How to raise your rates without losing clients
It doesn’t taking owning a gym to know everyone has a different relationship with money.
Some people are deal hunters who collect coupons and won’t buy anything that’s not on sale. Some come into the gym and think they’re at a car dealership and try to get you to lower your price because they’re a “fireman” or “teacher,” or whatever profession they chose that makes them feel entitled to a lower price. Oh, and then there are those who come in a pay for a year up front without blinking an eye.
And, of course, there’s everything in between.
Regardless of where your clients fall on the frugal to spendthrift spectrum, talking to people about money can be awkward. And telling people they’re going to have to pay you more money has the potential to be really awkward.
Though many gym owners are scared to raise their rates out of fear of losing clients, it’s the reality of any business owner’s world—chances are your massage therapist and hair dresser have raised their rates in the last 10 years. Your car insurance has gone up and your Netflix rate has increased—so why would your gym business be any different?
But time and time again, I talk to gym owners who have a handful of legacy clients with grandfathered rates, who are paying 40% of what the current membership rate is. Other times, rates in general are just too low and need to come up, but fear holds them back.
If you’re not able to take home at least 15 percent profit (after you pay yourself a wage), chances are your rates need to come up. And if you have people paying less than 80 percent of your current rate (For example, if your current rate is $250 a month, nobody should be paying less than $200 no matter how long they have been there), chances are some people’s rates need to come up.
Basically, if you’re struggling to make a living and your coaches also aren’t making a living, your rates need to come up. Period.
(Madlab Group rates are between $230 and $450 a month depending on how much personal training or other programs the client does. We have found anything less than $230 for a hybrid gym membership is too low).
So how do you go about delivering the difficult news to your clients? Here are some tips:
One-on-one conversation in person:
Don’t deliver the news in a group e-mail. Don’t host a client evening and tell your community together. Don’t send a text message. Don’t even phone your clients. Arrange a day and time to meet with each person individually. Yes, it’s time-consuming but it’s the best way to deliver the news properly, and is the best way to ensure people don’t get up and quit on you.
Everyone will react to the news differently, and this gives you a change to navigate each situation differently depending on how the person reacts. This is by far the most important piece of advice.
Recently, I had to deliver the news to two clients:
The first was a client who has been with us for 4 years. I told her her rate had to go up, and she said, “Yep, I get it. Your rent has gone up a lot. Don’t even tell me how much it’s going up. Just bill my card.”
The second conversation was with a Dad, where I had to explain that his daughter’s rate needed to go up because we had been giving her a student rate for a while, but she’s now part of the competitor’s program and also gets additional programming and she was basically paying only 40% of what she should be.
At first, he was taken aback, but then softened as I explained to him all the services she had ultimately been getting for a year and a half and wasn’t paying for. He kept going on and on about family rates and student rates and that he wants his two sons to join soon but it’s getting more and more expensive.
Then I asked him what a reasonable discount was, because right now his daughter was basically getting a 60% discount. When put that way, he agreed 60% was a huge discount. Suddenly, he was OK with raising her rate. After 20 minutes and some negotiation, we settled on a price. His daughter’s rate was bumped from $180 to $250, which he became OK with paying because he understood the value of the service she was receiving.
There’s no way I would have been able to get him on board with a $70 a month rate increase via e-mail or text. And there’s no way I could have had this conversation with him in a group.
Especially if people question your motives, be very clear why rates are going up. For example:
• Our rent has increased by 25%
• We just purchased $10,000 in new equipment
• The service we offer today is superior to the service we provided when we opened our doors
• We just added two weightlifting classes
• We hired cleaners to come in twice a week and ensure the gym is always sparkling clean
Whatever your reasons are, often it helps people understand if you explain the finances and why rates need to go up.
It can be tempting when you’re raising your rates to feel like you need to promise all sorts of things, like committing to buying 10 new rowing machines or adding three new class time, just because.
Unless you’re going to do these things anyway and you have built it into your budget and plan for the year, don’t promise things that you haven’t thought through just because you’re scared of losing a client.
It’s easy to play the assumption game when it comes to predicting which clients will react positively or negatively to a rate raise. As a result, sometimes you avoid the conversations with the clients you expect might quit, or you go in to the conversation fearful of their reaction and aren’t authentic in your conversation with them.
Let the client react how they will react before you change your approach or start negotiating a price with them that will keep them at the gym. In my experience, sometimes the people I expect to kick up a fuss don’t bat an eyelash. Stick to your guns!
Think about the future:
The first time you raise rates, they might need to go up quite a bit, especially if you have people grandfathered at $120 a month, but after the initial rate raise, put in plan a place to make smaller, more frequent raises moving forward.
At Madlab School of Fitness, we did an initial rate raise two years ago (for the first time in 12 years of business), and now we have a built-in 1.9% rate increase each year. That amounts to just a couple dollars or so a month for the client, which is easy for people to stomach.
When you do your initial rate raise, explain this to your clients and get them to sign a new waiver that reflects the annual 1.9% rate raise (or whatever you decide on).
Again, the first rate raise will likely be the most painful and you might lose a couple clients. Generally, though, they’re the people who were about to quit anyway. The ones you want will stick will, and your business, will be stronger for it.