Fitness Business School – The 5 Ms with Doug Spurling

Full Transcript

Hey, Pat Rigsby here and in today’s episode I’ve got my good friend Doug Spurling alongside, and we’re gonna talk about all sorts of stuff to make your business better. So let’s get to it.

Welcome to the fitness business school podcast. The show for fitness business owners who want to grow their income, increase their end impact and improve their lifestyle. Be sure to listen to the end of this episode, because we have a brand new special offer exclusive for listeners. So stay tuned.

So I’m excited to have Doug here with me today, and we’re, we’re hanging out. And honestly, Doug doesn’t have any idea what I’m gonna be
asking him, and that’s kind of the idea. I want him to be off the cuff. I want him to share some of the stuff that he’s thinking about, but I’m gonna give him a little bit of, I think a framework to work within, and we’ll go from there. But before we do that, let’s get some of the preliminary stuff outta
the way, like, welcome, Doug. Excited to be here.

Yeah. So, well, Doug was in town last week for our boardroom meeting. The, the group that he co-leads with me of higher level fitness business owners, he’s back this week to hang out at our Ideal Business Accelerator Mastermind event. And we’re working on some, some strategy stuff for some
of our projects. So, lot of, lot of quality time. But I wanted to maybe hone in on a topic that, that you covered during the boardroom meeting last week, this five Ms of fitness business. Now, obviously that was a very robust presentation, a lot of depth. We, it is probably beyond the scope of podcast
to dive in, but I wondered if I could just talk through some of those and get you to just share a few thoughts.

Yeah, I think it’s a amazing, framework that I used it as makeover kind of looking at if I were to go into a business and makeover the fitness business, what it would look like, what are the five things I would go through? So, simple framework, you can, you can implement and, uh,
work your way through the five. So excited to dig In. So, so if you ever have a, what is it, John Taffer, like bar, bar fix show. But for Jims, this is the
framework you’d use. Huh? I don’t know if I can play his personality, but, we’ll I don’t think I could either. So, so let’s kind of go down these, we have model marketing, membership, pricing, management, and money. To be fair to the private side of the, the boardroom group, we’re not gonna go crazy in depth, and because I know you did great work there, but why don’t you start out with model and talk a little bit about that for a minute and just
kind of a, a couple of the key points you would focus on if you were dialing in the business model for a training business.
So, I think the, probably the largest thing with model is for most people listening to this podcast, and, and most of the gyms that we work with, I think, an opportunity is really honing in on one model and becoming the best in the world at it. We can really simplify this industry into four
models. We have one-on-one training. We have, what we would refer to as semi-private, two, three people working out, but their own programs, your small group personal training, which is the, the four to six to one range, and a templated programming, and then of course, your large group
training, 15 to 20 plus people. And I think for a lot of people starting out, we kind of want to, we wanna do it all right? We wanna do it all. And so, one of the things I talk a lot about is becoming the best in world at one model, especially if your ideal business is, 50, a hundred,
150 clients. We don’t need to be doing all four of these. And if we do, we become mediocre at all four rather than really good at one. So, if I were to pull one nugget out of refining your model, it’s first before even refining it. It’s, it’s really just picking which one of those is, is going to be your model that
you become the best in the world at.

Yeah. The, the model piece of this is an interesting one because a lot of times people arrive at a model because maybe they worked in another gym and that’s all they had been exposed to, or they start out with either, one end of the spectrum or the other, right? They’ll start out with either
one-on-one cause they just don’t have enough clientele to do, fill up a small group or something like that. Or they’ll do group because they’ll take kind of a maybe front end offer approach and just fill in a time slot and, and try to fill up those peak time slots. So it, it would seem
to me from the observations that I’ve made over the years, that, the semi-private and the small group models probably don’t get enough attention when somebody’s trying to optimize a model because, they’re far less common in most markets. They have plenty of advantages, when competing head-to-head against, I see semiprivate com kind of competing head-to-head against one-on-one or small group competing against, large group or a class model. But, just I don’t think a lot of people in our industry are exposed to them with any depth. Maybe they’ve heard about ’em on a podcast like this, maybe they’ve seen somebody talking about ’em at a perform better type event. But yeah, I, I think you’re spot on there, picking the right model and saying, okay, how do we optimize this in every way, shape, form from the way you lay out your facility to the way you program, to the way you
differentiate with pricing? I mean, we’re, we’re in a pretty competitive landscape. I mean, I’ve been doing this a long time, and this is the most competitive landscape we’ve had as an industry.

So many franchised businesses kind of really moving into all corners of the industry. For a long time it was just, franchise service, the big box club. Then there was the, the smaller model, whether it be the women’s only kind of spin-off of curves, or there was the 24 hour model that
was kind of led by Anytime Fitness, but there’ve been a few others since then. We got into the, the low price model, and now not only do we have the, the kind of mainstream class models, the orange theories, the F 40 fives, the burn boot camps, but we also have the boutique approach that
somebody may dive all in on, being cycle bar or club plots or something like that. So, there, there’s so many different options and we’re not even touching on CrossFits or whatever else that may already have some brand recognition. So, man, if I know offline, we were talking about
in real estate, a lot of times you make your money when you buy in some cases here, you probably are making your money when you’re choosing the right model because everything else can can be built around that. And how you can stand out in the market and how you can price to be profitable, all are kind of built on that foundation. So model number one, man, that’s, that’s good.

I think, the one thing I would, I would add to that is the, the small group model specifically, if you look at, the people in our circle and, and, and I think the people that are listening to this, not to say that the other model, like a class model doesn’t care about clients, but the reality of scaling a class model, if you look at large group training in order for it to be a successful business, kind of putting, putting some of the other variables aside, you do have to have some component of lots of people per hour and get ’em in and get another group of people in the next hour. And so in order for it to be scalable, you do need to have a high volume, and generally speaking, the higher the volume of clientele that you work with, you just, bandwidth is only so wide, so you’re not able to spend as much time per client. So I do think the small group is that happy medium of, we know with one-on-one, the limiting factor is time. We, we can, we can really hold clients accountable. We can really spend a lot of high touch points with them, but the reality is, we only have so much time. So we, we lose scalability there with small group, you, you tend to, I think, really use the unique abilities of the type of people we surround ourselves with, people that want, yes, they want a strong
business, yes, they want their ideal business, but they also really want to hold the client accountable.

They want to design a good program for them. They, they really want to, know about them personally. And so that’s really hard to do on those larger scale volumes. So if you’re looking to build a business, 50, a hundred, 150, 200 clients, that’s, that small group is a sweet spot where you
could double down on that model and become, really good at it. Well, I, I think it may even merit us doing a, a separate episode, just diving into small group as, is a point of differentiation and to, kind of create that moat in the industry. So, no, that’s, that’s great. So let’s move on to M number two, marketing. So, again, if you were gonna go into a business, what’d be the first couple things you’d look at from a marketing standpoint and, and try to dial in?
So number one is, is really understanding, and I’m sure if you’re listening to this, you’ve not heard this term, for the first time today, but list building 365, that that’s, that’s been a core approach, of ours and really having a constant way out there, whether it be digital marketing, things like obviously lead magnets, but honestly, if you’re listening to this in your brick and mortar, I would say just as effective if not even more effective, is some of your, I guess you’d call it
gorilla style efforts to list build with things like, fishbowls at local businesses, joint ventures with local businesses where there’s not a necessarily an intent to sell. The intent is just to add value and collect email addresses paired with that, emailing, we recommend, three times a week, just so that you’re adding value and, throwing in the occasional ask. But, most people we know are, I would say there’s so much in this business that you can win if
you have consistency with a few things everybody is in, I don’t wanna say everybody, I don’t wanna assume, but a lot of people who struggle in, in this industry are, they chase the shiny object, they move on to the next thing, and they never stay consistent with a handful of core things. So if you can stay consistent with list building 365 and a three time a week email, you’re already gonna be ahead of the game. So those, if I was like just starting out, those would be my
top two that I would have, in place for a fitness business.

Wonderful. Yeah. The, the marketing side of it, I mean, I think I get it. I certainly didn’t come from a business background. Most of our people didn’t. Even the the higher end people it, that, that we work with in boardroom, very few of them had any sort of prerequisite business knowledge and so it, it’s not kind of our
default focal point. Our default focal point is always, Hey, I love being in the gym, I love training, I love, the culture, the atmosphere, the energy of being in here. I, I love programming and maybe the figuring out better ways to solve problems, to help people move past injuries, reach goals faster, all that stuff. But, successful training businesses have, a couple different ingredients in the recipe, and one of those key ingredients is marketing.
So finding something that you can be consistent with. And I think that’s why I love the, the list building 365 approach, that three time a week, email type thing, simple referral systems, those sorts of things that can just become habits which fall in line with a lot of what we teach from
a fitness standpoint. the same consistent fundamental behaviors over time yield the best results. So, very cool. All right. Let’s, let’s keep rolling. Membership and pricing. And I thought, you did a pretty cool thing and worked through a little pricing calculator during our meeting. So what,
what could you share about pricing? Because man, this one, you want to talk about something that a lot of people fumble through. This is it. Yeah,
For sure. I mean, I know when I first started, I kind of looked around at the local competition and said, this is what they’re charging, so I’m gonna charge a little bit less than that and, and think that that’s the way to, to go about it. That was 11 years ago, so learned a lot since then. And we even if we look at the training gyms around us we’re assuming if we’re modeling their pricing, we’re assuming that they know what they’re doing. And maybe that’s true, maybe it’s not. But I
certainly wouldn’t want to, count my, my business success, the how I support my family, all of this, on somebody else’s model, somebody else’s pricing. So I think it’s really important to first start with how many clients is your kind of dream come true, Jim, because, some of that ties back to model for sure.
If you, if you want to have, 400 clients, you, you probably aren’t gonna do that with one-on-one or semi-private. You’re a unicorn if you do. But you do have to think about how many clients is your, is your dream come to your gym because that, that does factor into your pricing. The bigger one that I
think is, is probably, an area of opportunity. And I know for me it’s, we have 11 staff now, and that comes with a very large expense. And so when you, depending upon how many clients, you want to work with, I would actually spend more time saying, okay, how many clients do I want? But
more importantly, how many staff do I want? Is it just gonna be me? Do I want three staff, four staff, 10 staff? There’s no right answer. generally speaking, the more clients you have, the more staff you’re gonna need, depending upon the model you run. If you run large group, you’re probably gonna need a little bit less than if you run a, a smaller ratio, like a small group, six to one, you’re gonna need more staff to service that. So I actually think, an easier
way to look at your pricing is saying, okay, how many, how many staff do I need? And what is the staff going to to cost me? And, just a, a quick pro tip, do not, maybe, maybe over overestimate what you think that’s gonna be, because as we know, pay is continuing to, to what people demand for pay, what, what the market demands for pay is continuing to increase. So look at, of course, what your local market needs to pay a trainer to be competitive, what they, what you need to pay an admin to be competitive, but do the math of around how many staff you need and what that would cost you per month.

And once you determine your staff cost per month, and this will tie into one of the, the final m, which is money, but, we use a rule of thumb that is 40% of your, payroll, or sorry, 40% of your revenue is payroll. So if you look at that, once I know my payroll cost, I can build my goal monthly revenue around that. So if we look at it and say, say your payroll’s gonna be $20,000, if you multiply that times two and a half, which is 40%, you get a goal monthly revenue of $50,000, and then you can take that 50,000 and divide it by how many dream come, dream come true clients you have. And that’s kind of the average price that you need to have on your price sheet. So you can see, I based it around, if you’re, if you’re in this business, whether it’s your own pay or if you plan to scale and have
a team, your largest expense is gonna be your payroll. So using the payroll, figuring out that first, that can then be multiplied times two and a half. Figure out
your goal that determines your goal revenue. Once you have your goal revenue, which, I feel like people kind of, I call it, wagging it, right? They kind of just, wildly guess it. And, that your goal revenue really is determined based upon that formula. So your goal revenue, then divide it by how many clients you want. So if you, if your monthly goal revenue, using the previous example, $50,000, you only want a hundred clients, you gotta make sure that your average, uh,
membership is around $500. Now, obviously, that would more so mean that you’re in a, probably a semi-private or a high-end small group model. So that’s how I would maybe look at your pricing at a little bit deeper level, rather than just, kind of looking at what the local competition is. Pricing.
No, I think that’s wonderful. And I think the, the, the biggest takeaway probably is looking at your pricing at a deeper level. The, i I would assume that when I first meet with people and I ask them how they arrived at their pricing and what the logic was behind it, not one in 10 have some sort of logical
reasoning. Now they, they obviously arrived at that number, however, they did, but not one in 10, which is, which is pretty, pretty amazing. When we think about how, you know, being 10, even 10% different on your pricing can totally transform a diff like a, a business. All right, so
let’s keep moving. Let’s talk about management. So management is, I had to make this fit with the five m’s to be nice and clean. I would
actually prefer, to call that leadership just cuz I like that term a little bit better. But when we, when really this is all a category about how you’re taking care of your team, right? And so as I mentioned if you wanna service, let’s just call it as a round number, more than a hundred clients, you are, you are definitely going to need a team, in place regardless of the model you run. and so depending upon your ideal business, that’s gonna determine the number of people
you have on your team. But when we look at your team, I would say the biggest mistake that I made in the past and lesson learned, and now of course, trying to help others not make that same mistake, is looking at it from a standpoint of when we hire somebody that is not like, check a box and done, they’re
hired and just throw them into the model and expect them to be okay.

So we have to have some rhythm of ongoing training. And with our team, at our gym, we use sports analogies often. And so this is, this is practice, right? You have your game. And so for us in this business, the game is when you’re on the floor working with clients, that’s, that’s game time. But for, for any good
player in the sports world, they practice even the best players practice. And so a question, kind of a rhetorical question I would ask is, w what is your practice? How are you practicing with your team? And so I realize, the frequency of your practice might be different, in business, those practices would commonly be labeled as meetings but trying to work towards a meeting rhythm. And so, whether you follow people like Patrick Lencioni and Death by meetings,
there’s plenty of meeting frameworks out there. I think they get a bad wrap, simply because they can be poorly run if not planned out. But meetings
are the time to bring your team together and to not only train on areas of opportunity, but spread praise across your team, share what you’re working on, get them excited about the future, keep them connected on the same page. So, if I was, looking at your fitness business, I would be
looking at how often are you meeting with your team? And the the most important part is that there’s a rhythm to it. And so the rhythm may not be weekly. If you’re a smaller operation, that may not be feasible. Maybe you do a meeting every other week or a meeting on the first Tuesday of
the month. The key there is it’s rhythmic and it’s expected, it’s scheduled. It’s not like, oh, we have a bunch of stuff to talk about, so let’s schedule a meeting. Those pop-up meetings will certainly happen. It’s business, it’s not a, a perfect formula, but we can be proactive with our trainings with our team by having a regularly occurring weekly meeting on the schedule. That’s where we fit in, training on processes, training on systems, updating, major
projects we’re working on. And then don’t forget, reward what you want repeated.

That’s one of our favorite sayings with our team we try to work on. So if we want a behavior repeated, it’s not just calling out when it’s bad, but using those times to fit in recognition and praise for areas that they’re doing well. So we’re down to the fifth M item number five, I guess. And this again, very much kind of like the pricing side of things is one that, that I think gets overlooked just continually, right? We kind of back ourselves into whatever the, the money side of things is into the business. It’s almost like, this residual thing rather than building a business around the money we need to make the way that we should, should manage our money. So dive in, man. I can’t wait to hear this one. So money is I think the mindset around money in this fitness businesses, I’m just gonna
take whatever’s left over and oftentimes there’s not left, nothing left over because we weren’t proactive with any type of, of financial model. So, two things I would probably, pull apart from the money section One is, just a quick recommendation. We’re big fans of Profit First and their model. There’s pro, the Profit First Book lays out the model. Honestly, if you follow that model, you’ll be ahead of 90% of people. From a tactical standpoint, I think
it’s important to have a percentage plan for your revenue cuz we, we’ll always be paying attention to our monthly revenues in this business. And so if we understand what is our percentage model for that revenue, as revenue changes, and I know I fell into this trap. Revenue was climbing, revenue was climbing, but I looked at what I was personally making and it wasn’t really changing. And so to not fall into that trap, having a percentage based model where, and I’ll, and I’ll
break it down here in a second, but a certain percent goes to each area. That way whether you’re making five grand a month, 10 grand a month, or 50 grand a month, those kind of continue to scale and, and grow with it. So the financial model that we teach is 40, 30, 30. So 40% goes towards your payroll,
that’s your people. that does include, I always get this question that does in that recommendation include a, compensation for your role in the company as an employee, so not as the owner, but let’s, most of you are a coach, and maybe, maybe a coach slash admin or maybe a a manager type pay.
So you do wanna include, whatever you pay yourself monthly, that’s your 40%. So that includes all your payroll for your team. It’s 40% of your revenue. So if I had a facility doing $10,000 a month, I would have $4,000 a month that would go towards that. And as you can see, when you scale,
now you’re doing 20,000 a month, now you have $8,000 towards payroll. using the 40% example, the 30% is your base operating expenses, and this is everything from your rent, your utilities, your insurances, your continuing ED spend, every other expense that you, put out throughout the year that is not payroll. And so we want to be tracking that, but make sure we keep that under 30%. That doesn’t sound like a lot, but realize that because we run a service based business, most of our expenses are gonna be going towards payroll.

So the 40% to payroll, 30% to BOE based operating expenses, and then the final 30%, the best 30% is your profit in taxes. And so depending upon your situation, the 30%, that’s gonna be owner benefit retained earnings or savings for the business, stashing money away for your tax bill, whatever it may be, it’s the excess that’s left over and 30% is the goal. Are you always gonna hit that every month? Of course not. But if you build a financial model that only has, payroll at
40% and you’re base operating at 30% as you continue to scale, now 30% of 10,000 is good, 30% of 20,000 is even better. So that percentage changes as you or that percentage is fixed. But as you increase revenue, obviously the, the fixed dollar amount rolls with it. So we love the 40, 30 30, model. It’s simple, it’s easy to follow and it makes sure that you’re, getting rewarded and the the final thing I would add to this that’s been a favorite line of ours recently is, this
is, this is a, a cash flow business. Very few people in this, business actually sell and have an exit. And I think that’s just important to have in the back of your head for the long game of this. And not saying that, you can’t sell your fitness business down the road, but I would be really paying attention to the cash flow that it creates every month and using that, to build your wealth. And so that’s why we want to have that 30% that goes towards it.

All right, so if Doug was gonna come in and transform your business, right, give it the, the full on makeover, those are the five Ms hopefully you took a lot away. I mean, just hearing it again from my perspective, I still even kinda latched onto a couple other nuggets that, that I enjoyed the first time through. So, and if you’d like to spend more time learning from, from Doug, learning from our team, obviously he’s heavily involved in all the coaching stuff we do, be sure to shoot
me an email at [email protected] and we’ll connect and see how we can help you build your ideal business.

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