The Game with Alex Hormozi - The 6 Things Gym Profit Leaders Are Doing Right That You Might Not Be...🏆🏆🏆 | Ep 85

Episode Date: November 20, 2018

"And so I'd highly recommend sticking to your guns and they'll respect you more and they'll be way less of a pain in the ass customer." Today, Alex (@AlexHormozi) discusses six things that gym leaders do differently than the average gym. These include charging higher prices, not offering discounts, optimizing space utilization, having lower payroll and higher commissions, and being located in highly competitive marketplaces.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(0:56) - Pricing: Industry leaders charge $172, average gym charges $132.(2:16) - Discounts: Industry leaders don't offer significant discounts, average member pays $142.(2:33) - Commissions: Industry leaders have double commissions, motivating trainers.(4:06) - Marketplace: Industry leaders are in populated areas with competition.(7:42) - Space Utilization: Industry leaders use half the space per customer.(9:04) - Payroll: Industry leaders' payroll is half of laggards.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Happy Tuesday. We're actually on No Talk Tuesday, which is a new thing that we started at gym launch, meaning we don't have meetings going on, which is awesome because then everyone just gets to GSD get stuff done. And so one of the things that have my agenda today was actually my agenda yesterday was to make this video for you guys. And this comes directly from a report that was released by Zen Planner, which I highly encourage you guys to go check out like different industry reports because they're very

telling just to see where the entire industry is on. whole is obviously like that that spans different types of studios etc but I thought that the report that they had was really really valuable so and I just like having things confirm what we preach but anyways there were six things that were outlined that that market leaders do that the average gym does not do and so I kind of like I was originally thought like maybe I'll make a video about each one of them but I don't want to waste your time and so I want like if it were me I would just want one video with all of the findings so that you don't have to go through the 30-page report. So hopefully that's cool.

I can save you some time. So the six things I'll go over are pricing, discounts, space utilization, payroll commissions, and marketplace. Okay. So one of the findings that they had was that industry leaders, so gyms that make the most money, charge more. Hmm. What a concept. And the average gym charges $132 a month. Now, this is different from the data that we fooled, which was $118.

dollars per month from all the gyms that we had it. Obviously, that could be a difference in what types of studios they're pulling from, but you know, it was $14 different. But anyways, just so you know multiple use, you know, multiple data sources. But the industry average that they had was 172, which is in alignment with what we typically tell people to do, which is the minimum, you should really charge the 167 a month. So that was their average, so I tend to skew a little bit higher than what their averages in terms of how much profit you should be trying to make per customer.

but it's a good benchmark or bromagery. Now, I think what's even more telling than the $40 difference between the laggards or people who are less profitable versus the industry leaders is the second point, which is discounts. So when they looked at what the gym was offering as their membership average, right?

132 versus 172, you see a small difference there. I mean, not small. That's a 30% difference. But it's ballparky, right? Now, when you look at the discounts, And I thought this was probably, like of all the things I'm going to go over, this is probably the biggest one. Industry leaders didn't really discount. And so the average member at their gym was paying $142 per month. So 172 is their average membership.

And then 142 is what their average member was paying. Now, guess what the average laggard was paying or having their members pay. It was $72 on average per member. And so what does that tell you? It tells you all the people, like when we tell the story of like most people, who start their gym early on and they get all these people and they they promise them a lifetime rate for being a founder right what that does is it just forever draws down and drags down your average EFT there's two ways to approach it one is you can fix it by like filling up your gym first and then going back to those people and raising it and saying sorry we're at capacity like I have to make these changes or you can make money tomorrow and just tell them that you want to raise the prices we've done it both ways and you can well it's it's nice to just make more money tomorrow

but you can have your own beliefs around that. You have to break that being said, don't discount, right? Don't discount. A lot of people do these backdoor deals because they're really just trying to, like, they're desperately trying to close the sale. But what ends up happening is you just kill the profitability of your facility. And so you just perpetuate this issue.

Now, just a side note on pricing, most people would then make the conclusion, so I'm skipping to number six on Marketplace Data. Well, these guys must be in markets where they're alone, or they're like they can control their own pricing, or blah, but there's not a lot of competition. But it turns out, and this is just directly from the report, that the market leaders tended to be in areas

that were the most populated with other facilities. What does that tell you? It tells you the best rises to the top. The best way to get really good is to go to the jungle and cut your teeth with the fiercest peace. So if you can go to the most competitive marketplaces, see who's winning, model that. I'm going to totally too much more right now.

But when I quit my consulting job, I went to Southern California because I knew that that was the hotbed of fitness, and I genuinely believed that I told everyone, I was like, if I can make it there, then I'll be able to make it any. And so that was the thought process. And so I would implore you to probably use the same thing.

And if you're in a market that's not super saturated, then you might as well just use leader tactics from the hotbeds of the fiercest competition, right? So those industry leaders also had the true belief that their product and service was better intrinsically. And so part of that is, you know, like the chicken or the egg, like do they have higher prices? And then that influences their belief about their quality of product or service or does that enable them to have a higher quality product or service? Or is it reversed that the great quality product is what gets the high.

Like you can go either way back and forth. My belief is that the higher your prices, the more money you'll have left over in order to reinvest in the experience. And so then you actually do and are worth that higher price. And the reality is that most people are willing to pay more, especially when we're talking about 30, 40% more to have a much better experience. They just don't know that yet. And so you just have to prove that to them. Right. And most people think that like initially when they're making the decision around the membership, like I can only afford X, which means this is only my only ability to perceive value relative to my membership is at this rate.

And I have not been demonstrated value in excess of that. And so it's your responsibility to show them and demonstrate excess for, sorry, value for an excess of that so that they will then stay at that hire rate. It's kind of like you don't know until you know. Mosy Nation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business, going to $50, $100 million plus. We would love to talk to you. And if you like that, we would like to hear more about it.

Go to acquisition.com. You can apply anywhere on the page and talk to one of our team and see if we can help get there. So anyways, so that's about pricing. Make sure that you're on the 170 plus range, which you've probably heard a bunch of videos for me anyways, which works out that's like 39 bucks a week or more if you're billing weekly. Okay. Discounts don't do them. You're devaluing yourself. It's also a really bad habit because it just shows lack of conviction in your product, lacking conviction in the salesperson, lacking conviction what you're actually selling, which is results, not what you're not the actual service. And one of the big,

big, nagging ones that sucks about this. And mind you, I did this early. So I'm not like trying to say, look, I didn't do this. I totally did this. Is that as soon as you make a discount early on, what ends up happening is that that person owns you. And now they think everything's negotiable. You know what I mean? Like, I used to sell T-shirts. They'd be like, well, I'll buy it for 20. I'm like, the price is 25 bucks. Like, buy the, you know, like, this isn't negotiable. You know what I mean? But when you start with that, the nation, everything is negotiable. Also makes you seem like a mom and pop rather than like a more established company. Like, these are our prices. You know what I mean?

Like, this is what it is. And so I'm a lot. And so I'm, I highly recommend sticking to your guns and they'll respect you more and there'll be way less of a pain of the ass customer. Okay. Now, when it comes to space capacity, that kind of thing. So on average, the industry leaders use half the amount of space per customer compared to the average kind of loser gyms. And so what does that say? So the tactics that I recommend highly are partnering people up, getting rid of movements that are not necessary that are very space consuming. I totally demonized double unders and I know everyone's like what and I know in the crossword world, you know. My big point is this is that for general population, which is what the majority of us serve,

there are other tools, there are other exercises that we can use to accomplish the objective of conditioning someone that do not require as much space, as much complexity, and a learning curve. So unless you have people who are competing, right, which that entire organization has made a huge move, pivot, recently against that because they don't want to deal with the worldwide organization of competitors against that. Like most people are never going to compete and so they really just want to look good and feel good and there's a lot of ways to do that that don't take nearly the amount of space that, you know, doing snatches for time with, you don't know what I mean?

Things like that. So the way that they're able to use less spaces that they're selecting exercises that are not going to be as space consuming. And that's the first thing. And the second thing is I highly recommend you partner people up so that one person cheers and holds other, you know, one person cheers, spots, and rests, while the other person does a strength-based movement, whatever. And so that actually allows you to pretty much one and a half X or double the amount of people

that you can have at your facility. So if you're like right now, you can only service 16 people per hour and you're doing barbo lifts for everyone, right? Like you can probably remove that stuff, partner people up, and then immediately increase your capacity to 30 per session. Why is that important? Because you can decrease the amount of session times. have and you cut your overhead and have.

Might be something to look into. And so, as a result, the next line down is payroll, right? Their payroll was on average half, half, okay, of the laggards. So right now the laggards half of their gross revenue, what's a payroll, whereas the industry leaders it was 25%. Part of that is because their price is higher, so relative to the price that they're charging, they are less of it is going to payroll. That's one of it that's just math, right?

The other part of it is that I'm a big believer in this, and I, I, I, I'm a big believer in this, I've said this before and it goes with the next line down, which is commissions, is that I'm a big believer in having lower base pay and then having lots of incentives around semi-privates, around, you know, selling other products that you have at the facility, up, like, actually doing front-end sales, converting people into memberships, like all of these different things selling internal plays, like you're doing a, you know, 28-day stubborn belly fat blast or whatever, like, you're selling that to your internal members, like give that as incentives. And so then the trainers base pay is lower, but then their upside is higher.

And so the actual amount that these facilities paid their trainers was actually more than the other places. But that was because they had two times the amount of commissions as the lagging gyms. So all in all, if you're like, what are the notes to take home about this? One, make sure that your pricing is premium. Have a reason to have premium pricing so that you can have a premium product, right? If we were really cheap at Jim Lunch, I would not be able to require our customers. I'd not be able to have the crazy support team that we do. We wouldn't be able to continue to reinvest and spend money to try and figure out what the next thing is on a constant basis.

New ad platforms, new ads, and funnels and whatever, right? If we didn't have the money to do that, then our product would be inferior. We wouldn't be able to market to anyone. It wouldn't be able to find people. And so it's either a virtuous cycle or a vicious cycle. And I've talked about that in the past. So make sure that your pricing is premium. The next thing is never discount.

Like, don't negotiate with terrorists. to say that to my staff. Like, never negotiate with tariffs. Like, the price is the price for a reason. Because if it's not that, none of here, like, none of us have jobs, right? And it is your responsibility as a business owner to uphold that standard. Like, if you're the first, like, you tell people, hey, don't discount, but then, like, you always are the one making side deals because you're the owner. Like, you need to practice what you preach. Stand tall. Right. And then space utilization, look at your exercise selection. Um, and then consider partnering people up. I think it's a great selling point. I sold it as safety. I sold it as motivation.

it's cheering and then I also sold from a science component. I'm like, listen, if you actually want to gain muscle, like I can't have you just working, I'm trying to use the right term, hardcore for 16 minutes straight. Like, you can't do that. You need to rest, like energy systems don't work that way. So I need you to go hard for 45 seconds and then we're gonna have you rest for 45 seconds

and then you'll go hard again, right? You're gonna spot the other person and make sure you catch your breath and you can do another set. So consider that, it also doubles your capacity of the facility. And then payroll, have a lower base, and then higher upside on the commissions, and you'll be able to get more performance and ultimately keep your fixed cost lower so that if for some reason someone isn't performing or you're not getting the sales or whatever that month, then you don't have as much fixed overhead that could skin you a lot. So anyways, those are, that's the, that's you not having to read a huge document of what's going on. That's what the industry leaders are doing.

and I would highly recommend that you adhere to those things because they make sense. And the last point, which is marketplace, well, they must be in some, you know, standalone market, they must own their market. No, they were in the most competitive marketplaces. And those are the places that you have to and where diamonds are formed. And that's why the best practices are made because if they didn't have those, they'd go out of business. And so that's the place to them. Those are the hotbeds.

And so if you're in a competitive market, then you have more reason than anyone to follow the things that are just outlawed. So anyways, hope you guys are doing it. having a two-time Tuesday an amazing Tuesday lots of love talk to you soon wow