Every person who works for your company should generate 2.5-3.5x what they're paid. This is called Contribution margin, and it's a basic accounting principle. The 4/9 model is a simplified, actionable rule based on Contribution Margin. Gym owners don't need to understand advanced accounting to benefit - they just use the 4/9 math. Application of that math changes slightly as the gym grows, but the goal is always to set up the gym for the future, without creating barriers to growth down the line.

When a trainer or coach is acting by themselves, with no facility, they can keep almost all of the revenue they create. When they become a gym owner, they enter our world, and they should pay themselves 4/9 of the revenue they generate. The other 5/9 will go to overhead.

Likewise, everyone they hire should be paid 4/9 of the revenue they generate. In this case, with a gym owner employing one other trainer would provide: marketing client streams insurance access to equipment access to space a sales funnel a banking portal (with fees covered) promotional materials administration software for booking and service delivery mentorship In essence, the gym owner covers all costs and does the work to grow the trainer. The value is immeasurable, because the trainer literally couldn't do it on their own. The trainer's income is split like this: 4/9 to the trainer 2/9 to overhead 3/9 to the owner.

When the second trainer joins the gym, the owner's costs increase but don't double, so their contribution of 2/9 is enough to share costs. All positions that deliver the primary service (coaching) should be paid up to 4/9 of the revenue they generate. In Stage 1, Stage 2 and Startup, the gym probably only needs another coach, who should be paid 4/9 of the revenue they generate.

As the gym grows, though, it will eventually require staff that don't generate revenue and don't deliver the primary service. For example, the gym will need a cleaner and an accounts administrator. Now the pay strategy evolves to a Salary Cap: 44% of all revenue covers staff costs. This might require a rate increase to cover the new staffing costs; but most often, the costs are covered as more clients join. The 2/9 portion of the owner's total revenue creates a "pot" from which they can hire first a cleaner, and then an admin. Their income doesn't change, but their EHR improves. In Growth phase, the gym probably needs a few coaches (paid up to 4/9 of the revenue they generate), and two or three roles that don't generate revenue (an admin, a cleaner, and possibly a CSM.) Their compensation and hours are determined by the space left under the salary cap after the owner and coaches have been paid. At this stage, the owner will be making 4/9 of the services they provide and 3/9 of the services provided by all others. If they choose to hire an administrative role, that comes out of the 3/9, and the owner must reinvest their time in higher-value activities, like marketing. They might also choose to do less coaching, which reduces their pay from the 4/9 but increases their pay from the 3/9 generated by other coaches.

At the next level of gym growth, the gym might hire a manager. Now the pay strategy evolves to Contribution Margin: the total revenue of the gym should be 2.5x-3.5x its staffing costs. In effect, staff pay drops to 3/9 or lower - not by reduction in pay rates, but by increase in profitability. This happens through economies of scale: 1 - the gym has more people in its groups, so coaches earn a bit more but the gym profit increases disproportionately; 2 - the admin and cleaning labor doesn't increase as revenue increases; 3 - the gym might share staff across several locations; 4 - some gym staff might become salaried, trading security against a lower share of hourly revenue.

It's important to notice that there are short-term dips in profitability at each evolution. When the gym hires its first coach, the owner makes less on each client than they'd make if they took the client themselves. When the gym hires its first non-delivery role (like an admin or cleaner), they are paid out of the profit account, and the owner makes less in the short term (but buys back their time to do better marketing and sales - Growth phase.) When the gym hires a manager, they are paid out of the profit account, but the gym owner buys back their time to open a second location or invest elsewhere - Tinker phase.)

Gym growth is stunted when the gym pays their staff incorrectly at any stage. In the first stage, if the gym overpays its second coach or trainer, the owner has created no extra margin for the business. The second trainer might reach their target income faster, but the owner will still be stuck training clients for money--essentially competing with their new hire.

In the second stage, if the gym overpays its coaches and trainers, the owner will not be able to create time to manage clients or billing or learn to market. Client churn will be high; the gym will experience a roller-coaster of growth as the owner keeps reaching their limit as CEO. The gym will hover at 100-150 clients and low profitability for years while the owner gets burned out and the coaches leave to start their own gym.

In the third stage, if the gym overpays its trainers and staff, the gym could actually fail as the owner redirects their attention elsewhere. Since managers can't grow a business - but can only maintain it - shrinking profitability means the owner is quickly pulled back in to 'save' the gym. Or, worst case, they jump to something more profitable and close their gym. Why run a complex, stressful business that isn't profitable just to employ other people?