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You’ve tracked your time. You’ve grouped your hats. Now we calculate the most important single number in this entire course — the one that turns your Role Table from a spreadsheet into a set of actual decisions. It’s called your Effective Hourly Rate, or EHR. This lesson walks you through the full calculation, addresses the most common mistakes, and shows you exactly how to use the number to decide which role to replace first.
Fair warning before we start: for most gym owners, the number that comes out of this calculation will be lower than they expected. That is not a failure. It’s information. Keep reading — the second half of this lesson is about what to do with a lower-than-expected number.
Your Effective Hourly Rate — your EHR — is the actual amount of money your business pays you per hour of work. Not your sticker-price “I’m worth 200 per hour” number. Not what you charge a personal training client. The real number, based on two honest inputs: what you actually take out of the business in a year, and how many hours you actually work to earn it.
The formula is embarrassingly simple:
Annual Personal Income ÷ (Monthly Hours × 12) = Your EHR
That’s it. Two inputs. One answer.
Here’s why the number matters so much. In Lesson 2.2, you built a Role Table — every hat, how many hours it eats, what it would cost to hire out. The Role Table tells you what you could hand off. The EHR tells you which of those hand-offs are financially obvious. And it does it with one very simple rule:
Any task that someone else can do for less than your EHR is a task you are losing money on every time you do it yourself.
That’s not a motivational statement. It’s an accounting fact. If your EHR is 25 per hour and someone else would clean your gym for 10 per hour, then every hour you spend cleaning costs you 15 in opportunity. Over a year, that becomes thousands. It’s invisible on your books, but the loss is real — you’re paying for the cleaning with your own time, and your time is worth more than what a cleaner costs.
Before you punch the numbers in, I want to pre-address something that happens to almost every owner who does this exercise.
Your number is probably going to be lower than you thought. Not because you’re bad at business, but because the denominator — the hours — is almost always bigger than owners realize once they have an honest log. A gym owner who thought they earned 60 per hour often discovers they actually earn 15 or 18.
If that happens to you, do not do the two things most people instinctively do:
The solution to a low EHR is to transfer low-value tasks to someone cheaper than you, so you can fill the freed hours with work that raises the number. That’s the whole game. That’s what this lesson unlocks.
OK. With that out of the way — let’s calculate.
The first input is your annual personal income from the gym. This is the part of the calculation that trips up the most people, so we’re going to be explicit.
The rule is:
Count everything you personally took out of the business. Do not count money that stayed in the business.
That’s the whole rule. Everything else is a version of that.
Let’s walk through three real situations.
Scenario A: Regular salary. Lars pays himself €3,000/month salary plus a €500/month owner’s draw. His December bonus month is an additional €5,000.
Wait. Lars’s EHR calculation in this course uses €42,000, not €47,000. Why? Because in his real year, Lars also left €8,000 in the business account for new equipment and €2,000 went straight to paying down an equipment loan. He didn’t count those, because he didn’t personally take them. His final figure: €42,000.
This is the adjustment most owners forget. If you pay yourself 3,500 a month on paper but consistently “re-lend” 800 back to the business, your real personal income is 2,700 a month — not 3,500.
Scenario B: Irregular draws. Maria runs a smaller gym and pays herself whenever there’s cash in the account. Some months she takes out 4,000. Some months she takes out nothing. She had a rough Q1 (a refrigerator broke, ad costs spiked) and a strong Q2–Q4.
Don’t try to “average” month by month. Just add the full 12 months of personal withdrawals. The 12-month window exists specifically to smooth irregular cash flow. Maria’s total for the year comes out to 28,000 — that’s her number.
Scenario C: Business younger than 12 months old. James opened his gym 7 months ago. He has 7 months of personal withdrawals totalling 14,000.
Use all the months you have. Annualize by dividing by months available and multiplying by 12.
If your income figure feels ambiguous — if you’re not sure whether to count something — the default is count only what hit your personal bank account. If the money stayed in the business account, it wasn’t personal income, even if you think of it as “yours.” You’ll get a cleaner, more honest EHR if you stay strict on this.
Write your final annual personal income figure down. You’ll use it in Step 3.
The second input is how many hours you work per month. Use your 7-day log from Lesson 2.1 to calculate it.
Lars tracked 52 hours over his 7-day log.
Lars’s monthly hours: 192.
Gym owners are systematic under-counters of their own hours. Here are the most common blind spots. Check your log against this list right now:
If your log feels low after checking these, add a 10% buffer. Gym owners rarely over-count. When in doubt, the honest number is higher than the tracked number.
Here it is. The whole calculation.
EHR = Annual Personal Income ÷ (Monthly Hours × 12)
Let’s run Lars’s numbers.
Lars’s EHR is €18.23/hour.
MODEL TO INSERT — EHR Formula Callout
What it shows: A clean visual of the EHR formula with Lars’s numbers plugged in. Top line:
€42,000 ÷ (192 × 12) = €42,000 ÷ 2,304 = €18.23/hour. Visual style: large formula at the top, result highlighted.Why it matters here: The formula is the core mechanic of the lesson. Having it in one visual — with real numbers — makes it memorable and re-findable when the student pulls the lesson up later to check their own work.
Suggested form: Clean formula card with the result boxed. Use the soft green principle color for the result box.
Stop reading. Open a calculator. Use your own two numbers.
Write the number down. Don’t react to it yet — the next two sections explain how to interpret it.
Good. Seriously — good. That means you have more room to improve it than you thought. A low EHR is not a sign you built the wrong gym. It’s a sign that the bottleneck diagnosis from Lesson 1.1 is real, and now you can see it in a single number.
The fix is not more hours. The fix is the rest of this course.
There’s a second number worth calculating alongside EHR, as a quick sanity check. It’s called the Buyback Rate, and it comes from Dan Martell’s Buy Back Your Time. The formula is:
Buyback Rate = Annual Personal Income ÷ 8,000
Why 8,000? It’s a rough approximation of the upper bound of how much you’d work in a year if you were truly flat-out — roughly 154 hours a week, which nobody actually does. The number is intentionally conservative. It represents the maximum hourly rate at which it makes sense to hire out a task.
Lars’s Buyback Rate: €42,000 ÷ 8,000 = €5.25/hour
Compare to his EHR of €18.23/hour.
The two numbers should be in the same ballpark — usually within a factor of 3 or 4 of each other. If they are, your inputs are probably fine. If they’re wildly different (say, your EHR is 10× your Buyback Rate), recheck your hours or your income.
More importantly, the two numbers define a hiring range:
An important caveat about the Buyback Rate. The 8,000 denominator was designed with larger businesses in mind — entrepreneurs making several hundred thousand a year and up. For smaller gym businesses with lower owner incomes, the Buyback Rate will come out very low (often single digits per hour). Don’t let a low Buyback Rate make you feel bad. Use your EHR as the primary decision number. The Buyback Rate is a sanity check, not a verdict.
This is the moment the EHR actually does something. Open your Role Table from Lesson 2.2 side by side with your EHR number.
For each role, convert the monthly cost into an hourly rate using this formula:
Hourly Rate of Role = Monthly Cost ÷ (Weekly Hours × 4.33)
(4.33 is the average number of weeks in a month. Close enough for this calculation.)
Then flag whether each role is below your EHR or above it.
Here’s Lars’s Role Table from Lesson 2.2, now with the hourly rate calculated and the “Below my EHR?” column filled in. Remember Lars’s EHR: €18.23/hour.
| Role | Hrs/Week | Monthly Cost | Hourly Rate | Below EHR? |
|---|---|---|---|---|
| Cleaning & Facilities | 5 | €150 | €7 | ✅ Yes |
| Member Admin & Emails | 10 | €380 | €9 | ✅ Yes |
| Floor Coaching | 22 | €1,400 | €15 | ✅ Yes (borderline) |
| Social Media & Marketing | 5 | €400 | €18 | ≈ Wash |
| Class Programming | 3 | €350 | €27 | ❌ No |
| Lead Follow-Up / Sales | 5 | €600 | €28 | ❌ No |
| Management & People | 2 | €500 | €58 | ❌ No |
Look at what just happened. Three roles — cleaning, admin, and coaching — come in below Lars’s EHR. Every hour Lars spends on any of them is an hour he’s paying a premium to do himself.
Let’s read the rows:
The roles in green — cleaning and admin — are Lars’s top candidates for the decision in Lesson 3.1.
Go to your Role Table right now. Add two columns:
Fill both in for every role. When you’re done, circle every row marked “Y.” Those are your candidates for the next lesson.
If zero roles come in below your EHR, don’t panic. There’s a whole section on that case in Lesson 3.1 — the “fallback path” — and the decision is still makeable, just on different criteria. Keep going.
You now have the two numbers that make Module 3 possible: your EHR and a Role Table with every hat flagged as above or below that number. In Lesson 3.1, we use those two things to make the single most important decision in the course — which role to replace first.
Before you open Lesson 3.1, make sure:
See you in the next lesson.
Remember: The EHR is not a grade. It’s a compass. Wherever it points, that’s where the next hour of your attention should go.