Profits make all good things possible in a gym business. They provide a solid foundation for gym operations, resources for expansion, and incentives for you and your staff. However, increasing profitability requires more than generating revenue. You can even do it without increasing revenue with informed planning, management, resourcefulness, and creativity.
There are several ways to boost your gym’s profitability, but we offer ten of the most effective options for reaching your profitability goal. But first, let’s clearly define profitability, the importance of knowing your margin metrics, and common threats to profitability.
Is Your Gym Profitable?
If your gym’s total revenue exceeds the total fixed costs, it is profitable. For example, suppose your average monthly revenue from memberships, classes, and product sales is $36,000, and your monthly rent, equipment expenses, salaries, and other operating costs average around $21,000. In this case, your gym is profitable.
How do You Measure Your Gym’s Profitability?
You can accurately measure your gym business’s profitability with these two metrics:
Gross Margin
Gross margin represents the difference between all gym-generated revenue and direct costs to produce and maintain revenue-generating offerings. So, it is your profit after you subtract the costs directly tied to providing gym services, such as utility bills, equipment maintenance, and salaries.
???? The average gross margin for gyms ranges between 40% to 60%. So, if your gross margin is 50% on an average monthly revenue of $36,000, your average monthly gross profit is $18,000 ($36,000 x 50%).
Net Margin
Net margin refers to the amount of money you have left after you deduct all expenses, including administrative costs, rent, marketing, and taxes. Since it includes direct and indirect costs, the net margin is a broader indicator of your gym’s profitability.
???? For example, suppose your average monthly indirect cost is 20% of your $36,000 average monthly revenue. The dollar amount of your average monthly indirect costs would be $36,000 x 20% = $7,200.
To calculate your average monthly net profit, subtract your average monthly direct costs ($18,000) and the average monthly indirect cost ($7,200) from the average monthly revenue ($36,000).
$10,800 is your average monthly net margin in dollars or 30%.
If your net profit margin ranges between 15% and 29%, your gym is in growth mode, but the business is still at risk of downturns. This reality is why you should work to reach 30% or higher to make your gym a stable, growing business.
What Factors Threaten Your Gym’s Profitability?
As you prepare to increase your gym’s profitability, you must guard against the greatest threats to your objective. These profit-draining factors deserve your attention and preventative action:
- Increasing competition: Depending on the location of your gym, competition for new and present members can get fierce, especially at certain times of the year. Your success in increasing profitability depends on how well you compete with other gyms in your area.
- High member turnover and low core membership rates: Your gym’s profitability heavily depends on your ability to keep your members engaged in the process. This is why you must increase member retention by reducing churn rates to be more profitable.
- Bad customer experiences: Unhappy members typically write negative reviews on social media and consumer websites. They can also damage word-of-mouth publicity.
- Staffing issues: Failure to recruit and retain qualified staff and personal trainers can directly hinder profitability in several ways, including additional training and recruiting costs, struggling operations, member dissatisfaction, and fewer new member sign-ups.
- Poor financial management and planning: Three anti-profit-making habits are: 1. not staying current on bills, 2. failing to monitor essential gym performance metrics, and 3. losing cash flow control.
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Increase Your Gym’s Profitability with These 10 Smart Methods
Here are ten dynamic profit-building strategies you can apply without help from a consultant:
1. Boost Member Referrals
Few profitability strategies work better than nurturing a community of loyal members who can refer their family, friends, and co-workers to your gym. You can promote member referrals by offering incentives like membership upgrades or renewal discounts for each referral who signs up. Gifts, prizes, and special recognition also work as effective incentives.
???? Giancarlo Regni’s referral strategy boosted his gym's revenue by $10,000 each month. Check out his story to learn how he did it.
Along with promotional material in the gym, you should promote the referral program through the gym’s social media and website. However, the most effective way to encourage member referrals is to provide an elite member experience. Your referral program should include the following:
- Unrivalled customer service
- A wide variety of services and classes
- The most up-to-date technology
- A fun and welcoming environment for all members
Using hashtags and tagging your gym’s social media pages can also help you create a forum that allows members to highlight their activities and experiences at your gym.
???? Gym management software like Kilo provides an excellent way to track your referral program. You can use it to monitor referrals and issue rewards to members for referring potential members. In addition, the software allows you to issue a personal thank-you or social media recognition to loyal members.
2. Use a Dynamic Pricing Strategy and Tiered Membership Plans
Innovative strategies like dynamic pricing and tiered member plans enable you to compete for more potential members. They also help you keep members whose life situations may change.
???? LifeTime implemented a similar strategy in 2022, boosting their revenue by 40%. Discover how they did it in this article.
Dynamic pricing is a method where prices vary based on demand, time, or membership duration. For instance, offering discounted rates during off-peak hours can attract cost-conscious members and increase facility utilization. Setting prices based on market trends and competition analysis can allow your gym to maximize revenue and remain competitive.
Source: Nected
Similarly, tiered membership plans help you cater to a diverse group of potential and current members. For example, a basic plan might offer access during non-peak hours and limited class participation, while a premium plan could include full-time access, personal training, and additional perks like sauna or spa access. This approach expands your market reach to more prospective and current members and provides opportunities for upselling.
Source: GoodLife Fitness
However, before developing either of the strategies, it is essential to do market research to ensure your pricing structure is competitive and targets the needs of your potential members. Your research should also identify your members’ unique needs, allowing you to create a valuable membership package that fosters long-term participation in your gym.
3. Cutting Costs with Efficient Operational Practices
Reducing money going out is just as important to profitability as increasing revenue. This is why regularly reviewing operational expenses is essential to improving your net margin. For example, you can save money on energy costs by adopting energy-efficient practices, such as LED lighting, programmable thermostats, and energy-efficient equipment.
You can also increase profit by efficiently managing staff according to peak and off-peak times. As a result, you can effectively staff your gym without unnecessary labor expenses. In addition, training your staff to perform multiple duties and use automated scheduling software can add cost-saving efficiency to operations while enhancing member experience.
4. Focus on Improving Member Retention Metrics
As we mentioned earlier, one of the primary profit stealers is high member turnover. So, improving member retention can significantly boost your gym’s profitability. You can accomplish this objective with a solid group of strategies designed to keep your existing members happy and engaged over the long term.
Here are some effective member retention techniques you can implement:
- Collect valuable feedback from members through regular surveys and use it to enhance the gym environment, services, scheduling, and equipment inventory.
- Encourage continued participation with a loyalty program that provides discounts on services, free passes to exclusive events, or complimentary personal training sessions.
- Stage special events for members to show your appreciation for their loyalty and reinforce a feeling of community among your members.
- Ensure each member can access personalized services, such as customized workout plans, regular assessments, and one-on-one consultations.
- Regularly communicate with your members through social media, email newsletters, staff, and other means to keep them involved and updated about new events and promotions.
5. Optimizing Lead Management
Improving the process of recruiting new leads and converting them into new members is essential to increasing your gym’s profitability. However, lead management is a time-consuming and challenging process. This is why streamlining the process is vital to reducing costs and increasing revenues.
???? Gym owners Dai & Lisa Palmer generate 300 leads every month. Dive into this article for a detailed breakdown of their successful management strategies.
A customer relationship management (CRM) system like Gym Lead Machine is the best solution for streamlining your lead management process. It can help you monitor all leads in a central location and automate follow-up messaging, such as reminders and introductory emails. It also allows you to set up lead scoring to ensure your sales team gets the hottest leads.
Another effective method is to use lead capture forms on your social media pages or website to optimize the lead management process. This method lets you automatically capture leads and respond to every potential member. For the best results, make sure your forms are mobile-friendly and straightforward. They should also include a lead magnet like an eBook or free trial to motivate sign-ups.
???? Read more: Gym Owners Beginner’s Guide to Effective Lead Capture
Regardless of your lead management method, monitoring your lead conversion rate and reviewing your sales data to find ways to improve is essential. Lead management data is beneficial in fine-tuning your sales funnel for high performance.
6. Maximize Gym Utilization
Your gym spaces and facilities are valuable assets with profit-increasing potential beyond your current use. For example, you could use the gym space during off-peak hours for events and workshops. Also, renting the space and equipmentduring off-hours can generate additional income. As an added benefit, hosting fitness-related workshops or renting out space for community events can increase exposure and attract new members.
Another way of increasing profit is offering 24/7 access to accommodate members with varying schedules. Along with increasing facility utilization, this feature can increase member satisfaction. You can provide this service without additional staffing by investing in security cameras and secure, automated entry systems for members with around-the-clock access.
???? Kieran Williams runs two open access gyms with a limited membership model that profit $30k/mo. Read his story here.
7. Invest in Staff Training and Development
A well-trained and motivated staff can help you elevate gym profits in many ways, including member experience, efficient operations, member retention, and lead conversion. This is why investing in regular training for staff is cost-effective. Your training programs can cover the latest fitness trends, customer service skills, and tutorials on new equipment. In the process, you prepare your team to provide high-quality service to your current and potential members.
???? Oskar Johed’s CrossFit gyms make over $110k a month with profits of 20-30%. He invests a lot of time in developing his coaches, and believes better coaching leads to better retention, which provides the owner with a better financial result.
The other essential part of this strategy is to reward your high-performing staff with performance-based incentives. Your staff reward program can include bonuses for meeting sales targets, member retention goals, or exceptional customer service. Whatever you decide, the incentive should align with your business objectives and growth strategies.
8. Enhance Member Experience with Technology
Enhancing member experience with the latest technology is an exceptionally effective way to help increase revenue and reduce administrative and staff expenses. It also helps improve member engagement. For example, you can develop user-friendly mobile apps with class booking, workout tracking, and personalized fitness plans.
???? All these functions promote convenience and motivate members to use your services regularly. Additionally, integrating virtual training options can attract members who prefer remote workouts.
9. Upsell Personal Training
Upselling personal training can create a lucrative revenue source that can help you increase profitability. By offering members personalized attention and customized workout plans, you can profit from this premium service that aligns with optimizing member experience.
Here are some practical ways to boost your personal training sign-ups:
- Free consultation: A free personal training session allows members to sample the benefits of one-on-one training. It also helps you establish a deeper bond with your members.
- Highlighting the benefits: You can use email newsletters, social media, and in-gym promotions to promote the benefits of personal training, including personalized attention, quicker results, and added motivation.
- Enlist your staff: Direct your staff to stress the benefits of personal training to members. Also, you should offer them incentives for signing up personal training clients.
- Offer package deals: Discounted package deals for multiple sessions effectively motivate members to sign up for more sessions. To appeal to the budget-conscious, offer personal training packages with varying commitment levels and price ranges.
10. Applying Gym Management Technology
To succeed in today’s digital environment, you must use technology to maximize your gym business’s performance and profitability. Gym management software like Kilo is the best tool for optimizing operations, automating routine tasks, and enhancing member experience. It saves time and resources and boosts revenue by allowing you to focus more on business growth.
Gym management technology impacts several critical areas of your business, including the following:
- Elevated member experience: Gym management technology enables you to offer a more personalized experience for your members. With the appropriate software, you can monitor member behavior, preferences, and progress, allowing you to provide customized recommendations and promotions. Features such as online class bookings, mobile check-ins, and automated membership renewals make it convenient for members to engage with your gym.
- Lower operational costs: This technology allows you to automate many gym-related administrative tasks, including scheduling, billing, and staff management. It also saves time, reduces the chances of errors, and permits your staff to concentrate on members and money-making activities.
- Enhanced sales processes: You can use premium fitness software to help track leads, automate follow-ups, and manage your sales pipeline more efficiently. As a result, it helps put you in a position to close more deals and increase profitability.
- Gather valuable insights: Gym management software allows you to gather and analyze valuable data on member behavior, participation, and preferences. You can use this information to get valuable insights into the strengths and weaknesses of the gym’s offerings and member experience. It can also help you maximize your revenue by making more informed decisions concerning pricing strategy, class schedules, marketing efforts, etc.
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Next Steps
Increasing your gym’s profitability is a multi-faceted project. For this reason, these strategies can put you in a better position to reach your profit goal in the highly competitive fitness industry. You can also use this information to establish a best practice guide to help keep your gym business on a continuing path to increased profits.
To learn how Kilo can help boost your gym’s profits, book a free call with one of our experts today.
