Mike Alpert, the COO at Smart Health Clubs, shares tips for improving the financial well-being of your health club.
There are many things that lead to the financial well-being of any health club such as new member sales, non-dues revenue, member retention and total operating expenses. When you analyze each of these on a monthly basis it is critical that you know all of the numbers.
Let’s take a look at new member sales and assume that your club finished September with 100 sales. And let’s assume that your joining fee/initiation fee was $50 and dues collected for the first month were an additional $8,000. You collected $13,000. Great. But do you know what the cost of the sales was and what your breakeven from a cash flow basis is?
First you need to add up all of your sales associates base pay, all commissions you paid and any bonus for meeting or exceeding your budget numbers, your sales directors’ salary and bonus, if any and all of your marketing expenses and operating expenses for sales that you had during the month. Don’t forget to add in any labor and operating expenses you had for social media or internal member referrals. When you add everything up the chances are you are either in the red or there is very little profit left.
Now let’s look at cost of sale. Take all the expenses from above and divide them by 100 — your new member sales — that will tell you the cost to sell each of the 100 new memberships. If your average dues per month are $75 you divide that into the cost of sales number and it will tell you how many months it will take you to break even from a cash flow basis.
It will become crystal clear that it’s more cost effective to keep a current member than to attract and sell a new member. Look at ways to incentivize your current members to refer their friends and associates to you. The use of a good digital marketing system can offer a great way to do this with little to no internal cost to you. The point is to know your numbers and stay on top of them. Cash flow is critical for the financial well-being of your club.