How do you figure out what you should be charging for your services, especially now, when you may have higher overhead due to heightened cleaning regimens along with lower capacities to maintain an acceptable and comfortable distance between your clients?
There’s a lot that goes into answering this question, of course, but your starting point is to first make sure you’re charging enough to your clients so that you can sufficiently cover your costs to deliver your services. For this, you need to calculate the cost-per-client.
But breaking even isn’t the goal for you, I hope. You’ll want to have some money left over so that you may continue to build and grow your business. So beyond your costs, you need to also consider what additional margin you require or desire.
This Pricing Per Member Calculator will help you play with some different options to confidently settle on the price you should be charging your clients, on a monthly or another defined-period basis, using all of your expenses and additional profit as part of the equation.
Before you start considering what your competitors are charging or what you feel your clients might be willing to pay, you first need to know your own numbers. This is where many businesses fail because they don’t price their services appropriately to account for ALL of their costs and fixed expenses. Now, with heightened protocols to keep spaces clean while safely social distancing clients, this equation can look different than it did before. We must also include any new costs incurred with additional cleaning and maintenance that will be required to keep your studio safe for your clients. This tool will help you calculate and figure out what you should be charging your members each month (or other defined period), on average, so that you can adjust for these new protocols that will be put in place due to the heightened COVID-19 small business requirements.
This is a calculator that will determine what you should ideally charge for your client memberships. While the default is set to “Monthly” you may certainly change the period amount to determine what their day rate or drop in price should be. Keep in mind that to help maintain a healthy and sustainable business, you will want to have stability. To get the stability you need and deserve to run your wellness business, you should educate your clients on the benefits of committing to themselves and to your studio with a monthly recurring membership.
You have the ability to identify your desired margin at the top (for a healthy and sustainable wellness business, I recommend setting your margins between 30-40%). You will also define and project how many clients you will have in the defined period that you’ve set up.
From there, you’ll enter your fixed costs. Fixed costs are going to be all of the expenses that you pay monthly to run your business such as rent, dues and subscriptions, and utilities. You may list these out one-by-one or simply tally them into one line item. Don’t forget to add in your owner’s compensation! This should be built into your model so ensure that you, the owner, gets paid.
(Pro Tip: If you want to figure out your client daily rate instead of the monthly rate, you’ll need to take all of these monthly costs and divide by 30.4 to determine the daily cost.)
After you get these expenses entered into the calculator, you’ll fill in your instructor and supporting staff and/or hourly rates using the next calculators. Now you can watch the magic of formulas calculate both your cost-per-client to simply break even, as well as the price you should charge your members to realize your desired margin.
Step 1: Define your margin and period.
Desired Margin: This is the amount you want to make above your actual cost. Enter a percentage (I recommend between 30-40%).
Period Duration: This is your reminder on how you plan to enter your fixed expenses. The default is set up for “Monthly.” Keep in mind, as you’re filling out your expense amounts, that we are basing this off of each month (especially if your pay periods are more frequent).
Step 2: Provide additional volume details
Pricing-Per-Memberships Sold per Period: Enter how many monthly memberships you expect to sell, on average, throughout the month. If you are unsure how many memberships you will have, play around with different scenarios. We will need to have a gauge on how many expected members you have in order to determine your “break-even” per client.
Step 3: Add fixed expenses.
These are your expenses directly related to the operation of your business. Include your guaranteed pay, but do not include any other employees’ or independent contractors’ payout in this calculation. We want to separate out your instructor and support staff pay.
Step 4: Add Staff (Instructors / Support / Hourly) expenses.
In the “Instructor and Support Staff Calculators” you should add in each one of your instructors, how much they get paid per class, as well as how many classes they teach in any given month (or period as defined by Step 1, b above). This will then calculate your monthly class totals along with your total class payouts. If your instructors are employees or W2s, you will want to include your state’s tax rate to account for those extra costs as well. If your instructors are Independent Contractors or 1099s, you may skip this step.
Many of you already have and or will want to start including hourly pay staff to help support your teachers. In this Staff Calculations calculator, you can add in your hourly workers, their pay rate(s), and how many hours they will work for the month or period. For hourly workers, you may include the tax rate to get a true total of your employee payout costs.
The bottom two calculators will tally all of your payout to people, and you will enter these numbers in your “Pricing-Per-Member Calculator.”
Pro Tip: for continued use and to add additional line items, download the Excel version of these calculators through the button below.
To download your own Excel version of the above calculators, click the button above, download the Google sheet as an Excel workbook and save for continued use.
These specific key performance indicators allow you to best track your studio’s targets and goals. By using data to analyze the needs of your business, you will be able to see what is working and what needs more attention. This is especially important as you are in a position to review the progress of your virtual classes and offerings and potentially in-studio classes as you plan to re-open!
Measure Data to Better Understand your Virtual + In-Studio Revenue Opportunities:
Overall Revenue vs ROI:
Chris Beer and FitGrid
To put it mildly, things have changed since you drafted your original pricing model, so as you begin to think about reopening your in-studio classes in stages, with smaller class sizes and different operating costs, have you adjusted it? Switching up your business model may be the last thing you want to do in these tumultuous times, but it could be what keeps you in business for the long term.
Have you ever wondered how many clients you need in a class in order to break even? Does your class pricing or instructor rate need to change to support the latest occupancy rules?
There are many factors to consider when creating a pricing model, and each organization’s model will vary by their geographic location, client base and offerings. There is no “one size fits all” approach to adjusting pricing during Covid-19, but there are great resources available to help you crunch the numbers.
The FitGrid Profit Calculator is one of my favorite (free!) tools to help clients create pricing models for their boutique fitness studios. It not only can help you determine your breakeven, but also how many clients are needed per class in order to reach a certain profit goal. This pricing model applies to both in-studio and virtual classes, as the fixed costs (rent, utilities, insurance, software, marketing, etc.) support both formats of classes.
Let’s get to work. You’ll need a few bits of information to get started:
The target profit (after expenses) your studio would like to earn each month. This number must be less than your average monthly income.
Average total revenue generated during the period of one month. Include new revenue streams, such as income from livestream and on-demand classes.
Total cost of operations that your studio incurs to generate revenue (rent, utilities, insurance, software, marketing, etc.). Include new expenses, such as PPE and increased cleaning supplies. NOTE: Do not include any instructor payroll numbers (exclude instructor pay).
Average number of classes scheduled at your studio during each day. Tip: Take the total number of classes scheduled for a week and divide by 7 and then average to the lower number (to be conservative).
Average pay rate your instructors earn per class. To get the most accurate number, calculate an instructor’s total pay per month and then divide by the total number of classes they teach each month.
Average amount of revenue generated each time any client visits your facility. FitGrid subscribers can simply divide the average revenue per class by the average number of visitors per class.
Number of visitors needed for a single class to cover its costs, making neither a profit nor a loss. Instructors with average class sizes smaller than this number are contributing to overall financial losses for the business.
Number of visitors needed in each class to reach the goal profit stated at the very top (Profit Goal). Use the green slider to see a correlation between the class size and overall profit goals.
When playing with this tool, keep in mind that there are several factors that go into the equation. While it’s easy to focus on raising revenue, keep in mind that one of the easiest ways to make money is by spending less. Use this opportunity to get a firm grasp on the costs of your rent, utilities, insurance, software, marketing, etc., and contact those vendors to see if you can negotiate better rates on your service
Have you ever wondered how many clients you need in class in order to breakeven? Our Profit Calculator not only can help you determine the number, but also how many clients are needed per class in order to reach a certain profit goal
THIS TOOLKIT IS MADE POSSIBLE DUE TO THE SUPPORT OF OUR PARTNERS
BFS brings you relevant knowledge and content for your business
at all times. Check out more on the blog below and join the Insiders
for premium content