Maximize Revenue and Profit Per Square Foot
A famous business adage is to incorporate at least three to five major new concepts into your business model every year. In these tough economic and financial times, staying put and not developing your business can lead to a dramatic decline in your ability to compete in the fitness industry. Every year, many indirect costs increase — and in a lot of cases, those costs must be absorbed.
At the same time, there is enormous pressure on membership dues thanks to so many low-dollar competitors entering the market. How do you avoid being in a constant state of reduced profits?
There is a solution. Think about how much revenue you would receive if you had every square foot of your facility full to capacity for 24 hours per day, seven days per week. Now let’s look at some options to increase a club’s capacity.
Retention: Retention is the No. 1 driver of profit — the longer you keep members, the higher their Lifetime Value. To increase retention, are you differentiating your club from the competition? Is your customer service and attention to clients exceptional? Are your facilities and equipment clean and never broken? Do you communicate with the customers and provide value-added tips, expertise and advice as part of the membership?
Filling Off-Hours: Do you have a separate membership that includes closed (24/7 access by remote-door reader) hours that is more expensive? Do you have an off-peak membership that is less expensive than a standard membership?
Group personal training increases your revenue by trainer, and by space — and is a segue to increase individual training. Are your trainers, coaches, class instructors booked to capacity? If you don’t have online booking and scheduling, you are missing an opportunity.
Many clubs are using virtual on-demand Group X systems to decrease the costs of paying instructors during low usage times, while still being able to use the studio space.
Online Membership Sign Up: Online membership sign up is another incremental revenue enhancement — and can be accomplished by simultaneously reducing or redirecting labor costs. Products such as supplements, clothing and how-to brochures can also be added to your website for added dollars to the bottom line.
Have you considered using various media resources to enhance your reach to the public? For instance, Facebook and other social media advertising that offers either a special offer, or gift certificates that can be bought online, are effective.
Reports: You won’t improve what you don’t measure. Are you measuring your revenue by charge code, by member type, retention, your direct and indirect costs, closing percentage on tours, and traffic by marketing resource? These measurements will provide brainstorming ideas for improving profit.
Reduce Costs: Increasing profit per square foot by reducing costs is another area that is vitally important. Have you redirected your marketing resources to a spectacular website, and email blasts versus mail and newspaper advertising? What are your merchant rates? Do you receive your EFT dollars immediately, or does your processing company hold the money and receive the interest for a period of time? Have you analyzed the most economic means for cleaning, upkeep and repairs — is in-house or sub contracting better or more cost effective, or maybe a combination of both?
Additional Revenue Streams: Have you looked at adding additional revenue streams per square foot? Are your group exercise classes full? Do you offer children’s or school-age fitness programs? What do you offer in the aerobic studio? What types of group personal training do you offer? What about peak performance training, functional training, Pilates or yoga?
The challenge in owning a business is the ever-changing economic landscape and competitive culture. All new ideas and business improvements are not going to be successful. The key is to identify three to five per year, do a comprehensive plan to implement, evaluate the results, keep the good ones, move on from the ones that don’t fit your demographics, and obtain advice or consulting from industry resources. You must be constantly improving.
David Porter has been a sales consultant at Twin Oaks Software Development for many years. Previously he ran several businesses, including Suburban Athletic Club outside of Boston, which he co-owned and operated for 10 years. He can be reached at 860.829.6000 or email@example.com.