“Margins, Margins, Margins!”
You’re not earning what you think you’re earning.
Have you seen, A Christmas Story? If not: mid-movie, there is a dream sequence by the main character, an eleven year-old boy named Ralphie. His teacher sits, red pen in hand, angrily marking up disappointing writing assignments shouting “Margins, margins, margins!” Arriving at Ralphie’s paper, she halts, transformed. The music changes, the mood elevates and she raves about the content and brilliance of his essay. Ralphie is hoisted on the shoulders of his classmates and paraded around the room, celebrated for his victorious work.
What does this have to do with your income as a trainer?
I want you to be like Ralphie: victorious, different and maintaining incredible margins (although of a different nature.) Below, is one very important perspective on your financial margins. Next time you contemplate your income and ability to make ends meet consider the calculation below.
What are you really earning?
“What do you earn per hour?” I think most would promptly respond with “I charge X dollars per hour.” So, when we think about what you are earning for the day or week or month (which on tough days, is often one way to forge ahead) simply thinking, “Well, I charge $80 dollars per hour and trained 25 sessions this week so, I’m earning $2,000 dollars” is inaccurate.
Let’s examine. The fly in the ointment for me is package pricing which many of us are still offering. Every time you offer a package price (i.e. discounting sessions client buy in bulk) you need to be clear about your true profit per hour and as a result, your ability to garner a healthy paycheck.
Client A buys your largest package, which is priced by you at a 20% savings to them, 20% discount from you. This is a service industry and that saving comes from only one place: your earned income. It cannot come from a negotiation with a distributor or from buying your widgets in bulk as in other industries. This package price now means you are earning 20% less. Similarly, Client B buys your smallest package at a 5% savings to them, 5% discount from you. You are now earning 5% less. Client C purchases sessions at the full price, no savings, no discount.
If you’re selling packages, that flat calculation above ($80 x 25 =$2,000) is misrepresenting your profit margins. How much exactly? I think the results will surprise you. Hypothetically, twenty –five sessions trained last week came from twelve clients. Four clients are receiving 20% off, five are receiving 5% off and three are paying full price every session.
As a result, you are really only earning $1,816 (depending on the breakdown of how often each trains.)
Let’s multiply this by 50 working weeks in the year and you have just given away $9,200.
So, I implore you to reconsider the use of the package model and research other pricing options. Give yourself the most profitable profit margins and clear communication to your clients of your worth. Reach out anytime for help: firstname.lastname@example.org