Struggling to pay the bills month after month?
You’re not alone. If you’re like other fitness business owners, the big problem is margins.
If your profit margin is below 15%, you’ll struggle in “survival mode” until you’re exhausted.
If the profit margin is between 15% and 29%, you’ll grow and experience some financial relief, but you will still be at risk.
But if you want a stable, sustainable, growing business, you need to do what high-performing gyms do – reach 30% or higher profit margins.
Here are six “profit keys” that will show you how to do that:
- Revenues: Strong revenue is the first step to a high-profit fitness business. What drives your revenue growth? You’ll start with your best clients/members – who are they, what do they buy, how much do they pay, and how can you better serve? You should be bringing in 80% of your revenue from core services and another 20% from ancillary revenue.
- Cost of revenue: After revenue, this is the second most important number in your business. If you get this wrong, it’s impossible to achieve high gross profit and operating profit margins. Look at these two numbers: Coaching Labor Costs and Sales & Marketing Costs. You must invest in attracting and retaining great people on your team, but you can’t afford to overspend here. Be careful about overspending in advertising costs, agency management fees, etc.
- Gross Profit: How much money do you have left after you spend to sell and fulfill your services? That’s your Gross Profit Margin. The most successful fitness businesses operate at an 80% Gross Profit Margin. Most fitness businesses struggle here because they are not generating enough revenue to cover their costs plus margin, or because their cost of revenue is too high. Watch this number like a hawk!
- Strategic expenses: When you get Gross Profit right, now comes the easy part. Just don’t spend all the money your business has brought in! Of course, you’ve got to have the right lease and rent percentage, but you must also ensure the other investments you’re making are working hard for you to optimize client lifetime value. Make your business so awesome that people never want to leave.
- Operating profit: Your revenue minus the cost of revenue and expenses equals operating profit. Your operating profit should be 20% to 30%. If it’s not, you need to re-engineer the money math so it is. Continuously improve the returns you’re getting on investments to grow (find and sign up new awesome clients/members) and retain (deliver value, ensure people want to stick around and keep buying from you) revenue.
- Protect net profits: Deduct taxes. Hire a good accountant and tax advisor. Tax advisory (and optimization) is essential for every business owner. Maximize the way your money works for you to support your personal and professional goals.
Once you’ve assessed where you are, you’re ready to address your key issues. Get your margins right, then execute. That’s how you’ll grow throughout the next year.
Want to learn more?
Join us for our weekly LIVE virtual workshop, the 7-FIGURE FITNESS ENTREPRENEUR™. Unlock your fitness business potential and master the art of sustainable growth. And get the plan to sell out your fitness studio and create a waiting list for your next (or first) location! Includes LIVE Q&A with NPE CEO Sean Greeley. Secure your seat now!
About the Author
Sean Greeley is a founder, coach, family man, author, and speaker who helps fitness entrepreneurs build sustainable and predictable 7-figure businesses. As founder and CEO of NPE, he has dedicated his life to helping fitness entrepreneurs find the clarity, confidence, and courage they need to break through and grow to the next level…without sacrificing their personal life in the process.