This 7-figure gym owner weighs in…
What’s up Gym World?
A common debate among gym owners is whether to pay coaches a salary or by the hour.
I recently chatted with Chris Travis of Seattle Strength & Performance to hear why he offers all his staff members a salary plus full benefits.
He does it for two reasons:
- It attracts better talent
- And keeps them working at the gym longer
Chris’s gym offers semi-private training. His two locations generate about $1.5M a year and each is run with two full-time staff:
- A facility lead
- A program design assistant
They both spend 25 hours a week on the floor and another 15 hours on various business tasks. Starting salaries are $50k/yr, with full medical and dental benefits, a 401k with a 4% match, and three weeks of PTO. Chris’s lean model makes salaried positions feasible.
However, a common pitfall among successful gym owners is overspending on payroll.
Here’s how to avoid it:
The Salary Cap
Greg Crabtree’s The Salary Cap is the best book I’ve read about managing staff pay. Crabtree says owners should think about payroll like an NFL team thinks about their salary cap.
The goal is to get the best possible team while staying within your salary cap.
To set your salary cap, you need your gym’s:
- Revenue
- Profit target
- Non-salary expenses
Subtract target profit and non-salary expenses from revenue, and you’ll get the maximum amount you can spend on your team.
If you’re struggling with a profit target, I recommend shooting for 23-33%.
When can you afford to hire?
Suppose your gym generates $500k a year in revenue, your profit target is 23%, and your non-salary costs are $135k. Your salary cap is $250k.
Now let’s say you implement some tips from Gym World and your revenue grows to $575k.
Congratulations, you’re now running at a 33% profit margin.
But there’s one problem: you need to hire more help.
How much can you afford to spend?
If you were following Crabtree’s model, you would set a 23% profit target based on your new revenue—which, in this example, raises the salary cap to $308k. Which means you have an extra $58k to spend on your team.
Once that money is deployed, wait until you return to a 33% profit margin before repeating the process.
Tl;dr
It doesn’t matter if your team is part-time, full-time, contracted, or salaried as long you stay under your salary cap.
Chris’s salaried approach works for him because he runs a model that can generate $60k+ in monthly revenue with just 2 full-time staff members, but your situation might be different.
Watch or listen to Chris’s Gym World interview for a deep dive on how to pay coaches.
ttyl,
j
