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How Can Gym Owners Define Success

2020 was the year of the new normal! The pandemic forced several businesses, especially gyms and fitness centers, to change their business model to stay afloat in challenging times. The way gym owners measure success has also changed.  The number of gym members alone can never tell you much about the business’s profit margin, client […]

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2020 was the year of the new normal! The pandemic forced several businesses, especially gyms and fitness centers, to change their business model to stay afloat in challenging times. The way gym owners measure success has also changed. 

The number of gym members alone can never tell you much about the business’s profit margin, client retention, or even the average value of a client. Plus, you also need to assess the effectiveness of your coaches and their contribution to business success. So how can gym owners define and gauge the success of their gyms? 

In this post, we’ve shared some common parameters that will help you measure your gym business success. Use them to build strategies that can take your business to the next level. 

  1. Client-Related Parameters

To ensure success, gym owners need to improve the number of memberships each month and retain each client or member for as long as possible. Client success can be measured using the below-mentioned parameters. 

  • Client Retention

Calculating your gym’s retention rate will help you determine the health of your gym membership and if there’s a problem that needs to be addressed. The following metrics can help you determine client retention.

  • Monthly Churn – It is the average percentage of clients who leave the gym each month over ‘X’ months.

Monthly churn = No. of clients lost in a month/ No. of clients you started the month with 

So, if you started the month with 50 clients and lose 10 clients that month, your client churn that month will be 20%.

  • Monthly Retention – It is the average percentage of clients who stay with the gym each month over ‘X’ months.

OR

Monthly retention = 100 – Monthly churn rate (from above)

So, going by the same example, your monthly retention rate is 80%. 

  • Average Client Value

This is what the client pays you through their membership with you. This can be determined by calculating – 

  • Average Revenue per Member

This value will tell you how much each member is worth. It’s good to compare this value with your CAC. If CAC is higher than the revenue the member brings, you are at a loss. 

Average revenue per member = total revenue / total number of members

  • Lifetime Value Per Member (LTV)

Looking at your member’s LTV will help you project the growth of your gym and its revenue. Here’s how you can calculate LTV. 

LTV = cost of membership X member lifetime 

We will know about member lifetime in the subsequent point. 

  1. Client Behavior-Related Parameters

In the fitness industry, it’s critical to study member behavior. That’s because there’s a strong correlation between parameters like the frequency of use and the member satisfaction levels. 

Here are a few parameters you should pay attention to when assessing member behavior. 

  • Attendance per Member

Checking the member attendance is critical as it offers interesting insights that impact the client retention rate. Measure attendance from the standpoint of individual members and their average attendance. Alternatively, look at them as a ratio of class attendance per capacity. 

So, attendance per member = actual students in class / class capacity) x 100 

Ideally, each member should have an attendance of two or more visits per week. If your members aren’t visiting regularly, something’s not right!

  • Member Lifetime

How long do clients stick with your gym? This parameter directly feeds your gym’s retention rate. Here’s how to calculate it.

Member lifetime = 1 / Member Churn

  1. Vital Coach Metrics 

Your team of fitness coaches plays a vital role in the success of your gym. Measuring how productive they are is key to creating customer value. Here are a few coach metrics that can help you determine their effectiveness. 

  • Member Retention

We’ve already covered this point; yet, it’s important to measure this metric not just for the facility but also by each coach. Track individual coach retention to spot laggard trainers who may be negatively impacting your gym’s profitability. 

  • New Members

Getting new members to the gym is about expanding your customer base and growing your business. Regularly monitor the consistency of your coaches in getting new people into the system, thus opening up a new marketing channel for business growth.

Besides, it’s critical to measure the service offered through surveys like Net Promoter Score (NPS) survey. This simple survey will help you quantify how your coaches are performing.

  1. Business Performance Metrics 

Knowing your business numbers is a critical part of running a profitable and healthy gym. Monitor the below-mentioned metrics to spot issues before it’s too late. 

  • Revenue

Revenue is the total gym earnings during a specific period. Ideally, you should be comparing these numbers monthly to spot trends and project future revenue. 

  • Expenses

Like revenue, you need to have a firm understanding of your business expenses. Are there any recurring expenses that your gym incurs? Have you installed new treadmills or recently undertaken an epoxy resurfacing project? All such expenses need to be considered when calculating monthly expenses.

Include the cost of overheads, supplies, equipment, upgrades, and labor to determine the expenses your gym incurs.

  • Cost of Acquisition Cost (CAC)

It is critical to assess how much you are spending to acquire a new member. To make profits, you need to keep the CAC low. 

CAC = total marketing costs / No. of new members during that period

  • Net Profit 

This is the difference between your revenue and expenses.

  • Gross Margin

The gross margin shares the percent of income the gym retains per period. Here’s the formula you can use to calculate gross margin. 

Gross Margin = (Revenue – Expenses)/Revenue

A successful gym will have high margins. Hence, it’s wise to adjust your margins by reducing expenses.

For instance, if you spend less on advertising it will lower your CAC, thus improving your margin.

Summing Up

Whether you are an industry veteran or a greenhorn gym owner, taking a firm grip on your business metrics will help you monitor the progress of your marketing efforts. If you aren’t tracking them yet, start today! The awareness you will gain through this simple exercise will help you focus your resources on upgrading your business. 

Use the information shared above to measure and define the success of your gym business.

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