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The ADD Advantage

"Coop, get me the f*@&^! out of the education system!" was how it started, two weeks ago.

We'd been researching ways to help kids with autism and ADHD since our very first day in business, almost exactly five years ago.  Now that it was coming to a head with our Ignite program, we were suffering from a severe case of "hurry up and wait."

Tyler is an amazing teacher. But he's bound by the rigorous confines of the educational system.  Instead of teaching CrossFit and Paleo and Primal, he's forced to gag up the dry dust of the old Food Pyramid and Cardio. He's been reading and studying the effects of exercise on the brain for years.  He knows all kinds of neat stuff about BDNF, IGF-1, and other exercise-induced chemicals; he can bring a hyperactive kid around in under four minutes with his centering techniques.

Faced with an incredible opportunity to include Ignite as part of a young man's therapy - and thereby open the world of insurance-funded CrossFit - we also faced a big obstacle: put together a compelling case, based on science, for the program. By Monday, 3pm.

All weekend, we wrote until 11pm; I'd send a draft, get up at 4am, and revise.  The ebook we finally handed to the claims manager is on the Ignite site.  But in the middle of it all, while cross-checking references, I took the ADD short-form test.  At midnight.

I 'failed' the test.  I've long suspected that I'm a little ADHD - I love starting things, but not finishing; I'm usually juggling a dozen things in my head at once; my workday is incredibly long, but I rarely finish everything. This site lists several other frequent things I do in a normal day.

"ADD people are high-energy and incredibly good brainstormers. They will often happily work 12 to 15 hours by choice. The business community should not fear ADD. Instead, they should see that they have a potential gold mine here."
- Dr. Kathleen Nadeau, a psychologist who is ADD herself (from an ABC News Report)

People with ADD are excellent at seeing a situation from all sides, says Dr. John Ratey. Emergency-room doctors, nurses, entrepreneurs....the ability to approach an obstacle from ten different ways is of enormous value.  Likewise, the ability to imagine oneself in the shoes of others - to empathize - has helped me keep clients for years (getting close to 7 years for more than one.)

Is my truck untidy? Heck, yeah. Can I tell you the phone number of a client from five years ago? Yes. Do I send emails, and then think of another detail, and send a second one...a few seconds apart? All the time. Could I handle this business without ADD? I don't think so. While prioritization gives me anxiety, and procrastination usually costs me extra energy, I'm able to generate ideas rapidly. I can 'see' shapes while I'm listening to music, and that helps me appreciate it more. I can switch rapidly between creative and academic tasks, like math. I can incorporate successful ideas from other industries into ours.  And I can write for 5 blogs in the same hour.

Instead of 'good' or 'bad,' I'd love to see the education system appreciate the gifts bestowed by ADHD. Frankly, in a business environment that's just suffering the effects of the Atomic Wedgie that is facebook, Twitter, LinkedIn, and blogs, we're going to need more scramblers.

The Rate Reminder

In one of the very first posts I wrote here, I urged readers to know their rates, and stick to them.

This was a lesson learned the hard way by a former employer, who runs a small network of fitness equipment 'superstores.'  In my first month as her manager, I was struggling to sell ANYTHING, and asked when we'd be having a 'sale.' She fired back, in her typical machine-gun style:

"Chris, you never, ever, ever cut your rate. You drop  your price once, you can't ever come back from it. What's Bill gonna say when Ted gets 10 percent off? I want 10 percent off, too! You drop your rate 10 percent for one guy, you do it for everyone. Now quit drinking free coffee and reading T-Nation, and get back on the sales floor!"

That was a decade ago.  Last week, she offered to sell me the local store.  I drove past their new location during my 5am commute.....and saw windows full of 'SALE! SALE! SALE!' signs. I saw a dozen different brands, instead of the three flagships we bragged upon back then.

And then...another example from our own Box.  Lately, we've been packed with sports teams, from whom we require a minimum 10-week commitment. We've been after one special girls' hockey team for three years; though we train the age group younger than this team, and the age group older, the team of our desire has been 'training' every winter at a local boxing club.

This year, their coach offered us an opportunity - again - to quote for their business.  Throwing it to the wind, I said, "Look, Mark, we really want your team in here. Tell me what you're paying elsewhere, and I'll try to beat it." The rate was ridiculously low ($150/month for a group training session every week.) Can we do it for less? Yes.  After all, the lights in the gym are already on; the staff is already there; the insurance is already paid.

BUT. It's unconscionable to undercut every other team.  Pretend, for a moment, that there's not a single parent with daughters on two teams; that there's no conversation between coaches and players of this team and that team; that we're not a town with one degree of separation.  Pretend no one would ever find out.  It would still be wrong.  If we're providing Sally training for $8 per session with her team of 17 others, and Megan will pay $4, is it wrong to take Megan's $4? You bet it is.  It's robbing Sally.

We don't operate on a 'pay-what-you-think-it's-worth' model. We sell a professional service, that costs money.  Not sure what they're selling...........

"Now-That" Test One

Two weeks ago, I posted on an interesting observation from Dr. John Ratey: "Now-that" rewards go farther than the old "if-then" type.  We decided to put it to the test during our largest event of the year: Catalyst Games 2010.

After we closed registration, we announced our 'Grand Prize': a cruise for two to the Bahamas.  A member had donated the cruise as a prize for the Games, and we'd hinted that we had something awesome to give away, but we didn't tell anyone WHO would win, or HOW.

As soon as registration closed, we announced, "NOW THAT you've taken the bold step, we're going to reward you: everyone who finishes all four events is eligible to win a cruise." Participants had 1 chance in 53 - pretty great odds - as long as they followed through on their commitment to try. 

The feedback was immediately positive, and had the effect of underlining our predominant message: we want our folks to go where they're uncomfortable, do what they fear, and emerge on the other side.  Yes, someone's going to come first, but everyone's going to win, and not in the ridiculous "everyone-wins-because-there's-no-loser" way that schools now think is useful.

In fact, when a small issue arose afterward regarding the rankings, the participants didn't even blink. Here's the story: at the last minute, in an attempt to keep participants shooting for the highest level, I threw out a concept that I called 'dynamic scaling': you could do event #1 as Rx'd, then drop to Scaled for event #2, then go back up to Rx'd for event #3, and so on.  At the end of the day, you were ranked according to your lowest scaled level.  The mathematicians in the crowd are wincing already, I can tell....

Our third-place finisher in the womens' Rx category should have been dropped to Scaled #1. She had the good sense to not balk, to jump onto the podium and accept a bouquet, and then discreetly mention to our scorekeeper that there was an error. She was embarrassed, but it wasn't her fault. No big deal; the actual third-place finisher was Catalyst's own RMT, and she declined flowers anyway.

There were other, smaller points errors, but they didn't affect the outcome, and there were no complaints, even from those directly affected.  With one exception: a participant would have liked perfection in the scoring, and made it known.  Realizing that a rehashing of all events would require days of work by an exhausted volunteer staff, I asked a few of the judges for their opinion. They agreed unanimously that we'd correct errors if requested by the athlete directly affected, but not by others.

NO ONE asked for correction.  Surely, people spotted errors.  But they GOT IT. We'd put our money where our mouth was by reinforcing the notion that participation in competition was the goal AND the reward. In return, we received six emails stating that we'd changed the life of the participant; we received 2,000 pictures on facebook (and dozens of conversations with strangers,) 7 new members the following week, some great media footage, and a warm afterglow that, frankly, hasn't worn off, 8 days later.

I think we've got a winner here....

The Business Personal Trainer

Five years ago, we started Catalyst in four little rooms above a stationery store. We had a line of credit worth $16,000 and a coffee maker.  No bank would touch us. We couldn't afford to match the funds necessary for grants. 

We did have another huge asset, of course: a reputation.  Mike Watson (now our head Trainer) came over after a couple of weeks, and helped convince Jo Ann Bailey (our RMT) to do the same.  We put her in a bank-vault-turned-boardroom-turned-massage room; made do with tiny space and intermittent air conditioning; painted lime green over the wallpaper.  After a year, we rolled the dice and got a much larger space.  Two years later, we added a second.  Now, we're looking to buy our own building.

And we did it all without a business plan, a cash flow projection, a marketing plan, a mission statement, a 'vision statement'.....all the rules now considered 'fundamental' to business, we broke.  Frankly, we didn't know any better; we got lucky; we worked our butts off.  

Maybe the greatest part: Mike now teaches "The Business of Fitness" at a local community college.  I wish I could sit in on one of his classes, because I picture him telling kids to rip the pages out of the textbook, as if it were The Dead Poets' Society.

Jokes aside, we realize we'd be more efficient if we had a concrete road map to follow.  While I did some company reorganizing after reading E-Myth Mastery by Michael Gerber (absolutely mandatory for entrepreneurs,) these changes didn't give us a plan for the future.  They streamlined our current operations, but we still realize that we're likely doing more work than necessary, and in the wrong direction.  ADD is a boon for business owners, but it's not a great trait for cartographers; and we NEED a map. 

Banks require these plans because sweat equity isn't measurable.  They've heard it all before: "I promise to be early to bed, early to rise; that neither rain, nor snow, nor dark of night shall deter me from..." and they're no longer listening. Without a plan on paper, you can't raise capital.

Enter Melissa (she's also a CrossFitter!). Every Friday morning at 7am, I meet Melissa at our quieter facility.  I sit in a quiet room, and we go over our progress. 

"This week," she'll say, "we're working on cash flow projections.  What's your attrition rate?"

"Uh...." I'll say. 

"Okay," she'll respond, "that's your homework."

This is precisely the arrangement I requested, and over four weeks, we're going to have a pretty impressive business plan, complete with attractive cover.   Here's how it works:

1) Each week, Melissa shows me what our plan looks like so far;

2) We identify gaps, or weak links;

3) She assigns me homework for the week;

4) 3-2-1, go!

At the end of September, she'll give me a little bill, and I'll have the foundation we needed 5 years ago at last.  In October, she'll write another for our Holdings Company.  A simple agreement without long meetings with accountants and lawyers.  And the best part: I sound like a client who's just discovered CrossFit!

"I've never made progress this fast! I've never believed X was possible! NOW I know what I've been missing! I hurt in places I've never thought possible! I finally got back into my jeans from high school!"  Okay, I'm going too far.  But you get it. Just what I need, when I need it.

How We Did It

 
I advocate doing regular (but not normal!) events to keep interest high and training intense.  That's no secret.  Our lineup, over the next 12 months (insert 3 Virtualmeets, likely) :

November 20 - FranFest (partner challenge.)

January - No Grains - All Brains! Eating challenge.

March - Murph 2011 - in the snow. Hugely popular.

April - Fight Gone Bad (Good Friday)

May - BaseLine Week (Angie, Michael, Grace, Kelly, and Fran, plus a deadlift meet, over 6 days.)

July - Midnight 5k - with bands.  A fundraiser.

September - Catalyst Games 2011 (our annual championship.)

Yesterday, Cody asked how the heck we got all these people to turn out; it's no secret that FGB V is seeing declining enrollment, sadly.  I don't have the answer to increasing turnout for FGBV (it's more awesome than ever!) but here's what we do:

1. Add the event on our site.  Build up to it for a few days.

2. Don't release event details or rules all at once...or add a twist, in the case of Murph.

3. Stress, in all your posts, that you're encouraging competition of self.  As one beautiful email read today, "I now consider myself a competitor, but on my own terms." Loved it.  Our grand prize - a cruise, donated by a sponsor - went not to the top male or female Rx finisher, but was randomly drawn from every person who finished all events (ie didn't quit, or 'tap out.') 

4. For the big stuff, use a venue outside your box.  We used a giant waterfront Pavilion, right on the river.  Absolutely gorgeous.  Sound system, lots of room, bleachers....well, you can see for yourself on our Catalyst Games 2010 site.  Can't do it? Change your box around.  You have to let people know they're not just paying for another workout.

5. Despite having a time cap on every event, don't award a DNF; instead, make it clear that every rep counts.

6. Have scaled categories, right down to the very lowest level.

7. Pump up the kids.

8. Hold a 'best photo' contest - we had 2000 entries submitted on facebook for the Games last weekend.  Of the 7 new members gained so far this week, 6 saw pictures on facebook before calling.

9. Invite media.  If you have to, make it a charitable event (winners of the Catalyst Games 2009 got to donate $250 each to any charity they wanted.)

10. Build excitement at the venue.  We let anyone who owns a business and trains at our Box put up a banner for free. Lots of colour.  And most wound up kicking in a prize anyway.  We feigned surprise when the offered.

11. Build the family all year. YOU can't talk 50 people into participating; but their friends sure can. Our cruise winner was dragged in, kicking and screaming....but as soon as we said "3,2,1...go!" on the first event, she tried hard.

12. Create souvenirs that won't be duplicated.  We gave away cowbells with Catalyst Games 2010 logos on them.  They make a lot of noise.  They also look great on people's mantels.

13. Drag out the suspense.  We build things up to a fever pitch.

14. Reassure folks that there won't be anything they can't do. We trickled out all four events early....but the last was only released 48 hours before the competition.  Everyone knew they could finish, at least.

15. Offer online signups. We use MindBodyOnline.  Pretty easy to commit to something online that you'd never do in person, and if there's money involved, they won't back out.

16. Set a rate instead of having each person fundraise.  I hate asking people for money, and if you took a poll, I'd bet that most people pay the minimum themselves instead of asking for help from friends.

17. Keep putting out philosophical articles, stressing the value of completion v. competition. Remind the most nervous that it's in YOUR best interest to make THEM look good on Games day.

18. Feature the athletes individually. Put up athletes' profiles for ANYONE who will answer a few questions. Use these to demonstrate the huge spectrum of athleticism that will be present; to build up the family by telling everyone's stories; to show who's endorsing your program with their participation.

19. Instruct referees to keep everyone fair, but when in doubt, to give it to the lifter.  To that end, it helps not to have a high degree of technical difficulty; we use "ground to overhead" instead of "snatch," because we don't want to have different judging standards for different athletes.

20. Keep reminding people that they're a part of something bigger than themselves; that they're not alone out there.  We had lots of 'Catalyst' banners; we also had some awesome 'CrossFit' banners.

21. Get some high-level acknowledgement. When Lisbeth posts our pic on the A-blog, everyone hits 'like.' When we did FranFest last year for charity, Jason "Rhabdo" Kaplan wrote a nice paragraph on strategy.  The guy holds the world record - 1:57 - and all I had to do to get him to contribute was to ask. No one's asked my opinion, but wouldn't it be amazing if we had a CFHQ trainer at Ontario Sectionals next year, running a WOD for spectators, or doing the first event with the competitors?

22. Get some graphics work done. Our shirts were great (we printed the poem, "Invictus" on the back; last year, we used Jon Gilson's "Don't Quit.")

23. Build continuity between events.  We release the next event a few days after each event, because the afterglow effect is still big. We'll als be adding a points series in January, and a 'league' system at the same time.  More to come on those ones.

24. Include the spectators, if possible. Our photo contest is one way; these are the most likely 'next CrossFitters' around your Box.  Grab them.

25. Give people a common place to reflect and share memories. Facebook is great, but if you're not friends with everyone, you'll miss stuff. So I opened up the Games blog to comments, just for one day, for people to share stuff.

26. If you have athletes with special needs, GET THEM IN THERE. They need competition. And you need to deliver it to them.

27. If you see anything 'cool' in other sports, steal it! For instance, motocross - a growing 'fringe' sport - uses 3-digit race numbers instead of the standard two.  So we did, too. They just look cool.

28. Standardize the judging as much as possible.  Miss a rep? Yellow card - repeat, please.  Miss another one? Red card.  Do 3 reps over. Take the subjectivity away as much as possible.

29. Use a microphone.  Mention everyone by name during each and every heat.  If you're comfortable doing play-by-play, that's even better.

30. Sponsors - if you want them, remind them that CrossFitters are an extremely loyal group.  Mention to 50 CrossFitters that Dr. Chiro supports the program, and he's got far more value than in any other possible medium. Charge accordingly.

31. Use off-brand, 'insider' logos to maintain the sense of group differentiation.  In the pictures from the event, you'll see a lot of 'Green Army' shirts.  That's us...but there's no mention of Catalyst on there.  Also, everyone here knows that anyone wearing a 'Sport of Fitness' hat has puked during a WOD.

I'm forgetting things, I"m sure. I'll add more; please add posts to 'comments' if you have ideas!

The Value of Competition

I took last week off from posting; we hosted the Catalyst Games.

55 athletes. We rented a massive waterfront pavilion, printed up some green shirts, made up a few short WODs, and got me a mic.  14 volunteers, some lost sleep...

...and over 2,000 pictures on facebook. 6 new members signing up on Monday. Two newspapers onsite. Huge personal bests. A feature video produced by a local website with which we have no affiliation. Double our website hits.  Photography and art and dozens of spectators.  Six out-of-towners, visiting just for us.  About a dozen competitors who were spectators last year.  A reunion, celebration, contest, and poetry.

I'm a huge fan of regular, massive contests within your box (FranFest is next for us, November 20.)  We do Virtualmeets three times per year; we run in the snow, and at midnight, and do Fight Gone Bad with a vengeance.  It reminds folks that we're a family, striving together, to achieve a common end, using this vehicle called CrossFit.

'Now That' Beats 'If-Then'

Last night, after registration for Catalyst Games 2010 had closed, we announced the Grand Prize.

No one knew we'd be doing it.  No one even knew there was a Grand Prize.  By waiting until after the registration had closed, we're doing an experiment.

Daniel H. Pink makes a few key points in Drive: The Surprising Truth About What Motivates Us.  His idea is that motivation has changed; that the old ideas about 'Type A' personalities are antiques from the Industrial Revolution.  Instead, he characterizes people as 'Type I' or 'Type E' - Intrinsic or Extrinisic. 

Since what drives us has changed - he calls this new Era "Motivation 3.0" - it logically follows that our reward system has changed, too.  People are more likely to seek an experience; to pursue novelty; to look for a point of differentiation.  A sense of self-identity is now better satisfied by standing out from the crowd, rather than 'fitting in,' as would have been the desired outcome of the previous few generations. 

Pink's solution to providing novelty as reward: the surprise prize.  Reward that wasn't anticipated may have greater value.  So last night, we announced that we'd be giving away a 5-night cruise from a major line for two people.  We'd be giving to a participant - not necessarily the winner - of the Games. 

When my wife was at Enterprise Rent-A-Car, their behind-the-curtain motto was to set a high (but not perfect) expectation, and then overdeliver.  They didn't sabotage themselves to delight, but they didn't overpromise, either; that meant that their service was always surprising (and delighting) clients, who believed they'd stumbled on a real secret gem.

We're trying it.  We're giving the prize not as a reason to sign up (IF you sign up early, THEN you can win!win!win!) but as a reward for doing so, after the fact.  NOW THAT you've enrolled, here's the Free Prize Inside. 

Bonus: questions answered - Pink's Motivation 1.0 and 2.0 are best read in the book as background. The cruise was donated by a sponsor.  And Enterprise Rent-A-Car is the biggest privately-owned company in the world, with a lot to teach us.

Industry Research

While we're going through the process of purchasing a building, we've been provided with (or have uncovered) a lot of fitness industry research.  This isn't glossy-magazine "Top Trends For 2010!" stuff, but hard data disclosed on year-end reports and independent industry research done by independent consultants for various government-owned businesses. Some of it isn't available for publication; some is available but hidden.

The YMCA, for example, operates as a nonprofit.  That means that it's eligible for all types of tax advantages, employee funding, and program grants....but it has to publish its revenues and expenses, at least in Canada.

Our local YMCA's annual report, showing an operating loss for the last two years:

Download YMCA Annual Report 2008 - 2009 - you can google your own local YMCA annual report here. 

Why is it valuable? Shows trends of resource allocation.  For instance, if the YMCA's membership is growing, you'll see it.  If their kids' program is huge, you'll see it.  If they're relying on government funding, you'll see it.

Below: quotes from an industry research document, featuring mostly statistics from the U.S., prepared for a Canadian banking organization.  Sorry I can't be more specific, but the information can't be shared as a whole document:

Average annual revenue per worker is $35,000.  So if you have three trainers plus yourself, your company should be doing about $140,000 per year in sales.  If you're lower, you're not producing enough per peson; if you're higher, you're more efficient than the industry average.  Note: this is gross revenue, not net.

Most big gyms lease equipment, rather than buy, in order to mitigate the effects of wear, repair, and depreciation.  Plus, the risk is less.  I wonder how many CrossFit boxes consider the lease option?

Clubs can usually only draw members from within a 15-minute driving radius, but not more. Convenience is a major factor in choosing a club.  Very interesting.  Many of our members drive over 30 minutes one-way.

The average attrition rate is very high: 35 to 50 percent.  That means constant member recruitment.  Unless, of course, you offer a program and staff that's good enough to keep those folks around....

Most clubs have an initiation fee because of the high attrition rate.  The fee is high, and they'll finance it for you...at a rate of 18-28%, automatically deducted from your account monthly.  If the initiation fee is $500, you could be paying interest forever, whether you leave the gym or not.  That's why the monthly fee can be lower: you're really paying your monthly fee PLUS the interest on your 'initiation fee loan' every month. Dirty.

Franchise operations, like Gold's Gym, take 3-5% of annual revenue from the franchisee every year.  Our CrossFit Affiliate fees are $1000 per year (or $2000, if you're a new Affiliate.)  They also demand an up-front investment of $50,000, and facility costs of up to $1mil.  Do the math.

Most employees at a fitness centre are classified as 'unskilled' labour, and average hourly wages are actually lower than the national average for recreational facilities.  That's part of the reason for the huge attrition rate (see above.)

Consumer spending on fitness pursuits rose 1.9% in May 2010 (compared to May 2009.) However, corporate profits rose 34% in the first quarter of 2010.  That strongly suggests that fitness centres are decreasing operational costs instead of increasing memberships.

Novelty is selling.  Some of the more creative: Sex And The City - themed boot camp, Hula Hoopercize, and Jazzercize.

 Cash flow is high in the first quarter, and almost nonexistent in the last.  This is interesting, and suggests again that long-term contract-driven fitness centres aren't the way to go for stable cash flow.  For us, September is our second-biggest month of the year.

Kids' programming is touted as the next big revenue source.  Be prepared for more competition on this front; get the CrossFit Kids philosophy out now, before the competition really arrives!

Online sales help increase cash flow.  This is true even if you're not selling different services online or in person. We use MindBodyOnline.  We've noticed an improvement (it's easier to commit online first for most people.) I've suspected this to be true, but it's statistically proven now.

Corporate partnerships are the most highly-recommended way to grow.  If the bank next door pays a membership, all its staff will sign up because of the reduced rate, right?  How many CrossFit boxes are offering a corporate rate? 

Everyone is worried about client loss...but doesn't know what to do about it.  They're largely accepting a 40-50% turnover rate as a fact of life.  Acceptable losses.  We know better, don't we? 

Same goes for Trainers.  The industry at large is willing to accept 55% annual turnover as 'part of the territory.'  Again, I hope, we know better: the best way to keep a member is to develop their relationship with their coaches.

Most Trainers are paid by the hour as independent contractors.  Few are salaried.  Very few have benefits. Most leave the industry because of the low pay, odd hours, and lack of advancement opportunities.

Membership fees account of 80% of revenues.  Not for us, they don't - we're around 30%. 

Most clubs are unprofitable for 3 years, on average, after opening.  We didn't have that luxury: I had to be paid the first week.

Valuation of clubs, for buyout purposes: see below

 
Finally, spending growth by consumers will flatten at 4% in 2011 and remain that way for at least 5 years.

Bruce Springsteen: Endurance Coach

Long after he's gone, The Boss' music will be his ghost. 

Call it the Marketing Theory of Relate-ivity: his songs tell a story.  We can insert ourselves as the main character.  It's a great story, about blue collars and old cars and predetermined lives. We already all know the story, except that there's this little red ribbon of poetry running through it. 

Close to cliche, Bruuuuuuuce! (exclamation point mandatory, maybe trademarked) has managed to tell his story just a bit differently than what you assume at the outset. You think he's going to say this, probably rhyme "lie" with "die".....and then he doesn't. It's a hook.  It's very sticky storytelling, in all the best senses.  In fact, I guarantee not only that you can name five Springsteen songs, but also that you can repeat the chorus.

 In fact, Springsteen's such a great storyteller, other great storytellers ask him to repeat theirs:

Older country music shares some of the same hallmarks.  Clever lyrical twists lead you down an alley, and then double you back before you slip on the oil spill.  Tom Petty, John Cougar, Bob Dylan....they share this skill.  THIS is what creates memory: starting with the familiar, taking one step to the right.

CrossFit is undermining conventional gyms because it spins off great stories.  Better yet, it gives ordinary, blue-collar Jacks and Dianes a chance to insert themselves as the main character. A treadmill can count all the calories it wants, but it doesn't rhyme.  There's no poem in a pec deck; no verse in a Vibro-Gym.