As a gym business expert, one of the most common questions I get is:
“Can you evaluate my business? Can you tell me how I’m doing?”
It’s a great question—and one every independent gym owner, boutique studio operator, gym entrepreneur, and personal trainer should be asking regularly. Because just like your members need periodic fitness assessments to track progress, your business needs regular checkups to measure its health and vitality.
When I evaluate a gym, I look at a handful of key performance indicators that tell the story of how well the business is operating. These metrics aren’t random—they reveal where your business might be bleeding cash, underperforming, or positioned for major growth.
Let’s take a closer look at what I consider the vital signs of a healthy gym business.
1. Rent: Keep It at or Below 15% of Total Revenue
Rent is one of your biggest fixed expenses, and it sets the tone for everything else.
Ideally, your rent should be no more than 15% of your total revenue.
When rent starts creeping higher than that, it can become a serious burden—especially during slower months or off-peak seasons.
If your rent is above that benchmark, there are still options to improve your ratio. While renegotiating with your landlord may not always be possible, other solutions exist:
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Increase revenue per square foot through personal training, small group sessions, or premium memberships.
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Optimize space utilization so that every area of your gym generates value.
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Sublease or share space during off-peak hours to complementary businesses (e.g., physical therapists, nutrition coaches).
Bottom line: you want your facility to pay for itself and then some—not the other way around.
2. Payroll: Target 40% of Revenue or Less
Next comes payroll, another major fixed cost that requires careful management.
A healthy gym should have payroll costs at or below 40% of total revenue.
Here’s why this number matters:
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If rent is 15% and payroll is 40%, that’s already 55% of your total revenue accounted for.
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Add roughly 10% for other operating costs (utilities, cleaning, marketing, software, etc.), and you’re left with a potential 35% profit margin—a strong position for any gym.
If your payroll is significantly higher than 40%, it usually means one of two things:
- You’re overstaffed relative to your revenue.
- Your compensation model doesn’t align with performance or profitability.
The fix? Tighten scheduling, link pay to results, and ensure that every employee adds measurable value to your operation. Automating repetitive administrative tasks through AI systems can also free up hours and reduce front desk labor costs without sacrificing service quality.
3. Recurring Dues: Aim to Cover at Least 80% of Operating Expenses
I often tell gym owners:
“You’re only 30 days away from being out of business if your recurring revenue can’t sustain you through a rough patch.”
That’s why recurring membership dues are your lifeblood. They keep your gym stable even when upfront cash flow fluctuates.
At minimum, your recurring dues should cover 80% of your base operating expenses.
Ideally, they should cover 100% or more.
If your recurring revenue falls below that threshold, you’ll constantly be under pressure to:
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Sell aggressively to keep the lights on,
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Offer deep discounts or flash promotions to bring in quick cash,
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“Cash out” members with long-term paid-in-full packages—sacrificing future income for short-term relief.
Sustainable success means your base dues keep you afloat—while everything else (training, retail, events, upgrades) builds your profit.
4. Acquisition Cost vs. Revenue per Member
Finally, one of the most overlooked health indicators:
What does it cost you to acquire a new member, and what is that member worth to you?
Many gyms spend more to get a member than they earn from them over time—and don’t even realize it.
To find your member acquisition cost (MAC):
Divide your total marketing and sales expenses by the number of new members gained in that period.
Then calculate your revenue per member (RPM):
Divide total revenue by total active members.
If MAC > RPM, you’re losing money on every new member.
The goal is to lower acquisition costs (through smarter marketing, referral programs, and automation) while raising member value (through upsells, training, and long-term retention).
A healthy business doesn’t just add members—it keeps them, grows their engagement, and maximizes lifetime value.
The Bottom Line: You’re Not Stuck—There Are Solutions
Every gym faces challenges. Whether your rent’s too high, payroll too heavy, or cash flow too tight, the good news is that none of these problems are permanent.
There are proven strategies to:
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Reduce overhead without reducing service quality.
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Improve recurring revenue consistency.
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Optimize staff efficiency.
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Increase profitability within 30–90 days.
But it starts with awareness.
Just as a fitness client can’t improve without knowing their body composition, your gym can’t grow without knowing its numbers. These key ratios—rent, payroll, recurring revenue, and acquisition costs—form the foundation of your business health check.
So, ask yourself today:
“How healthy is my gym business?”
Because in the fitness industry, awareness isn’t just power—it’s profit.
Need help building systems, improving your facility, or turning around your gym business? Contact Jim here.
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Meet Jim Thomas
Jim Thomas is the Founder and President of Fitness Management USA, Inc., a premier management consulting, turnaround, financing, and brokerage firm specializing in the leisure services industry. With over 25 years of hands-on experience owning, operating, and managing fitness facilities of all sizes, Jim is an outsourced CEO, turnaround expert, and author who delivers actionable strategies that drive results. Whether it’s improving gym sales, fostering teamwork, or refining marketing approaches, Jim has the expertise to help your business thrive. Learn more by visiting his website or YouTube channel
