Alex Hormozi: Reopening the Right Way

The video is about how to reopen a gym profitably during the COVID-19 pandemic by adjusting prices and ensuring a minimum 80% gross margin.

This video by Alex Hormozi was published on Oct 29, 2020.
Video length: 12:48.

In this video, Alex Hormozi discusses how to reopen a gym profitably after COVID-19 lockdowns.

He explains that different states have different recommendations for reopening, which can create issues for gyms that rely on large group training. Hormozi suggests adjusting prices to reflect the level of service being provided and making sure to maintain an 80% gross margin minimum on services. He also encourages gym owners to take advantage of the opportunity to fix everything that was wrong in their gym before reopening.

Hormozi provides a simple math example to help gym owners determine how many sessions they can reopen with at any given moment.

• Alex Hormozi discusses the math behind reopening a gym during the COVID-19 pandemic.
• Different states have different recommendations for reopening.
• Pricing services should reflect the level of service being provided and supply and demand.
• Profit levers should be adjusted to ensure a minimum of 80% gross margin.
• Math can be used to determine how many sessions can be reopened at any given moment.
• Reality check should be based on actual billing and attendance, and hard decisions may need to be made.
• Opportunities in crisis include resetting and improving business, making hard decisions, and thinking creatively and strategically.

Reopening the Right Way (ALEX HORMOZI) - YouTube

Introduction

• Alex Hormozi talks about the math behind reopening a gym profitably during the COVID-19 pandemic.
• Different states have different recommendations for reopening.
• The profit model is not built for large group training to not be able to do large group training.

Pricing Services

• If you're only able to have 10 people per session, then you need to price your services at the price that that service would be normally offered.
• You need to adjust your price to reflect the level of service being provided.
• The people who will want to come back are going to be itching to come back.
• Supply and demand work together for this scenario.
• You can increase your price when you have supply and demand in your favor.

Profit Levers

• Read section two of the Gym Secrets book before reopening.
• This is one of the biggest opportunities of all time for people who own a gym.
• You want to make sure that you're making an 80 gross margin minimum on your services.
• Every percentage point makes an enormous difference.
• Set the number whatever you want, but the rule of thumb is a minimum of 80.

Reopening the Right Way (ALEX HORMOZI) - YouTube

Math Example

• You can know by math how many sessions you can reopen at any given moment.
• If you have 150 customers before this and only 100 want to come back, you can build their card now.
• If they're billing at $100 a month, then that's what they're saying.
• Calculate how many sessions you can have based on the number of customers and the price point.
• Adjust the price point to ensure a minimum 80% gross margin.

Money Math

• Recurring revenue of $10,000 per month
• 80% gross margin on cost of delivering services
• Cost of fulfilling a session is $20 or less
• Payroll for fulfilling services is $2,000 per month or less
• 100 sessions can be fulfilled per month

Reality Check

• Base scheduling on actual billing and attendance, not promises
• Allocate sessions based on number of weeks in a month (4.3)
• Divide sessions among available days and times
• Start with a smaller number of sessions and work up
• Make hard decisions if rent is too high for revenue

Five Key Changes

• Switch from unlimited to 2-3 times per week as main offer
• Change billing to weekly, bi-weekly, or 28-day cycles
• Adjust prices to ensure 80% gross margin or higher
• Reduce overhead by cutting poorly attended sessions
• Focus on profitability, not just increasing capacity

Opportunities in Crisis

• Use COVID-19 as an opportunity to reset and improve business
• Each change can have a significant impact on revenue and margin
• Be willing to make hard decisions and adjust as needed
• Take advantage of the situation to improve profitability
• Think creatively and strategically to succeed in the new normal

Adjusting Prices and Services for Reopening a Gym Profitably

• Adjust your pricing to match your service.
• Limiting people's sessions means fewer people show up, which means the number of people per session goes down, and your value goes up.
• Minimum recommendation is $167 per week, which works out to $39 a week.
• Most people will be at $49 a week or $59 a week or $69 a week.
• Get rid of exercises that take too much space and eat too much square footage.
• Cut sessions from 60 minutes to 45 minutes to increase capacity and decrease payroll.

Watch the video on YouTube:
Reopening the Right Way (ALEX HORMOZI) - YouTube