The Pros and Cons of Personal Trainer Business Models

This article appeared in the June 2016 issue of Athletic Business. Athletic Business is a free magazine for professionals in the athletic, fitness and recreation industry. Click here to subscribe.

On a fairly regular basis, I receive emails from readers asking for thoughts on a variety of topics related to the day-to-day business of club ownership, and I try to respond as thoughtfully as possible. For example, a reader recently wrote to ask about personal training.

Good morning Rob,
How is your personal training program set up? Are your trainers contractors, or staff members paid hourly or on a salary? And if they are staff members, are they considered full-time with benefits? Currently, we are booking their training sessions, taking the money when a client registers for personal training and distributing the "split" on a monthly basis. The IRS has said if we continue to do so, we are making them employees and must treat them as such. We are now considering changing to having the trainer take the money and pay us our split, but are wondering how to manage this.
     Thanks you for your input. I really appreciate your ideas and articles. And you're really funny and smart too.        — Diane

OK, so I added the part about how funny and smart I am. But what follows is what I told Diane (really):

I'm afraid the IRS is correct. If you "manage" the trainers (set pricing and packages, take money, advertise the service, set the schedule, schedule clients, etc.) then they are employees. If you exert any real control over how they conduct business, then they are employees. If they were true contract trainers, they would simply pay you a fee — basically rent — to operate their business within your club. Clubs that employ contract trainers usually charge trainers a flat fee per month or a percentage based on how much the trainer charges per hour times the number of sessions completed each month. Obviously, a flat rate per month is easiest.

There certainly are benefits to having contract trainers (almost zero overhead, no administrative work, and you get paid no matter what). But, and this is a big but, what happens when something goes wrong? What happens when a trainer is late or doesn't show up for an appointment? What happens when a client is unhappy or unsatisfied with the level of service? Is this going to reflect poorly on just the trainer or on your club also? And remember, if they are contract trainers you will have almost no control. Do you think your members will understand that dynamic? Will you be able to tell your members, "I'm sorry but you will have to talk to your trainer, they just rent space here." Your members probably won't be happy with, "I'm sorry, it's not our fault. You hired that guy."

And while I do paint a somewhat negative picture of contract trainers, we have considered going this route many times in the past. Personal training has a large overhead. We have a PT manager, we do the advertising, we promote and sell the service to our members, and we train our desk staff on how to handle inquiries and sell packages. It's a 50/50 revenue split, but every time we run a sale on personal training, the difference in that sale price comes out of our cut, not the trainers'. They get paid the same. All of the overhead comes out of the club's share of the revenue. It's a costly business to run and it must be managed well to turn a profit and to give your members the level of service (and results) they expect.

We always prefer to have control over how personal training is run within our clubs. We have full- and part-time trainers. They are all employees, but we do not offer benefits to any employees, though we wish we could. A part-time trainer might handle 8 to 15 hours per week, while a full-time trainer will do 25 to 40 hours a week. We encourage our trainers to think of the service they provide as "their business." We are there to help and support them but, ultimately, they are responsible for their own success or failure. Part of the ramp-up process for new trainers involves teaching them basic business principles — what we call Business BootCamp.

We start trainers off in their comfort zone, asking them to design workouts for different fictional clients, including clients with special needs or limitations. The new trainer must then take other senior trainers or managers through workouts.

The next step is to teach them the basics of all of our PT prices and packaging. How can you find the best, most appropriate package for your client if you don't know our pricing?

Then the fun begins. We teach the trainers how to introduce themselves to someone on the workout floor. (Yes, we teach them how to say hello — no detail is too small.) We teach them how to ask for a referral from a current client (elegantly). We teach them how to look for the person wandering around the club — the one who looks like he or she needs help.

We don't teach them to sell. We teach them how to cultivate relationships. You will never walk up to a new member, introduce yourself as a personal trainer and have that person pay you $500 for a 10-session package. That's not how it happens. As a personal trainer, you have to establish yourself as a professional, as someone who is willing to answer questions and be a resource for people. Not everyone they talk to will buy personal training. But everyone they talk to will be a potential source of referrals. As a personal trainer, everyone you meet can help you build your business.

Something else that we think is unique to our personal training program is how we compensate our trainers. Our trainers are paid a flat hourly rate for each session they train. On top of that, they are paid a bonus for the number of sessions they complete each month. The goal is for them to get their clients to train consistently. This way, the client gets the best results, they use up their sessions, they buy more (if they are getting results and love their trainer), the club makes more money and the trainer makes more money. Everyone wins!

And, in case you are wondering, Diane loved my ideas. For more on this topic, see an article we wrote for AB a few years ago, including our list for personal trainers of "5 Ways to Sell Without Selling."

In the meantime, keep the feedback coming. Your question(s) could spark a future article.

This article originally appeared in the June 2016 issue of Athletic Business with the title "Contractors vs. employees? We prefer to have control over our personal trainers"