Interview with Eric Ruth
Eric was really the first person that I ever got to follow and learn from when it came to marketing and specifically direct response marketing in the fitness industry when he had his original fitness based business, Fitness Marketing Systems. Some of the most influential products and resources that frankly our industry has ever seen.
I had the good fortune to work with Eric on the first product that I ever released where we partnered together and launched the Personal Training Money Machine way back in 2005. Eric also co-found Net Profit Explosion which he sold his stake in a couple years ago and now he is out there influencing entrepreneurs once again with his new business, the Referral Challenge. He is also, I think, hands down the best copywriter the fitness industry has ever seen.
Eric’s Business Biography
Back in 1998, I was working as a direct response copywriter, specifically in political fundraising, for a company called Response Dynamics in McLean, Virginia. I enjoyed the work and it really sharpened my copywriting skills even though it was a bit of a grind. I had the good fortune to meet a great marketer by the name of Craig Fort in the real estate niche, who I had followed for a long time. He became a bit of a mentor to me and encouraged me to pursue information marketing because of my copywriting background and also because there was a fitness tie in there as well. I had helped an old girlfriend of mine build her personal training business and done that fairly successfully in the early 90’s.
So he encouraged me and I did what he told me to do. I started a company called Fitness Marketing Systems. I started with small display ads in ID Personal Trainer and other fitness industry publications. The business grew nicely over the years so I left my copywriting gig in 2001 and went full time with Fitness Marketing Systems and things just started to take off.
In 2005, I had a Fitness Marketing Systems customer by the name of Sean Greeley who had a personal training business here in Orlando and he participated a great deal in the calls that I would do with my customers and was very enthusiastic and clearly a smart guy. He just kind of continued to put himself in front of me until one day he showed up at Phil Caplan’s forum where I was presenting and we met for the first time. We’d talked many times before but that was the first time we had met in person. He had some ideas about things he wanted to do and we started working together, a little joint venture with a nutrition product. I saw that he had some skill sets that I didn’t have. He was very good at managing information, managing people and I was not. Working was my strength.
“My first business at the height of it I was doing about half a million dollars a year working out of my home office with 1 part-time employee.”
I invited him to partner up with me and we formed NPE. Utilizing the customer base that I had developed with Fitness Marketing Systems we grew NPE very rapidly over the years. It had some fantastic clients, really great people and the business grew dramatically. Just to give you an example, at the height of my first business, Fitness Marketing Systems, I was doing about half a million dollars a year working out of my home office with 1 part-time employee. It was a great lean business, very successful, profit margin was huge. With NPE within about 3 years, we had 10 times that revenue and grew it to 5 million dollars a year.
The sad thing is really and the primary source of my frustration with the business was the fact that the margins were just so thin. It was a big bloated business so there was plenty of revenue but there wasn’t a whole lot of money left over at the end of the day, which is a very bad thing. I got frustrated because of that and also because of some issues between Sean and me. So I decided it’s time to get out and I sold the business and moved on. It was a great time while it lasted and had a very significant impact in the industry. It was fun for a while, but then it became more of a grind so it was time for me to leave.
So today what I’m working on primarily is the Referral Challenge. It’s a relationship based marketing program with an emphasis on consistent communication with your sphere of influence in order to generate and maximize referrals. There’s a lot more to it than that but that’s the big picture. My primary objective is to grow that because I firmly believe after having done just about everything you can do in marketing, I have experienced it all, and I believe in my bones that Referral Marketing is the best form of marketing there is. It’s comprehensive, it touches every part of your business and it’s also highly effective.
The Referral Challenge is my primary focus, the secondary focus is Core 4 which I’m doing with my wife and another partner, Gary Schwarney. It is a high level curriculum based training program and coach program which is very interesting. We’re just getting started with it and it’s already off to a nice start.
Take who you are as a person, what matters most to you and build your business to support those values and your most wanted lifestyle versus the other way around, which is your business dictating your lifestyle.
“Take who you are as a person, what matters most to you and build your business to support those values and your most wanted lifestyle versus the other way around which is your business dictating your lifestyle.”
I’ve done both. I’ve been in both camps, I started lean and mean and that was beautiful, but then with NPE it was big and bloated and wasn’t congruent with my values because I was chained to a desk working constantly. No freedom, no time for family, no time for fitness. The finance side wasn’t even really there. It was great to say I own a 5-million-dollar a year business, but when I’m personally making less money out of the business in NPE than when I ran Fitness Marketing Systems, which was 10 times smaller, then you know something’s wrong.
Eric’s 18 Common Traits of a Successful Business
I actually have a list of 18 things that I believe are commonalities in successful businesses. Obviously they’re all critically important, but each individual will have to listen to them and filter them through their value system to determine whether they fit for them. These are in no particular order, I just wrote them down.
The first one is manageable, ideally low, overhead.
I don’t care how big your business gets you’ve got to manage the overhead.
The second one is having fat margins.
Pricing your products and your services the right way. You need to do the math on those things and that’s important. There needs to be a mathematical component to it. There needs to be some thought that goes into it, it can’t just be random. With us in the information marketing business it’s a little bit different because the products and services that we sell primarily have very large margins since they’re created one time and then you can sell them over and over again. But with service based businesses there’s many more costs that go into it so you’ve got to do the math and figure out your pricing so that your margins are there because you’ve got to have a profit to reinvest back into the growth of your business.
“Pay yourself first and don’t be overly aggressive with speculation when it comes to your money.”
The third one, along the same lines, is being financially conservative.
It served me so well with Fitness Marketing Systems, I was making sure that I paid myself first. So pay yourself first and don’t be overly aggressive with speculation when it comes to your money. Be conservative, think things through. There are times when you want to invest for sure, you absolutely need to invest, but you need to do it in a certain way and get outside guidance and advice, don’t just make decisions emotionally.
Generally, you don’t want to get into a habit of paying yourself last with whatever is left over. That is just not smart. I’m not saying that in a demeaning way, because I understand. I understand the psychology, I’ve been there. But if you are in a situation where you’re doing that, paying yourself last you need to take a hard look at how you’re running your business right now and start making changes. Because the bottom line is, if you go down the business goes down.
I think there is sort of the limited calculus that goes on from a business owner’s perspective. They go, what do I see in my marketplace? What is my competition selling at? I’ll either try and fit right in there or undercut them which is the kiss of death and you never want to be the low price provider. It’s such a dangerous proposition because the only way to go is down from there.
Let me just throw out a little calculation that can be done. This is very basic and there’s a lot more that needs to be considered but when you’re trying to price your services you’ve got to look at your hard costs. What does it cost you to deliver that service? That’s primarily going to be your overhead plus your labor, there’ll be some other things that go into that. Look at your hard costs.
Say your hard costs is $50 for whatever unit. On top of that you want to add your client acquisition cost and you need to know that number. How much does it cost you to buy a client? Because we all buy our clients. Let’s say that’s another $50. You’re now at a baseline of $100 for your price and from there what I would do is a keystone markup. I would just double it. Again, this is very general so you need to look at this in terms of your business and filter it. But as a general rule I would double it. Now you’re up to $200.
Dick Chilton, one of my mentors and favorite people in the world that worked with me at NPE and just a wise man with a forty-year track record of high level sales and sales management with fortune 500 companies, always talks about the Murphy Law. You’ve got to factor in for Murphy so I would add another 20% on top of that. I’d be looking at pricing this unit that has a hard cost to me of $50, I’d be pricing it somewhere around $220. That’s just a basic formula to start for your pricing.
“When talking about salesmanship, people are afraid to price where they need to price because they lack confidence in their ability to sell.”
When talking about salesmanship, people are afraid to price where they need to price because they lack confidence in their ability to sell. That’s what it comes down to. One of the issues that so many fitness business owners run into is that their background for the most part is technical. They’ve probably been athletes and embraced physical fitness most of their lives and then they went to school and studied kinesiology or biology or something along those lines. Then they maybe got an internship or something so they’ve always been very technical in terms of their education. For them the business side requires a lot of education that has to occur in a short period of time.
For me, I grew up in the service and sales business. My entire life that’s what I’ve done and that background has served me well because selling is what business is about.
Maybe the best book on selling—it’s not necessarily tactical but it’s mindset related and that’s 90% of selling—is called “How I Raise Myself up From Failure to Success in Selling” by Frank Becker and you can get it on Amazon. It will help you get your mind right about how to sell.
The fourth item on my list is being congruent to your values.
Basically that’s about integrity. Forest Walden, the CEO of Iron Tribe Fitness, he used to be a franchisee and then a master franchisee in Fitness Together. He’s a young man, maybe 39 or 40 and he’s just hugely successful. I’ve known him for a long time and one of the things I always talk about with Forest is that he is truly congruent. He is exactly what he appears to be. His values that he espouses are the values that he lives by. There’s no deviation, there’s no conflict. I think that has served him so well over time because he’s just true to himself. I think when you’re that way it’s sort of like parts the sea for you, it’s really that powerful. Being congruent to your values is huge.
Number five is maximizing internal opportunities and systemizing your business before expanding.
One of the things we used to deal with at NPE and at Fitness Marketing Systems when I’d do consultations is business owners who had their business was running well and all they could think about was expansion. They were like, well look I’ve got this one camp or this one facility that’s generating X number of dollars. If I only had 3 more I’d be a millionaire. They think along those lines which is normal, it’s natural to think that way but it’s also very dangerous.
“His values that he espouses are the values that he lives by. He’s just true to himself. Being congruent to your values is huge.”
I can tell you that of the hundreds and possibly maybe thousands of fitness business owners that I know who have tried to do that, 7 out of 10 fail when they try and expand. It is very tricky. There’s a lot of conditions, a lot of circumstance that you cannot predict. To give you an example, your primary location now is doing great you might think all I have to do is rubber stamp this some other place. But the other place that you open up doesn’t have the market your primary place does. So even though you’re doing everything the same in the other place you just can’t pull in the clients the same way you could in the original location. That may be difficult to foresee, you did a little due diligence and everything looked good but your marketing isn’t working over there the way it is in your primary location. These are things that you run into. Can they be overcome? Yeah they can sometimes, but it will take a lot of time and effort to do so and now you’re running 2 businesses instead of 1 and it starts to really wear you down. That’s a dangerous one.
What I mean by maximizing internal opportunities is within your existing business. There are many ways to generate additional revenue within your business. You have to look at the numbers. As a basic starting point, look at how long your average client is staying with you and then what can you do to increase that period of time? Then of course your average client lifetime value so the first one is about time, the second one is about money. Their value, how much are they worth to you and what else can you sell to them? Because if they’ll buy from you once they’ll buy from you twice.
“How much are they worth to you and what else can you sell to them? Because if they’ll buy from you once they’ll buy from you twice.”
I’m not talking about forcing things down their throat, I’m talking about discovering what other things they need, what are the problems they have and then presenting solutions to help them. There’s a great deal of opportunity to increase profit and grow revenue with your existing location. The best advice I can give you is max out the revenue from your current location and systemize. Systemize everything you’ve got because then if you do want to expand you’ll give yourself a much better chance.
The sixth one on the list is producing and promoting proof.
I just released a checklist called the social proof checklist. That’s something I see that’s lacking in a lot of fitness businesses, they’re not producing enough proof and they’re not promoting that proof aggressively enough.
I’m amazed by the Amazing 12 Program, which is something that I was introduced to a while ago. I write about it in the social proof checklist. Paul McIlroy is a gentleman in Ireland and he has a fitness business there where he developed this training methodology he calls the Amazing 12. It’s a 12-week program and he’s put so many clients through it and generated such incredible social proof with dramatic before and after pictures, had such great success with it that his business blew up. He had so much demand for his services so he decided to license out his training methodology to other fitness business owners. I think he licensed it for like 10 grand a year or something like that.
Now he’s got like 30 or some odd coaches around the world using this Amazing 12 program and if you just Google Amazing 12 and then click on images you’ll see there’s like hundreds and hundreds of these beautiful before and after pictures. These guys know how to produce and promote proof and because of that their business has exploded. That’s a big one.
Along those lines, I know and really like and respect, a man by the name of Brad Linder who’s a fitness business owner down in Texas. Brad is just a great guy who really embraced the collection, the production and promotion of social proof. He now has over 350 video testimonials from his clients on his YouTube channel, which is just incredible. On top of that he’s got hundreds of before and after picture and written testimonials. His website is just jam packed. He does a fantastic job with producing and promoting proof. His business is rock solid and it has been for years and years. Primarily I think because of that, along with other reasons too, but that’s certainly one of them.
“They buy because they trust you and there’s no better way to generate trust than proof.”
I want to reinforce that when you have social proof like that, you don’t need to be a creative marketer, you don’t need to be a great copywriter. All you need is to put a ton of proof up and make good offers. You have those 2 things and you will get business because what does proof do? It overcomes skepticism. Skepticism, cynicism, doubt, those things are the reasons people don’t buy. They buy because they trust you and there’s no better way to generate trust other than a good relationship (that’s the number one way), but the second best way is proof.
Number seven is to sell the right way at the right price.
We kind of talked about this earlier so I won’t go into it too much. That’s one of the things I learned when I was working as a waiter to put myself through college. One of the first waiting gigs I got was at a nice restaurant, upscale place in Tyson’s Corner, Virginia. It’s not there anymore, but it used to be a pretty hot spot.
My manager was watching me the first week or so I was there and he took me aside at one point and said, Eric you need to get your average ticket price up. I was like, okay well how do I do that? He said the problem is you’re an order taker, you need to be a salesman. That really struck home with me. Anybody can take an order, that’s a $10 an hour job. Selling is about helping people, enhancing their experience, giving them what they want at the right price. That’s so key. Clearly you need to understand how to isolate the problem the person is experiencing, relate to that problem, build value, provide proof and then close, close, close. Don’t be afraid to close repeatedly. Because often times it takes more than one. You can’t just listen to that first no.
“Anybody can take an order. Selling is about helping people, enhancing their experience, giving them what they want at the right price.”
I’m not talking about being pushy, the antithesis to good salesmanship. You do not want to be a pushy aggressive used car guy. What you want to do is be a problem solver and a value builder so you need to learn the right way to sell at the right price.
Number eight is to never stop selling.
Never stop. You need to be marketing and selling all the time but it needs to be soft. Watch how Pat Rigsby sells. Just read his emails and you will learn so much about how to consistently provide value and softly encourage people to buy. Because I think he just does it in a brilliant way and a lot of that is the consistency of it.
Being consistent. Showing up every day in some form of communication. It may be that every day is too much for your fitness business and that’s fine. But the key is to be consistent and showing up regularly, so never stop marketing and selling.
So that leads to number nine on the list, communicate consistently.
That sort of goes hand and hand with what I was just talking about. The communication needs to be 2-way, it needs to be a conversation. It’s not just about you pushing out information. It’s about a conversation because that’s how you develop relationships and you’ll see often times you can’t just rely on the times that your clients are working out with you because that’s transactional. There’s obviously relationship building occurring during those times, but it’s also a transactional time period. They’ve paid you for that time, they’re there to get something done so there needs to be communication that occurs outside of the transaction.
Number ten is critical—building a strong network.
You’ve got to have it. For me personally this is something that, since I value my time, I sometimes think of having to go out and talk with people as a burden. It’s unfortunate and I wish I didn’t think that way, but sometimes I do. I just have to push myself through it because the only growth comes when you’re uncomfortable. It’s like that saying, you got to get comfortable with the uncomfortable. If networking makes you uncomfortable, all the more reason to do it because it’s so critical. There’s just so much proof that there are fewer things that will impact your ability to grow as a person and a business more than having a strong network.
I want to reinforce something. Don’t go into any relationship with any expectation other than your own growth as a result of the relationship. You don’t initiate relationships to get something from the person other than just the opportunity to get to know them and potentially learn from them and share some insights with them. It’s that way you look at it, that mindset, that framework that makes all the difference. I’ll give you a perfect example.
“You don’t initiate relationships to get something from the person other than just the opportunity to get to know them and potentially learn from them and share some insights with them.”
Pat and I, we started off as great friends and then we became head to head competitors for years while I was at NPE and we didn’t maintain the friendship, that was on me. But after I left NPE the first big name person in the fitness industry to get back in touch with me was Pat. It wasn’t because he wanted anything from me, it was just because he was congratulating me on launching the Referral Challenge and letting me know what he thought of it. I thought that was wonderful. It’s that type of mindset, it’s that type of attitude that makes all the difference. Because when you have those friendships, those relationship opportunities naturally present themselves, they just evolve out of it sometimes, not always, but sometimes they do. If you don’t have those types of relationships, then your opportunities become much more limited.
Number eleven on the list is to delight clients, just delight them.
I found out about this in an email and I also heard Warren Buffett talking about it recently. He said, it’s a 3-word mission statement. Warren Buffett, I think the second richest man in the world said, just delight my customer. That should be your mission statement. The way you delight, is not by doing the expected. When somebody buys something from you they expect high quality service so that’s expected. The way you delight is by doing the unexpected. That’s a lot of what the referral challenge is about.
Number twelve is don’t step over dollars to pick up pennies.
I see this far too often where people are myopic about the investment in their business. Let’s put it in a different way, they’re myopic about the investment in their relationships, in their clients and how they acquire funds. To give you an example, my wife and I work out at this really great facility with awesome trainers and it’s pricey. I told them repeatedly, hey you know I love these t-shirts that you guys have. They’re like “yeah, they’re nice”. They didn’t even give me a t-shirt. I give them a lot of money every month and all I want is a freaking t-shirt, it’s $10. I thought, well should I just ask them? But then I thought, no I’m not going to do it I’ll just buy one. I’m not going to ask for something like that, but they should be offering it. That’s what I mean by they are stepping over dollars to pick up pennies. It would cost them 10 bucks, maybe 7 bucks to give me a t-shirt and it builds a lot of goodwill. Plus, I would become a walking ambassador for them, a billboard. I’m wearing their logo and their name.
“When somebody buys something from you they expect high quality service so that’s expected. The way you delight is by doing the unexpected.”
Another thing along those same lines that’s stepping over dollars to pick up pennies is weak offers. When you put an offer out there with 10% off or something like that or just being cheap about your front end offers. Your pricing for your full service packages should be, as I mentioned earlier, a fat margin. As for your introductory offers you want to look at making them very compelling. That doesn’t always mean you reduce the price dramatically, I mean just think it through. Having good offers and not having a guarantee is another way of stepping over dollars to pick up pennies. So guarantee what you do. Very few people take you up on it unless you really mess up.
Number thirteen is to develop and invest in your staff.
You’ve got to do that. You don’t want churn in your staff just like you don’t want churn in your clients so develop and invest in your staff. Get your people trained and really invest in them and build relationships with your trainers. Raise them and they will raise you up. A high tide floats all boats, kind of thing.
“You as the principal in your business, that is maybe your most important role is to be decisive. You have to make the decisions everyday about what needs to be done.”
Number fourteen is to listen to clients.
That’s kind of redundant because I talked earlier about communication. Consistently have 2-way communication. I won’t get into any more detail about that, but pay attention to what your clients say.
Number fifteen is to be action oriented, particularly when the action is imperfect.
This is really a distinguishing factor between entrepreneurs who really move forward rapidly and those who don’t. That’s the willingness to take some risks, intelligent risks, and put yours out there with whatever it is your developing. If you’ve got a new offer, for instance, even if it’s not perfect but it’s good enough to get out there—then move forward with it. That’s what I mean. Action oriented, have some urgency in what you do.
Number sixteen is decisive leadership.
I remember when they used to call George W. Bush, somebody developed a nickname for him, where he was decider in chief. You, as the principal in your business, is maybe your most important role, to be decisive. You have to make the decisions everyday about what needs to be done. They’re not all going to be right, but you’ve got to be decisive.
Number seventeen is to know your numbers.
It’s just critical. It’s something you’ve got to be looking at, ideally, at least once a week, maybe on a daily basis depending on your particular situation. The numbers you’ve got to know, some of the critical ones, is to know your lead class by source. For instance, how much are your leads that you generate on Facebook costing you? If you’re doing direct mail how much are those leads costing you? You need to know that and you need to know your client acquisition cost. How much does it cost you to buy a client? If you’re running a space ad in your local magazine and it cost $1,000 to run that ad and you get 5 new clients from it so your client acquisition cost from that source is $200, you just divide your total ad expenditure by the number of clients generated and that gives you your client acquisition cost.
It will vary by source but you need to know those things because that’s one of the ways that you determine your ROI and which source is better for you than others. Maybe on Facebook your client acquisition cost is only $20, so you know you need to be scaling up your Facebook ads and maybe I’d continue with the space ad as long as you’re generating clients at a breakeven or better. But I would put more money in the Facebook if my client acquisition cost is lower.
There are other considerations, I’m not going to get too long winded about this, but you also need to know if you’re generating a client from Facebook for $20 and that client might only be staying with you for 3 months whereas the client generated from the full page space ad in the magazine stays with you for 6 months. You might be getting a better client from that other source and this is only something you can determine over a period of time and that’s again why you need to know and watch your numbers.
Obviously you need to be looking at average lifetime value of a client. You need to be looking at your fixed and variable expenses. Those types of things. Know your numbers.
The last one is to create great offers.
Offers are the new USP and each offer should have a unique selling proposition and that’s one of the key things. If you combine, as I mentioned earlier, you combine the positive of proof with great offers and you’re consistent about promotion you will grow, you will get more clients and your business will grow. And that’s my list.