Applying the ‘Wal-Mart school of thought’ when it comes to pricing usually works great…
For Wal-Mart, that is. They can slash their prices, because that’s how their corporation was built in the first place -and they’ve got a behemoth supply chain to match their horrifyingly low 3.5% profit margins. Awesome for massive warehouse retail companies. Not so good for personal trainers.
Adopting the practice of cutting your fitness training hourly rates in order to attract clients and keep them coming back is probably not going to be your best course of action. While this might be sustainable in the short term, that model just isn’t going to fly over the long term. So, how can you tell if your rates are just too low?
Well, if you’ve lately been saying to yourself, “Wait, something can’t be right,” and you feel like your fitness business has you doggedly running in a never-ending sand pit; then perhaps, it’s time to reevaluate your rates.
Model Fitness Biz: Income – Costs – Gym Time – Rate
Now, first thing’s first, let’s get the basics out of the way. All too often, I’ve seen trainers calculate their rates backwards, and this tends to result in pricing that’s either way too high of (in most cases) way too low. Here are the steps that you should take:
- Calculate your desired yearly/monthly income.
- Add up ALL of your yearly/monthly business costs (ie. taxes, cont. education, certifications, transit, gym fees, marketing costs, equipment, etc.).
- Determine how much time you wish to commit to your business (ie. training time, business tasks, marketing, etc.)
- Apply the difference to determine the appropriate rate.
Now, if your rate doesn’t seem correct, then you might have to take another look at your costs. It’s either that, or your expected standard of living isn’t attainable -all things constant, of course. For instance, if you’re expecting to make $55,000/yr in Northeast Antelope Valley (LA area) then you’re probably not too far off in your expectations. If you’re trying to make that kind of money in Malibu, then you’re shooting way too low, given the area’s obscenely high cost of living.
One way to tell if it’s time to raise your rates is to look at the rates and yearly average income of other trainers in your local area from within a 45-minute driving radius. Here’s why this matters…
#5 – Other Trainers’ Rates Are Much Higher In Your Area
Once you come up with the average statistical information on rates and incomes of fitness trainers in your area, then it’s time to compare. I’ve found that if you’re below your local competition by more than 10%, then you need to close that gap to within at least 5%.
The point is that clients are going to come to you for value and not for price -and if you’re heavily devaluing your services in comparison with other trainers in your area, then you might want to take a step back and reassess your business’s structure. In most cases, this comes down to ineffective branding that’s dependent of the local market’s perception of cheap services. As mentioned, in the long run, that’s going to hurt.
#4 – You’re Not Getting Enough Clients
Another key indicator that you’re not charging enough for your services is one that might be somewhat counter intuitive: you’re getting too few clients.
Again, it’s not uncommon for us to forgo purchasing a cup of coffee from a convenience store -in order to willingly pay twice that amount for roughly the same-sized cup at Starbucks. I can guarantee that a Starbucks is going through way more coffee than your average convenience store, despite the fact that the convenience store has Starbucks’ Pike Place Roast price beat by a good 50%. What’s the difference?
It’s a matter of perceived value: if your prices are basement-level low, then prospective clients are going to perceive that you give basement-level quality of service …and walk away.
Fisher Price can increase their prices of toddler toys for the simple fact that their brand is on that little plastic playhouse in your backyard. The reason why you bought it is because you probably wouldn’t have trusted in the quality of the no-name brand, even if it was 25% cheaper. Thus, if you just can’t seem to find the clientele to fill up your goal of 20 hours-per-week in gym time, then your prices might actually be too low, and not too high.
#3 – You Have Something Unique to Offer
Let’s say for instance…
You happen to have a unique skill to add to your fitness business, a certification that most other trainers don’t have, or you cater to a select clientele in a way that most trainers could not.
If you were still in the practice of price-cutting, then you’re really doing yourself a disservice if this is the case. How so? Well here are a few factors…
- Often times, a special certification or unique skill requires additional resources to develop, which will add to your overall business’s costs (ie. school loans, time).
- A special clientele niche tends to be extremely loyal; however, that factor also tends to require a more rigorous and costly marketing effort.
- Your uniqueness should be reflected in the rate difference, between you and the other non-unique trainers in your area. If it doesn’t, then you might actually be nullifying your special qualities by failing to indicate this with higher-than-average rates.
That’s just the nature of business. If you’re able to provide something that the vast majority of your competition cannot, then your rates should reflect this fact openly. Otherwise, prospective clients will find your rates to be more confusing, instead of seeing an opportunity to snatch up a good deal.
#2 – You Just Can’t Seem to Make Ends Meet
This is usually the second sign that trainers tend to notice -since it’s showing up every month when paying the bills. Unfortunately, this particular sign tends to be quite the crafty deceiver in the beginning -given how the usual human reaction is guilt-rooted, wondering what our problem is. We tend to ask vague questions like, “Why is my business going nowhere?” and “What am I doing wrong?” …rather than the more specific… “Are my prices too low?”
That’s one reason why I tell people to look at what other local trainers are making, and then start making comparisons, based on the facts. If you’re in the process of running your business to exhaustion and you’ve had hiccups with turning a profit, then there could be a cost that you’re not accounting for. For instance…
- Your facility renting costs might be above average.
- You might be traveling farther than most other trainers.
- You might have an extra certification that other trainers don’t have, which inturn added an education cost (see #3).
- You might have problems with your payment structure (series vs. package)
- You might not be leveraging your assets the way your competitors are.
- You might not be properly marketing, spending too much time and effort on an ineffective method.
Whatever the case may be, if you’re having problems making ends meet, then it might be time to pound the pavement and continue your market research of other local trainers. If you’re apart of an fitness association or Chamber of Commerce, then these should be your starting points.
#1 – You’re Working Too Hard
This is probably THE most subtle sign of them all; because, if you’ve got a work ethic of steel, then chances are that you very well might be making ends meet. However, you’re working 65 to 70-hour weeks in order to do so. At which point, you’re probably wondering if you’re simply inefficient at running a fitness business, or you erroneously feel like this is simply a ‘normal’ thing.
The point is, nobody actually wants to work 70-hour weeks, nobody actually wants to put in 14-hour workdays, and nobody actually can successfully do so (for long). Here’s what would naturally happen if this were the accepted industry status quo: either every local trainer’s rates would naturally have to skyrocket to meet demand, or most trainers would start dropping their businesses for a more agreeable line of work. In which case, you end up with less market saturation.
This is why your abnormally difficult workload is a sign that you might want to reevaluate your rates to see if they’re artificially low, as this would explain why you’re forced to take on 5 more clients than is economically necessary (in order to mitigate the problems that are caused by #4).
Sound Economics Can Keep You Sane and Successful
The key here is to charge your clients what you’re worth!
If you’ve set your rates to accurately reflect this, then things are going to flow far more smoothly. Also, if you’re adding leverage, expanding your client-base by adding a variety of product/rate options (like group and in-home sessions), building your brand effectively, and keeping an eye on what others in the business are doing …then your fitness business’s turnaround is inbound and hot.