It’s not the percentage of revenue concept that’s flawed: It’s the broken business model
Last week, Morning Chalk Talk put out an article written by Dr. Sean Pastuch of Active Life Rx, whom I obviously have a ton of respect for: “Why Coaches Should Never Work for a Percentage (Opnion).”
Pastuch agues, rightfully so, that percentage of revenue doesn’t work as coaches aren’t able to make a professional wage ($75,000-plus per year) earning 4/9th of revenue (which is what many gyms have started doing). Or at least, he argues it’s not possible unless you start charging $200 an hour per session to your clients.
He said this: “If we agree that burnout happens when a coach works more than 25 training hours per week, and if we agree that everyone should have two weeks of vacation per year, then we have some easy math to work with, we simply multiply 25 (hours) by 50 (weeks) and we end up with 1,250 (annual hours worked). Divide $75,000 (total income needed to begin to reach financial freedom) by 1,250 and you get 60. $60 is the minimum amount of money a coach can afford to work for if their primary income is going to be from one-on-one coaching. In order to pay a coach $60/hour and pay them 44% of the session rate, the session would have to cost $138 and it’s unlikely your average gym is willing to charge that.”
This logic makes a lot of sense if you’re working under a traditional personal training or group class business model. And even though $138 an hour doesn’t sound horribly unrealistic to me (we successfully charge $90), the bigger issue here is that the gyms giving 4/9th to coaches are working in a model that doesn’t work! So it’s not percentage of revenue that doesn’t work: It’s paying 4/9th across the board to all coaches in a broken business model that’s the problem.
Before I explain the MadLab hybrid model and how’s it’s producing tons of professional coaches, it’s also important to note some other shortcomings of paying a flat percentage to coaches (4/9ths). It does not consider:
- A coach’s experience in the system (new apprentices shouldn’t be making the same amount as an experienced coach who has been through an accredited education program and has years of hands on experience).
- Type of service offered (pt versus classes versus specialty programs should all have different pay-out rates)
- Who acquired the client? (referrals should be paid at a higher percentage than clients given to the coach, as it incentivizes coaches to find their own clients. If there’s no incentive for the coach to get their own clients, they won’t do it nearly as effectively).
With that aside for a moment, what sets the MadLab system apart is its SCALABILITY. And that is what makes it successful: Over and over we are producing coaches who are earning a professional wage in the industry—making WAY more than $60 an hour—and yet we do not have to charge $138-plus an hour to the client each time they come in.
Here’s how it works:
MadLab coaches earn a percentage of revenue off all of their clients: Their fundamentals clients, their personal training clients, and their hybrid clients (people who do a combination of group classes and periodic personal training). The vast majority of clientele are hybrid clients paying somewhere between $235 and $330 a month.
Essentially it means coaches might earn just $36 an hour (40 percent of $90) for a fundamentals or personal training client, HOWEVER, where the real money is made is from the hybrid clients.
For the sake of simplicity, let’s say I have 50 clients all paying $275 a month. They each meet me once every 6 weeks for a one-on-one personal training session or lifestyle consult (depending on their needs), and then attend my classes (of which I coach 5 per week) and other coach’s classes throughout the week.
Over the course of the year, if I’m making an average of 45% off these clients’ revenue (I earn either 40 or 50 percent off each client depending on whether or not they’re a referral or were given to me by the gym), I earn $123.75 per client per month, ($123.75 x 50 client = $6,187.50 total per month).
This means an annual revenue of $74,250 (note this doesn’t include new fundamentals clients or personal training clients, or other services I sell, such as an individual program).
Now let’s look at the hours I have to work for this:
•Group class hours: 5 per week = (5 x 4.34 (average weeks in a month) = 21.7 hours per month or 260 hours in a year
•If each of my 50 clients meets me 8 times in a year (once every 6 weeks), this amounts to another 400 hours.
660 Total hours worked to earn $74,250 = $112.50 per hour
The reality is in the MadLab model, which is 100 percent percentage of revenue-based, coaches end up earning well over $100 an hour, with our top coaches, who have between 60 and 85 clients of their own, making close to $300 an hour (working 20 to 30 on floor hours a week).
It’s not the percentage of revenue concept that is flawed: It’s the broken business model that is getting in the way of coaches earning a professional wage.
To learn more about what the top 1 percent of gyms do to maximize revenue, keep clients for life and pay coaches a professional wage, DM MadLab Group on Facebook the code BEERS for a completely free video training series. (https://m.me/MadLabGroup)