Coaches Profit Split When Hiring Independent Contractor

[MamaOf2Gymnasts]

We were approached by a parent who is certified in yoga instruction and teaches children's yoga in a nearby town. She would like to offer classes through the gym, and I love the idea of adding this to our program. The biggest thing we need to work out is the profit split.

I see this as an independent contractor situation. Students will pay the gym and we will give her the percentage agreed upon. In my mind, this is different than a situation where we hire and train coaches, they teach the way we ask them to, use our equipment, etc. But with the yoga class, she will bring her own props and will conduct the class the way she sees fit and has been trained and certified to do so.

So my question is... has anyone encountered this situation? And if so, what do you think a fair split would be? She is asking 80/20.

Thank you!

 

[nevertooold]

80 for her 20 for you? Or 80 for you 20 for her?

 

[wgagym]

80(her)/20(you) sounds fair as long as she is using a space you are not already using or need to use. I think it would be a nice little bump in revenue and will bring more people into your gym hopefully increasing your enrollment.

 

[iwannacoach]

80/20 in her favor is way off. It doesn't matter if you aren't using a space that she'll occupy and benifit from. You are prviding an space that will be lit and heated for people who attend her class. These people will park cars in your parking lot, or park on the street where many current customers park, making it a nightmare. They will use your bathrooms, lobby, and linger to carry on conversations that contribute to the constant noise in the facility. Oh, did I mention that the perspire like crazy. Discarding the odor contribution, consider what that's going to do to the humidity level through-out the entire facility.

Looking at the finances of her income from attendees.....It's possible that she'll start with a small group and grow from there, so I'm gonna do some small group math with 7 yoga students paying a pretty reasonable fee of $12.00 for a one hour class for a total income of $84.00. An 80/20 split would give her $67.20 for the hour....for doing what, walking in turning on the lights and conducting a class....geez, I think I want to be a yoga instructor when I grow up!

Farther down the road her class will grow to a larger number, so I'll just triple everthing to 21 students creating an income of $252.00 with her cut being $201.60. If she could grow that business model to two classes a day four different locations she'd be earning about $80,000 per year, with two weeks vacation. Who wouldn't want an 80/20 split when it could create a 10-12 hour week that you could live on.

Sure, treat her like a contractor, but make her invest some of her own energy into making the classes a success. How would you react to one of your own instructors becoming a "contractor" with a few students paying just 3/4 your normal class fee. Do the same math and see what you think about that scenarior in juxtaposition with the yoga scenario.

Maybe a sliding scale that gives her the 80% at first but reduces her percentage by 1% for each additional student would reflect her use and benifit of the facility and provide her with a "stipend" to get her program up and running. Revisting the math with the sliding scale and 21 students would garner her a 66% cut and you a 34% cut.....just an idea of how I'd treat the situation.

 

[MamaOf2Gymnasts]

80 her / 20 me. Our concerns are... I'm not 100% sure I would just turn over keys to the building and let her run it without us there... so an extra trip to the gym and time out of my day once per week, or if it's piggy-backed on the gym schedule, it means we have to tear down our preschool setup and put it back up, so time and effort on my part. If we are able to acquire additional classroom space in our building, then we have to mat the floor... this would allow us to run yoga during current gym hours, but in a different space. And once it's matted we can use it for other classes we've talked of adding to our program. But the 20% we get would have to cover insurance, rent for the additional room, heating during winter months, my time and cost promoting the classes (unless I leave that solely up to her). When you think of all that, I just wonder if 20% covers it. That was my hesitation.

But if it seems fair, then maybe we should try it and see how the cards fall. If nothing else, the income could cover the cost of matting the floor. (In case you're wondering, matting the floor has to be done because it's an old school building, and the floor... well, just take my word for it.

Thanks for any feedback!

 

[MamaOf2Gymnasts]

iwanna - Definitely good points. I had thought about my time/effort/travel, but hadn't even thought about bathrooms/paper product use, additional cleaning, parking....

I'm not sure I understand your suggestion at the end. Can you explain again but use some numbers for example? Because the way I'm taking it is the first 7 students would be 80/20 split. Each student above that reduces her cut by 1%.

Also, I'm thinking of intangible benefits of this too. This woman has a HUGE network within the local population with young children. Her children have taken preschool gymnastics with us for a year now. I certainly don't want this negotiating to turn sour because she can definitely help build our reputation/enrollment. And the way I see it, every child who walks through those doors for a yoga class and sees our colorful gym full of equipment and kids tumbling could potentially be a new gymnastics student. So if it's an 80/20 split, but our enrollment increases by 10-20% then we win.

We're looking at $75 for a 6 week session. So if we run three classes (three different age groups), and they all fill with 7 kids each, that's $315 for us. That covers the cost of matting the floor. But... whatever we agree to now will set the precedent for the future.

Any of our other classes, we enroll, we set the rate, and coaches get paid hourly. If we decided to run an adult fitness class, I would advertise, hire a coach, and pay them a specific fee for the class that wouldn't depend on enrollment in the class. This is just a whole other ballgame we're dealing with.

 

[AmandaLynn]

I also feel that 80/20 is WAY too high. Yes, you may gain a few clients from her students, but it works the other way around, as well. And you would be providing her with a place in which to operate her business that is FULL of potential clients (assuming that your gym is average sized).

From a business standpoint, I'd probably aim to begin negotiations at a 60/40 split and go from there, depending on details more specific to your particular situation. However, I'm not a gym owner, this is just my $0.02.

 

[iwannacoach]

Sure it would be nice to add to your enrollment by exposing more kids to the facility, but that same benifit extends to her when your current students become aware of her classes while they take place in your facility. I kinda see that as being in her favor as you certainly have far more than 21 kids in your program. If you have 200 kids right now and just 4% enroll in yoga, she'll have one more class just through her relationship with you.

The sliding scale works in my mind like this. A class of just 5 kids gets her $48.00 per hour at 80%, I'd be shocked if that's not enough to work as a starting point. The 1% adjustment was based on a single class growing to a size of 21, let's just see if that works well with her over-all enrollment. So let's assume that you'll be getting 1% more as your share for every child after the initial basis of 5 kids per class (just an example that provides what I think is fairly generous profits for her) times 3 classes for a total of 15 kids. She adds a child for a total of 16 kids and her percentage is reduced by a small amount...let's say 1%, making her cut 79%, add another student and her share drops to 78%, another and it drops to 77% for her overall program.

If she adds a total of 10 kids for a total enrollment of 25 for a cut of 70% on gross revenues of $1875.00 a 6 week session and she'll have worked her 18 hour six week program plus a few administrative hours (be generous and say 12), she comes out with a six week income of $1312.5 for an hourly "profit" of just over $43.75. Do the same math with another 5 students added for an average of 10 kids in three classes her percentage drops to 65% of gross revenues of $2250.00 for a "profit of 48.75.

You can slide it even more to encourage growth by decreasing her share differently, like by 1% for each of the first 7 adds and 1/2% for the next seven. You could put a cap on either your total income from her program, or agree that her share go no lower than a certain percentage, or just to an overall fixed share. The decending share model could stop at 69.5%, which with a gross revenue of 3 classes X ten kids will produce $2250.00 and an hourly profit of $52.12. These number include enough admin time for her to spend 40 minutes for every 60 minute class doing all of the background work, and I'd think she could easily trim that to 30 minutes or even 20 minutes per 60 minute class to get her hourly figure to around $65.00 per hour.

Seems pretty fair to me....where do I go once I've been certified in yoga!

 

[nevertooold]

80/20 is way too high. Offer her something closer to what you would pay an experienced coach per hour.

 

[Faith]

Can you rent her the space at a flat rate per hour? Cover your costs, heating/lighting/transport etc, add a % profit, then leave her to it. Then you have a regular known income, and you're not losing out if no one turns up one week, in holiday season etc.

That's the way it works round here with these sort of classes. Rent the space, then it's up to the instructor to make a success and therefore profit.

 

[wgagym]

If it is any work for you 80/20 is a high, but if she running this as her own business out of your space then paying her like a coach is not appropriate. I think you could either figure out a flat rent situation, but with the potential of her program being sucuessful then it may make more sense to do it from a percentage. And again I think 80% for her is fair as long as she is doing all the work. You are not doing extra promotion for her at your expense, you are not tearing down and setting up rooms for her, and she is not using space that you could be using at full profit for you. I would easily agree to something like this at my gym.

 

[wandrewsjr]

Agree with wgagym. 80/20 is fair if all she is doing is using space. But if you are setting up/tearing down, including her in your promotions and collecting/processing the tuition payments from her students, then you should get a bigger cut to cover your/your staff's labor. I think if you frame the discussion with her this way, she would understand and there would be no bad feelings.

 

[BlairBob]

When I was considering running CrossFit or some other S&C program in the gym, I was hoping for an 85/15 or 80/20. I was prepared to go as low as 65/35 but preferably 75/25.

Crunch some numbers on it. Decide whether you are looking to profit off it a little or a lot. Besides it does provide a service for your parents and might get some new parents with new kids into your gym.

 

[marie83]

we rent out our space on an evening after our classes have finished for zumba classes - we charge a flat rate for rent and then the instructor fills the class with as many people as she deems fit. Whatever is left after our rent is payed is hers to invest into her business.