Ask a studio owner what a member pays and she will tell you to the dollar. Ask what a member is worth and most will pause, because the number has never been on a screen in front of them. It should be. It is the figure that says how much an ad can cost, whether a note to a fading regular is worth ten minutes, and what it means when three people cancel in a week.
The math is five lines long and needs nothing you do not already have. This piece runs all five on one invented studio: 240 members, $169 a month, losing 5.5% of them a month. Swap in your own three numbers and the rest follows.
The math in one minute
- A member is a multi-thousand-dollar relationship, not a monthly payment. Dues times stay puts the number on the table.
- Average stay is just churn upside down. One divided by monthly churn. Every point of churn you remove adds months to every member.
- Payback matters more than the ratio. A studio runs on cash, so ask how many months of dues it takes to earn back what a member cost.
- A save is worth the months that follow it, and costs a note rather than an ad.
| The line | The sum | In the example | What it decides |
|---|---|---|---|
| 1. What she is worth | monthly dues × average stay | $169 × 18 = $3,042 | how seriously to take one cancellation |
| 2. What she cost to win | acquisition spending ÷ new members | $3,495 ÷ 15 = $233 | what the next ad dollar has to beat |
| 3. Payback | cost to win ÷ monthly dues | $233 ÷ $169 = 1.4 months | how much cash growth ties up |
| 4. What a fade costs | dues × the months she did not stay | $169 × 12 = $2,028 | what the at-risk list is really worth |
| 5. What a save is worth | dues × the months she went on to stay | up to $2,028, from a note | where the cheapest revenue is |
How do you calculate member lifetime value?
Monthly dues times average stay. Dues you know. Average stay is the number most owners do not have, and it is sitting inside one they do: one divided by monthly churn. A studio that loses 5.5% of its members each month keeps the average member 1 ÷ 0.055, which is about 18 months. Multiply: $169 × 18 is $3,042.
The reason this works is that churn is a rate of leaving, and the average wait for something that happens at a steady rate is one over the rate. It is an approximation, new members leave faster than old ones, but it is a good one, and it has the great merit of moving when your studio does. Which leads to the most useful table in this piece.
Read the gap between the rows. The same studio, the same price, the same members, and a member is worth $1,183 more at 4% churn than at 5.5%. No price rise does that. This is why seeing the fade before the cancellation is a revenue project and not a customer-service one. The churn calculator runs the same sum on your own figures and shows what each point does to a year.
What did she cost to win?
The second line is cost per new member: everything spent on getting members, divided by everyone who joined in the same period. In the example the studio spent $3,495 on ads last month and 15 people joined, so a member cost $233.
Two cautions. Count members, not leads: a campaign that produces forty form fills and two members cost what the two members cost. And be honest about the numerator. If the intro offer loses money on every class, or a staff member spends ten hours a week on follow-up, that is acquisition cost too. The cost breakdown covers what belongs in it. Whatever you include, keep it the same every month, because the trend is more useful than the level.
What is a good payback period for a new member?
Short enough that growth does not starve you of cash. Payback is the cost to win a member divided by her monthly dues: $233 ÷ $169 is 1.4 months, so she has paid back what she cost partway through her second month. Everything from there to month eighteen is the return.
You will see a ratio quoted for this, lifetime value to acquisition cost, with three to one offered as the target. Treat it with some suspicion. It is a rule of thumb borrowed from software companies, and nobody has shown it fits a studio. Payback in months is the more useful form of the same idea, because a studio is a cash business: a member who takes ten months to pay back her cost is a loan you made to your own marketing, however handsome her lifetime figure.
What a fade costs
Now the uncomfortable line. Average stay is an average, and the members who pull it down are the ones who drift: three classes a week, then two, then one, then a cancellation email in the new year. A member who leaves at month six instead of month eighteen has not cost you a month's dues. She has cost you the twelve months she did not stay: $2,028.
Multiply that by the list. If twelve regulars are fading right now, the monthly dues at risk are 12 × $169, which is $2,028 a month, and the value walking toward the door is twelve times that again.
What is it worth to save a member?
The months she goes on to stay, for the price of a note. If a two-line message in week two of a fade brings back a member who then stays another year, that note earned $2,028. No ad does that, and none of it needs a discount. It needs someone to notice in time and to write as a person: name the class she used to take, invite her back to it, ask nothing else.
Be careful how you count it, though, because this is where retention numbers usually go wrong. You cannot know how long she would have stayed, or whether she would have come back by herself. A number that claims the full twelve months is a guess dressed as a result. The honest version counts only what can be confirmed: she was at risk, a note went out, and she is still a paying member sixty days later. The Recovered Revenue ledger works that way. It credits one month's dues when the membership is still live at sixty days, again at ninety and at a hundred and twenty, and stops at three months however long she stays.
Should lifetime value use revenue or profit?
Revenue to see the scale, profit to set a budget. Dues times stay is a revenue figure, and it is the right one for the question this piece started with: is one member worth ten minutes of attention. She is. For a spending decision, though, a member's dues are not all yours to keep. Instructors, rent and the booking platform take their share first. Apply your margin: at 60%, the $3,042 member is worth about $1,825, and that is the number her $233 cost should be set against. It still clears it nearly eight times over. It simply clears it less dramatically, which is the point of doing it.
Where this lives
All five lines come out of data your booking platform already holds. What is missing is someone to keep them current, because a lifetime value worked out once in a spreadsheet is out of date by the next billing run. That is what Xyzios does. It works with Mindbody and is an approved Mariana Tek integration. From your own history it shows average revenue per member and average member lifetime, a lifetime value that applies a margin, so it reads lower than the dues-times-stay figure above, and one blended cost per new member to set it against. The At Risk list shows the dues at risk in dollars. For members at high risk a save note is drafted in your studio's voice and waits for your approval, and the ledger credits a save only for the months it has confirmed. At the Founders Rate, $199 a month for a location, the software costs less than one member's dues in this example.
Whatever you use, run the five lines once with your own numbers. The leak calculator will size what is slipping away, the five levers cover what to do with the members you keep, and the two-minute studio check shows which number needs you first.