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According to Mike Alpert, the CEO of The Claremont Club, putting together your yearly budget is a process that should take time and be thought out carefully. And, it shouldn’t be a one-man show. Your gym’s managers should play a vital role in building a yearly budget and take ownership of their individual departments.
“It is critical to give your managers ownership of their departments,” said Alpert. “Listen carefully to their input and ask questions if necessary to understand their reasoning.”
Your budget process for the upcoming fiscal year should begin no later than October, and should consist of a consolidated and detailed income statement, a detail of your labor by month and a detailed income statement by department.
“It should be broken down by revenue, operating expenses, labor, payroll and depreciation,” continued Alpert. “For each line item you should be looking at three to four years of history and then take into effect your net gain or loss in membership for the previous year — usually through September with your budget for October, November and December. You should also pay attention to the state of the economy and how this might affect your operating expenses.”
Another factor to consider in your budget is club history. “We have learned that historical information is a great indicator of the continued trend of revenue, expenses and labor,” explained Alpert. “An example might be that membership was up in the previous year, but dues revenue was down. Was this because you budgeted to have more family memberships and ended up with more single memberships?”
Line items club operators can commonly forget to budget for include: marketing, continuing education for staff, and increases in utilities and insurance. To safeguard against being surprised by a huge jump in costs, Alpert confers with energy consultants and insurance brokers so he can intelligently budget for increases in those areas. In addition, “We check with our vendors and ask about pricing to make sure that we are getting the best prices possible,” he continued. “We also let them know that we will be getting other bids on their products.”
Once your budget is finalized, Alpert advised having detailed notes and explanations for the plan, especially if you will present the budget to a board of directors or shareholders. This will minimize lengthy questions and long board meetings.
The Claremont Club has been using the same budget template and process for the past 20 years, and Alpert explained the biggest budgeting challenge continues to be labor. “With minimum wages going up 33 percent over the next four years, new sick leave laws and benefits, we see labor as the major cost going forward,” he said.
Alpert’s final piece of advice for budgeting? “Take your time and pay very good attention to history,” he added. “Make your management team an integral part of the process. Listen and question them on anything that you need clarification on. Use very good notes and assumptions to support the numbers and don’t try to do your budget with one draft.”