Episode 341: Plugging the Profit Leaks in Boutique Biz

In this episode of the Female emPOWERed Podcast, Christa Gurka breaks down the hidden “profit leaks” quietly draining revenue from Pilates studios, cash-based PT practices, and boutique fitness businesses. If your schedule is full but your bank account still feels empty at the end of the month, this episode will help you uncover where your business may be losing thousands in missed revenue and low profitability.

Christa shares practical strategies to improve utilization, tighten up memberships and packages, optimize payroll percentages, fix cancellation policies, reactivate old leads, and stop leaving money on the table. This episode is packed with actionable business advice for studio owners who want to increase profit without constantly chasing more clients.

In This Episode, Christa Covers:

•  The biggest hidden revenue leaks in boutique fitness businesses 
•  Why too much flexibility in packages hurts profitability 
•  How unlimited memberships can quietly destroy margins 
•  The real cost of underpriced semi-private sessions 
•  Why payroll percentages matter more than revenue 
•  How frozen memberships become canceled memberships 
•  The importance of reactivating old leads and former clients 
•  How small utilization improvements create massive profit growth 
•  Why profitability matters more than simply being “busy” 

Key Takeaways

•  More clients are not always the answer 
•  Small operational changes can add five figures in revenue 
•  Clear cancellation and expiration policies protect profitability 
•  Semi-private pricing should reflect the value delivered 
•  Payroll should typically stay between 30–35% of revenue 
•  Retention and reactivation are often more profitable than new marketing 
•  Tiny 1% improvements compound into major business growth 

Resources & Programs Mentioned

🌐 Christa Gurka Official Website

📈 Fit Biz Accelerator
💼 Elevate to Exit
🎙 Female emPOWERed Podcast

Connect with Christa Gurka

📲 Instagram: @christagurka
 

Transcript

Speaker 0:00

Hey there, everyone. Welcome back to another episode of the Female Empowered Podcast. I'm your host, Christa Gurka, and today we're talking about something that I recently talked about on a previous episode, and I got so many DMs, I decided to do another one. It's something we see over and over again inside Pilates studios, cash-based physical therapy practices, boutique fitness businesses, and generally any type of service provider, and it is this: our businesses are oftentimes leaking money in places that we're not even noticing. We're busy. Our schedules are full. We have clients coming in. We have money coming in, and at the end of the month, we still look at our bank account and think to ourselves, "Where did it all go? Why is nothing left in here?" We're not crazy. We're not bad at business. I'm doing that in air quotes. And you probably do not need 100 more new clients. What you need is to find and stop the invisible leaks that are quietly costing you $20,000, $50,000, maybe even more every single year in your business. So today I wanna walk you through the biggest hidden leaks I see in studios and practices, help you calculate what they're actually costing you, and give you some simple, easy, actionable ways to fix them. Because really the truth is you probably do not need 1,000 more clients. You probably don't need to hire a bunch more people. You need to keep more of the money that's already coming in, that you already making. All right? So leak number one, too many flexibility in your packages. This is one that I see all the time in fitness studios and Pilates studios and PT practices. Owners create packages because they wanna be nice. They wanna be flexible. They wanna make it easy for clients. It's what they've done... It's what our industry has done over and over, and what ends up happening is the package protects the client, but not necessarily the business. So let me give you a couple examples. Eight sessions that can be used any time over six months, clients rolling over sessions forever and ever, flex memberships that encourage cancellations because I can always make it up later, no expiration dates, like we prevo- previously discussed, no late cancellation policy. And then owners wonder why their utilization is low even though they have a significant amount of members. So what often will happen with these kind of packages is that clients with too much flexibility cancel those prime time spots because they know they have extra time to use it. It's not gonna expire. But you do not have enough time to fill that spot. So now you're left with lost revenue, low utilization, unpredictable schedules, and instructors sitting there either underpaid because they're not getting paid for that time or underutilized. you're losing money, you're paying them, and they're not doing work. So let's say you have 10 members who each miss one session a month, just one that you cannot refill, and those sessions are worth $40 in a group class. So 10 sessions times 40, that's $400 a month. Over a year, that's $4,800 a year, and that, my friends, is a conservative example, right? It's a conservative example. Instead of unlimited flexibility in all of these packages, what if you tried more auto-renew memberships, four sessions in four weeks, eight sessions in eight weeks, okay? Maybe a small freeze fee after 30 to 60 days, so clear expiration dates, like not for five years. Strong communication is required for this. So one of the things that's really important to let your clients know, especially when you're a boutique and you're serving a certain type of industry, a certain type of clientele, is, "We saved this spot specifically for you. We will honor this spot specifically for you. And because of that, we ask that you use it or you release it in time for another client." So f- enforcing that 24-hour cancellation policy, or, if it's for group classes, a 12-hour cancellation policy so that you can get other people into that spot. You can also then make sure to be charging people f- no-show fees and cancellation fees. Our cancellation fee was the full cost of the session, so if you canceled w- inside of that cancellation window, it was the full cost of the session, and if you no-showed, it was 100% the full cost of the session. For our people that had memberships, they were allowed one late cancellation a month, and anything over that, not only did they lose the session, but they actually got charged a fee on top of that. What we're trying to do is create a culture where people don't just not show up because we got a lot of people that want those spots, all right? So definitely some things to think about where you could be leaking money. You can be kind without creating a business model that leaks money. So you can have flexibility. You can have a variety of service packages, although I don't recommend a ton of them 'cause- Less is more. And so you can still create value for your people and have it work for the business as well. All right? Leak number two that I often see, especially in a studio-based practice, is underpriced semi-private sessions. This is one of the biggest leaks I see in Pilates, and also right now in physical therapy practices. So you have a semi-private offering. You think it is more profitable because there are multiple people in the room, but when you actually run the numbers, you're noticing that it's not... It's barely profitable at all, and why? It's because they are underpriced. A semi-private session is priced at $45 a person, and if there are 40... If there are three people in the room, that's 135, I think, $135, right? So but if an instructor is getting paid 50 to $60, your rent and overhead is another $20 out of that, okay? Suddenly, you're left with very little actual profit. So what do you have to do in these situations? You have to make sure that you're charging appropriately. So if there's only three people in a class, there's only three people in this private session, what you need to do is be charging appropriately. So you take what would be a private session, okay? Maybe $100, maybe $250 if you're a physical therapy practice, and now divide that up by three. Okay? So if your private session is a hund- let's just say $125 for Pilates, okay, and you divide that up by three, right? Let's do the math. That is $42 a session. Okay? And so now what you wanna do is increase that a little bit in case you get a cancellation, right? So you're gonna go to $50 a session. Let's say you take that two fifty and you divide that up by three. You're a cash-based physical therapy. That's $80 a session, right? Roughly. So let's say you have someone that no longer necessarily needs one-on-one physical therapy and you wanna start to open these semi-private pods where three people can be treated at the same time. They can ch- pay $85 a session versus two fifty, and it... when three people arrive, you're getting at least as much as you do for that hour. So making sure that you're not pricing those semi-private sessions the same as a group class or a group offering. They're a little more premier than that. All right? So making sure that you're Pricing rule follows the productivity and sustainability of your business. So for every service in your business, you should be asking yourself, "What is the total revenue generated? What does it cost me to deliver this service? And is there at least 20% of profit margin left over?" If the answer is no, then your pricing is probably too low. Okay? So y- you want to definitely look at those and make sure that after all of your expenses are paid, you're hitting about a 15 to 20% profit. So all of your expenses paid, the instructor paid out, your operational costs, your owner salary. it's important to understand that busy, being busy, being full on your schedule doesn't always mean profitable. It's important. revenue coming in is one metric, but what stays, profitability is a more important metric. Okay? So that's a more important metric to follow. So leak number three in your business, payroll percentage. So if your payroll in your business is over 45%, this is one of the fastest ways to quietly be destroying your profit. So I see businesses all the time doing 800,000, a million dollars a year and still feeling broke because payroll has crept up over 45, 50, sometimes even over 60% of revenue. So that means 60% of what you're bringing in is going out immediately to your payroll. Okay? How does this happen? You give raises without raising prices. You add another admin person. You keep someone on because they're loyal, but they're not necessarily producing anymore, right? So the quality has gone down. You overstaff because you're afraid of being short. You don't hold people accountable. And then also, it's just the way you decide to pay people, right? I hear all the time from owners, and I did this myself, I heard all the time, "Oh, it's a 50/50 split, is industry standard." And that is not correct. A 50/50 split is not industry standard. A 50/50 split would be industry standard if you were a partner in the business, but not if you're a staff member, certainly not if you're an employee, because the cost of carrying an employee is anywhere from 7 to 15%. So if you're already paying them 50% of what you bring in, and then the cost of carrying that employee is another 10%, now your payroll costs are 60% or higher And that is really, difficult to remain profitable in a service-based business when 60% is already going out before you pay rent, before you pay marketing, before you maintain the equipment, before you pay yourself, before you pay your credit card fees, before you pay utilities, all of that stuff, okay? So payroll is one of the biggest profit eaters in our businesses. So for most boutique service businesses, payroll ideally should be somewhere between 30 and 35% of total revenue. Closer to 30% if you want strong profitability. Above 45% usually means something somewhere needs to change. So how do you calculate this, okay? This is how you calculate it. You take your total payroll for the month. How much did you pay in the month? And you divide it by your total revenue. So you get, in that you get times 100 is your payroll percentage. So if your monthly revenue is 80,000 and your payroll is 40,000, your, it's 40,000 divided by 80,000, that's 50%. That means half of every dollar that you make is going to payroll before you pay rent, software, supplies, credit card fees, taxes, et cetera. So here are some questions you should ask yourself. One, are you overstaffed? Do you have more people than you need? Usually this is not the case in our industry. Most people are trying to hire. Are team members in the wrong role? So do you maybe have the right people on your team, but maybe they're sitting in the wrong seats in your business? Are you paying too much for low-value work? Can you supplement some of this work with AI? A lot of stuff can be done with AI, with Claude, with Perplexity, with Gemini. There's all, Figma. There's all sorts of things that can replace, and I hate saying this, like I hate talking about, people losing their job, but can you replace certain repetitive tasks with AI features? It's possible. are you keeping people on your payroll because you like them, not necessarily because their roles make sense? Now is not the time to keep people on your team if they're not necessarily the right people that are gonna get you to where you wanna go. So this is something we need to e- evaluate. Are you paying your practitioners or instructors more than 30% of what you're bringing in? That's a huge thing, and if you're like, I only bring in $50 for this class, I can't pay someone 15," then the solve you have to solve for is you either need to raise your prices or you need to get more people in those classes. Okay? So it's just math. You have to look at the numbers. And by no means am I at all saying that people don't deserve a livable wage. They do. Of course, they do deserve a livable wage, and the business needs to stay financially solvent. If the business is not financially solvent and you have to close your doors, nobody's gonna get a livable wage 'cause nobody's gonna have a job, and that is not a seat you wanna be in. Also, if you look at this over time, right? So some people say, "Oh, I'm a Pilates instructor. I've been teaching for 20 years. I should be getting $75 an hour." let me just explain to you. If you laugh at $45 an hour, $45 an hour, the full-time equivalent of $45 an hour is $94,000 a year salary. $45 an hour is not a bad rate at all. Okay? So $45 an hour, the full-time equivalent is $94,000 a year. So at Pilates in the Grove, we created a system, we created a business model where I had several instructors making six figures, over $100,000 a year, teaching 30 to 35 hours a week, which, yes, is a lot, getting paid vacation, getting access to health benefits, getting continuing education. The business was still operating at an 18% profit margin, and myself as owner was still drawing a high six-figure salary without being revenue generating. So those things can be accomplished. My studio can still have good profit margin, and my instructors can still make great salaries. Both things can be true at the same time if you look to the numbers and create the system and create the processes and create the business model that allows for that, which is again why in that, podcast episode I did a couple weeks ago, which was like you cannot compete on price, is I had 10 reformers in my studio. Studios that have four should not price the same as I do with 10. I can get twice as many people in, into my class, so you can't compete with me on, price point, so you shouldn't be charging 28, 29, $30 a class. You should be charging 45, 48, 50, $55 a class. That way, at $55, at $50 a class times four, that's 200, right? Your instructor could make $60 for that hour. Okay? $60 at a full-time Equivalent, right? Is, let me see, let's see. That's over $100,000 a year. So this is what you have to think about when you're messaging to your team, or you're making offers, or you're looking at your numbers. Okay, so you don't have to have high payroll, but you do have to have... Like you math has to math. Here's another leak. Freezes, people that allow f- membership freezes without a follow-up plan. This is one of the sneakiest leaks in your business, frozen memberships, because frozen feels safer than canceled, right? So people are like, if they're frozen, they're gonna come back." But is there a system for them coming back? Is there a time limit on when they come back? Because if you don't have a system, most frozen members quietly become canceled members. We see this all the time. A member freezes for travel, for summer, for injury, for life, and then nobody follows up with them. There's no set time that membership goes back, no text, no email, no reminders, no invitation back, and then three, four, five months, and now they're gone. Now they have no reason to come back. So here becomes a problem. If you have 15 members that freeze at any one time at an average of $200 a month, that's $3,000 a month, okay, over the course of a year. So let's say they don't come back. That could be five figures a year that you're losing in membership revenue. So one of the things that's really important to do is w- if you're gonna allow freezes, the freeze should be time-sensitive. So like we allow freezes up to 60 days, or we allow freezes up to 30 days. Or you can even have that you're, you allow freezes with a fee, so they can pay $20 a month to freeze their membership for up to three months, and then they can be locked into that price when they come back. That's another option, okay? Number two, it's really important to have a reactivation phase. So if you don't have a time limit where it automatically renews on said date, you should absolutely have a reactivation process. So basically, there's an automated system that goes out 30 days after freezing, two weeks before the return date, something like that, "We can't wait to see you back." There's a, "Here's a link. S- schedule your classes now. Please note, we're gonna... if you want to continue this freeze..." Maybe you do something where, it's free for the first 30 days, but then after that, if you wanna continue to freeze the membership, it's a 20 or $25 a month hold charge, okay? The other way you can do this is that- They, if they freeze it with that fee, they avoid a reactivation fee. So maybe there is a reactivation fee if it goes past 90 days, where if they f- if they're frozen past 90 days, you have a reactivation fee of, I don't know, $100 to reactivate the membership. But it's important that you have some sort of process for finding these freezes and reactivating them. So my biggest thing is don't allow endless freezes. You should definitely charge a freeze fee or require a reactivation fee, or have a time-sensitive time. So it's at after 30 days, it automatically gets re- recharged, or after 60 days, whatever that is. Okay? Here's another huge leak we see in Pilates specifically, unlimited memberships in Pilates. so often I look at businesses and we're... I'm like, "How... Oh, you have the unlimited membership." And I'm like, "Do you know what your average cost per class is?" And oftentimes people don't, which is fine. That's normal. We're gonna look- we look into the numbers, we dive into the metrics. We have a spreadsheet that helps people calculate that. And nobody on initially thinks that their unlimited is costing them money. Nobody does. But oftentimes when we look at it, usually they're like, it's only, a few people buy it and so expensive. We definitely are making money on that." But we look at the numbers, and we just did this recently with a business that was at the re- at the s- at the retreat in Atlanta, and we looked at the numbers and how often those people come, and she was giving away... Those people were paying, $16, $17 for a class, okay? We had a situation at Pilates in the Grove where we ha- And ours was expensive. It was, like, $499 a month. But we noticed we also didn't have a limit on you could only come once a day. It was, like, truly unlimited. So we had some people that were coming twice a day, taking up spots in our premium times, like 8:30, 9:30 in the morning and on Saturdays, and they were coming, 45 times a day, okay? So I'm just gonna show you. Let's see the math. So 45... Not 45 times a day, 45 times a month. So $499 Divided by 45 times a month, they were paying $11 a class. So they were paying $11 in our prime spots when we had wait list people. So check your unlimiteds, because I bet you're gonna find that you're losing money on them, because most people that do buy the unlimiteds, they come, right? the way you lose money... The way you make money on unlimiteds is when people spend $300 and they never come. But people that buy unlimiteds, especially for Pilates 'cause they're so expensive, they usually come, and they usually come a lot. So another huge leak in your business when you're giving up utilization, you're giving up prime spots, especially in Pilates when you have a limited amount of people. in yoga or sometimes even spinning that you have, 40, space for 40, it might not be that big of a deal, but in Pilates, especially when you have s- only space for six, seven, eight, 10 people, the unlimiteds could really be crushing your margins, okay? Another leak we see, old leads and past clients. All right? This is probably the easiest money in your business, people that have been with you for years and years. They already know who you are. They said yes once. They're your biggest clients. So what usually happens to these people is they are grandfathered in at rates that no longer serve your business. These are those founding member rates that you were so excited about, and now they're still taking class every day, and they're paying $12 a class. And I know what it feels like to have those people that really supported you at the beginning, but we are a fee-for-service model. It would be different if we could... It was just a gym, and it didn't matter. We weren't capped at how many members we could have. But the businesses that we're in, right? Even if you're a physical therapist and you were charging $100 when you first started, and you're still seeing this person three times a week, and now your rates are 250, you are losing $450 a week, okay? $450 a week seeing that patient for $100 when you could be charging 250. Now, over a year, that's $23,000, okay? $23,000. That's five figures. So I'm not saying you have to get rid of them. I'm saying maybe you can bundle them with somebody else. Maybe you get- Jane and John, who both are paying $100, and they share a session now, and you work with them together instead of individually, or maybe they only come once a week or, at some point it's just important to look at those numbers and make sure you're, that you're not... You're only one person sometimes, or you only have this one Reformer that's available, and it's important. Again, your responsibility is to keep the business financially solvent. So just take a look at some of those things. Now, another way that we could be leaking money with old clients and old leads is how... when was the last time you followed up with those people that have fallen off or never converted? Do you have a follow-up system? You have all of these people that are, like, built in that said once, that said yes once, but where are they? Do you have inquiry forms that are just sitting in your inbox? People who came in once or for one month and then disappeared. Clients who finished a package six months ago and who have not been back. maybe somebody who at the time said, "Not right now," but maybe reaching out, they're like, "You know what? I really would like to try this now." So it's easier to sell to people that have already said yes to you once. So think of it this way. If you reactivate just two former clients each month, and each one of them spends $500, that's $1,000 a month, $12,000 a year. Another five-figure fix. If you convert just 10% of your old leads into current clients, you could add thousands of dollars without spending another penny on marketing. So a simple reactivation, re-engagement campaign. Simple as anything. Once a month, you can send out a "We were thinking about you" email, right? You can talk about a seasonal promotion. You can say you still have unfinished sessions here. You can have a check-in text. You can invite them to a workshop or a challenge or an event that you're doing. Okay? You do not necessarily need more leads if you're ignoring the ones that you already have. Reach out to some of those people. What do you have to lose? they... They're not coming now, and if they don't come, you lost nothing. But if they do come, you could add five figures to your top line revenue, right? Which will improve the profitability of your business. So why not do it? It's easy. It's low cost. It doesn't cost you anything. All right? Next. How can a 1% utilization change affect your profit? 1% utilization. 1%. 1% changes every day. This is the part that most people miss. You don't always need some gigantic, dramatic transformation. No. A simple 1% improvement Over time, consistently could change everything. So let's say your studio currently runs at 70% utilization, or your PT business, or your one-on-one, your chiropractic, your acupuncture business, you currently run at 70% utilization. That means if you have 10 spots on your schedule, seven are utilized. So you're at 70% of your full utilization, okay? And your weekly revenue is about $5,000 a week. If you increase your utilization just from 70 to 72, that's not 2% more profit. It could be thousands more because your fixed expenses relatively stay the same. Let me say that again. Increasing your utilization by 2% isn't just a 2% increase in profitability. It could be drastically more because your rent is the same. You're not paying more in rent. You're not necessarily paying more in marketing. You're not necessarily paying more in admin. You're not necessarily paying more to your manager. You are probably paying maybe a little more to your clinician, but for the most part, your s- fixed expenses are staying the same, and you're getting new people in. So let's go over an example. A 2% increase just means two more private sessions a week at, let's make the math super easy, $100 a session, okay? That's $200 a week. All right? $200 a week times 52 weeks, okay? So 200 times 52 is five figures, 10-- over $10,000. Five figures increasing the utilization by 2%, by two people. That's it, okay? How much is that as profit? if you pay your people .3, okay, $7,000 of that could be profit. All right? What if you get three more class spots at $35 a class a week? Okay? That's another $5,000. So now, just with these two things, filling three more class spots, getting two more private sessions in a week, you've increased your top-line revenue by five figures and your bottom line by probably four figures, okay? A large percentage of that top-line revenue will flow down to, directly to your profit because the rest of your expenses stay relatively the same, except for what you usually pay for your instructor. This, my friends, this is why I care so much about these tiny little leaks, because small changes compound over time. 1% change day over day can turn a tanker ship They don't have to be these big, huge swings. They could be 1%, one little thing that you focus on day in, day out, week in, week out, month in, month out. So if you feel busy, your business feels busy, but not necessarily profitable, I want your first thought to be, "Where could I possibly be leaking money? Where can I optimize to close the leak in my system? Can I get fill empty spots on the schedule? Do I have too many options in terms of flexibility in my packages? Do I have underpriced services? Is my payroll above 45 or 50%? Do I have a lot of frozen memberships or people that have fallen off with no reactivation, no follow-up strategy? Am I losing money with my unlimited memberships? Am I losing money with people that are grandfathered in on founding member rates? Do I have old leads that have never been reactivated or reached out to?" Because I, I believe that chances are you're already making enough money, you're just losing too much of it in ways that you can't see right now, and when you fix these little leaks, not only can you create more profit, but now you'll have more stability, more peace, more cushion, without necessarily having to work more hours. So you don't always need more clients. What you need to do is create a system and a structure that you keep some more of the money that are already coming, that's already coming in. Find the leak in the bucket, plug the leak, and watch your profits rise. These little things. You know how when you're treating a patient or working with a client in movement, right? Sometimes these little tiny things, having them shift over more onto their stance leg will help them feel the engagement in their hips or their, or their glutes, right? Giving a small cue on how to breathe property allow, properly allows people to feel their, abdominals engage a little bit more. So small tweaks can make a huge difference. So before we stop, start putting more and more people at the top of the funnel, let's try to fix the leaks at the bottom of the funnel, okay? And then you might need less people at the top of the funnel. So I hope this episode resonated with you. It's a lot of math, but I hope it also gave you even at least one thing that you could go back in your business and reevaluate and be like, "Ooh, could I be leaking money here? Is this a system or a place that I could find that I could maybe plug and add four or five figures into my top-line revenue year over year?" I think you can. I think you can find all of this. And if you're interested in having somebody help you with that, this is exactly what we do in our Fit Biz Accelerator program, and even more what I do in my Elevate to Exit program. So the women that are looking to really optimize their business so they can sell it in the next three to five years, this is... We have exercises very specifically to find these leaks and give you a step-by-step roadmap on how to plug them. So if it's something that you're interested in exploring, I invite you to go to my website, www.christagurka.com. You can check out the Work With Me section, and you can see all of the opportunities to work with me in the community. We have month-to-month memberships. It's my mission to help thousands of women create sustainable, profitable boutique fitness and wellness and healthcare businesses. And I am confident that you all can do it, especially with a little bit of a framework, a little bit of a roadmap, and some guidance from someone who has been there, done that for you. So all right, ladies, I hope you enjoyed this episode. And until next time, bye for now.