Finding the “Secret Sauce”: Reducing Revenue Risk

How do you position the relationships you have with your customers and competitors to improve the probability that you’ll meet your monthly number? Business owners who can do this have often found the “Secret Sauce” for running a successful business. I recently interviewed a business owner who has done just that.

Personal Trainer’s largest barrier to business success is the venue where they train their clients. If a trainer works for a gym, the gym takes a large cut, usually 50%, of the fees the trainer earns. If they train clients at the clients’ homes, they spend many hours on the road driving between clients and are limited by the equipment the client has available and what they can carry.  If they train in their own home, they need dedicated space and there’s the safety risk when taking new clients.

The Fitness Salon’s owner, a longtime personal trainer, has opened a fully equipped gym that solves that problem.  For a set monthly fee a personal trainer can conduct as many training sessions as she can schedule.  The owner also sets up every trainer to succeed.  Included in the agreement is personal coaching on starting a personal training business, no fee for the first month and half the fee for the second month – to allow trainers time to build their clientele and put away some cash to support themselves during the transition.

This not only benefits the trainers, but reduces the revenue risk for the business:

  1. By charging a monthly fee instead of a percentage, the risk is moved from The Fitness Salon to the personal trainers who have the client relationships.  At the beginning of every month the owner knows the lowest his revenue can be for the month, based upon the rent he collects.
  2. By collecting the monthly fee from the trainers instead of collecting payments from clients, the administrative overhead is significantly reduced. The owner no longer needs to have staffing available every moment the gym is open, reducing his expense and allowing him time to grow his business.
  3. The target market for The Fitness Salon becomes personal trainers exclusively instead of being both personal trainers and people who want to be trained. Marketing to a group of accredited professionals when you have the solution to issues that have long plagued their industry is just a matter of telling them what you have to offer.

How can you do this for your business?

  1. Can you affiliate with other businesses offering the services you’re offering and forge an overflow agreement? (This helps smooth out business peaks and valleys and your reciprocal agreement can include a 10% finder’s fee.)
  2. If you’re offering your clients a service, can you move your clients from a transaction based relationship to a retainer based or monthly fee? (This reduces the overhead and helps predict revenue.)
  3. Can you bundle your services by offering a discount for paying for multiple sessions or services? (Also reduces overhead and incents your clients to return.)
  4. If you’re offer a consumable product can you set your clients up with an automatic renewal? (It’s easier to retain a customer when you’re “pushing” the product to them.)

Get more ideas for finding  “The Secret Sauce” for your business from $1,000 Start-Ups.

Published by Leah Ward-Lee

Leah Ward-Lee, the author of "$1,000 Start-Ups", is a serial micro-entrepreneur. She opened her first business at ten after lobbying for and receiving a shoe shine kit for Christmas. She pulled her wagon through the neighborhood, going door-to-door, offering to shine her neighbor’s shoes for twenty-five cents a pair. Once her wagon was full, she took the shoes home and polished them. Unfortunately that business was short-lived. She hadn’t tagged the shoes and couldn’t remember whose shoes were whose, so her dad went with her to retrace the route until every pair was returned. Since then she’s had businesses developing and teaching college courses, instructing aerobic classes, owning half a plane that was rented to a flight and maintenance school, and renting homes. She’s also owned a consignment store, a gift shop, a gift basket business, a consulting firm, hosted The Executive Toolbox (a weekly radio show), and a publishing company. She also spent twenty years in the US Army, served as the Chief Information and Technical Officer for two major insurance companies, and has a second career as a management consultant. Leah resides in Dallas, TX and on Amelia Island with Sammy and Goliath, her two rescue dogs.

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