Adam Smith and Human Capital in the Fitness
Industry on the Brink of Substantive Change
By Phil Kaplan
I – Who in the World is Adam Smith?
personal trainers we like to address the concept of change.
We change our clothes every day (I hope everyone reading
this agrees), we find change in the bottom of our gym bags (only
because those post-workout drinks always cost $2.49 or $3.29
or some other “9” that means we get handed change when we’re
low on pockets), and if we travel to clients’ homes or exercise
facilities, we know the feeling of trying to will red lights
to change to green.
in the work force can relate to the word “change” at some level,
but we are more powerful than most, at least potentially. We have the power to initiate change, maybe
not to change the color of traffic lights at will, but better
yet, we can actually alter the course of someone’s life in a
very positive way. When you really stop and think about the massive
impact we’ve collectively had upon the mindsets, the health,
and the appearance of our clients, the potential of our power
also recognize that a little at a time the industry’s changing
. . . for the better. Why
then, does the field of trainers fail to take a consistent and
unified stand, to declare, at some level, its independence?
Why is it taking so long for “Personal Fitness Training”
to emerge, not as an afterthought component of the health club
field, but as a respectable profession built on noble ideals
with awe-inspiring power.
no. Here goes Kaplan getting up on his soapbox again,
spewing forth his anti-health club conspiracy theory nonsense.
on there. I’m not suggesting
trainers abandon health clubs any more than I’d suggest doctors
leave hospitals, or lawyers leave the courtrooms, but our population
respects doctors for their knowledge and their scope of practice,
regardless of whether or not they practice in hospitals, on
the sidelines of NFL games, on missions in third world countries,
or out of private offices with snooty receptionists and a sliding
glass pane in the reception window. Trainers should be respected every bit as much
as those doctors, every bit as much as attorneys, regardless
of where they practice, and every bit as much as dedicated health
club owners who recognize the inherent value of a force of unified
fitness professionals (ummm . . . let’s not forget, besides being a personal trainer
. . . I sit on the other side of the fence as well . . . I understand
the viewpoint of the health club owner . . . intimately).
I’m not suggesting rebellion, but I am suggesting it’s time
for a global change within our industry, and I’m promising to
be instrumental in bringing that change to fruition.
the past several years I’ve spoken at the IHRSA and Club Industry
conferences about “the New Paradigm,” about pulling the rug
out from under those stuck in old school health club operations. I’ve attempted, with some level of success,
to force the adventurous, the ambitious, and the morally sound
health club owners and operators to ethically capitalize upon
the virtues of accomplished and competent fitness professionals
for the proverbial win-win. Throw the members into the mix and you create
a 3-Way-Win, the ultimate scenario for everyone involved.
I’m going the next step. I
want to personally play a role in raising the bar so high that
the concept of mediocrity and the existence of a “personal fitness
professional” cannot co-exist.
It’s time to redefine “what we do,” and to shake things
up so we can have the impact upon our obese overfat population that we’re truly capable of.
Requires A Strengthened Foundation
history there have been many distinctive periods of global change,
beginning with man’s discovery of the ability to control fire
up through and running right past the space age into a world
where Tony Little sold 72,000 ab rollers
on QVC, and then it continued into an unusual place where people
“chat” by sitting at their computers typing little keys.
Americans there are many dates that are drummed into our heads
throughout our history lessons, and I would venture to guess
that few years rival the attention we’ve placed upon 1776. It’s the year man discovered the medicine ball.
C’mon, you know better than that . . . it’s the year
America declared its independence, but it’s also the year economist
Adam Smith began to identify the intricacies of capitalism. All hail Adam Smith!!!
in the world is Adam Smith? It’s not really that important. Let’s just say he was a very smart man, and
he proved himself back in the days when Thomas Jefferson, Ben
Franklin, and a bunch of other guys in funny clothes with odd
hairdos were trying to initiate change.
it was a time when the word independence took on an entirely
new meaning, and not only were Americans going to band together
as a union, but they were also going to lunge forward into a
society where anybody can own a business, where commerce was
controlled by the common man, and where a government was established
to allow for independent prosperity. Adam Smith was clearly way ahead of his time,
as anyone who comes up with theories that stand true for over
two centuries must have extreme foresight.
Smith recognized that there were three elements of production,
three factors that contributed to successful commerce:
Concern for Muscle
I’m sorry. It’s habit.
Adam Smith identified the synergistic relationship between
three other elements:
Adam Smith perform a side lateral raise balanced on his knees
atop a stability ball? Probably not. Could
he run a marathon or hit 365 on the bench?
Not likely. So
if he spent his time studying economics and commerce, why would
you have any interest in this man who was buried over 200 years
ago? I’ll tell you why.
Because if you aspire to succeed in the business of Personal Training,
you really should understand business.
not asking you to become a historian, nor am I asking you to
pursue an MBA, but in other fields of economic pursuit people
study their craft, hone their skills, and pursue business knowledge. Personal trainers tend to study their craft,
hone their skills, and follow the flawed path laid out by an
industry that failed to recognize the value of its skilled practitioners.
Self-Evaluation May Be in Order
me to raise a few questions with the simple agenda of getting
you to ponder a few issues you might never have taken the time
to question or consider objectively.
What was your “net profit” last month?
trainers would have difficulty answering the question.
They may know how many sessions they conducted.
They may even know how many dollars they collected,
but “net” is the determining factor as to the financial
success of your business. Have you accounted for gas costs? Clothing? Continuing Education costs? Study materials, books, licenses, certifications,
advertising, marketing, printing, etc, so on, ad continuum?
If the answer is yes, if you absolutely
know your “net,” I assure you you’re among the rare few.
a retailer, a health club owner, a franchisee, or the owner
of an employment agency whether they know their net.
I assure you, they’ll know.
Do you accommodate clients with freebies?
you conduct free consultations, as most trainers do, or
if you work in the health club arena you may perform as
many as “three free sessions.”
I believe it’s an economic mistake.
Perhaps you spend an extra 15-minutes
after the session is up reviewing exercises or discussing
scheduling. There’s a cost attached. Maybe you feel obliged to spend hours writing
up programs, or finding exercise illustrations for your
clients who travel. Maybe
you do free fitness assessments.
If you don’t do any of these things, and you have
a thriving business, you’re to be commended, but again,
those who consistently charge for their time do not comprise
a majority by any means.
you even consider asking a doctor to perform a free exam,
a free blood test, or a free hormonal assay?
If you answered “no,” why should you perform those
services you are typically paid to perform for anything
less than the fee you deserve?
Would you ask a lawyer to take some time, for free,
to write out the steps you’d need to take to resolve a legal
issue by yourself? If
so, I give you points for courage, but you would also have
to prepare to hear the words, “no way.”)
Do you discount your rates in exchange for commitment?
trainers sell packages. One session is $60, but you can get four for
$200, or perhaps ten for only $400.
The mistake lies in believing that training sessions
are a commodity that can be packaged for increased profit.
The truth is, packaging
your time for reduced fees ensures you’ll earn less money
by year’s end.
Do you allow your clients to dictate your schedule?
I ask trainers this question, the knee-jerk response is, “of
course not,” but then a new perspective on scheduling begins
to unfold. If you ever
ask a client, “when do you want to
train next?” you’re allowing your clients too much control.
I defy you to try to get a haircut appointment at a
time that is not “on the schedule.”
Try to get a dentist to hang around after posted hours
to examine your teeth. Unless your dentist is unusually accommodating,
or in love with you, you’re probably going to have to make
some shifts in your own schedule if you want those chompers
professionally looked at.
Trainers admirably bend over backwards and fail to
recognize, they’re contributing to their own subtly impending
burnout, and burnout always always
always leads to reduction in revenues. Always.
Are you subject to no-pays, no-shows, or last minute cancellations?
calendar says, “session,” the phone call says, “can’t make it,” the bank account
takes a hit. It’s the
burden of our profession, as clients see our relationships
as casual and somewhat social, and if I hadn’t learned to
overcome this burden, I’d believe, as you might at this moment,
that it’s a necessary evil.
It isn’t. I
ask every client to submit a retainer, equal to one session’s
fee. In the event that
the client cancels or doesn’t show, the retainer is forfeited,
the professional is paid.
The idea is not necessarily to collect money for no-shows,
but when you employ a policy requiring commitment and money’s
on the line, something funny happens. Clients show up.
Do you spend any money at all on advertising?
is flawed in three primary ways.
One, consumers are subjected to information overwhelm
on a daily basis, so even the most creative ads can fall flat
due to nothing more than mass desensitization. Second, consumers
are savvy enough to know that you paid for the ad, thus the
information disseminated is biased and the red flag of apprehension
is raised along with a belief barrier.
Third, it immediately puts you in a cash flow deficit.
In other words, the ad has to deliver not only interest,
but actual revenues just to recoup the dollars you forked
out. Trainers never
have to advertise, but they do have to learn to market, and
if you believe the two words are synonymous, it further reinforces
my point, that trainers need foundational business skills.
you feel I’ve been unfair or taken a myopic view of a massive
industry where over 400,000 people call themselves trainers,
where over 20.000 health clubs employ trainers and fitness directors,
and where the information available to help trainers master
core stabilization, posture assessment, pre-hab and post-rehab training methodologies, and strength and
agility training abounds, I understand your sentiments, but
I stand firm. I meet the great trainers, I visit the rare
health clubs who do prosper with a commitment to excellence,
but I see the other side as well, and for every trainer who
commands respect and achieves prosperity, I’d conservatively
guess there are 250 floundering. I don’t want to point fingers or indict anyone
or anything as the cause, I simply want industry-wide recognition
that as our population gets further into deconditioned
land, we have an obligation to excel, and we deserve to be compensated
and respected as professionals.
In the fitness arena today, Fitness Directors are pushed
beyond their level of competence as they’re asked to lead and
manage without any actual training in those disciplines.
Trainers are asked to generate clients, but nobody ever
teaches them to comfortably sell. When personal trainers take the leap into operating
their own facilities, they are typically naďve related to bookkeeping
issues, payroll issues, and they’re surprised by the number
of “I didn’t expect this” thoughts that roll through their heads
on a daily basis. Perhaps worst of all, when they try to hire,
they find that the words “fitness professional” have never been
clearly defined and aspiring trainers, although they may be
well-intentioned, believe that any certification “counts.”
begin to escalate the perception of an industry by displaying
consistent performance at the highest levels again and again
and again, even if that display is initiated only by a select
few willing to self-regulate, to challenge the prevalence of
mediocrity, to break the chains of the old paradigm, and to
pursue excellence at all costs. Those courageous industry leaders become the
epitome of human capital, as they become frontrunners in illustrating
the potential return generated by investment of energy, brainpower,
and continuous forward motion over and around obstacles that
could not have been predicted.
order to maximize our human capital (to be discussed at length
shortly), and find emotional, financial, and personal reward,
we absolutely must recognize that we are in business, and in
that we must apply some foundational Business Skills.
(Part II - The Foundational Rules below)
II - The Foundational Rules
are a few simple and foundational governing rules I share in
my seminars, rules that help to create a firm pedestal upon
which a personal training business can be built.
If You Are Going to Succeed, Make Certain Your Financial Pumps Exceed
Your Financial Drains.
seems so simplistic it borders on common sense . . . but in
practice, this rule is ignored far too often.
It ties in with the “what did you net” question.
Trainers usually measure their finances by the number
of sessions they did multiplied by the number of dollars they
collect per session, or in some cases
the number of packages they sold multiplied by the per-package
price. They may go as far as to keep track of “expenses”
related to equipment purchases, advertising, and printing must
be subtracted from revenues in order to determine “net,” but
if they fail to recognize that meals on the road, gas, marketing
time, free sessions, cell phone bills, cost of supplements,
programming time, cancellations, no-shows, drive time, and educational
materials are all “drains,” it’s easy to allow money to pour
out faster than it’s driven in.
Position Yourself to Prosper in Exchange for
you believe your “job” is to “take people through workouts,”
you’re completely missing out on recognizing your own power.
When you come to understand that people fail in fitness
programs because they’re confused, because they’re misled, because
they lack clarity as to the always necessary “next step,” you
can best serve them by acting as a workout leader when appropriate,
but ore importantly, as a resource for basic understandable
truth. Since 1986 I’ve been operating with a money
back guarantee, and by 1994 that guarantee became “unconditional.” It’s allowed me to put myself on the line, to
put myself in a position where I can only prosper by delivering
more value than people expect, and to this day this approach
has served me well. Thrilled clients bring more clients, and as
you continue to touch greater numbers of people with the intention
of delivering extreme value, your daily operations and your
marketing become so wonderfully intertwined you never feel as
if you’re “at work.” You’re simply thrilling people and being rewarded
Recognize and Utilize Your Marketing Resources . . . no, go beyond utilization
into the realm of exploitation
is anything, and I mean anything, that puts you, your name,
your image, your materials, your likeness, or your point of
view in front of people. When
you’re training people, if you’re visible in front of others,
you’re marketing. When
you stand at the deli counter to order lunch, if you have a
shirt on identifying you as a fitness professional, you’re marketing.
If you’re talking to someone, you’re interacting with
someone who knows people, who is capable of spreading the word
of the value of your services, who may work in or participate in an environment with lots
and lots of people who need you but don’t know you exist. If a client expresses gratitude for the results
you were instrumental in delivering, the marketing opportunities
hope is that the questions and rules I provided help you rethink
things just a bit, help you examine whether you are operating
at maximum capacity. Now,
back to Adam Smith and his theories on economics. More importantly, let’s examine how the three
factors impact our livelihoods:
Land or Property translates to Rent
you own a facility, if you pay a facility a monthly “rent,”
or if you rent some space from a landlord, the value of the
property, in terms of demographic, traffic, visibility, and
image, have a massive impact on your potential to succeed.
If you pay more than the landscape dictates in terms
of value, you may be fighting a losing battle.
I’ve met trainers who pay $1200 per month to train in
a virtual free-for-all facility.
The market bears no more than $35 per training session.
That means, all other expenses aside,
a trainer would have to do 35 sessions at the top market price
to even cover the “land” cost.
Imagine training for 35 hours before you earn a nickel.
If you’re relying solely on revenue generated by your
training sessions, you’d be seriously handicapped.
The gym owner justifies it as follows:
a trainer trains 35 sessions per week, in four weeks he can
make about 5K a month. That leaves $3800. The trainers just aren’t motivated."
it any wonder there’s a huge turnover in training staff?
It’s also interesting to note that the “top” trainer
averages 26 sessions “on the book” each week and is typically
subject to 4-5 cancellations. His clients pay between $25 and $35 per session.
His best month ever generated a total of $2520.
Oh, wait, there’s a footnote to be added.
Because he’s “been there so long,” he doesn’t pay rent.
can see how the gym owner has a flawed perspective on “land”
value, and trainers mistakenly buy into a struggle.
Adam Smith would certainly consider a change of venue,
or perhaps a change of the valuation of the terrain.
Goods or Services translates to “Personal Training Sessions” and other Profit Centers
is a vital link between perceived value and cost when it comes
to goods or services. If a training session is valued at $60, but
the trainer sells packages of 10 sessions at $400, guess what
happens to perceived value.
Nobody perceives a training session as being worth
$60, it’s worth $40 at best, and that’s assuming the trainers
deliver on their promises. If you’re going to be successful, you have to
maximize the potential return on the goods or services you
sell or provide. Free
sessions, discounted rates, and complimentary assessments
become value handicaps, even if their packaged initially as
“incentives.” In addition,
many personal training entities buy products such as supplements,
heart rate monitors, and exercise aids and they sell them
at cost, wind up with dead inventory, and habitually “borrow”
from their own inventory making the “Profit Center”
the equivalent of money chasing gravity on a one way trip
into the Black Hole of Calcutta.
Human Capital equates to Time
Investment and Return on Labor Costs
may be the greatest challenge both for club owners and for
personal trainers. Club
owners fail to recognize the value of investing in their potential
rainmakers, and it’s rare that fitness directors or personal
training leaders get any of the structured training middle
managers would get in conventional business settings.
Trainers fail to recognize their own value, they neglect
pursuing an investment in business education, and as a result
they negatively impact the return on their goods and services.
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