Paying the Dumb Tax: How to Stop Wasting Time and Money in Your Gym

Most gyms don’t fail because of one big disaster. They fail because of small, repeated mistakes that drain money, energy and time until the owner burns out.

In this episode of “Run a Profitable Gym,” Two-Brain founder Chris Cooper explains how to spot and avoid common mistakes in your gym—in other words, how to stop paying the “dumb tax.”

From undercharging to chasing the wrong metrics, Coop shares how he paid the dumb tax in his own gym and learned some tough lessons.

He explains how to replace guesswork with clear data, build pricing and systems that work, and make decisions that increase revenue instead of eroding it.

Ever feel like you’re working harder and harder but never getting ahead? This episode will show you how to break the cycle and start building a sustainable, profitable gym. 

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0:52 - What is the dumb tax?

3:47 - Always chasing more clients

4:34 - Undercharging and discounting

6:18 - Confusing the model with the method

8:09 - How to avoid the dumb tax

Transcript

SPEAKER_00: 0:00

Gyms don't fail because they've made one colossal mistake that they can't fix. They don't fail because they've run out of good ideas. They fail because they repeat the same small mistakes over and over. And these mistakes cost them time and money and clients and staff and energy, and eventually it's all too much. The gym owner finds themselves working harder and harder and making less money until they run out of time or money or energy and they close down. In his book, The Road Less Stupid, Keith Cunningham calls making these small mistakes over and over paying the dumb tax. This is Run a Profitable Gym. I'm Chris Cooper. And if you're like me and you've read The Road Less Stupid, you'll love the audiobook version. And I think you'll get a lot of enjoyment and maybe like, oh, that's me, forehead smack or two out of today's episode. So what is the dumb tax? Well, you pay the dumb tax when you make decisions about numbers without understanding the math or ignoring it. The dumb tax is the price of guessing or winging it or assume something will work just because it feels right to you. So for examples, a lot of people will tell me, Coop, I want 300 members. And that number sounds great until you realize that you haven't done the math on how many of those people you can actually serve. You don't know what they should be paying. You don't have a plan to consistently acquire and retain clients. You haven't studied who's actually successful with 300 members, because a lot of people say they are and they're not. And the result is years of chaos and lost cash. That's the dumb tax. Look, I've paid more dumb tax than... Anybody I know, I've paid enough to cover everybody here listening, okay? So learn from my mistakes. I'm going to start by giving you an example of like one of the first ways that I paid the dumb tax. And later this week, I'm going to give you another blog post about what these mistakes are actually costing you. So one of the first and one of the many ways that I've paid the dumb tax as a gym owner is when I opened up, I gave a 20% discount to military, police, nurses, firefighters, and teachers, because I thought it would build goodwill in the community, whatever that means, and lead to referrals somehow and make up the gap in volume with people. But in reality, it didn't build any loyalty. It didn't increase referrals. It gutted my margins. And it taught my clients that I didn't believe that my service was worth the price that I was charging for it on paper. Keith Cunningham would say, dumb. Coaching is not a high volume game. And so that was the lesson that I had to learn, but it cost me hundreds of thousands of dollars to learn that. I don't want the same for you. So I'm going to give you some other examples here. So first, selling a year long paid in full membership at a discount. Now, this used to be popular in the access gym world where You don't care if people show up. You just want as much money up front as you can get from them. And then if they never show up again, that's fine. But that doesn't work in a coaching business. If you give your best clients a discount on their membership, you are paying the dumb tax. Because think about this. Who is most likely to stick around for a year without a discount? Well, it's your best clients, right? So why on earth would you give them 20% off or a couple of free months to keep them for a year? Now, I'm putting this one first because there are actually business coaches out there, I just found this out, who are telling gym owners to sell this year-long, paid in full commitment at a discount to raise money to pay the business coach. And of course, this is crazy, and it's the gym owner who winds up paying the dumb tax on that decision. I would never tell you to do something that's gonna hurt your business just so I could get paid. Don't pay the dumb tax on that. Second example, chasing client headcount. Most gym owners pay the dumb tax by chasing the wrong metric, which is more clients, more clients, more clients at any cost. But the truth is that two-brain gyms routinely take home$100,000 a year, like profit, on 150 clients or fewer. And let's face it, you probably have 150 clients or fewer. According to our data set of 15,000 gyms worldwide, the average number of clients a coaching gym has is 126. But they're charging as if they have 300, So those 126 are not enough. The best gyms in the world earn more with fewer clients because they focus on value, not volume. It's a coaching business, not a membership warehouse. And if you undercharge to try and get more clients and make it up in volume, you are going to pay the dumb tax. The third example is undercharging because other people are undercharging. But Coop, the gym down the street only charges X. Yes, and the gym down the street is going out of business. They're paying the dumb tax. If you assume they know what they're doing and anchor your price on them, you will also be paying the dumb tax. The fourth example is related. It's discounting to bring in business. It's thinking that a discount equals marketing. But giving people 20% off or making an offer just to get people in the door is attracts the people in the door who are going to be out the door again next month. You are not competing on price. You're competing on outcomes. The coach who can get the best results, the results that the client care about, the coach who can do a no-sweat intro, measure what the client cares about, and then produce the results is going to win, especially with AI speeding everything up now. If you can't get your client's results, it doesn't matter what you charge. You're going to be paying the dumb tax by consistently bringing people in and then losing them. This is a related example, and this is my fifth and that's offering 40% off on PT or memberships. So if somebody is a member of your group training program and they want to do personal training, you give them 40% off. You will be paying the dumb tax because again, these are the people most likely willing and able to pay full price. Big discounts tell your clients that your service isn't worth that full price. It also kills your margin and your momentum. So if you sell personal training for 40% off, somebody is paying that 40%. The client's not So it's either got to be you or most likely, or the coach. You are not going to make up a high value service in volume just by selling a lot of it. And you're not going to sell more of it by discounting. My sixth example is confusing the model with the method. So a lot of people will get a Pilates certification and they'll say, okay, I know Pilates. Now I have to set up some one-on-one appointment times. But Pilates can be taught to a group. On the other end of the spectrum, a lot of CrossFit coaches still think that CrossFit has to happen in a big group. But what they're doing is they're confusing the model and the method. So your method is the tool that you're going to use to get people results, and the model is the way that you deliver it to the client. So if your method is Pilates, it can be delivered to the client one-on-one, in a small group, or in a big group. If your method is CrossFit, great, you can deliver it to your clients one-on-one, in a small group, or in a big group. You determine your method. Usually the client determines your model by telling you what they want. I want schedule flexibility. Let's do one-on-one. I want schedule flexibility. I want a lot of individual attention. You know, I don't want to be in a big group. I'm a little bit nervous, but I don't think I want one-on-one rates. Semi-private. I want the fun and energy of working out with all my friends. Big group. Fantastic. The method doesn't change at all. The model does. And if you confuse the two though, you're going to be paying the dumb tax because you're going to limit what you think is possible. And you're going to try and force a model on your clients that they don't want. They'll leave for the wrong reason. And that is paying the dumb tax. So the seventh example is not knowing your numbers. And this one is brutal. Because I've been talking about this for 15 years now. There's no excuse not to know the numbers that drive your business. If you're 20 years old, you've got a garage in your parents, you know, a gym in your parents' garage, and you're selling memberships while you try to make it to the games, fine. But if you employ staff, if clients rely on your gym being around next year, then it's irresponsible not to know your numbers. That doesn't mean you need to be an accountant to be a successful gym owner. Knowing your numbers means knowing what your AR I'll see you next time. you know, we're grown up gym owners now. We have to be responsible. The best part about knowing these metrics is that now you can filter all of the other stuff, the hype, the overexcitement, the recommendations from people who aren't doing as well as they say they are, the advertisements coming in from the marketers who are struggling to get their own clients. You can look at these metrics and say, okay, will your claim improve my ARM? Will it improve my retention? Will it improve my client headcount? By how much? In how long? You don't have to take claims at face value anymore. You can take anything that I'm telling you too and say, which one of these metrics will it improve? By how much? And in how long? And I should be able to answer that for you. Here's the thing. If you are doing things by your gut, if you're winging it, If you're just jumping in and hoping that you'll fix it or build your wings on the way down or whatever, you're going to wind up paying the dumb tax. The dumb tax is not 15% or 13%. In many cases, it's 100% because it costs you everything. This is what drives businesses under. This is what makes gyms fail. It's not that you lack creativity or you're not working hard enough. It's that you keep repeating the same old mistakes over and over and you don't have the knowledge or maybe the guts to make the change. That's what mentorship is all about. And the last recommendation from Keith Cunningham is always avoid paying the dumb tax by paying somebody who's already made these mistakes so that you don't have to. In our next video in this series and in the blog post, I'm going to share the true cost of what paying this dumb tax actually means. And spoiler alert, my first hiring mistake cost me over$100,000 in actual wages, let alone the year of wasted time training and evaluating and trying to fix this person. And I've got plenty more of those examples. So we'll see you on the next video. In the meantime, share your dumb tax stories or your questions at gymownersunited.com.