Million-Dollar Mistakes: The True Cost of Inaction for Gym Owners

Tired of watching small mistakes drain your gym's profits? Here's how to stop paying the “dumb tax” once and for all.

In this episode of “Run a Profitable Gym,” Chris Cooper explains how seemingly small business mistakes compound into million-dollar losses over time. More importantly, he tells you how to stop making these gym-sinking errors.

Coop presents three types of mistakes that destroy gym profitability:

• Compounding problems get worse over time. Example: hiring without proper training systems.
• Delaying problems punish you for procrastinating. Example: avoiding necessary price increases.
• Mounting problems are fueled by the increasing momentum of repeated errors. Example: dumping more members into a gym with a broken pricing model.

Chris also gets brutally honest about his own expensive mistakes as a gym owner, and he calculates the real cost of inaction and poor systems so you can see how errors affect P&L statements.

Tune in for the full breakdown and then take action before profit-killing mistakes put you on the path to bankruptcy.

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0:01 - Intro

1:39 - Compounding problems

7:59 - Delaying problems

11:43 - Mounting problems

14:58 - What’s the cost of change?

Transcript

SPEAKER_00: 0:00

Nobody goes broke and loses their business from making one big bad decision. Businesses go broke from a thousand small mistakes that add up until they total over a million dollars in lost revenue, wasted time, and unnecessary stress. Today, let's talk about how these mistakes compound into million-dollar mistakes for gyms and how to stop paying the dumb tax once and for all. I'm Chris Cooper. This is Run a Profitable Gym, and if you want to talk more more about these or share your own stories, I've shared enough of mine, go to gymownersunited.com. That's our free group for gym owners where you can engage in conversation with over 10,000 gym owners worldwide. It's productive, it's positive, and sometimes it's funny, just like this. Today I'm going to talk to you about million-dollar mistakes. The mistakes that you make in your business at startup don't just cost you one time. They compound, like interest, but in reverse. So the first example I'm going to show you here is a really simple mistake I on pricing. And that's putting a 15% discount on a$200 membership for 10 clients. Over two years, that will cost you$7,200. Now imagine scaling that simple math across dozens or hundreds of clients, and you can see how discounts delete dollars over time. So we're going to talk about the types of million dollar mistakes that gyms make and how these little things, I'm only saving that guy 10% a month, how they add up and compound into million dollar mistakes over time. Trust me, I've made millions most of these and I can share stories with you about that. I'll try and do that as we go through them. There are different types of mistakes that drain your bank account. The first is compounding problems. These are mistakes that get worse the longer you let them sit, like hiring the wrong person and then failing to train them properly. So Let's say that you hire somebody and you're going to pay them$40,000 a year, but you don't train them properly. And at the end of the year, they haven't done anything that you like. They're not a good coach. They're not doing their manager job. You've wasted$40,000. And then if you decide to keep them, you'll continue to waste money because you still haven't trained them right. Or if you decide to replace them with somebody else, you'll be wasting that money all over again. Do you see how these mistakes can really add up and compound? I've done this several times. I had an intern who I hired at my gym, you know,$45,000 a year. And I wanted him to take over group coaching so that I could work on marketing and sales. And after the first quarter, he wasn't a very good coach. And I thought, well, he needs to shadow more. He needs to read some books. And so I'd give him these textbooks to read and I'd tell him, come and shadow Tyler, come and watch charity, come and watch Mike. And he'd come and he'd shadow. And after the second quarter, he wasn't any better. And so, okay, now I want you in my classes every day, watch what I do, take notes. We're going to debrief after class, you know, really going all in to try and get a return on my investment. And again, we were six months in and I had already spent$22,500 on his salary and it wasn't working. And so after the third quarter of him shadowing me, it still wasn't working. And I finally took him aside and said, Hey kid, get your act together here. If you're not a good coach, I can't keep you after the end of the first year. And of course he immediately lost all motivation to succeed and just phoned it in for the last quarter. And that was it. And that was 40$25,000 wasted that I could have taken home to my kids or applied somewhere else. The problem is that if you don't change the way that you train your staff, it doesn't even matter who you hire because bad processes burn out unicorns. You can hire amazing people, not give them good training, give them poor feedback, give them no feedback, and eventually you just burn through great staff. Another similar example would be hiring a coach who looks great on paper but doesn't fit your culture and then keeping them for years. Or another example is committing to a lease that's way too big and sticking with it because you feel trapped rather than looking for alternatives, like talking to the landlord about downsizing or even subletting some of your space. Now I've got another chart here too. And this chart shows how combined losses from discounts and low rates can add up to$86,400 over four years. And that's just from pricing issues. So, you know, here's an example of a pricing issue. We were working with this gym and they actually had three locations and one year to fund the third location. location, they decided that they would offer a paid in full rate for their clients who wanted to pay for the next year in full. So this was like November. And they said to all of our clients, hey, if you want to pay in full for the next year, we'll give you two free months. So you know, a bunch of their clients took them up on it 12 or 13. They paid in full for the next year, the gym owner said, amazing, I've got all this cash in my bank account, we're going to fund the opening of my third gym. Okay, but the next year, When they reached November, they had 12 or 13 of their best clients who said, okay, I'm done paying for the year. And so they kept coming for free. Well, that created a little bit of a revenue shortfall. And so the owner said, well, maybe we better do this again. Let's offer the same thing again. And so, of course, you know, he puts it out there and the same 12 people take it and a couple more. And the next year, in August, they've run out of money again. Uh-oh, let's do it again. And so they get in this... crazy cash hungry cycle. And the real problem was that they were discounting, not that they were needing to sell more paid in full. And by the third year, the owner of the gym had realized his mistake, didn't know a way out of it, had to close down two of his locations and started working with me as a mentor to fix the problem. That was costly. That was an expensive change because of course, you know, only his best clients who would have been there anyway, signed up to pay for a year in advance. So he was just taking money off the table that he would have collected if he had just waited for for no reason, and then got himself into this vicious downward cycle that eventually burned him out. He wound up selling the gym to somebody else. You know, another great example of this is when you give somebody a discount just to kind of get them in the door, right? Or maybe because you really respect their line of work. You know, I really respect firefighters a lot. Like, you know, when everybody else is running away from trouble, they're the ones running toward it. And early on in my career, I thought I'd love to give these people a discount. And so I gave them 20% off. And the first month the firefighter firefighters were like hey thanks a lot really appreciate it not necessary but thank you the second month they didn't say anything the third month they didn't say anything and after about a year and a half of this and me giving them 20 off every month of a rate that was already way too low I realized that I was out thousands of dollars on these 10 firefighters they weren't attracted by the discounts in the first place and when I took them away again I did it as tactfully as I could but they got mad they forgot they were even getting a discount and so they thought that their price was going up 20% because they were a firefighter. And so I had this kind of Sophie's choice of keep giving them the discount. That's not doing anything for me or take the discount away. Try to keep two thirds of them and make the same amount of money on coaching fewer people. Well, it seems easy to just let it ride, let it ride, let it ride. But eventually it hits you. This is unfair to all of my other clients who are paying more money for the same excellent service. It's also costing me more because I'm putting these people into groups filling up groups with discounts and I'm needing to add more groups, even though I'm just like breaking even on the revenue that I'm giving them. And so eventually when you figure out that these discounts are really hurting your business, you know, it's a painful change. And I'll get to how to work through the change of this later. But the longer these things go on, the worse it gets, the harder they are to change, the harder they are to reverse course. And if you don't reverse course, you leave it go too long. They can be the thing that kills you. That's the dumb tax. So the first type of mistakes that create million dollar problems are the compounding ones. The second ones are the delaying ones. Sometimes the real cost comes from putting things off. So for example, let's say that you determined after about six months that a staff person wasn't really a good fit, but you don't want to confront them. And so you send them to their level two and you hope that, you know, CrossFit will fix them. Or you start giving them evaluations and those turn a confrontational or you like put the bad news in the poop sandwich because you don't want to give them all the bad news all at once right and so over time this person just gets more and more toxic more and more frustrated worse and worse and you don't confront it the reality is that it's very hard to fix people quite often we're looking at a person on our staff and we're like wow they're they're not doing a good job and we need to ask ourselves do we have a process problem or a people problem 90 of the time it's a process problem we haven't told them exactly what to do We haven't trained them. We haven't coached them. But 10% of the time, it actually is a people problem. And when somebody is toxic, you have to picture them as like spitting their toxicity on everybody else and infecting them. And the longer you leave them, the more people they will infect more deeply and grievously. And so you have to get them out as quickly as possible. When you've determined that you've got a person on staff who is a problem, the best next step that you can take is to get rid of them as quickly as possible because they're going to infect your other staff. They're going to infect your other clients and they're going to infect you. Another really common example of this in the fitness industry is delaying a price increase because you're worried that clients will leave. But the longer you leave it, the less you can afford to lose these clients. The earlier you do it, Even though it's painful, the easier it will be, and a year from now, you could be completely recovered. The third one is waiting to hire a mentor until you're desperate, you're almost bankrupt, and you're reactive, and you're like, I don't know what to do. I give up. Instead of hiring a mentor when things are doing okay. Look, this was me. I made all these mistakes, but this was my most grievous one. I was bankrupt. I could not write a check to pay the rent when I hired my first mentor. In fact, the check I gave him should If I hadn't done the work, it would have. Don't make my mistake. Just because things are going okay right now or you're treading water doesn't mean you're doing well. If you're breaking even right now, you are losing time, you're losing ground, and you are fragile, my friend. That means you should be working with a mentor always to grow your business. I've worked with easily 10 mentors over the last 10 years to grow my gym, to grow 2Brain. Each one of them helps me get over the next step. stage of my business. You know, when I was growing Two Brain, I started off working with Dan Martell. I systemized and optimized things. And then I started working with Todd Herman to build out an Ascension model to help gym owners get the right advice they needed at exactly the right time in exactly the right way. And then I moved on to other coaches to help me improve my coaching. And there's been other mentors since. As your business grows, its needs change and you'll need different mentors, but you'll never not need mentorship. Imagine one of your clients says, to you, their coach, when will I not need a coach anymore? The answer you would give them is, hey, when you're in a rough state, you're sick, you need a coach to turn things around, do triage, get you back to level. When you're well, but not fit, you need a coach to push you to the next level. And when you're fit, you need a coach more than ever to help you keep pursuing the next thing without injuring yourself. And it's the same for business. The thing with these types of problems is that the longer you wait, the higher the dumptown you will pay. The price of your procrastination and your fear is lost money and time. The third type of problem that can create a million dollar mistake is what we call mounting problems. These are mistakes that pile up because you try to fix the problem by just doing more of the same, working harder, doing more. So for example, you hire staff without fixing underlying systems. And then you say like, oh, well, they're not doing it. They need management. That's not me. I'm going to hire a general manager. And now you've got two layers of staff who don't know what to do and don't know how to fulfill to your level. Another example is just dumping more members into a broken pricing model with different discounts and poor retention. Hey, in 2018, we were all attracted to the ad agencies and gym launches that would do that and new you challenges, right? But if your underlying system was broken, you wouldn't keep those people. Most people didn't anyway. And soon they had come in, they had tried your service and they were gone and never coming back. This is the reason that I called my first blog for gym owners don't buy ads.com. Because my first mentor, Dennis wisely said, Chris, if you start bringing in your ideal client, right now, you'll never keep them. Your gym sucks. They're going to see the mess. They're going to hear the noise. They're going to see the crazy like power lifters and they're going to quit and you will never get them back. Don't buy ads yet. Fix your problem first. And this is a big problem that we see with a lot of gyms is they think that just getting more members is going to solve their problems or getting more revenue will solve their problems. It doesn't. It exposes the underlying problem and it does so when it's too late and you've burned through potentially good clients and good money. Another great example is trying to incentivize staff with money. So you pay higher salaries without a revenue plan to make up the difference and you wind up working harder for less money or you give a percentage of sales to some salesperson or to your coaches thinking that that will make them good at sales. It won't. And so these problems cost you millions of dollars over the years unless you fix them. So here's a little chart you'll find interesting. This is what happens if you avoid a$10 rate increase for 150 members and you Over two years, that costs you$36,000. Now that's not$36,000 in potential revenue money you could have owned. That is literally you opening your wallet, writing a check for$36,000 to your business and saying, here you go. I refuse to raise rates by$10 per client per month. That's where the money comes from is right out of your pocket. That means you can't afford to make more opportunities for coaches. It means that your kids can't get the skateboard that they want. And it means that you're fighting with your spouse over the grocery bill, just like I was. Look, Here's the brutal truth. If you don't change your business, you will keep paying the dumb tax forever. I sometimes, I feel weird calling it the dumb tax, but the reality is that you're not making these taxes because you're dumb. You're making these taxes because you're ignoring them. And that means, you know, unfortunately the mistakes are avoidable and that's what makes them dumb. It makes no sense to continue wasting money like this when the result could add up to millions of dollars. Here's what to remember. When you give somebody discount, that discount doesn't go away. There's no limit to it. Bad hires will not fix themselves and sometimes can't be fixed. Grandfathered rates keep eating into your margins forever. Okay. Now I want to talk to you about like what change costs, because let's face it, making mistakes is crazy expensive. Changing can cost you too. change does cost something, but it's always cheaper than paying the dumb tax forever. For example, you might hire a mentor like our team of mentors at Two Brain Business, and you'll pay that mentor because this person is a professional who's dedicating their time and attention to helping you. But you'll stop paying the dumb tax, and the speed at which you act determines how quickly you will save your business. The big thing that you have to remember when it comes to change is that once you understand the change has to be made, the faster you can make that change, the quicker you can get results. There's a reason that when politicians come into office, they make all their big changes in the first six months, because hopefully by the time reelection comes around, their clients, right, their electorate will have forgotten about all the chaos and turbulence. And so a lot of us just we avoid making change because we don't want to make people mad and we don't want confrontation. This is a bad time. There will never be a good time. Nobody is coming to save you. It's time to make change right now. And as soon as you know the correct change to be made by working with your mentor, looking at your metrics and saying, here's what has to be done, the best thing you can do for your business, for your family, for your staff, for your members, and even for yourself, is to enact the change right away. There's always a best way to do it, and that's why we're called Two Brain Business. The left side of the brain is knowing what to do, and the right side is knowing how to do it best. Doubling your pricing for your current clients is not a good idea, but increasing your pricing for your current clients by 15% at a time over maybe a couple years if you have to do it, that is a good idea, and it's so important that it's almost mandatory. You're probably undercharging and the people that you're comparing yourself to are also undercharging. The difference is that if you fix your rates now, three years from now, you'll still be here and they won't. Your business will not change itself. If you don't change your business, it will fail. Only you can save it and you will be culpable if it does fail. So look at the costs in the charts that I've shared with you. And the goal here was just to show you like these things add up over time. And I really want you to take home the message that you need to take ownership of your business. I don't just mean on paper, like you're the sole proprietor or you're the CEO. I mean, own it. I mean, nobody's coming to save you. I mean, take the wheel. I mean, learn the skills that you need to learn to actually run a business instead of just hoping that being a better coach might save me. That won't happen. Now I've got a little exercise for you called the wallet test. So I want you to pull up your client list and I want you to look at one client who's getting a discount right now, or even somebody that's getting like a scholarship, but those things are still going around. Next month, instead of giving them a discount, charge them full price and then reach into your wallet, take out the cash difference and give it to them, physically hand it to your client. So if you're charging$100 a month and you're giving somebody 20% off, next month, charge them the$100 and take$20 out of your wallet and keep doing that every month until you get tired of paying the dumb tax. The dumb tax has nothing to do with your intelligence and everything to do with your willingness to just let things ride because they don't hurt enough to change them. The mistakes that kill these gyms are not giant catastrophes. They're tiny cuts compounded over time, bleeding your business dry, leaving you susceptible so when the landlord does increase the rent by 10%, it doesn't knock you out of business. The key is to stop paying the dumb tax now. Get some clarity, raise your rates if you have to, change your class times, eliminate unnecessary discounts, whatever you have to do, make the changes so that you stop paying the dumb tax and save your business. Call a mentor. The biggest dumb tax ever that I've ever paid was trying to figure out everything on my own. No, I opened a business so that I could be creative and be a problem solver. Well, that's great if you're designing your logo. It's not great if you're trying to set your prices or a mistake that could haunt you for the next 10 years. It's not great if you're trying to determine who your ideal audience is so you don't attract a What happened in my gym? Every mistake that you make at startup will take you six months and about$100,000 to fix. But if you don't fix them now, they will compound over time and get worse and worse and worse. And the only thing worse than paying the dumb tax is paying interest on the dumb tax. If you're waiting for somebody to step in and save your business, Good news, bad news, you are it. And the first thing that you should do is call somebody who knows how to guide you through the changes that you need. I'm Chris Cooper. This is Run a Profitable Gym. Look, I am so tired of seeing gyms fail. And I'm so tired of it because I see them repeating mistakes that are avoidable, that we've been talking about for a decade now. And I even see other business coaches giving people bad advice just because they don't know any better. The reality is that you need to take control of your business. And that means first accepting that is not going to change unless you make the change. And second, learning the things required to run a business, like how to read a profit and loss statement, how to look at your metrics, how to talk and coach your staff. These things are crazy important. And if you don't do them, your business will be gone and then you can't help anybody.