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James Millar
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Probably a more important number to know (same for any business).

1. Average profit per member/ customer per year? Calculated with some allocation of all overhead except marketing. Then consideration to lifetime value based on average periods of membership.

2. What is the cost of acquisition for a member (customer)? I don’t have the answer but I can safely tell you its not to be zero. Obviously the lower cost methods are best but it generally takes a mix. Facebook costs might amount to $50 per paid member. Google Adwords might by $65. Flyers might be $25. Referral programs might cost $10. All guesses but you get the point.

If 1 is higher than 2 then you are heading in the right direction. We find these two metrics helpful because it tells you what marketing resources you can afford to deploy to win a paid member. If you are making $600 per year profit per member (exc marketing costs) and they have a lifetime value of say $1800 (on a 3 year churn) then you can theoretically afford to spend anything up to $1799 and still be making money (if you can manage the cash flow issues). For that you could give them free ipads, free PT lessons for 6 months, whatever gets them on board.

If you get that marketing recipe right them its just a matter of scaling. That’s what the big gyms do.

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