Please enjoy this transcript of Luke Carlson – How to Attract and Keep Great Personal Trainers in your HIT Business Part 1 (#215).
Generate more profit in your high intensity training business – Join HIT Business Membership
Lawrence Neal: Lawrence Neal here, and welcome back to highintensitybusiness.com. Today’s guest is Luke Carlson. Luke is the founder and CEO of Discover Strength based in Minneapolis, Minnesota. Discover Strength’s five personal training facilities are among the highest volume revenue training facilities in the country. Luke is a sought after speaker to businesses and leaders in a variety of industries. Luke, welcome back to the show.
Luke Carlson: My pleasure, thank you for having me.
Lawrence Neal: Thank you for joining me. How you doing?
Luke Carlson: I’m doing great, Lawrence. We got a great Monday morning here in the US and the Twin Cities is where I am, and it’s always an honor to get to chat with you.
Lawrence Neal: At the Resistance Exercise Conference earlier this year, there were some incredible presentations. Among those presentations was your one called The Goose and The Golden Egg, which was a really tantalizing title. I remember talking about it with Hannah a few weeks in advance and I was like, “Oh, what’s that about? That sounds really interesting.” I really, really enjoyed the presentation and excited to go through some of that today. Because I think it’s enormously valuable to a lot of the listeners and a lot of the members in the membership because I hear the challenges all the time around acquiring, retaining, developing trainers. Obviously, that’s such a critical part of the business. I’m so excited to dig into this with you and provide some strategies and tactics for those listening. I guess, just to set the stage, you want to talk about what is exactly The Goose and The Golden Egg firstly?
Luke Carlson: Yeah, ultimately, The Goose and The Golden Egg is the mindset that is… I think it’s captured by Stephen Covey in the parable that he tells when he, in a nutshell, says there’s two farmers and they find out that they have a goose. This particular goose, of all the geese that they have on their farm, is actually laying golden eggs, one golden egg per day. Of course, these golden eggs are just wildly valuable. So the farmers say, “Well, it sure would be great to have a heck of a lot more golden eggs. The problem is, the bottleneck, is that we have to wait each day, we have to wait 24 hours to receive another golden egg. How do we expedite this process?” What they do in their fervor to get more golden eggs, they kill the goose and open up the goose and thinking they’re going to find multiple golden eggs. Of course, they find just one golden egg. And now they have killed their ability to produce more golden eggs.
Luke Carlson: Now this is the parable that articulates Covey’s P and PC balance, so P is production and the PC is production capacity. You have to have a balance between actual production, which is the golden egg, and the production capacity, which is the goose. You’re not going to get any more golden eggs unless you take care of the goose. For us, the goose is the personal trainer and the golden egg is great workouts, or you could say revenue, and they’re really probably one of the same. For 13 years, I’ve always gone back to the fact that the center of the entire business has to be the goose, it has to be the personal trainer. It’s not me, it’s not other managers, it’s not leaders within the company, all of those are wildly important. But when it comes down to it, all we do is sell one on one in small group workouts with the goose. If we have great trainers, we’re going to be ultimately a great company.
Luke Carlson: The focus has to be on the goose, and as soon as we stray away from that, which is easy to do, I think the product, the ability to grow revenue is marginalized.
Lawrence Neal: Excellent way to start this one. What we’re going to do now is obviously walk through the presentation, and for those listening, don’t be worried if it’s so strategically and tactically rich that you’re thinking I would need to take notes. Because we are going to be adding a link to the slides to support this in the show notes as well, which will be over at highintensitybusiness.com/golden. But let’s walk through this, so the first section is on attract and the first point is website transparency. What does this mean exactly?
Luke Carlson: Lawrence, so I’d love to answer that but let me just make sure I make one more statement because I’m not sure if there’s a time to circle back to it. This is a philosophical approach, and the philosophical approach is you can be what’s called a genius with 1000 helpers. You’re the one running the business and you’re the genius, and then you have a lot of helpers that are helping you do what you need done and that’s one way to run a business. Then the other way to run it is to really empower, and I love the word empower, but to empower your team and put your team on the pedestal and put the people, in this case, the personal trainer on the pedestal. I am not going to argue that there is a right or wrong answer there. I will say that, for me, the only way to run the company is the latter option, not the first option.
Luke Carlson: The latter option is really where we make the company about the personal trainer, and so working at Discover Strength, being a part of Discover Strength is not, “Luke has a vision and Luke has an idea of what needs to be done and now everyone’s going to help Luke do what he needs done.” It is that is not what we’re trying to do at all. It is really building the business around the goose. I’m not saying that’s the only way to run a business, I’m saying that’s that’s this presentation comes from that philosophical belief.
Lawrence Neal: That’s obviously a philosophical belief that you believe very strongly and that really determines the direction of your business?
Luke Carlson: Absolutely, it’s everything, it’s everything. I didn’t mean to sidetrack you there, I just wanted to make sure that I got that out.
Lawrence Neal: No, not at all. Yeah, no, it was probably important to set the scene with that as well. But, yeah, I guess going back to the presentation, the first part of it… and you may want to just elaborate on what I say to make sure that it’s clear. But the first part or the first slide is about attracting the right candidates, isn’t it? For your High Intensity Training business?
Luke Carlson: Yeah.
Lawrence Neal: Would you like to just maybe elaborate on that and then pass walk through the tactics that you employ at Discover Strength?
Luke Carlson: Yeah, so sometimes we make the mistake of starting with hiring, like what’s the hiring process look like? What’s the interview process look like? But you can’t start with hiring, you have to start with attracting. Are you even attracting the right talent to your organization? The most powerful tool that we have in terms of attracting is using our website to market. We always think about our website or we think about the marketing function of a business, just marketing to acquire more clients. But a huge focus of our marketing should be marketing to attract talent, to attract personal trainers. The key here is that we want transparency on the employment section of your websites, so you should have a tab that says careers or employment. Then the tactic here, and this comes from just a brilliant speaker and author by the name of Marcus Sheridan, and what he would suggest is you just think of the four to six questions that you would ask if you are looking for a job?
Luke Carlson: I mean, if we were looking for a job, what’s the first question we’re going to ask? Well, how much does it pay? Now we have to think from the lens of a personal trainer, how much does it pay? What are the hours like? Everyone’s going to ask what the hours are like because in the world of personal training, you could be working from 5:30 a.m. until 8:00 p.m. with clients scattered throughout the day. Am I working weekends? What’s the expectation in terms of hours? The next question, and I’m making these up off the top of my head, personal trainer would ask is, “Well, do I have to find my own clients? What’s the expectation in terms of how much I’m selling and is there a commission on how much I sell? Or is there clients provided for me? Is there any benefits?” You come up with the four to six questions that you would ask when you were looking for a personal training job that you think your ideal candidate would ask, and then provide those answers.
Luke Carlson: I’m not looking at our website right now, we did this a while ago, but if you go to our website in the employment section, we’re going to provide the exact question and the answer to those four to six questions that we think every personal trainer is going to ask. Because people are doing research on you before they apply to work with you, they’re looking at all these things. We would do the same if we were investigating a job opportunity, a career opportunity, we would want to know this information ahead of time. We want to create this transparency ahead of time by having it all on the website. I think that is the first and most powerful thing we can do. Now related to that, we can have some great video content and really sell the candidate on why they would want to work with Discover Strength. But that’s separate from the transparency, the transparency piece is you’re sharing the good and the bad and the ugly in answering those questions.
Luke Carlson: We still want to have more traditional marketing that’s going to be a video that really tells a story about why someone will want to work at Discover Strength, and what’s unique about working at your facility, your studio, your gym. We want to market in both of those ways. I would start with the answer to the four to six questions, though.
Lawrence Neal: Yeah, and that’s excellent and I will obviously link to where does Discover Strength demonstrate that from the show notes? I guess maybe it’s a given but you’ve recently redone your website, it looks very professional. If I were a trainer or prospective trainer and I went to a High Intensity Training business, or personal training business website, I would lose confidence if that website looked really unprofessional. I guess, that’s also equally important, right? To have a website that looks professional and sends that kind of message to the candidate?
Luke Carlson: Lawrence, amen. There’s so many people, I’m just thinking about our field, and I’m thinking about how many colleagues there are around the world that I respect immensely. I’ve looked up to and I’ve put on a pedestal for the better part of 20 years. I say this is the guy or this woman has such an incredible reputation. I know about their reputation, in some cases, I know them. But then maybe I go to their website and I see a different story and I think, “Well, if I was going to refer someone to go work at that business, I can say positive things about that business or that particular leader or that particular business operator.” But then they get to the website and I think, “They’re going to have a bad impression when they get to the website.” You are so right that the website is absolutely going to almost be a deterrent of having the right person want to pursue the employment opportunity.
Lawrence Neal: Not to digress too much, but I spoke to your sales and marketing vice president, Hannah, about your website. For an investment of a few thousand dollars, maybe around 5000 at the higher end, listeners to this, business owners, can outsource a great new website, and they don’t have to learn how to build the website themselves. I think the majority of the studio owners listening to this have got the cash flow or the money to invest in that kind of thing. It’s just so important for their business.
Luke Carlson: Yeah, I agree, and of course, just everything we talk about is going to go back to, “Well, what is the constraint in your business? What’s the bottleneck in your business?” In almost all cases, it’s do I really have great trainers and am I retaining great trainers? Well, you have to make the investment, you have to find a way to make the investment to attract the right people to the organization.
Lawrence Neal: Yeah, good point. Then the next part of this attract piece is one of the key tactics that’s worked very well for your business, and which is your SIIP and WIIP processes, if you will. Would you like to elaborate on those?
Luke Carlson: Yeah, so these are our SIIP and WIIP stands for Summer Intensive Internship Program, which we have going on right now, and Winter Intensive Internship Program. We live in an area where there’s a lot of colleges and universities, many of them or most of them have exercise science degree programs. The idea of the internship is to give people an experience where they’re working with Discover Strength. We are increasing their enthusiasm and excitement about Discover Strength during that process. I got to give a few details here. I don’t think internships in our world work. It can be a classic internship where you’re coming and you’re hanging out, and I know people that I really respect that have a summer internship. And you come into work five days out of the week and you train some clients and you just hang out. I think you can bore the intern by doing that.
Luke Carlson: I think what we want to do is we want to give them a little taste of it. For us, what we do is six weeks long, you come in for a classroom session once a week. For us, it’s Thursday nights, it’s about two and a half hours long, one hour of classroom, hour and a half of going out in the floor. We do it at night, so 7:00 at night we start with classroom, and then we break those up into six different topics. The first one would be like introduction to High Intensity Training. Second topic might be special populations, third topic might be athletics or strength training related to athletic, strength and conditioning related to sport and performance. It starts off with just the lecture portion, and who does that lecture? We just rotate it between our staff.
Luke Carlson: We have two staff, double team each lecture, then they go out into the floor and they learn some techniques. First week is we’re going to learn how to do a proper repetition. All right, so the basics of repetition, what it looks like to train your muscle failure? And that’s it. Then everyone’s going to do that on maybe three, four, five, six exercises. Then the next week we move on to advanced overload techniques, we teach what a breakdown set is, we teach how to do an assisted rep, etc. We teach pre-exhaust, we teach post-exhaust, etc. Then the next week we’re teaching something else. Each week we’re just teaching one element. Now during the week, so that’s just a two and a half hour time commitment at night once a week, during the week, that intern gets to come in and train one of our trainers one time. And they get trained by one of our trainers one time. You’re getting a full just incredible High Intensity Training workout once per week.
Luke Carlson: Which, man, you do a workout with us once per week, your interest in High Intensity Training and Discover Strength is just going to grow throughout the course of the internship program. Then you’re getting to train somebody and the reason we have them train our trainers is they can make mistakes with our trainers and our trainers can give them feedback. We would never want them to train one of our clients. We do not have our interns train our clients because it’s just our opinion that that degrades the brand. We’re not going to have our trainers learn, excuse me, our interns learn on the clients. Then at the end of the internship program, every intern does what we call a capstone presentation. We give them about six different topics they can choose from, everything from body building to ACL repair to preparing a football team for their football season, “What would the strength and conditioning program look like?”
Luke Carlson: They’re working through that over a number of weeks, they have a partner when they do that project and they present that project on the last day of class. It’s a short, concise presentation, and any of our staff are welcome to come to listen to it. I always come, we try to get our leaders and managers to come to listen to that presentation. We serve carrot cake, because I like carrot cake and then we have some beer and some alcohol there so they can celebrate at the end. It’s a great way to wrap up the presentation. The idea is over six weeks, we’re increasing their interest and their excitement about High Intensity Training, about evidence based training, about Discover Strength. At the end, we know of all of our interns, we’re going to find a couple people that are great candidates for us to hire down the road. We let them know that, “Hey, we do things like REC. Hey, we’re going to be hiring and this is when we’re going to be hiring.
Luke Carlson: All of these students are undergraduate students, we rarely take a senior, we generally want juniors and college or university. Because we want to position so that when they’re a senior, they’re thinking about us and they want to come to work for us.
Lawrence Neal: Do you know, I’m thinking about this if I were a young lad, I would have absolutely jumped to that type of opportunity. You must see, it must be so fun for you because you must see assuming this probably isn’t every single candidate at the slightest. But every now and again, or perhaps this happens quite frequently, you’ll just see someone’s eyes light up as soon as they start learning about this. Then they become obsessed just like the rest of us, just like you and I, and other people that have been on the podcast. Do you see that happen in them? Does that make sense?
Luke Carlson: Lawrence, absolutely. We see people that are division one scholarship college athletes and they say like, “How have I not been exposed to any of this? By the end of it, they’re in love with it and they can’t wait to move forward with an interview process. If they don’t decide to interview with us or work with us, who cares? They’ve been exposed to something completely different. We’ve given them value, we’re putting tools in their tool belt that they can take with them. I didn’t mention this but each week there’s two to four research articles that are assigned to them. They’re reading journal articles, discussing them, they’re exposed to all of it. By the end of it, they know who James Steel and James Fisher and Ralph Carpinelli and all of the names are. They’ve been through it. They read the book, If You Like Exercise… Chances Are You’re Doing It Wrong. That’s the one book that they read and they discuss different sections of the book throughout the internship.
Luke Carlson: It’s all about just giving them just enough to get excited, enough hands-on, enough discussion, enough learning to get excited. In the early days, like 12 years ago, we would bore the heck out of an intern because we just had them hang out for a full summer. They would train staff and it was just a bad experience. If you’re going to do an internship program, don’t just do an internship program, craft something that increases someone’s excitement about the brand. If you don’t have people that want to work with you and the internship program’s over, you’ve done something wrong. I have plenty of friends and colleagues who I think are just boring in terms of we fell into that category for a long time. We’re trying to make the internship program truly something that is exciting the candidates and attracting them and wanting them or creating situation where they want more.
Lawrence Neal: How do you actually establish this with the colleges and universities? Like how do you make it so that they promote it to the students? How do you build that kind of awareness and build that connection?
Luke Carlson: I’ll tell you what we’ve done historically and then I’ll tell you what we’re about to start doing. We have, I don’t know, for eight years, we advertise on all of the local college and university jobs boards where you can advertise internships and jobs and so forth. But then we try to have relationships with key faculty in all the colleges and universities. If we have a faculty member at a college or university and they have a student that they find that’s really interested in strength training, they will always, almost always, refer that person to us and our internship program. Then what we try to do is every summer, excuse me, every late spring and then every winter, we try to get out to the colleges and universities and give a brief presentation in as many classes as they’ll allow just talking about the internship program.
Luke Carlson: Sometimes it’s broader than that, we’ll say, “Hey, we’re here for a visit. I have David Gschneidner from Discover Strength, he’s going to speak for 15 minutes on three things. He’s going to speak on employment opportunities, about the upcoming Resistance Exercise Conference, and about the internship program.” We’re going to the school and we’re in front of them. I think that’s really important, and we’ve done that for a long time. What we’re starting to do now is pick the key universities that we want relationships with and saying, “Hey, we’re going to just financially support what you’re doing. We’re going to create a situation where we’re donating money to your exercise science lab and buying you things that you need each year, and just to be a great partner with you. Because we want to support what you’re doing and updating your facilities.” I have a dream, lines of buying a full line of medics equipment and creating a strength training laboratory at my alma mater, the University of Minnesota.
Luke Carlson: That’s what we want to do is continue to support them and what they need so that they’re going to think about us. It’s a hopefully a win/win. We’re just constantly trying to think win/win, what does that department need? Of course, one thing they need is they need their students to land jobs when they graduate, and so we can obviously provide that. But what do they need in terms of resources and support? We’re just trying to create a collaborative relationship.
Lawrence Neal: Yeah, yeah, that’s important that last bit. Obviously, for the processing, Luke and I will be doing a piece of content on how to recruit trainers within the membership. If you’re a member listening to this, stay tuned for that. That’ll be coming soon next week. We will probably dig into more in the way of tactics to find trainers. I’ll probably ask big questions around the type of copy they might use for the job board out, for example, and other tactics that we haven’t had time to necessary talk about now. Because you’ve got quite a lot of areas to get through in terms of The Goose and The Golden Egg presentation. I just wanted to make you aware of that. If you’re interested in joining the membership, it’s highintensitybusiness.com/membership. Luke, the next, if you’re happy to move on to the next part unless if you’ve got anything more to say on the attract side of things?
Luke Carlson: No, let’s move on.
Lawrence Neal: Okay, so the next part is hiring. You’ve got a really rigorous but effective process for hiring candidates, which is made up of four key interviews. Would you like to just walk through that front part?
Luke Carlson: Yeah, so the four interview process there is, number one, a group interview and that’s the interview that I do. We bring candidates in about every two weeks. Last week, Monday, I did one with 20 candidates, that’s a lot of candidates. Sometimes it’s as little as two or three candidates but we do in the group. The big focus is read your core values speech. You should have a speech prepared that talks about your core values. When you’re done reading that core values speech, the message is, “Hey, if you share a similar set of core values, you should come work with us. If you do not share a similar set of core values, you should not come work with us.” If you deliver that speech the right way, half of the room will want to sign up and move on to the second interview immediately. If you do it the right way, about half that room will jog to the parking lot to get in their car because they want nothing to do with your organization.
Luke Carlson: You have to really in intimate detail talk about what the company is all about and what the core values are all about. I read the core values speech and then the only other thing I do is talk about the core purpose and the niche of the company. I say, “Hey, our core purpose is to lead the movement in evidence based exercise, here’s what that means. If you’re drawn into this, you should consider working with us.” Number two, our strategic niche is personalized strength training, all we’re going to do is one on one small group strength training. It’s all we’re going to do, it’s all we’re going to talk about, it’s all going to think about. If you’re not into strength training, we’re not a good fit for you. If you’re into exercise or just fitness, in general, we’re probably not a great fit for you. It’s core values, core purpose, why we exist, and the strategic niche which is the sandbox that we play in. We’re going to share all that.
Luke Carlson: Then if they’re interested, they let us know within 48 hours, they move on to the second interview, which is just a video interview. They create a YouTube video. I think that right now it’s six minutes long. They submitted to our hiring team, which is six people that do all of our interviews, and they answer a couple of key questions. You can make up whatever questions you want there, but our questions are, “Have you lived the core values? Why are you passionate, or tell us a story about how you’re passionate about strength training?” The last question is, “Tell us how you’re going to help us become the best customer service company in the world?” So, really, part of this is giving them a homework assignment. If someone can’t complete this, so the video’s too long, or they do something incorrect, or it’s just sloppy, you understand that, well, they can’t handle this homework assignment.
Luke Carlson: They probably are not going to have incredible attention to detail in all the work that they do. Interview number one is the group, interview number two is they are just producing a video, shooting it off to you, and your team’s looking through it. And then you can decide who do we want to pass on? We use Slack as internal communication of the company, it’s like group chat, essentially, it’s like almost a texting service that replaces email. That hiring team is just communicating via Slack, “Hey, what do we think of this video from Lawrence? Are we going to pass him on or not?” Then we pass a certain percentage of those people on the third interview. Third interview is your traditional interview, one hour of just grilling people and asking them questions with our hiring team. We use a hiring team so that people really get good at interviewing. All of our managers do not get to be a part of the hiring process because most managers are not trained on how to actually interview.
Luke Carlson: Our hiring team is trained on how to interview, and they really go deep and the different master tactics of interviewing. That’s about an hour long and when you’re done with that, you move on to interview number four which is the workout interview. We’ve probably talked about that before, and you’ve had some other people on the show that are now doing a workout interview. You can schedule that with one member of our hiring team and you come in to one of our studios and go through a High Intensity Training workout. The idea there is we want to see you in the real world. It is about just beating somebody up and having them throw up, it’s about that. Not completely, but it’s about seeing somebody in the real world and seeing when they’re waiting up in the lobby, how do they interact with other clients or staff or our front desk staff and.
Luke Carlson: We find out do they like the workout? Are they into the workout? It’s their first exposure to our product. You got to be into the product if you’re going to work at Discovery Strength. It’s group interview, then a video submission, then a traditional interview with our hiring team and then a workout interview and then we’ll make the hiring decision after that.
Lawrence Neal: I appreciate that. I guess one last shameless plug. Obviously, Luke, you did a great hiring process Q&A where you got into the details of the interviews down to the questions. Every single bit of criteria, the formats of the interviews within the membership. Again, people listening if you’re interested in accessing that and learning about Discover Strength’s hiring process in depth, then please do consider joining the membership. The next section is onboarding, so the first part is personal training bachelor’s for two weeks. Which is, I guess, when a trainer first comes aboard, this is their first two weeks in the business?
Luke Carlson: Yeah, so what we used to do, or what you have to think about is from the time we’ve offered a job to this person to the time that they can be on the floor with a client, what’s the right timeframe for you? Well, you can have all different debates on what that timeframe, what that process should look like? We’ve shrunk it from about a month to three weeks to now two weeks. We try to just include what you really need to know on the floor in those first two weeks, and we call that PT bachelor’s. It’s two weeks of getting you ready to be on the floor. Let’s be clear on that mistake we’ve made in the past. We used to think you had to read every journal article known to man before you could be on the floor, and now we realize, “Well, before you’re on the floor, you need to have really good skills on the floor.” You need exercise instruction skills, you need to understand the mechanics of how to perform the exercise.
Luke Carlson: Then down the road, you can read all the journal articles and all the Ellington Darden and all the Arthur Jones, etc. PT bachelor’s, which is just personal training bachelor’s, is the first two weeks. You graduate that, you’re on the floor with clients. Just an important side note, for the first 30 days that you’re on the floor, you’ll be called an apprentice trainer so we don’t charge as much for your workouts. That is so imperative because we know that brand new trainer is never going to be able to give a workout experience like our trainer that’s been here for seven years. We can’t charge the same amount, and our clients are fine learning or having the trainer learn during their workout as long as they’re getting charged less. All of our clients love to work with an apprentice trainer knowing the workout’s not going to be the same because they’re getting charged less.
Luke Carlson: Then we reach out to that client and ask for their feedback on what the workout’s like and how we can have the trainer improve. Step one is PT bachelor’s the first two weeks, step two is what we call… It’s okay if I move on to step two, Lawrence?
Lawrence Neal: Go for it, yeah.
Luke Carlson: Yeah, step two is PT masters, and that’s just a 30 day period. What’s happening in the first months. Now you’re on the floor, or I should say the next month, now you’re on the floor for the next 30 days, what are you continuing to learn? What are you continuing to do? Then step three is PT PhD, which is just what’s the next six months look like? I’m not suggesting that we have all the perfect steps, I’m just saying you have to understand, what do we do before someone’s on the floor? What do we do in their immediate development of like the next 30 days? Then what needs to happen over the next six months? I think you have to think about those three different processes or portions, and that’s what we’ve done. Over the next six months, you’re reading key books and you’re getting exposed all the research, and you’re going through a workout.
Luke Carlson: All of our new trainers will get trained by me, just their own workout, once per month for six months because I want them to do a workout with me. That’s one of the million things they’re doing in the first six months. The first two weeks it’s just how do you actually do a repetition and how do you coach a repetition? Let me tell you that that PT bachelor’s, the first two weeks starts with what we call Essentials, and Essentials was inspired by what McDonald’s does. McDonald’s has Hamburger University where they’re just going to break everything down into the component parts of, “We’re making a hamburger but we’re not going to teach you how to make a hamburger on day one. We’re going to teach you where to put the pickle. This is how you put the pickle on the burger. Put the pickle here, put the pickle here, put the pickle here, put the pickle here, put the pickle here, over and over. Now you know how to put a pickle on the burger. Now we’re going to move on to the slice of cheese.”
Luke Carlson: And maybe I went out of order, “This is how you put the cheese on, the cheese on, the cheese.” For us, PT Essentials is this is what a transition looks like or a turnaround over and over and over and over. You’ve tested out of that, here’s what a pause and the contracted position looks like. You have to do it over and over and over and over and over. Okay, you have that, here’s what an appropriate eccentric looks like over and over and over and over. We pick all the elements of Essentials and you just figure out how to put the pickle on the burger, and then you move on to something else. Then, eventually, you go a little bit more macro and learn how to train a client. But we want to make sure we’re very clear on all those component parts, and so that’s a part of PT bachelor’s.
Lawrence Neal: I love that. It makes me think whenever I go through like a McDonald’s drive through, which is very rare these days, for obvious reasons, I’m stuck in two minds in one and one hot side, I just love the elegance and the efficiency of their business, right? Which I’m sure, as you said earlier, you appreciate as well. But at the same time I’m like, “I’m not sure if this is a good thing for the world in the type of food they produce. But, hey, it’s an interesting thing. The next section once they’ve been, I guess, trainers have been on boarded, they go through those steps. Well, actually, I guess this is all happening at the same time really, these next few steps we are going to be covering. The next section is compensation. So how I guess trainers are compensated, and it’s my understanding that you are charging a… You’re, sorry, paying a percentage of revenue generated on you.
Luke Carlson: Yeah, so I think compensation is key. It’s key, obviously, in any job. We care about compensation. That’s one of the key things that attracts us to a job. There’s research to say that we’re more likely to retain an employee, and they’re actually likely, excuse me, to be happy in life if they’re earning a decent living. But that tails off after a certain point, and so they don’t need to make a million dollars a year but they need to be fairly compensated. We compensate based on a percentage of the revenue generated exactly like you said, and this simple notion, the simple reason for this is let’s just use easy math. I think this is pretty expensive but let’s use easy math. If you’re charging $100 for a session, for a 30-minute session, you’re going to pay your trainer a percentage of that.
Luke Carlson: I think that percentage, I’m throwing out numbers, is probably going to be somewhere between 30% up to just shy of 50%. If it’s 50%, that’s pretty darn high. But let’s just say it’s between 30 and 50%. For me, we have people move through a process where they’re starting lower and ending up higher. So more veteran trainers receiving a much higher percentage. A more skilled trainer that’s better at retaining clients receives a higher percentage. But let’s say it’s 30 to 50%, the beauty of it is as you increase your prices, all right, your trainer gets a raise. But the business is always making the same percentage. If you ever decide to do a discount, you are protected because you’re paying a trainer just a percentage. If you say our sessions were $100 and we pay our trainer $32 every time. Well, what if you offer a discount of some kind? Then you’re riding your own margin.
Luke Carlson: If you raise prices, then the trainer is not getting a piece of that and the trainer has to be excited about an increase, a price increase. This way, your gross margin is always maximized. It’s always, well, first of all, it’s always protected and then I think what the trainer can make is to always maximize. If you pay your trainer a salary, for example, your gross margin is going to fluctuate every month. If you really want to be safe or cautious, you have to underpay your trainer. With this situation, your trainer is always getting the maximum amount that they possibly can. They’re always getting as much as your gross margin, the gross margin that you’ve deemed what you need. It allows the trainer to make as much money as possible.
Lawrence Neal: You talk about in this presentation the importance of maxing out gross margin. Why is that so important in this business?
Luke Carlson: Well, let’s just say so I realized it takes a little bit of homework. You have to understand what’s the acceptable gross margin for you, and our short definition of what gross margin is because we get this confused. It’s the $1 that’s coming into your business. The gross margin is the amount that you keep, not the gross to profit, the amount of the business keeps that goes to pay for all of the overhead expenses. After you’ve paid the trainer, the gross margin is left over to pay for the rent of the facility and pay off the equipment costs and pay for your front desk staff if you have front desk staff. Pay for your salary if you have a salary. Let’s just say if your gross margin is 48%, that means you have 48 cents leftover to pay for everything else.
Luke Carlson: Well, guess what happens after you’ve paid for everything else, after you’ve paid for your salary and the studio costs and so forth and any marketing you’re doing, well, the rest goes to the bottom line, goes to just pure profit. So the more 48 cents, the more dollars that come in, the more 48 cents you have coming in over and over and over. Eventually, you’re going to pay off all those fixed costs and the rest just goes to the bottom line. Which, by the way, there’s a lesson in all that. The lesson is the way to become really profitable in this business is just to sell more, to have more personal training sessions. I’m going to tangent for one second but there’s so much talk in our industry and there has been for eons that, well, maybe you can’t make that much money in this industry. Maybe the personal training model is not a highly profitable model and that is not true.
Luke Carlson: It’s just an indication that that business hasn’t done enough revenue, hasn’t done enough sessions. If you do more sessions, which is very doable in a small studio, my goodness, the profit can be just absolutely massive. We have a sales problem, we don’t have… is the model a profitable model, issue or problem? When we know that gross margin is, then you build everything around that. If you say we need a 50% gross margin, we need a 48% gross margin, we need a 60% gross margin, then you’re going to say, “Okay, as long as we stick to this, we’re going to pay the trainer everything else. And it’s my opinion that we want to pay the trainer as much as possible as long as that gross margin is retained.
Luke Carlson: We know what our gross margin needs to be, and I don’t want to share it because I don’t think there’s one right gross margin. You just have to figure it out for you. We know what our gross margin is going to be and we make sure that our trainer is always going to get paid every other penny outside of that gross margin.
Lawrence Neal: I suppose it’s fairly obvious but am I right in thinking that the importance of maxing out that gross margin is really just to build a stable business? Where you’re going to be able to continue to pay trainers, provide a service to your clients, continue to reinvest in… or maybe that’s what the profit’s for. Obviously, new technology and new studios and expanding the business, paying for all the equipment and really optimizing the service to the customers. Is that why you deem it to be so important?
Luke Carlson: I agree but I would use the word predictability. The reason you want to zero in on a gross margin is you want to have predictability, you want to understand, “This is what we can pay trainers, this is what we’re always going to pay trainers, this is how much we have left over to pay for everything else.” There’s only a few levers we can pull. We can reduce our overhead expenses, which we can have a studio that has less lease or rent cost per month. We can market less, we can… there’s only so many levers that we can pull but if we know what that gross margin is, man, we can plan and budget for everything else. We can understand that if that gross margin’s consistent and we just sell more and more sessions and more and more clients, this is what’s going to happen to our profit.
Luke Carlson: I think it’s all about predictability. I’d rather run a business with a worse gross margin that’s consistent than a business that has a little bit higher gross margin, that has wild fluctuations because I just wouldn’t know how to plan and predict and budget.
Lawrence Neal: How would other organizations have wild gross margins? I don’t know.
Luke Carlson: Okay, so you pay your trainer just $25 off of every session but you’re discounting session sometimes and you have all different types of sessions at different price points. Depending what that client, excuse me, what that trainer does in that particular pay period, you may have paid that trainer a much higher percentage and so your gross margin got worse. Where if you’re paying the trainer just purely percentage, or if the trainer’s on a salary, well, they just are expected to train a certain amount of sessions on that salary. Well, if they train fewer sessions, your gross margin’s going to be worse. If they train more sessions, your gross margin’s going to be better. Let me tell you, you’re happy if they trained more sessions and your gross margin improves, but guess what that trainer’s thinking? Trainer’s thinking, “Okay, why am I training more people?”
Luke Carlson: That’s probably where I should have started is the reason you want to pay a percentage is it aligns with the business interest, with the trainer’s interest, with the client’s interest. We used to pay all of our trainers in the old days a salary, and let me tell you what happened. At 7:00 p.m., we close at 8:00 p.m., if a client calls in and wants to get a workout at 7:30 and my trainer, who’s on a salary is going to make the same amount of money no matter what, does that trainer want to book that 7:30 session or do they want to not book that 7:30 session and just go home? The trainer doesn’t want to book the session, the business, we want the session. Does the client want the session? Of course, they do. We had a different interest, the interest were not aligned between what the trainer wanted and what the client and what the business wanted.
Luke Carlson: Right now, if a trainer calls in, excuse me, a client calls in and wants to get in 7:30, the trainer says, “Heck, yes.” The business says, “Heck, yes.” And the client says, “Yeah, heck yes, I want to come in and train.” You have to have a set up where all three parts have similar… their interests are aligned.
Lawrence Neal: Yeah, it makes total sense. I understand how that variability in gross margin could be a real problem as well. The last point, and then we’ll wrap up this, and obviously, do a part two to cover the rest, the last point here is make your own raise. Giving the trainers the opportunity to generate more income, and so do you want to just elaborate on that?
Luke Carlson: Yeah, so there’s an infinite number of ways you can do this. What we do is we have a tier system, so there’s four different tiers that you work through, and how do you move from one to the next? One is time with a company or a number of sessions trained. You can’t move to a tier two with us until you’re at least at one year with a company. You’re not even eligible for tier four, which is our top tier until you’ve been with the company for five years. Part of its time, but part of it is, internal development. You have to read, you know, we read all the books. You read Body by Science and you take a quiz. You read Body by Science question and answer, you take a quiz. You read [Nautilus 00:43:05] Bullets In One, you take a quiz. All right, but then you have to get a certification. Once you get your hit uni certification, you’re eligible for tier two. Once you get an American College of Sports Medicine, cancer exercise trainer, you’re eligible for etc.
Luke Carlson: It’s all of the internal education and time with the company that allows you to move to another tier. Could you stay at a tier one or tier two forever at Discover Strength? You could, we’re going to try to nudge you and say, “Hey, you got to create your own future and create your own raises.” You move on from tier one to tier two to tier three to tier four. You don’t have to overcomplicate things, but within each tier, we have an A, B, and C level. An A, B, and C level is how much you get paid within that tier based on how good you are at retaining clients? That’s a whole nother layer but if you’re a really good trainer, and you’re a tier one, you’re going to get paid more then a, I guess, “mediocre trainer” that’s a tier one. If you’re a tier four, you’re making more money than a tier one no matter what, but you could be a tier four A trainer. Which means not only have you gone through the whole process, but you are really good at retaining clients. You’re going to get paid more.
Luke Carlson: We want excellence at every tier but then we also want to go through the tier and continue to grow and develop ourselves. You are, Lawrence, creating your own raise but you are also on a journey moving toward becoming a master of your craft and an expert educated trainer. Now every one of your listeners is going to have a different idea of what that journey should look like. They’ll read different books and attend different conferences and get different certifications and be exposed to different educational opportunities. These are just the ones that we picked, and some of them for us are exercise, some of them are business related. We have people read particular business books or customer service books as they walk through that process.
Lawrence Neal: Awesome. We will do, we’ll certainly so a part two to complete this and cover all of the rest. Just on what Luke said there, in terms of the development plan for his staff, there’s a great pyramid table in the slideshow, so please check that out. Luke, best way for people to find out more about you?
Luke Carlson: They can always go to our website, discoverstrength.com. They can shoot me an email at anytime if they have a question, [email protected]
Lawrence Neal: Cool, and do you want to talk about… I believe you have the real hit experience coming up as well, is that correct?
Luke Carlson: Yeah, we have a real hit experience coming up in August, so we do this three times a year, just two days of going really deep on growing the personal training business. And then getting connected with some of the history of High Intensity Training. And so, ultimately, when I think about the real hit, what is it? It’s two days where you’re going to leave the course feeling like an expert in running a personal training business. That’s the transformation that we want you to go through. Wherever you are, when you walk into it, after two days, you’re going to say, “I have now graduated from the real hit experience, I’m an expert in knowing how to run the personal training business.
Lawrence Neal: That’s great. Awesome, and that’s over at the realhit.com. We’ll link to that in the show notes. Then also obviously you’ve got the Resistance Exercise Conference. That’ll be March 2020, is that correct?
Luke Carlson: Yes, sir.
Lawrence Neal: That’s over at resistanceexerciseconference.com, so I encourage the listeners to… I don’t know why I say listeners, I should just say you because everyone’s listening, to check out, to go there. Is there like an early bird rate at the moment available for people?
Luke Carlson: Yeah, we still have an early bird rate going on, and Lawrence, you’ve done it. I thank you so much for mentioning the conference in the podcast. What the conference is and has become is it’s the gathering place of High Intensity Training practitioners or evidence based training practitioners. It is I would say 60% learning, you can change the percentage if you want, 40% collegiality and connecting and sharing stories and fun. It’s if you haven’t experienced it, put it on your calendar, we’d love to meet you and spend time with you and get connected. My favorite thing that all of your listeners say, because my staff feels this way, is the highlight is not even speakers, and we have incredible speakers. It’s connecting with other attendees. Quite, frankly, Fred Han made a bigger impression than people this year than I think any of our keynotes, and just based on his physique. It’s a lot of fun, it’s my favorite two days of the year for sure.
Lawrence Neal: Yeah, absolutely. I promote it so much because I love it, and I recently did an episode with Tom Tims and Craig Huber all about REC 2019. If you’re listening to this and you’re intrigued to learn more, then you might want to listen to that episode as well and I’ll link that in the show notes. To find a blog post for this episode, please go to highintensitybusiness.com/golden, and for all episodes, please go to highintensitybusiness.com/podcast. Until next time, thank you very much for listening.