Make the Pivot to Revenue Per Square Foot and Revenue Per Staff Hour
Most gyms, health clubs and fitness studios focus on revenue per member. Some may go a step further and break revenue down into average revenue per member per month and average length of member retention.
Incremental revenue opportunities often emerge when considering both revenue per square foot and revenue per staff hour. Both are measures widely used in other industries and hold wide learnings for club owners and operators.
Revenue per square foot is the main financial driver for retail stores and one club owners are increasingly focused on. It essentially challenges retailers to decide how best to use their space. Of course, this metric applies directly to retail sections of clubs (think juice bars and clothing sales), but increasingly club owners should think about this metric for the club in its entirety. For example, while on-site physical therapy or spa services drive incremental revenue, they require physical space to operate. A well-run spa/massage room might generate $1,000 a day in revenue, but also requires 100 square foot of space. That’s $10 per square foot per day.
On the other end of the spectrum, additional services such as health testing require little to no additional space and often carry retail price tags over $200. Trainers and/or staff make the tests available to members from existing locations at the club, be it the front desk or the gym floor. Selling just one such test a day would essentially translate to $200 per square foot per day.
Similarly, another notion gaining traction is revenue per staff hour. Let’s look at the same two activities as above in regards to this metric. In the example of the spa/massage room, let’s assume all massages are 60 minutes long and a full utilization averages eight massages per day. Knowing that the full day’s revenue was $1,000, means the revenue per staff hour is thus $125.
Now let’s look at the economics of selling ancillary fitness and wellness tests. These tests are usually done via a simple oral swab or a small finger prick. Filling out a test requisition form and supplying the sample is usually a 5-minute process. Allowing 5 minutes for your trainer or staff to explain the test means the entire process takes 10 minutes.
With a retail price of $200, that means selling tests has a revenue per staff hour of $1,200 — nearly 10 times having a full spa room. While certainly no one should expect a staff member to spend a full hour doing nothing but selling tests, it’s a useful metric to help understand the cost of revenue and the productivity of staff time.
By considering both revenue per square foot and revenue per staff hour, club owners and operators may find themselves considering new services and products in a new light, and hopefully a more profitable one.
Kevin Weinstein is the CEO of Analyte Health, the nation’s largest consumer online testing company. He can be reached at email@example.com.