Jun 13, 2022 | Advancing Your Career

My boss charges at double my rate. Am I getting ripped off?

Q. Dear Zenagos, I work as a personal trainer at a gym. They charge clients $80 per hour for my services, but I only get paid $30 an hour. And, I have to do other work around the gym like sales. I feel ripped off. Wouldn’t I be better off going out on my own?
–Charlotte

You are not alone. Many professionals who provide services through a company feel the way you do (including hairdressers, tutors, dog groomers and trainers, salon workers, yoga instructors, coaches, and computer programmers). When you provide these services, it feels very personal, and the company relies on your individual talents and relationship-building skills. It’s tempting to think that you could just go out on your own and take your regular clients with you, and you would make double the money or more. Before you take the leap, though, make sure you really understand how business works. Here are a few things to consider:

You need to have a plan.
What exactly will you do? Will you offer services at your clients’ homes, at your home, or at a local park? Will you set up your own gym location? When you investigate setting up your own retail location, you will probably be surprised what it takes. In order to sign a commercial lease, you often need to have been in business for a minimum of two years, meet a minimum level of credit, and have commercial insurance. It is wise to get a business mentor, who can help you dodge common mistakes and avoid getting in over your head.

Be prepared for your boss’ reaction.
Even if you have a great relationship, do not be surprised if your boss (who is typically the owner or general manager of the business) becomes really angry if you take your clients with you. The cost to acquire a customer includes the cost of the retail location, the cost of all advertising, the cost of sales employees, and the cost of all collateral materials like brochures, business cards, billboards, and flyers. The gym owner may have paid more than $400 to acquire each training client and may not break even and start earning money on that client until you have completed more than ten sessions. So, if you walk away with 10-20 clients, your boss could see that as your “stealing” thousands of dollars of the company’s hard-earned value. Before you burn that bridge, make sure you check your contractual agreement with the company and understand whether you could be violating any terms.

Be prepared for your clients’ reaction.
Your clients may love you, but still decide not to follow you. A client who goes to a gym may enjoy that routine and enjoy other benefits of gym membership (classes, cardio equipment, and seeing friends). They may not want to work with you at their home or at your home or at a local park. Be prepared to have some clients say that they will stick with the gym.

Don’t forget to pay your taxes.
If you do start taking payment directly from your clients, don’t forget that you owe a lot of that to the IRS and, depending on where you live, your state. Make sure to pay your quarterly estimated taxes, or you could create a big debt really quickly (and be forced to learn the word “garnishee”!).

Consider some of the other benefits of being an employee.
As a personal trainer, you may not be getting traditional employee benefits (health insurance, life insurance, retirement plan), but you could be benefitting from the gym’s liability insurance, facilities/pool, security, parking, and other services. And, don’t forget the best benefit of being an employee – if you want to, you can always just walk away and do something else. That freedom has value.

So, before you make the leap and go out on your own, do spend some time learning about business and considering all of your alternatives. You might actually make more money if you stay at your current company and ask for a slightly better deal, or if you go to a direct competitor who values your experience.

If you do decide to go out on your own, you will enjoy the many benefits of being in business for yourself. It can be highly motivating to follow your passion and call your own shots. You will design your own lifestyle and control your own schedule. And, although people don’t talk about this often, small business is a fantastic tax break. You can deduct most of your expenses, staying in a lower tax bracket and getting better bang for your buck.

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