Leveraging External Service Providers
As the fitness industry continues to grow to multi-site ownership and operations, consider outsourcing as a strategic step to gaining a competitive advantage. External service providers (ESPs) should be considered as partners, rather than just a contractual business that carries out a major function of the core business.
Before, cost reduction was one of the main reasons why companies look to ESPs. It still is, but today there are several critical areas, such as:
- Freeing up and gaining access to additional resources.
- Improving and maintaining business focus.
- Recruiting top talent.
- Streamlining time-consuming tasks.
Businesses should carefully consider the ESP partner they choose, to ensure their core competencies are fully utilized. Companies want to invest in internal resources to deliver core capabilities and focus areas with clear lineage of responsibilities, and outsource non-critical business functions.
In engagement with an ESP, the first step is to create a RFI (Request For Information) on key business requirements, and deliver to potential partners for response. This provides a general idea on what services the partner can deliver and whether they are the right fit.
In the RFP (Request For Proposal) process, this is where you develop your scope of work, deadline to respond and a presentation from the provider. Determining costs are associated with the type of contract. Fixed costs and fixed costs with incentives contracts are typical in the fitness industry.
At the time of contract negotiations, a common mistake is not including KPIs, 30-day and quarterly business review timelines. Developing your KPIs and holding the partner accountable is critical in maintaining a successful partnership.
If your company does not have an internal procurement or legal team, consider hiring an outside firm to assist in the negotiations, as well as advise and draft the contracts within the best interests of your company.
The future of multiple partnerships is the way of doing business today and tomorrow.
Missy Moss is a sport, fitness and wellness industry consultant, and a former IHRSA Executive Board Member.