so it's also worth it. Within our first probably three weeks of two Brain , we had already covered our membership plus more. Are
You serious?
Oh yeah, easily. Wow. And since then, full transparency, we had gone in December of maybe mid like twenties to 30, touching 30,000 a couple months and we'll finish this month over 40. And that's, you know, good for you. That's like 15, 16 months in.
So, and it's just a lot of things that are really simple, clarifying your offer, getting your niche down, and talking to someone that knows your business outside of it and can help get you where you want to go.
So simple six, Tim mentioned that is one of Chris Cooper's many books, you can get it. I'll put a link in the show notes for you and get that on Amazon. Check it out. You're gonna find all sorts of stuff in there that you can do to analyze your business and make it better.
I'll tell you this, if that book hits home, but you're just not sure how to do it, you owe it to yourself to take the next step, which is book or call and talk to someone about how mentorship can help you. And you're not gonna get a hardcore sales pitch. You're gonna get an analysis saying, your business could use this, we can help you with this. And they'll explain things for you and lay out the path forward.
And like Tim's saying, you're gonna get ROI on your investment. Like, Tim, it wasn't really a cost if you made all that money back right away, hey .
Yeah, it's, it's like a , it is like a coach, it's an asset and not a cost and not a liability. If you make money off of it, it is an asset. A hundred percent. There
You go. I'm super pumped. Tim , thanks so much for being here and I, I'm, I'm excited that you've , uh, covered the cost of that sweet space and , uh, you're going forward. I , I won't have you back in a bit and we'll see where you are . Thank you so much.
Thanks. Appreciate it.
If you're thinking about raising rates, give it, get the simple six, then book a call with our team and we'll have you talk about it. That was Tim Rainer . This is Run a Profitable Gym. This is where the world's best gym owners tell you exactly what they're doing so that you can have the same success. Please subscribe on your way out so that you don't miss a single show. And if you're on YouTube, I'd love it.
If you would hit a like on the button, that would be fantastic as well. And now here's Chris Cooper with a final message.
Hey, it's two Brain founder Chris Cooper. With a quick note . We created the Gym Owners United Facebook group to help you run a profitable gym. Thousands of gym owners, just like you have already joined in the group. We share sound advice about the business of fitness every day I answer questions, I run free webinars and I give away all kinds of great resources to help you grow your gym.
I'd love to have you in that group. It's Gym Owners United on Facebook, or go to gym owners united.com to join. Do it today.