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With Loud Rumor Performance Director Matt Kafora

Why Gyms Fail: Payroll Costs Are Too High

By Mike Arce | June 15, 2021

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Show Notes

What should your gym’s payroll costs be? 

How can you decrease costs without sacrificing member experience?

That’s exactly what Matt covers in this bonus episode of the GSD Show!

You can watch the whole episode here.

One of the prevailing reasons gyms fail is due to payroll costs being too high. Matt covers how you can spot your gym’s payroll losses and how to stop the leak. 

Allowing Underperformers

You may have some fantastic folks on your team, but if you allow underperformers to stick around, you’re actively losing money. Maybe they’ve been with you for years, or you consider them part of your family.  But if they’re underperforming based on the financial needs of the business, they’re a financial liability. 

You’re not getting the kind of return you should see from them when they don’t meet their quotas. We talk a lot about quotas around here- this is how you measure your progress!

Training Gaps

Are your team members clear on your referral or sales quota expectations? Do you have distinct targets everyone is aiming for? 

It’s your responsibility as the owner or leader to make sure your team is properly trained to hit those targets and hit them consistently. Set them up for success!

Once they have their target, you can cut them loose and forget about them, right? Not quite. 

While you can release them onto the floor, you must corral them and hold them accountable to their goal. Continue to invest in their preparedness to perform with continuing education and support. Progress will breed buy-in as you see them hit their targets! Their success is YOUR success. 

CASE STUDY:

During a recent office hours session, a client was gushing over an exceptional month at their studio. They were on track to have their best month ever in business.

But Matt had one question. “How many referrals did you get?” 

Only two.” They were instantly deflated.

This question was not meant to take the wind out of their sails but to hold them accountable. They know the right answer is five referrals. We have trained on this and the resources and tools are available for them to know how to do this. 

“But you only got two?” The big win here is that 30-60 days ago, they didn’t even ask for referrals. They were getting ZERO referrals. Their mindset has changed, they’ve taken this goal on as their own and are bought in!

The Solution

Set a Budget and Stick To It

Your payroll budget should be at 30-40% of your top line. Of course, the lower you can drive this number, the better. 

We recommend planning for a lighter salary and pay out more heavily for production. Implement compensation plans that allow your team members to write their own check. While the salary will constitute the bulk of the budget, commissions and bonuses can be approximated.

Monthly & Quarterly Reviews of Your Numbers 

Who closes out their books and reviews their numbers at the end of the month? Probably not everyone. 

If you don’t know your numbers, that’s like playing the game but not keeping score. 

Why would you do that?

Knowing your numbers is how you are able to spot trends. Based on those quarterly reviews and trends, you will set your quotas. And where does that number come from? Quotas are set at the intersection of challenging vs realistic.

The needs of the business will dictate what your quotas should be. This includes any outstanding debt, bills, equipment costs, expenditures, business expenses, etc. 

Consolidate Payroll Costs by Cross-Training Employees  

Some studios we’ve worked with have opted to do away with the front desk or have allowed coaches to take on management responsibilities. 

Consolidate your gym’s payroll costs by cross training, wherever possible. This is another way you can get buy-in from our team in reference to referral quotas. As with the case study client, they were upset at only getting two referrals. But this was evidence of buy-in! Where they previously closed none, they now have two!

Wear More Hats

As the leader and the owner, you may need to wear several different hats. Have you cleaned toilets? Mopped floors? Stocked shelves? Picked up trash outside? Plan on wearing as many hats as needed to stay ahead of the game and control our payroll costs. You need to be willing to do it all! 

These are all practical strategies you can begin implementing today to reign in your leaking payroll losses!