By: Craig Patterson —MadLab Group CEO
As the owner, do you feel like you’re the only one generating revenue at your gym? The only one even trying to sell? The only one who really cares about the business’ bottom line?
Do you feel like you have great coaches working for you, but they’re not interested in selling, building, and growing the business?
Instead of blaming your coaches for being poor salesmen, ask yourself how you’re incentivizing them to sell? What’s in it for them?
I have an engineering background, and worked at a handful of fortune 100 companies, before I got into the fitness industry. During my engineering career, there were entire departments at the firms I worked at that were solely dedicated to developing proper incentives in order to maximize the company’s bottom line.
I became obsessed with how humans responded to incentives.
Actually, my interest in incentives started long before I was an engineer—when I was an engineering student and varsity hockey player at McGill University in Montreal, Quebec. My hockey buddies and I got involved selling beer in the stands at the football games. We were paid 25 cents for each beer we sold.
I figured out early on there were a couple major flaws in the beer-selling system.
ONE: There were two sections in the stands nobody wanted to work. One was the opposing team’s area. Beer sellers avoided this area for fear of being mobbed, or getting ripped off by the opposing team’s fans. The other section was the alumni section, where uptight wives wouldn’t let their husbands drink.
TWO: Every time we sold our flat of beer, we had to line up and wait for these girls to refill our flats. Problem was they were too slow at pouring the beer. There was nothing in it for them—no incentive—to move faster. As a consequence, I found myself stuck in a line-up all the time, time that could have been better spent selling beer.
In order to maximize my profits, I realized I needed to find a way to solve these problems.
By the third game, I figured it out.
One of McGill’s biggest rivals—Queen’s University from Kingston, Ontario—was in town. I ventured into the opposing team’s area and struck a deal with a skinny little Jewish kid (we remained friends for years).
Instead of selling single pints of beer, I offered to sell him the entire flat for a $10 upcharge, and then he could sell the individual pints of beer to his people for whatever price he wanted. It was a win-win for us both. I made an additional $10 on each sale, was able to dump an entire flat of beer in a single transaction, and he profited, too. And it solved their entire group’s problem: They were finally able to access beer, and more kids were able to get drunk.
Second: The alumni section. I decided to go into the section and work the wives.
“Let the poor bastard have a beer.”
Next thing you know, the wives were on board, I’m dropping off flats of beer, and they’re tipping me huge. Problem number one solved.
Problem number two: I can’t meet the demand because the beer pourers are too slow and the line-up too big. So I take one server aside:
“Here’s $5 to bring me a full flat of beer whenever you see me coming.” Done.
Next thing you know, while everyone else is making $50 to $75 a game—$100 for an overachiever—I’m making $500 in three quarters of a football game (they always closed beer sales early).
The regular system was fucked, but nobody before me had gone in and figured out a better way.
This went on for a while, but my ex girlfriend’s brother soon caught wind of what I was doing (I was probably flashing cash and buying rounds at the bar). Next thing you know, the athletic director of McGill calls me into his office. I thought he was going to give me a job, to be honest.
‘This guy’s a genius. We should let him run all beer sales!’ After all, I was making more than the head of security and the police.
He didn’t see it this way.
Instead of investing in me—knowing I would help the university make money— he reprimanded me. His argument wasn’t based on fear that I was going to get too many kids drunk (that argument I could have understood). His argument was I was going to be making more money than him soon, and somehow this was a problem (and you wonder why universities aren’t prosperous).
What do you think I did next?
The lesson I learned from both this experience, and from years working as an engineer, is that in order to generate success and be profitable, incentives need to be aligned for all parties.
In the case of the fitness industry, policies and incentives need to be drafted in a way that benefits the client, the coach and the business.
The client wants to get fit, to stay injury-free, to feel special and part of a community, and to achieve and maintain fitness for life. To achieve this, the client needs high-quality coaching, individual attention and a coach for life to keep him on track with his fitness plan.
The client needs love from the coach
The coach wants to help others get fit, and wants to retain loyal clients invested in their health and fitness for life. He doesn’t want to sit around and be lazy. He wants to make a real difference in people’s lives. And he wants to be rewarded for his efforts. Working for $20 an hour won’t suffice for long. The coach who is looking to make a living as a full-time career coach in the industry needs to be able to make a professional living (upwards of $70,000 a year)
Incentives need to align for the coach to work hard and produce results
The business wants to help people get fit, and wants to keep them there for life. The business also wants to provide opportunities for coaches and clients by making a positive difference in their lives. And the business needs to be financially profitable.
What Doesn’t Work
Paying coaches by the hour, by the class or via salary doesn’t give the client, the coach or the business what it needs.
Coaches paid by the hour aren’t intrinsically or financially incentivized to look after the clients. They might coach them for one hour during a group class, but after that the client is not their concern. What’s in it for the coach if the client succeeds? What’s in it for the coach if the client sticks around for life? What’s in it for the coach if he or she brings in a new client or two? What’s in it for the coach if he ensures the gym stays tidy?
When a coach is paid by the hour, the class or via salary, he quickly becomes just like the girls refilling my beer at the football games: Rapidly disinterested, and eventually lazy because his paycheque is in no way connected to his efforts.
Coaches should be financially compensated as a percentage of the revenue they earn—per client, for the lifetime of that client.
When a coach’s paycheque is directly connected to his efforts, he is:
• More motivated to develop a relationship with and take care of his clients.
• More motivated to ensure his clients stick around and stay committed to their goals.
• More motivated to create and sell a specialty program, like a weightlifting class, or a nutrition challenge.
• More motivated to find and enrol new clients.
• More motivated to keep the gym clean.
• More motivated to care about the business’ bottom line.
The client wins. The coach wins. The business wins.