Is Your Staff Generating Enough?
What percent are you spending on your staff?
The 4/9ths Model
Brought to you by Chris Cooper himself
Every staff person should generate at least 2.25x what they’re paid.
That means gym owners can spend up to 44% of their gross revenue on staff costs, and still maintain a profit of 33%. Your gym exists to serve you; that means it exists to make a profit.
We’ve been teaching the “4/9 model” for over a decade. Thousands of gyms have turned around because their owners used this actionable model to become profitable. But if you haven’t been through a Two-Brain Business program, you’ve probably heard of the 4/9ths model in one of two ways:
- Through John’s book, Profit First for Microgyms; or
2. A critic who doesn’t know what they’re talking about.
First, here’s why the 4/9ths model works:
Most gym owners struggle to keep their labor costs under control. Few track their labor costs at all; and the rest stress over how much they’re paying, but don’t take any steps to control wages. So they impoverish themselves. A noble gesture, but unsustainable.
The simplest way to ensure your gym isn’t bankrupted by wage costs—and to provide meaningful, lasting employment to your coaches—is to tie their earnings to the revenue they generate.
In the 4/9ths model, coaches are paid for leading classes; coaching 1:1 clients; running specialty groups; and performing other roles. Each of these pays a different amount, depending on skillset. Coaches are never asked to coach classes for free, or to perform “extra stuff”—like cleaning or calling clients—without compensation.
Under the 4/9ths model, the gym owner contributes:
***NOTE FROM JOHN – This list is going to vary and have some differences whether the coach is an employee or a contractor. That topic is beyond the scope of this article though****
- Space and equipment for training clients (bearing the risk of leases and loans)
- Insurance for the coach
- Ongoing monthly training for the coach
- Booking and billing systems for the coach
- Banking access and fees
- Access to a prebuilt audience (this is usually the undervalued part)
- Security: the coach doesn’t have to worry about the lights being out, or the driveway unplowed, or the rent being unpaid.
In return, the coach is free to:
- Book clients
- Write training plans
- Deliver training plans
- Earn with no ceiling.
An easier way to think about the 4/9ths model is to think of yourself as a professional sports team. Your team’s Salary Cap is 44% of your gross revenue.
Now, the 4/9ths model has its critics. But they’re always people who are seeking attention on Instagram instead of seeking knowledge. The people seeking to grow their gyms usually ask us these questions:
How do I present the 4/9ths model to my coaches?
Talk about dollars, not percentages. Your coaches’ only business exposure has probably come from being a consumer, not an entrepreneur. They probably don’t understand what it costs to actually run a gym; they might even think you’re a secret millionaire.
If I say “I will give you personal training clients and pay you $31.11 per hour to train them, as well as covering your insurance and giving you ongoing training,” I’ve just made a coach the best offer in town. Up the road at Globogym, the coach can earn $18 per hour and receive only sales training with their wage.
If I say “You will earn $72 per hour for this group if you have 12 people in it, and $48 per hour if you have 8 people,” the coach will understand the value of increasing enrollment.
But if I say “44 percent” or “4/9”, they’ll think “Less than half.” That’s where the confusion lies.
Do I pay myself from the 44% (TEAM MEMBER BUCKET), or from the PROFIT, or from the OWNER’S PAY?
That depends which phase of business you’re in.
In the Founder Phase of entrepreneurship, you pay yourself from the 44%.This is because you are likely coaching all the classes.
In the Farmer Phase, you still pay yourself from the 44%, and try to also collect some PROFIT and OWNER’S PAY.
In the Tinker Phase, you should pay yourself solely from the OWNER’S PAY and Profit account, because you’ll have other staff covered by the 44%.
Not sure which phase you’re in?
Take our test at www.twobrainbusiness.com/test
Who pays the taxes?
That 44% (or 4/9ths) must include all payroll taxes, salaries, part-time labor and coaches’ pay.
While we take a directive approach of paying coaches 44% of the revenue from their PT sessions and groups, many gyms pay less–like 33%–to create a buffer for payroll taxes and management positions. Most globogyms spend less than 15% on wages, for comparison.
The gym owner’s greatest responsibility to their coaches, their clients and his or her family is making sure the gym remains open and viable.
The worst thing that can happen to a client is to begin a journey, start making progress and then have the gym close down. That closure also affects staff members and the owner himself or herself.
Profitable gyms can provide meaningful long-term opportunities for clients and staff. Coaches working for unprofitable gyms try to grow their branch on a rotten trunk.
The 4/9ths Model allows gym owners to be responsible and generous at the same time.
Improve Your Gym’s Infustructure
If you are wanting a deeper dive into this and more about how to make your gym infustructure more streamlined and organized check out Two Brain so they can provide you some guidance.
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