How Outstanding Collections Impact Your Gym

Here’s the reality: according to the Statistic Brain Research Research Institute, which analyzed findings from IHRSA, 63% of gym memberships go completely unused, and 22% of new signups stop hitting the gym six months in.

Granted, gyms and fitness studios understand and even integrate this fall-off into their scheduling, facilities and member outreach cycles. However, the true challenge comes when no-show members become non-paying members — when inactive members forget to update their billing information, or in some cases, opt to simply stop paying.

The Reality of Fitness Collections

While a one-off lapsed member may not seem like a major issue, most gyms are faced with much more staggering numbers. According to IHRSA, the average monthly membership hovers around $64 for chains and $57 for independent clubs. If you have 250 non-paying members, you could be losing $171,000 to $192,000 per year — and chances are that number is double, triple or even quadruple if you’re in a high-cost market like New York City or Los Angeles.

Intentional or not, millions of members aren’t paying their monthly gym and studio membership fees — and no matter the number, it’s impacting your bottom line and your business’s ability to grow and thrive.

The Problem with Staff Collections

However, that is just the beginning. Many gyms and fitness studios struggle to manage collections, which only compounds the problem. It’s common for gym owners and managers to turn to their staff to make collections calls during down time. While this may be effective at engaging members with expired credit cards or outdated billing information, chances are lapsed members dodging payments won’t be compelled by a quick check-in from their former gym.

Beyond that, though, every minute your staff spends dialing for past-due dollars is a minute they aren’t spending engaging active, paying members — members they could be registering, renewing or signing up for added services like personal training, team training, group fitness and products. It’s a lose-lose situation — you’re losing out on incremental revenue while not collecting those past-due payments.

Why Collections Agencies Weren’t Made for Gyms

With that in mind, many gyms and fitness studios opt to integrate a third-party collections agency into the mix. While many have significant experience, collections agencies tend to focus on credit card and loan delinquencies — more substantial, “traditional” debts. It’s no surprise, then, that only a small percentage of delinquent debts are ever recovered. For many businesses, recouping just 20% of past-due debts is high. In other words, that $192,000 in past-due payments will, at best, turn up just $38,400 in repayments — and that’s before the collections agency’s fees, which can hit 50% or more of debt collected.

How to Maximize Your Past-Due Collections

That said, there are targeted solutions to help gyms and fitness studios maximize their past-due collections while minimizing lag and added fees. When engaging a third-party collections agency, be sure to ask some key questions:

• Do you work exclusively with gyms, fitness studios and other fitness-industry businesses?
• How do you tailor your approach to the fitness industry?
• What is your success rate with gyms and fitness studios?
• Where are your call centers based and where is my data stored?

Aim for collections companies that deal exclusively with gyms and fitness businesses versus those who apply a one-size-fits-all approach. And beyond that, be sure your data and your member data is safe, secure and not sitting off-shore where it’s out of sight and often out of mind. By asking these questions upfront, you’ll better structure your past-due payment workflows and collections approach which, immediately, will boost your bottom line — and your business.

Alex Wolf is VP of customer success for Swift Financial Services, which provides targeted collections services exclusively for gyms, wellness studios and fitness facilities. Contact Alex at 347.943.6668 or info@Swiftfinancial.fit.