HOW DO YOU DETERMINE AND MEASURE BUSINESS SUCCESS, AND WHY DOES IT MATTER?
Revenue? Profit? Number of clients? Length of time in business?
How do you measure success at your business? Or do you even track and measure it?
In working with hundreds of gyms around the world in the last 15 years, one of the themes that come up over and over again is that most small gym owners are on survival mode, just trying to get by and stay afloat, that they don’t have a proper system in place to track and measure their success over time.
As a result, their business decisions tend to be made in a sort of fly by the seat of their pants mode, instead of being based on sound principles proven through data to help the business, the coach, and the client.
This is what we offer: A data-driven system to help guide decision-making that has been proven to work over and over in every market, at all types of gyms, around the world.
The Madlab Story:
Like many young gyms in 2005 (then a CrossFit gym), we played the guessing game. We had some wins and a lot of losses through trial and error and were left trying to figure this whole gym-owning thing out.
Ultimately, through conversation and many nights in Craig ‘Patty’ Patterson (Madlab’s founder) tiny beachside basement apartment in Kitsilano in Vancouver—discussing, arguing, cajoling, usually over many drinks—we (aka Patty and his various coaches) decided we needed a structured way to make decisions. Like a decision-making tree, so to speak.
From there, we reverse-engineered the thinking and asked ourselves: What is it we want to achieve?
It seemed so simple: We wanted the clients, the coaches and the gym to be successful.
This led to what has become the Madlab Prime Directive:
Every business decision we make has to be a win for:
While this was a great start, we weren’t done. What exactly does it mean to be successful? How do we define success for the client, the coach and the business? What did each party need?
The client needs to get fit and stay fit, to reach their goals and see their life improve.
The coach needs job satisfaction and the ability to make a good living—a professional wage, so they can stay in the industry and pursue a full-time career as a coach, take paid vacations, save for retirement etc.
And the business needs to be able to make a profit. Period. If not, why would it stay in business?
This led us to develop key performance indicators—aka wins—for each party. In other words, these KPIs, of which there are six, are the easiest way to track success for each party.
The 6 KPIs
For the client,
1. Client retention (monthly and annual client retention percentages)
2. Average client value ($/client per month/year)
For the coach,
3. Dollars per coach hour
4. Total (monthly/annual) coach pay
For the gym owner/business,
5. Profit (EBITA)
6. Business value (5 x EBITA)
Ok, so now we knew how to measure success, but we still didn’t know precisely how to improve these six KPIs.
This led to essentially a 10-year-long science experiment where we tracked what happened to each KPI based on different things we tried.
For example, we dabbled with all kinds of ways to bring in new clients—throw them right into classes versus one-on-one fundamentals, six-week challenges, group fundamentals etc.—and what happened to their client retention and average client value in each case.
And we tried different ways of paying coaches —by the hour, salary, percentage of revenue etc.—and we looked at how this affected dollars per coach hour and total coach pay.
We learned a lot of things along the way that worked for us, but did this work everywhere?
In light of this, we took what we had learned in Vancouver and implemented what we were doing at other gyms.
First, we did a one-year Alpha study of seven gyms in Canada, the United States and the UK in 2013, followed by a Beta study of 33 gyms in 2014 and a Gamma study of 55 gyms in 2015.
After this, an MBA student from Harvard University, intrigued by what we were doing because he saw huge improvements at his gym in Boston, conducted a six-month study and found that when independent gyms transitioned to the Madlab model:
Gross revenue increased by 55 percent,
Profit increased by 120 percent,
Coach pay increased by 80 percent, and gym owner on-floor hours decreased by 40 percent.
Also, in 2015, Zen Planner, a popular client management software in the gym industry, commissioned another 18-month study that looked at 1,600 gyms and compared average client values and client retention rates among Madlab and non-Madlab gyms.
The results showed:
Average Client Retention:
Non-Madlab gyms: 25 percent
Madlab gyms: 60 percent
Madlab School of Fitness: 80 percent
Average Client Value:
Non-Madlab gyms: $120/month
Madlab gyms: $199/month
Madlab School of Fitness: $217/month
Average Client Lifetime Value:
Non-Madlab gyms: $1,737
Madlab gyms: $5,431
Madlab School of Fitness: $10,911
As a result of the above data, we created nine laws that work in all markets at all types of gyms worldwide.
In short, when you follow the nine laws, your KPIs improve, and your clients, coaches and business become more and more successful.
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