An In Depth Analysis of the Recent Zen Planner Yearly Report By OPEX Fitness CEO Jim Crowell
Every year, Zen Planner produces a financial report compiled from surveys of all of the gyms in their Customer Relationship Management (CRM) system. Information such as member size, rent expense, number of instructors, and types of classes offered is compiled and analyzed to benefit their community and the fitness industry as a whole. We can learn a great deal about the fitness industry, how to run a gym, and how to determine what success means by taking a look at this report.
I wrote an article last year discussing Zen Planner’s 2016 Affiliate Report, and when the new report dropped this year, I thought it would be interesting to take a look back at what had changed year to year and what this information can allow gym owners to do.
My goal with writing this is to help coaches and gym owners sift through this mountain of data to help them use it effectively in their own gyms and business practices. Now for my favorite part, let’s take a look at the new exciting data!
Zen Planner curates information that would only be helpful to gym owners. People, like myself, who crave context will want to understand more information than would be beneficial to Zen Planner to put out. The rest of this article will be fashioned as an attempt to gain clarity and context from the large amount of data that Zen Planner presented. Without context, recommendations would be foolish.
The first contextual idea I want to throw out is that Zen Planner defined success as net profit. I get why they did that, but everybody and every gym has a different definition of success. As a coach or gym owner, you owe it to yourself to decide how you will define, track, and improve your success every month you’re open. Perhaps it’s net income only. If so, you will be forced to make concessions to your coaches and clients in favor of cash. If you’re unwilling to do that, merely tweak your definition of success. When you go after what inspires you, you will have more fulfillment and develop a platform to succeed financially long-term.
This year, Zen Planner adopted two terms to distinguish their winners and losers in the affiliate world: “leaders” and “laggards”. The leaders are classified as those who make $7,000 or more in net income, NOT revenue, and the laggards are classified as those who are break even or worse in net income. However, this is not always the case. Here’s an example of why:
Let’s say that a gym makes $20,000 in revenue…
Which of the above two situations is “better?” The tax savings of the above bullet (assuming they are paying taxes fairly in the eyes of the IRS as an employee of the business) looks better, but the net income is $10,000 different. See the confusion? To understand the specifics here, we need to understand not only the business’ net income, we must also understand the total cash flow that is earned for the gym owner. Without that, we are a bit in the dark.
The first thing that really caught my eye was the disparity between how much the ‘leaders’ were making per client – $145, vs. the ‘laggards’ – $66. What I’m more curious about, though, is how the average membership price for the laggards was $128 per month but the monthly revenue was only $66. Zen Planner discussed gyms giving discounts, but I tend to believe that discounts are not what caused this large of a discrepancy. While I don’t have any data to support this belief, I have worked with thousands of coaches and gyms at this point and I would chalk up this discrepancy to a few problems common to affiliates:
If you are claiming that your “go to” membership option is $165/month, I would argue that you had better have an average client revenue of $150+/month once you’ve gotten over apx 20 clients. I don’t say $165 on the nose because perhaps people pay annual contracts up front for a 5% discount – YES contracts are great!. Perhaps you bring in a number of new clients who have prorated their first month so that you get them to pay on the first of the month in the future. That act means that your average client price drops; nothing wrong with that.
According to the report, Small gyms or ‘laggards’ have a median client count of 50 members. Leaders have 189. Nothing too out of the ordinary there. What I want to discuss, though, is how virtually everything else in terms of success will stem off of this number.
We’ve just discussed the dollar per client amount of gyms. I want to hold the dollar per client amount firm at $125 perclient (an amount I believe to be cheap for an affiliate). 50 clients at $125 = $6,250 in monthly revenue. 189 clients at $125 = $23,625 in monthly revenue. Micro gyms live and die off of client counts.
Micro gyms, including affiliates, aren’t complicated business structures. You have fixed costs which include rent, utilities, staff, costs, education, marketing as well as the cost of goods sold which include credit cards, coaching fees, and inventory.
Once you make enough revenue to cover your pre-built costs, which are often highly skewed to rent and coaching, every new client that comes in is profit, called contribution margin. The more clients you have, holding a monthly price point equal, the more profit you’re going to make.
I’ve not just blown your mind with that, what I’ve tried to do is to put context to how you’ll win this game. While holding costs relatively firm with each new client, you are putting in as many clients as you can each month. How do you do that, you may ask?
On the flip side of the coin, let’s now “float” the monthly revenue number away from $125/month, but let’s hold the total client number equal at 100. How do you move the price point north?
I don’t work for or have any affiliation with Zen Planner, so naturally some of the information they provided doesn’t make much sense to me. In order to provide some clarity in certain topics presented in the report I would need more information into how certain datasets were acquired. That being said, I want to point out a few problems I noticed in the report.
Plenty of good data came out of this report; here are some of the key points that I would echo as being really important to gym owners and potential gym owners.
I really appreciate that Zen Planner takes the time to put a piece like this together. It’s not easy to get this much information compiled. They do it cleanly, and the information is quite helpful. If you are a gym owner or looking to become a gym owner, check out this report. I’m curious to learn what you think about the information inside of it. There are some great points to learn from; there are also some points that I’d stay away from. At any rate, you control your own destiny. Learn from your business every day. Learn from you clients every day. Improve your business every day and you will thrive.
Got some thoughts to share about the 2017 Zen Planner Report? Let us know in the comments below!