Welcome back.
In the last lesson you built your Role Table — every hat you wear, how many hours it eats, what it would cost to hire out. That table is the what. Today we’re doing the how much. We’re calculating the single most important number in this entire course.
It’s called your Effective Hourly Rate. Your EHR. It is the actual amount of money your business pays you per hour of work — and once you have it, the Role Table turns from a spreadsheet into a list of financially obvious decisions.
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Before we start, one warning. For most gym owners who do this exercise honestly, the number that comes out is lower than they expected. Sometimes a lot lower. I want you to hear this from me, right now, before you run the numbers — a low EHR is not a failure. It is information. And the whole second half of this lesson is about what to do with it.
So don’t flinch. Just calculate.
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Your EHR is defined by two honest inputs. What you actually take out of the business in a year. And how many hours you actually work to earn it. That’s it.
The formula is embarrassingly simple. Ready?
Annual personal income divided by monthly hours times twelve — equals your EHR.
Two inputs. One answer.
And here’s why this number matters so much. Remember the Role Table you built last lesson? It tells you what you could hand off. Your EHR tells you which of those hand-offs are financially obvious. And it does it with one clean rule. Listen to this.
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. That’s an accounting fact.
If your EHR is 25 per hour, and a cleaner 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. You don’t see it on any P&L. But the loss is absolutely real. You’re paying for that cleaning with your own time — and your time is worth more than the cleaner costs.
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Before we run the math, one pre-frame. When your number comes out, you might feel the urge to do two things. I want you to resist both.
Urge one — work harder. Don’t. A low EHR cannot be fixed by adding hours. Adding hours makes the denominator bigger, which makes the number lower. Working harder is mathematically the wrong move. It is the opposite of the solution.
Urge two — get discouraged. Don’t do that either. Your number is not a grade on your worth as a business owner. It’s a compass. It points at the headroom you have. The lower it is, the clearer the next move is.
The real 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 is setting up.
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The first input is your annual personal income from the gym. And this is the part of the calculation that trips up the most people. So I’m going to be very explicit.
The rule is one sentence. Count everything you personally took out of the business. Do not count anything that stayed in the business.
Everything else is a version of that rule.
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What counts? Your salary. Your owner’s draw. Dividends, if that’s how you pay yourself. Bonus months. Any money that moved from the business account into your personal account.
What does not count? Revenue that was reinvested in the business. Team wages — what you pay coaches, staff, cleaners, that’s their income, not yours. Business expenses like rent and software. And very importantly — revenue. If your gym did half a million in revenue last year but you only personally took out fifty thousand, the number for this exercise is fifty thousand. Not half a million.
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Let me walk you through three real scenarios so you can find yours.
Scenario one — regular salary. Lars pays himself 3,000 euros a month salary plus a 500-euro owner’s draw. His December bonus month adds another 5,000. So his gross on-paper income for the year is 47,000 euros.
But here’s the adjustment Lars makes. In his real year, he left 8,000 in the business account for new equipment and 2,000 went straight to paying down an equipment loan. He didn’t personally take those. So his real personal income for the calculation is 42,000 euros. Not 47.
This adjustment is the one most owners forget. If you pay yourself a number on paper but regularly “re-lend” money back to the business, your real personal income is lower than your on-paper number.
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Scenario two — irregular draws. This is Maria. She 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 first quarter and a strong rest of the year.
Maria’s instinct is to try to “average” things month by month. Don’t. Just add the full twelve months of personal withdrawals. The twelve-month window exists specifically to smooth seasonality. Maria’s total comes out to 28,000 for the year. That’s her number.
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Scenario three — business younger than a year. This is James. He opened his gym seven months ago and he has seven months of personal withdrawals totalling 14,000.
James annualizes. He divides by the months he has, then multiplies by twelve. 14,000 divided by 7 is 2,000 a month. 2,000 times 12 is 24,000. That’s his annualized income.
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If your situation 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.” Stay strict. You’ll get a cleaner, more honest EHR if you do.
Write your annual personal income figure down. That’s input number one.
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Input number two is how many hours you actually work in a month. And you already have the raw material — your 7-day log from Lesson 2.1.
Here’s the math. Take your total tracked hours, divide by seven, that’s your daily average. Multiply that daily average by your working days per month — use 22 if you work weekdays only, or 26 to 30 if you work weekends. That’s your monthly hours.
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Let me run Lars’s numbers.
Lars tracked 52 hours across his 7-day log. 52 divided by 7 is about 7.4 hours a day. Lars works most Saturdays but keeps Sundays clear, so he estimates 26 working days a month. 7.4 times 26 is 192 hours a month. That’s Lars’s denominator.
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Now — gym owners are systematic under-counters of their own hours. I want you to check your log against this list right now, because if you’ve left any of these out, your EHR will come out artificially high and your decisions downstream will be wrong.
Did you count your commute? The drive to the gym, the drive home — that’s work time, because the only reason you’re in that car is the gym.
Did you count evening phone checks? Answering a member DM at nine at night from the sofa. Replying to a coach’s question while you’re cooking dinner. Those ten-minute blocks add up to hours per week that almost never get logged.
Did you count weekend hours? “It was just a quick Sunday thing” — if it was an hour, log it.
Did you count planning at home? Programming, content, ad review, strategy thinking at the kitchen table. If you’re thinking about the gym in a way that takes focus, it counts.
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And then the hardest one — mental load. You probably carry the gym around in your head most of the day. You can’t log that hour by hour. But the rule of thumb is: if you stopped running the gym, would this hour in your day disappear? If yes — it’s gym work.
If your log feels low after checking all of that, add ten percent. Gym owners rarely over-count. The honest number is almost always higher.
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Here’s the whole calculation again. Say it out loud with me if you want.
Annual personal income, divided by monthly hours times twelve, equals your EHR.
Let’s plug Lars in.
42,000 euros divided by — 192 hours times 12. That’s 2,304. So: 42,000 divided by 2,304. Which comes out to 18 euros and 23 cents per hour.
Lars’s EHR is eighteen-twenty-three.
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Now stop the audio for a second and do yours.
Open a calculator. Take your annual personal income. Divide by your monthly hours times twelve. Write the number down.
Don’t react to it yet. Just write it down.
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Welcome back.
If your number is lower than you expected — good. I know “good” isn’t what you want to hear, but I mean it. A low number means the bottleneck diagnosis from Lesson 1.1 is showing up in the math. The problem is real and it’s measurable — which means the solution is too. And the solution is the rest of this course.
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There’s a second, simpler number worth calculating alongside EHR. It’s called the Buyback Rate, and it comes from Dan Martell’s book Buy Back Your Time. The formula is even simpler.
Annual personal income, divided by eight thousand.
That’s it. Why 8,000? Eight thousand is a rough approximation of the maximum hours a really flat-out business owner could theoretically work in a year. It’s intentionally conservative.
For Lars, it’s 42,000 divided by 8,000. Which is 5 euros 25.
So Lars’s EHR is 18.23 and his Buyback Rate is 5.25.
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How do you use those two numbers together? Think of them as a hiring range. Anything that costs less than your Buyback Rate — that’s 5.25 for Lars — you should always hire out. There’s no scenario where it makes sense to do those tasks yourself. Anything that costs between your Buyback Rate and your EHR — between 5.25 and 18.23 for Lars — is a strong candidate to hire out. Every one of those is a net gain. And anything that costs more than your EHR is a hire to make with caution. It’s break-even or worse on pure math, and only justifies itself if the freed time goes back into revenue work.
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One honest caveat about the Buyback Rate. The eight-thousand denominator was built for entrepreneurs earning several hundred thousand a year and up. For a smaller gym business with a more modest income, the Buyback Rate is going to come out very low. Don’t let that make you feel bad. Use your EHR as the primary decision number. The Buyback Rate is a sanity check, not a verdict.
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OK. This is the moment the EHR actually does something.
Open your Role Table from Lesson 2.2 alongside your EHR number. For every role, you’re going to convert its monthly cost into an hourly rate. The formula is: monthly cost, divided by weekly hours times 4.33. (4.33 is just the average number of weeks in a month. Close enough.) Then flag each role as either below your EHR or above it.
You’ll find Lars’s full comparison table in your document. I want you to look at it while I walk through what it shows.
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Lars has three roles come in below his EHR of 18.23.
Cleaning at 7 euros an hour. Every hour Lars cleans, he’s “paying” himself 18.23 to do work someone else would do for 7. Every hour costs him 11 euros in opportunity. Over a year, with 5 hours a week of cleaning, that’s close to 3,000 euros in opportunity cost.
Admin and member emails at 9 euros an hour. Same logic. The opportunity cost per hour is a little over nine euros. Across 10 hours a week, that’s a much bigger number.
Coaching at 15 euros an hour. This one is borderline. The gap is smaller. And — this is the important part — coaching is close to Lars’s EHR, which means the math is thin, and a new coach hire comes with management overhead that doesn’t show up in this table at all. This is exactly why the Replacement Ladder puts admin before coaching. The cheaper roles have a bigger margin and much less onboarding friction.
Social Media comes in right at Lars’s EHR — basically a wash. And programming, lead follow-up, and management all come in above Lars’s EHR, which means Lars doing them himself is currently cheaper than hiring them out. He keeps those for now.
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Look at that table one more time. It used to be an abstract spreadsheet. Now every row has a number on it that either says “keep doing this” or “every hour you keep doing this is a loss.” That’s the entire power of the EHR.
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Go do this on your own Role Table right now.
Add two new columns. Column one — hourly rate — is the monthly cost divided by weekly hours times 4.33. Column two — below my EHR, yes or no.
Fill them in for every role. Circle every row marked “yes.” Those are your candidates for Lesson 3.1.
And if — when you look at your table — zero roles come in below your EHR, don’t panic. It happens. It’s more common than you think, and there’s a whole section in Lesson 3.1 called the fallback path that handles it. You’ll be able to make the decision either way.
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Here’s where we are.
You now have the two numbers that make every decision in the next module possible. Your Effective Hourly Rate — the real amount your business currently pays you per hour. And your Role Table, with every hat flagged as above or below that number.
In Lesson 3.1 we put them together and pick your first hire. Not the role you love. Not the role that sounds most impressive on a job description. The role that, according to your own numbers, is bleeding the most value from your week.
I’ll see you there.
One last thing before you go. The EHR is not a grade. It’s a compass. Wherever it points, that’s where the next hour of your attention should go.
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