How to Determine Your Ad Budget

You know advertising is important to grow your gym, but how much do you really need to spend on ads each month? It’s a delicate balance. You want to generate leads and build awareness in your community, but you also don’t want to overspend and go broke. Like most things in life, there’s not a one-size-fits-all solution!

However, there are some common mistakes you can avoid and some helpful tools to use to find the right budget. In this guide, we’ll show you how to determine the appropriate ad budget for your gym depending on your goals, the number of members, and revenue. We’ll also include tips from an expert who specializes in paid advertising for gyms, as well as the most common mistakes made when making an ad budget — and how to avoid them!

Technique #1: Figure Out Your Member Lifetime Value

Before you even start to think about spending money on advertising you should take some time to figure out your Member Lifetime Value (MLV). This number is an estimate of how much revenue a member will generate during their entire time at your gym. Knowing how much each member generates can tell you how much you should spend to get more of those members! It’s important to note this formula works best for more established gyms. If you’ve only been open a short time you probably don’t know the average length of a membership. That’s okay! You can either guess or skip this section and move on to the next one.

If your gym has been open for at least two years, this equation will work really well for you. It does take a little bit of math to get this number, but we’ll walk you through it!

Formula for Member Lifetime Value

(Monthly Membership Fee) x (Average Length of a Membership in Months) x (1 + Referral Rate) = Member Lifetime Value (MLV)

Let’s put some numbers in this formula to show you how it works. Let’s say your gym costs $200 a month and most members stay three years, or 36 months. We will estimate that one out of every four members refers a friend, giving them a referral rate of 25%. Plug those numbers in and this is what you get:

200 x 36 x (1 + 0.25) = $9,000

This means that on average, each member brings in about $9,000 of revenue. Knowing this can give you some perspective on what you spend to get a new member.

Technique #2: Estimate the Leads You Need to Meet Your Goals

The MLV formula is just one way to figure out what you should spend on advertising. The other technique is to figure out how many sales you need to make your revenue goals and how much it costs to generate a lead.

If we take the MLV example above and divide it by three (the average number of years most members stay at the gym), then you have the number an average member grosses a year: $3,000. If you wanted to gross $150,000 a year, you’d need 50 new members to reach that goal. If you convert 75 percent of your leads, then you need 67 leads each year.

(New members needed each year) / (percentage of leads converted) = (leads needed each year)

50 x 75% = 67

Next, you want to have an idea of how much it costs to generate a lead. This formula is easy. If you run an ad that costs $500 and it generates 25 leads then your cost per lead is $20.

500/25 = 20

Make sure to total all your advertising costs for the year and then divide that by the total number of leads to get your average lead acquisition cost. Then multiply that number by the total number of leads you need to reach your annual revenue goal. So in the example above, the gym would need 67 leads each year. Let’s say that the gym’s cost per lead is $20. Then they need to spend $1,340 per year or $112 per month.

These are all estimates you’re making, of course. The number doesn’t take into account any revenue outside the membership, and it won’t be accurate if your retention rates drop significantly. Even if the number isn’t completely accurate, it will give you a good ballpark and help make decisions about your marketing budget. This number will also help you determine if what you’re doing is successful. You can’t reach your goals if you haven’t made them!

Start with Brand Awareness

Let’s dive into the specifics of buying ads for your gym.

Sara Gunning is an advertising expert who provides advertising strategy and analysis for gyms as part of Zen Planner, a marketing solution dedicated to helping gyms, yoga studios, and martial arts schools grow and gain more members. When working with a gym she starts by asking the gym owners their goals for their ad campaigns and what platform they’ll be using.

For people who don’t have a lot of advertising dollars, Sara recommends starting with a brand awareness campaign. Brand awareness is cheaper than lead generation because any time you are asking a prospect to do something — like come into the gym or sign up for a free session — it costs more. With brand awareness, you are only asking someone to read a blog post, watch a video, or just learn about your gym.

Importance of Brand Awareness

Brand awareness is an important marketing strategy, because people can’t use your gym if they’ve never heard of you! To get more members, first you need to build brand awareness, then you can move on to lead generation and retargeting. While most gyms owners focus on lead generation, the best way to fill your marketing funnel is to start with a brand awareness campaign.

Raising awareness about your gym is important, because in most communities only 10 percent of the population knows your business exists. That means you have a lot of potential members out there who’ve never even heard of you!

How Much Money Should I Spend?

Most gyms should start by advertising on Facebook, rather than bidding on keywords with Google because it’s much harder to get results bidding on keywords if you don’t have a big budget. Spending $200 for a Google keywords campaign won’t have much of an impact. If you have a bigger budget, like around $1,000 for a campaign, you could try a Google campaign, but only after you’ve run a few Facebook campaigns and gathered leads.

For gyms with a limited advertising budget, Zen Planner recommends starting with $150 a month for brand awareness. Sara says the absolute minimum for brand awareness is $50 a month. A good brand awareness campaign — where you’re just letting people know about your gym — should last several months.

Then you can move on to lead generation, using the leads you gathered from your brand awareness campaign for your lead generation campaign. The minimum budget for lead generation is $250 a month, Sara says.

Budgeting for Lead Generation

Lead generation ads focus on driving the lead to take some sort of action, whether that’s to come in for a free consultation or try a free class. A good rule of thumb is your lead generation ad budget should be triple what you’re offering as a discount. For example, if your introductory offer is $150 off the first month of membership, your ad spend should be $450. Boutique gym memberships are expensive, usually at least $100 a month, so it’s going to cost more to find the right person. You have to increase your reach and your ad spend to find the right person for your gym.

It’s always better to invest more rather than less if you have the budget. Remember, however, ad spend is specific to each gym. This is why the formulas at the beginning of this guide are so helpful!

The Most Common Mistakes When Buying Ads

If you’ve never run an ad campaign it can be an intimidating process! Here are some common mistakes gym owners make when buying ads, and how to avoid them.

Too Many Campaigns in One Month

With enough money, almost anything is possible, but if you’re on a budget you shouldn’t run different ad campaigns for multiple programs each month. If your gym offers a kid’s class, an adult class, and a self-defense program, you don’t want to run separate campaigns for each program unless you can spend at least $1,000 a month. One campaign on a $500 per-month budget is stronger than running multiple campaigns and spending less than $200 on each.

Testing Too Many Things at Once

If you start your ad campaign with four different audiences and four different ad versions it’s very difficult to know what’s working. For most people, the best plan is to start with one lead campaign and one brand awareness campaign. Start small, then build up from there.

Making Too Many Changes at Once

For the first month don’t make any changes to your ads, even if you see an ad isn’t performing well. Wait for a month, then you can turn off underperforming ads. At the same time, you don’t want your ads to go stale, so be sure to rotate your ads at least every month.

Introducing Zen Planner

We know you’re busy running your gym. If you don’t have time to handle the details of marketing your gym, Zen Planner can help you attract and convert qualified leads with a la carte digital marketing packages. Just pick whatever services fit your needs and budget!

We offer content, creative services, and strategies that will bring in new members and grow your gym. Zen Planner’s Digital Marketing team has expertise across multiple channels, including Facebook, Instagram, and Google search ads. This means that wherever your members are, your gym will be there as well.

Together, we will work with you to create high-converting campaigns for cold traffic and retargeting — ensuring that you reach your ideal customers!

All digital marketing packages include a quarterly review with a marketing specialist so you can evaluate what works and plan future goals. The Zen Planner team has an entire group of people dedicated solely to building and optimizing paid ad strategies for gyms. Not only will we go to work for you, but we’ll get on a call with you every quarter to review results, talk strategy, and decide on the path forward.

All of our Digital Marketing services include the landing pages and/or “thank you” pages you’ll need — all within your package. Your future members are out there. We can help you find them.