The Profit Fix: Why 91% of Studios Are Broke (and the 3 Numbers That Change It)

The Profit Fix: Why 91% of Studios Are Broke (and the 3 Numbers That Change It)

Roughly 91% of boutique studios aren't sustainably profitable — and most owners are convinced that's a revenue problem. It isn't. In this episode, Jackie breaks down the three numbers that actually decide whether your yoga or Pilates studio pays you or just keeps you busy: rent, payroll, and marketing. You'll hear what healthy looks like, the real (uncomfortable) reason owners avoid their numbers, and exactly what to do about each one — so your studio finally gives you the money, freedom, and life you built it for.

Because knowing your numbers isn't restriction, and it isn't fear. It's the most empowering thing you can do as an owner. Your numbers are the controls.

In this episode:

• Why "protect payroll, protect rent, cut marketing" is exactly backward — and what that instinct is quietly costing you
• The real reason we avoid our numbers (it feels disempowering, like opening a bill you're scared of) and how to flip it
• What healthy actually looks like: payroll, rent, and marketing as a percentage of revenue
• Rent: how to negotiate it down — and the bigger move most owners miss, monetizing your space with a Premium Value Offer (PVO)
• Payroll: cut low-attendance classes, tie raises to attendance and performance (not tenure or certifications), and pay well without overpaying to keep someone
• Marketing: why running Meta ads to find new people is non-negotiable, and how organic content supports it
• The one brave action to take this week

Takeaway quote: "You don't have a revenue problem. This is a numbers problem. A sustainable business isn't a bigger grind — it's a machine that gives back."

Your action this week: Pull your numbers and calculate three percentages — payroll, rent, and marketing, each as a percent of revenue. Just look at them honestly. It's the most CEO thing you'll do all year.

Work with Jackie Murphy

• Say Hi on Instagram @studioceoofficial
• Join The Studio CEO Program: https://www.jackiegmurphy.com/studioceo
• The Grow Mastermind: https://www.jackiegmurphy.com/mastermind

Transcript

The Overhead Trap

SPEAKER_00 0:00

To be a real legit business, I need a big team, a big, beautiful space, or a big, beautiful online portal. This belief is something that almost every business owner quietly has running. And it can make you do things like protect payroll, protect a high rent costs, protect high expenses. And the moment money gets tight, the very first thing you'll be tempted to cut is marketing. I want you to sit with how backwards that is, because that one instinct, pour money into overhead and starve the one thing that might actually bring members through the door is a huge part of roughly why 91% of boutique studios are not sustainably profitable. So today's episode is one of the most practical I've done in a while, but I'm gonna show you what healthy could actually look like, and then exactly what to do about each of these numbers. What to do if you're overpaying on rent, how to cut your payroll without losing your best people, and where to actually put your marketing budget. So let's get into it. Take your business seriously, and scale to new heights without burning out, you are in the right place. I'm your host, Jackie Murphy, an award-winning certified business coach with over 12 years of experience inside the yoga industry. I have seen firsthand what it takes to build a profitable and scalable business. Join me as we dive into strategies, insights, and real-world advice that will help you grow your revenue, build a thriving team, and create a business that serves you as much as you serve your students. It's time to embrace your inner CEO and make more money without working more. This is just the beginning.

Lead Like A CEO With Numbers

SPEAKER_00 2:31

Hello and welcome back to the Studio CEO podcast. I am Jackie Murphy, and around here we help yoga and Pilates studio owners become the studio CEO. And being the CEO is the heartbeat of everything that I teach. And today we're gonna come at it from an angle that I don't think we talk about nearly enough. Your numbers. Today is going to be a specific episode about the handful of numbers that I believe quietly decide whether your studio is running profitably and sustainably or is a very expensive job that keeps you incredibly busy. Because the truth is that comes down to one thing. Whether you're willing to stop running your studio like you're the hardest working employee, and really start leading by diving into your numbers and letting the data tell you what sort of shifts to make. Now, underneath all of this, a lot of people that I speak with think that profit boils down to a revenue problem. If I could just get more members in the door, then we'd be fine. More students, add more classes, create more revenue. But the real issue isn't how many members you have. It can be where your money is going. And if you're protecting things like payroll and rent and then cutting marketing, you could be digging yourself into a very deep hole. So let's talk about exactly what numbers you should be spending on each of these things because this is the thing that no one really puts in front of you when you decide to open a business.

Healthy Benchmarks For Studio Spending

SPEAKER_00 4:25

A healthy studio keeps payroll somewhere around 20 to 35% of revenue. Most studios that I work with, they come in and they are running payroll. That is 35 to 50 percent or more of their revenue, especially since practices like profit sharing, where the instructor may get 60 or 70% of the revenue, have been incredibly common for a very long time. A healthy rent is at or under 15% of your revenue. And some studios sit at 25 to 35% of their revenue for rent. And listen, marketing, the thing that will help you fill your classes, get new students in the door, you should be spending at least a minimum of 10% of your revenue on marketing. But most studios squeeze this budget and they spend only one to two percent. So we want to put those three things together: payroll, rent, and marketing. That makes up a good chunk of your revenue, of everything that you're going to spend from what you've made. And notice what you could have done is that you've poured money into the two costs that don't necessarily grow the business and starved the one-line marketing that does. So hear me on this because it changes everything. Your profit problem might not be a revenue problem. This is just simply a numbers problem. We want to make sure that you are running your profit and loss statement like a CEO because you can't outwork or out hustle or get more hours in the day to fix a broken model. Adding more classes on top of a 50% payroll and a 30% rent just means that you're working harder to not be a sustainably profitable business. So that's the problem. The good news is that every single one of those things, everything with numbers is fixable. So we're gonna break these down one at a time. And here's what I want to say to those of you who are like, oh, Jackie, this podcast feels heavy. I typically avoid my numbers. I get it. But whether you avoid your numbers, whether you react to your numbers, or whether you are on top of your profit and loss statement, you all already have these numbers in your business. The data exists. The real question is whether or not you have empowered yourself and your business with that data. Avoiding looking at your numbers doesn't make your profit margin go away. It's there. It just makes you sit in a disempowered place as the CEO of your business on deciding how to spend money, how to budget money, when to hire, when to cancel classes, when to add classes. If you're reacting from your numbers and you're in this place of like, oh, it feels awful the moment I look at my PL, or it feels great the moment that we get more members, but it's highly volatile in that reactive state, that also is getting you out of the empowered place of the CEO that can look at this data and say, all data is clues to success. This is telling me a story that if I can look at this data objectively enough and have a clear goal of where I want to go, I can start to map out exactly how to get there. So I want to empower you to really dive into your numbers, to know these on at least a monthly basis so that you can make these decisions.

Fix Rent By Monetizing Space

SPEAKER_00 8:33

Let's start with number one, your rent. Now, if you are an online studio or you host your membership online, you can kind of replace rent with whatever you're paying for your online studio platform, your subscriptions, the total amount that you're paying to have all of your online systems work. Now, when it comes to rent, you can absolutely negotiate it down and you should. You want to know your comps, you want to renegotiate before your release is up and before your landlord is sure that you're staying. Get a tenant rep broker in your corner and cap your annual increases. Do all of that. Same thing if you're paying an online subscription and online software. There are so many different options for you. So you want to make sure that you're not overpaying where you're hosting your business right now and paying multiple different softwares, that maybe there's one that could do all of those. But here's the bigger like CEO move that I want you to be thinking about. You don't just want to try and pay less for your space. That is one move that you can make. See if you can negotiate, see if you can find something that is cheaper. But you also want to make sure that the space that you are paying for brings in more revenue. So, for a lot of my brick and mortar clients, what this means is adding a premium value offer. I call this a PVO. This means something that's at least four figures or higher to really make sure that the real estate that you're paying for is going to work beyond just your typical class schedule. Think about it. Your studio can sit empty for huge chunks of the day, of the week, and every one of those hours is essentially money that you're paying for or floor, the building that you're paying for. So this isn't the first time you've probably heard of this, but you could rent the space out. You could run workshops, teacher trainings, retreats, pop-ups, add more retail into part of your space. When you add revenue against the same four walls, your rent as a percentage of revenue will drop without you renegotiating a single thing. And that is how a CEO is going to think about real estate. Not just a cost to shrink, but an asset to monetize. If you have an incredibly large lobby and you're paying for a good amount of space for people to mingle, is there some way that we can restructure that space? Maybe you have a smaller lobby, but now you can fit 10 more people in a class. Or if you have a really large lobby, do you want to bring it back to the episode a few weeks ago and add in some sort of cold plunge or some sort of sauna? Figure out how to use the space that you have. And same thing if you're running your online studio, don't just look at your platform as I have an online membership and there's a library of classes. What other offer offers could you have that bring in more revenue to the business? Okay,

Cut Payroll Without Cutting Quality

SPEAKER_00 11:47

number two is payroll. And I want to be so clear. The goal here is never to slash pay. It is never to underpay your teachers. I think that would go against everything that I teach, but I truly believe that you can make sure that the amount that you spend on payroll doesn't hurt the overall business and feels good to your instructors that are teaching. We want to really focus on stopping paying for empty classes. So the first place we're gonna look is your schedule. And we want to be really honest here. Are there class times where we are just not seeing the attendance be enough to bring in a profit? You wanna know your break-even number. How many people do I need at this class time in order for this class to bring in a profit? So you go class by class, look at the attendance numbers. And if you're finding ones that are running below your break-even number or the ones that you're feeling are draining the studio overall, it's time to cut them or combine them and protect the schedule and the payroll that is helping you build and grow the business. Now, the next thing here, let's talk about pay raises. This is something that I work with clients a lot because they will have their staff come to them, their teachers, and ask for a pay raise. Now, what I recommend is doing pay raises once a year at the same time. We used to do this at the end of the year. This was not a constant ongoing negotiation whenever a teacher brought up a request for a pay raise. When you do this, one, it makes it operationally so much easier for you. And it gives the entire team kind of a way to breathe easy, knowing that they don't have to bring this conversation up. They know when the conversation is going to happen. They can know what to expect in that conversation. And here's the kicker: when you're giving out a pay raise, you want to make sure that you're tying that to attendance and performance of their class times, not necessarily their tenure. And that can be hard for some teachers to understand. It can be common in our industry for someone to think, I've been teaching for so long, so I should be making X, or I have so many certifications, so I should get Y. And when you're running a business, when you decide to give a pay raise, you're going to give a pay raise to the person who has brought in more revenue to the business. The person that fills the room is really who is gonna earn that raise. You wanna pay your people well, genuinely pay them well for doing exactly that. We just don't want to overpay to keep someone who has high tenure. Loyalty is wonderful. And I'm not saying we want to go get rid of people like this. I'm just saying it's not a reason to lose money on a payroll line every single month. It's not a reason for your overall business to go broke because we were overpaying the teachers. Because at the end of the day, that means the business runs out of profit, the business shuts down, the teachers don't have any classes, and the students don't get served. So it's not a lose-lose situation for everyone involved. So we want to make sure you're paying fairly, but you're paying for results, and you have to let go of the belief that you have to overpay in order to have good people. All

Protect Marketing Spend That Works

SPEAKER_00 15:48

right, number three, your marketing budget. Let's talk about where to actually spend your marketing budget. Remember, I think that you should be spending at least 10% of your overall revenue on marketing. Your goal should be to spend more on marketing so long as it's working, so long as it's bringing people in, then less over time. And I want to be super clear about where it goes because this can be helpful to give you kind of an understanding of where you will spend this money. I suggest that you run meta ads to reach new people. This is Facebook and Instagram ads so that you can get in front of people who have never heard of your business, don't know about you, and fill new leads and new students month after month after month, which should bring you new members. Now, there's elements of that funnel that could break down that if you want support with, that's exactly what we do inside of the Grow Mastermind. We really dive into making sure that funnel is set up really, really well. And listen, I don't think this means you need to stop word of mouth. I don't think this means you need to stop a referral campaign, but we can't rely on those alone. Those should be a bonus, and you should be able to know there's new people every single month by design coming in through Meta. Make that ad spin a line you protect, not a line you cut. Now, you can also support meta ads with Google search ads or showing up in Google Gemini responses. That means someone Googling around your area, Best Studio Near Me or Class Near Me, you would come up. Those should also be supported with organic content. So this is where we talk about your posts, your reels, your stories, all of that works together so that when someone sees an ad and clicks on your profile, it doesn't look like the business was shut down three months ago because you haven't posted, but it's very active and they're like, oh yeah, these are my people. I found them from a paid ad. The organic marketing has convinced me that like they get me, they connect me. When you run both the paid engine to find new people is non-negotiable. All right, so let's go ahead and bring this home. This

Pull Your Percentages And Act

SPEAKER_00 18:20

week, we don't need a big overhaul. We don't need to do a ton of stuff. What we need to do is pull your numbers. Stop avoiding, stop putting this off, or talk to the person that you have hired to run your books or however you have this and calculate these three percentages. What do you spend on payroll? What do you spend on rent? And what do you spend on marketing each as a percentage of your revenue? And then look at them honestly. Take yourself out for a little money date, get yourself a coffee or a matcha, and look at which number is maybe higher than it should be, lower than it should be. And then from there, this podcast has already given you tools to make those changes. The last thing that I want for any of you listening is to run a business that you are incredibly busy with, but at the end of the day, you're wondering, why can't I pay myself what I want? Why don't I have the profit that I want at the end of the year? Because those businesses eventually will burn you out and shut down. A sustainably profitable business, one that actually gives you what you want. Like you have to get something from the business and can support the business overall and you enjoy it. Now that is a sustainable business that will stick around and be fun to be in for years and years and years. So looking at your numbers, this is one of the most CEO things that you can do. Don't put this off, don't get busy at the front desk. Don't get busy with something else. Make sure you have that time.

Tools And Programs To Support You

SPEAKER_00 20:04

And if you want the PL that I give my clients, you can find it inside of the studio CEO program and inside of the Grow Mastermind. We make sure that both groups of people have that because having your profit and loss statement ready to go is just a non-negotiable. Your numbers tell the truth, whether you look at them or not. The only thing you get to decide is whether enough, whether or not you're feeling brave enough to face them. And then lead like the CEO who takes the information and moves forward. All right, my friends, I will talk to you all next week.