3 Steps to Create a Profitable Pricing Strategy for Your Fitness Studio
Pricing your boutique fitness studio is a delicate task. As a studio coach, I often hear that owners matched their prices to their neighbors or priced slightly below to stand out, but that's not a strategic pricing strategy; it's just a race to the bottom. Pricing isn't just about covering your costs, either. Your prices need to ensure that you can pay yourself and your staff well, generate profit for a future sale and longevity, and set aside funds for future growth or unexpected expenses. It's complicated, and it's one of the hardest things to get right. So let's do it together.
Side note: I highly recommend you grab the Perfect Your Pricing workshop and template so you can plug and play your specific figures and have them auto-populate your prices. If there is anywhere it's worth spending $99, it's making sure your prices actually support your profitability goals. You can find it HERE.
Step 1: Start with the Basics: Calculate Your Operating Expenses
Before you can set any pricing, you need to have a clear understanding of your expenses, which includes everything from rent and utilities to equipment maintenance and marketing costs. Include a line for payroll and payroll taxes, and remember to include your target owner pay, your emergency fund, an equipment account, or anything else you want to make sure is fully funded. If it's not in this calculation, there won't be money set aside for it.
Examples of Additional Line Items:
- Emergency Fund: You should have at least three months of expenses in a High Yield Savings Account (HYSA) in case disaster strikes. I use and recommend Ally.
- Equipment Upgrades: If you have a wishlist of equipment, turn it into a built-in item in your pricing and allocate a percentage into a HYSA. That's how we purchased our TRX S Mount!
- Debt Payoff: Allocate funds to pay down any business-related or startup debt quickly.
By including these in your pricing strategy, you can ensure that your studio is not just surviving- you're planning on growth.
Owner Pay is Not Profit
Once you have your new monthly breakeven that includes your pay, it's time to factor in your studio's profit. Why double profits? Although it may not always feel like it, you and your studio both need to earn a profit:
Sustainability: Profit is essential for reinvesting in your studio, whether it's for new equipment, marketing, or expansion.
Fair Compensation: Your pay as the studio owner can feel uncomfortable in the wellness industry, but you deserve to be compensated for your time and expertise. Without accounting for your pay, you're essentially working for free, which leads straight to burnout. Even if your studio is just starting out and the figure isn't what you hope it will be in the future, it's crucial to include this in your financial planning.
Growth and Stability: A healthy profit margin and fair owner pay ensure that your studio is attractive to future buyers and can weather any unexpected challenges.
If you're just starting to build profit into your pricing, multiply your break-even figure by 10%. That gives you your new total monthly revenue (TMR).
Step 1.5 Calculate Your Group Ideal Monthly Revenue
In the workshop, we have an additional step to calculate the current and ideal monthly client value and compare how many clients we'd need at the current prices. That's too complicated to explain in an article, so we're going to skip that step here. However, consider how much of your Total Monthly Revenue should come from group class package sales. For example, if you teach group classes and privates, you may want 75% of your TMR to come from group classes.
Multiply your TMR from step one by .75 to get your Ideal Monthly Revenue (IMR) from group pricing. We'll use this figure to set our group packages.
Step 2: Calculate Your Revenue Required Per Client
Stay with me; it's a lot of calculating (remember, there's a spreadsheet for this), but the payoff is in packages that support your profitability goals.
In this step, find:
Number of classes per month _________
Number of clients per class on average _________
Total Class Capacity _________
Your monthly breakeven from step one _________
Revenue Per Class: Divide your monthly breakeven by the number of classes you offer each month to determine how much revenue each class needs to generate.
Revenue Per Client: Next, divide the revenue per class by the average number of clients per class. This will give you the minimum amount each client needs to pay per class for average capacity.
Revenue Per Client Full Capacity: Divide the revenue per class by the total class capacity.
Step 3. Set Your New Pricing
With your new Ideal Monthly Revenue and your Revenue Per Client figures, you can now set your pricing and know that your packages will support your goals. Set your floor- your least expensive per-class pricing as the foundation for your largest package- i.e., your unlimited 12-month membership is equal to your Revenue Per Client calculation.
What If The Calculations Are Way Too High?
So, what happens if you go through all the steps and are left with a comically high per-class cost that you know clients are not going to accept? The math isn't mathing, to borrow from gen Z, and we need to make adjustments. You may need to focus on getting your average class attendance closer to your full capacity or look for areas where you can spend less. But, repeat after me, that savings is not from not paying yourself.
Here's to your studio's success!
