Small-Group Secrets: Pricing and Profits
Profit Center: How to maximize small-group profits.
Small-group training—workouts for groups of three to 10 clients (www.ideafit.com/fitness-library/small group-secrets-the-start-up-plan)—is a trend that’s changing the face of our industry.
Why? Profit margins are much better with small group, says Mike Bates, MBA, owner of Refine Fitness Studio in Windsor, Ontario. “If your goal is to make money, you should do as much [small-group training] as you can, as long as it fits with your training philosophy.”
This article—the second in an ongoing IDEA Trainer Success series on SGT—focuses on profit systems that help get small-group dollars to really make sense. It addresses three key points:
- what to charge
- how to collect payments
- what policies are needed to drive profits
So what’s a fair SGT fee? That depends on how personal your training will be. Is a relatively generic, circuit-based session your style? Or will you create periodized and customized exercise prescriptions for every trainee? The latter clearly takes more work and should be priced accordingly.
John Sinclair, a veteran trainer in Edmonton, Alberta, and a member of the PTA Global Faculty, charges $95 for a one-on-one workout and $75 for a small-group session (which he limits to three to six people). It’s not a huge discount, because Sinclair’s mantra is to keep it very personal: “I believe what I do with group training is an art. Most group training programs involve [everyone doing] the same exercises at the same time. But I offer personalized training in a group setting.”
To start, set your SGT fee to roughly the same level as a one-on-one 30-minute session in your market, says Rick Mayo, the owner of Atlanta-based North Point Fitness and North Point Personal Training systems.
Alternatively, charge about 20%–30% less than you would for a one-on-one session. “If you normally charge $60 an hour for a one-on-one, your [small-group] prices could start at $40 a session and have three to four people per hour,” says Rachel Cosgrove, the 2012 IDEA Personal Trainer of the Year and the owner of Results Fitness in Santa Clarita, California. This would net you $120 to $160 for that hour, at least doubling your hourly income.
Also, adds Bates, consider your profit margin goals, overhead costs, the number of clients in each group, your (or your trainers’) rate of pay and what your local market dictates.
How you accept client payments impacts your professionalism and client retention. You’ll need to choose between more traditional one-time charges and an increasingly popular method: ongoing electronic fees.
One-time payments are collected up-front and used to purchase fixed-period training, such as an 8-week program or a 20-session package. Once the client’s sessions have been completed, you must ask for more money (usually via cash or check) if the sessions are to continue.
Unfortunately, there is a psychological barrier to physically paying for something over and over again. Imagine a magazine subscription that required you to send a check on the first day of every month. You’d consider it a huge hassle, and you might not renew!
Nevertheless, one-time payments work well in certain circumstances. For example, if your training specialty is elderly clients, you may find them distrustful of ongoing or online payment methods. And feeder or funnel programs—short-term marketing initiatives, such as a 30-day weight loss challenge, designed to drive new clients to your business—are also best charged with one-time fees.
Ongoing payments, in contrast, are made in exchange for training services that have no defined endpoint. Clients are billed electronically on a regular basis (weekly, or more commonly, monthly). Customers simply notify you if they wish to cancel their ongoing agreement. Typically this is carried out via electronic funds transfer, such as a monthly auto-debit from a checking account or credit card.
An EFT agreement is like a personal training “membership” that automates your money-collecting system. In exchange, customers have the right to attend a number of sessions—either unlimited or fixed—within a set time period (such as four to eight sessions per month, as Cosgrove recommends).
With few exceptions, almost all the top trainers interviewed for this article series agree that ongoing EFT payments work better than one-time payments.
Why? Automated payments boost client retention. “When you remind clients that they have to pay each month, the chances of losing them are greater than if you just had the money come out automatically,” says Fred Sassani, founder of Bodies by Design Personal Training in Austin and Pflugerville, Texas.
Automated billing also allows you to accurately forecast how much money will be coming in each month. This makes business budgeting “a heck of a lot easier” than the old session-based sales system ever could, notes Mayo.
Once you’ve established a price and a payment plan, you’ll need policies to reinforce them. Specifically, you must outline the three C’s of SGT: contracts, commitments and cancellations.
Contracts. The key to making your payment plan work is to have an explicit agreement. Sassani’s customers sign contracts that state how much they will be charged each month, on what day and for how long. “I also have a cancellation policy that each client must read and sign,” he adds.
Commitments. Sassani offers 3-, 6-, and 12-month training options that automatically convert to month-to-month agreements thereafter. Cosgrove offers 3- and 12-month options, but he also has an $89 one-month try-it-out trial to get new clients on board.
Cancellations of Agreements. If you use an ongoing payment system, almost all the experts interviewed urge you to require 30 days notice for clients to quit. This allows time to either regain a trainee’s business or find a new customer to fill the spot, ensuring continuity of income.
Cancellations of Sessions. What about no-shows? Sassani used to refund properly cancelled workouts by sending a refund check at the end of each month for sessions missed, ensuring that his EFT agreements would not have to be modified. However, he has since adopted an approach that requires even less paperwork: Clients who skip small group can attend a large-group boot camp run by his trainers, or they can ask to drop into another SGT time slot during the same week.
The New Profit Model
One-on-one, pay-up-front packages of sessions are personal training’s past, say most experts interviewed for this series. While not all agree—some prefer to retain aspects of this classic business model—successful trainers are trending toward building predominantly SGT-centered businesses, supported by fewer hours comprised of one-on-one and boot-camp workouts, with automated EFT payment systems billed monthly.
“Small-group training is the wave of the future,” says Sinclair. “I doubled my income from this method of training.” He adds, however, that perfecting his SGT systems was the key to his success. The next issue of IDEA Trainer Success will examine how programming and scheduling SGT training times also impact your revenue potential. Until then, think big and go small!
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Online options. While PayPal is well known, it’s not ideal for EFT payments, says trainer Fred Sassani. In his experience, it’s not automated enough. “You will have to manually charge each client and punch their credit card numbers in [each month] or have them send you money,” says Sassani. “That can get really messy, really fast.”
Non-PayPal, Internet-based EFT options include www.mindbodyonline.com and www.1shoppingcart.com. Fees and terms vary; because of the rapid growth and frequent changes of online offerings, it’s best to explore all options.
Traditional bank. Sassani prefers a traditional merchant account at a bank for his EFT needs. He notes that while it costs him around 3% of his monthly income in fees, this cost is tax-deductible. Plus, all of his business dealings are in one location, so if something goes wrong he can address it in-person and without hassle.
Whichever EFT model you choose, be sure that you understand how (or if!) the system manages cancellations and collections. For example, are clients able to stop payments on a whim, or must they go through you? If a customer’s credit card refuses a monthly charge, will the system attempt to recharge it? How—and how quickly—will you be notified of the problem?Also be ultra-clear on the EFT service’s fees: Are they fixed and up-front, or are they recurring and based on a percentage of your revenues? Regardless of which method is applied, most trainers report that EFT-related costs pay for themselves in boosted client retention and paperwork time-savings.
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