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With Founder and CEO of Loud Rumor, Mike Arce

Maximize Gym Profits – Understanding Your LCV & CAC

By null | June 23, 2021

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Show Notes

Understand Your Lifetime Customer Value & Your Customer Acquisition Cost, So You Can Multiply Your Memberships And Maximize Gym Profits! ⬇️

Do you know how long a member stays with you for the lifetime of your relationship? How much can your gym or fitness studio afford to spend on customer acquisition and still be profitable? Do you know how to maximize gym profits, without adding new members? 

If these are your burning questions, then this is the GSD Show you’ve been waiting for! 

Mike is going to break down exactly what numbers you need to know to maximize gym profits. He’ll also share EXACTLY how Loud Rumor can help you hit the big numbers. You know, the ones that matter. 

LCV & CAC: What You Need to Know

LCV is the “Lifetime customer value” – How much one member should be worth over the course of your relationship.

CAC is the “Customer acquisition cost” – How much money your gym can invest to recruit a new member and still be profitable. 

LCV and CAC go hand in hand because the one helps you identify the other. 

B.A.M. Profits

If you were to purchase markers for $1, how much would you need to sell them for in order to make a profit?  $1.01.

If you have other costs such as sales commissions, handling, and shipping, this could add another $1. Bringing it up to $2. Now how much do you need to sell this marker for in order to turn a profit? $2.01. 

But what if you’re looking to make more than just a penny in profits? How much should you sell that marker for? As much as you want!

If you want that marker to be worth more to the customer than $2.01 but still be the same marker, you need to increase the perceived value. Just by increasing the perceived value, that marker could be sold for a lot more than the bare minimum. 

In this blog, we show you how to reverse engineer your numbers to find out how much you should be spending on advertising!

How BRANDING Can Maximize Gym Profits

What’s the difference between Jack Daniels and every other competitor? 

The branding! They have the label, the story, everything else behind it that makes it seem more valuable. 

Their competitors have the same or similar product, the same result is achieved with either one. The branding power behind the story of Jack Daniels increased the value perception and desire for their product.

You can maximize gym profits the same way! Increasing the perceived value of your studio and the services you offer.

Calculate your LCV

Let’s say the average member pays $150 per month.

If this member stays for 6 months, $150 x 6 brings their lifetime value up to $900. Is that it? How else can you increase their lifetime value?

Think of your ancillary offerings:

Calculate the Actual Average Member Value 

Take your monthly revenue and divide this by the number of members who contributed to that number. If you brought in $10k and you have 10 members, this makes each member worth approximately $1k each month.

If the average member stays 6 months, that’s an additional $900 per member to make their total LCV.  That same member may spend $100 per month on supplements. We’ve just added $600 to their LCV. Let’s say the average member spends $100 in retail merchandise over the course of their 6-month membership. That’s another $100!

We’ve just increased the LCV of EACH member to roughly $1600. It could be even more with referrals. 

I’ll use Loud Rumor as another example. If Loud Rumor made $500,000 per month, this doesn’t equal straight profit. This is our revenue, the “Top Line” number. The “top line” number is everything that comes into the business. 

The profit is found on the “Bottom Line”. After your costs and expenses are all paid, this is what’s left – your net profit.

Calculate A Profitable CAC

A healthy studio will have a 15%-25% profit. If a member is worth $1600, 20% of that $1600 is $320. This means you can afford to pay $319 to acquire a customer and still make a $1 profit.

At Loud Rumor, let’s say our clients pay us $3,000 for everything we offer, including fees and ad-spend. Those gym or fitness studio owners need to get 10 new members to make sense of this investment. 10 new members would make a CAC of $3200 and they will recoup their costs. 

Or you can make sense of the investment by just getting 1 new member.

HOW? Infinite returns.

A personal trainer only HAS to help with exercise.  A GREAT personal trainer sets you up with a whole program that covers nutrition, diet, lifestyle, rest, and accountability. That’s exactly what Loud Rumor provides our clients, the pitch is the same!

We don’t just drive leads. We teach you how to multiply each lead tenfold. What’s the bigger number? 10+10? Or 10×10? 

Loud Rumor provides value by developing an entire program to help you hit those big, “top line” goals. And we even provide a script to make it easy. Not just any script, the most valuable script a gym owner can have in their toolbox.

Getting new leads is great, and you need that. BUT it’s far more profitable to MULTIPLY your existing memberships. Maximize gym profits today by working with the Loud Rumor team!