All health club operators have some understanding of total cost of ownership (TCO) when it comes to the equipment on the floor. In many cases this understanding is based on the manufacturer and unit with the costliest failures from recent memory. This may not be an accurate portrait of long-term cost, but it does feel good to make a change.
Basic TCO is the direct and indirect costs of providing a treadmill, elliptical, selectorized strength or other to your members. The variables vary from operation to operation, but could include purchase or lease price, cost of capital, freight, installation, operational cost, maintenance, useful life and salvage value. Some other outlying cost of ownership includes risk of injury (slip and fall) and the opportunity cost of equipment not chosen.
Capital purchasing should include as many of these variables as possible, coupled with a formulated return on investment (RIO) to determine the absolute best choice. RIO variables would include variables from TCO and member satisfaction/use, perceived quality, perceived technology, ease of use and other qualitative inputs.
The fitness industry equipment life cycle has, for years, been dictated by the lease. On the surface it seems easier and owners assume the responsibility of repair and maintenance as warranty issues. A combination of TCO and ROI in the decision process will prove that there are better options. The lease model has created a big inefficiency in the industry. The inefficiency is that most organizations do not capture, store and utilize the data required to make accurate purchasing decisions.
Successful clubs have embraced technology and clubs should use technology to track every aspect of the life cycle of each piece of equipment. All equipment records should be identified with the specific piece of equipment.
When looking at a particular treadmill or other from the past year you should record and know:
TCO:
• Cost or cost average per unit.
• Operational average and per unit spikes.
• Maintenance cost.
-Parts cost
-Labor cost
-Who performed the maintenance or repair with time/date stamp (you may find that technicians skills are making the equipment/manufacturer look bad).
• Number of incidents (slip and falls). In most cases the manufacturer will shift liability to you and ask you to prove proper maintenance. These records will be your proof.
• Overtime you will have charted your own useful life timeline instead of manufacturer’s statement.
• Salvage value – use maintenance records to demand top dollar and attach salvage to retired equipment.
ROI:
• Hours used.
• Member complaints.
• Member compliments.
• Member retention during ownership.
• New members joined during ownership.
• TCO inputs.
With this data owners can weigh lease to purchase options, manufacturer performance comparisons, technician performance and member satisfaction. All this data should be stored in a convenient and accessible data base for reference in litigation scenarios. Equipment life cycle data is as important as class participation, liability waivers and the adoption of new class trends.
Managing the equipment life cycle is one of the easiest ways to give your organization the competitive advantage in an ultra competitive landscape that most believe has been maximized by member facing initiative.
Russ Hosea is the director of marketing for FitnessEMS. For more information, contact Tom Strickland at tstrickland@fitnessems.com or visit fitnessems.com.
