Find the extra rep in your business!
Just like building muscle, the health of your fitness business requires that you do those one-percenters that make the difference between growing your business or maintaining the status quo. Whether you’ve been in business for a while or are just starting out, chances are, you are probably offering some kind of discount or concession to certain sections of your membership base. This is perfectly normal and in many cases, essential to increasing your membership numbers. However, over time, these discounts are costing you more money than you probably counted on if they’re not regularly reviewed and adjusted. Here are a few ways your business is losing money:
1. You are not tracking the level of discounting or concessions within your business!
This type of review provides you with insights into the level of discount you are offering throughout your gym, box or PT Studio. For instance, you should be able to break down your total concession and discount amount by month and by type (for example student discounts or veteran discounts). Over time, these figures can change depending on the level of competition in your area or changes in your membership demographics. Tracking these trends allows you to make minor adjustments to your discounts that can have large impacts on your bottom line. Reviewing this part of your business becomes more important as you reach capacity. At some stage, your fitness center’s revenue growth will flatten out as you can not add more members. This type of analysis helps you determine those memberships that should no longer be offered or whether customers on a previous deal, are still eligible to receive that level of discount. For example let’s say you have the following scenario:
- You are now at 95% of capacity for your gym
- You have noticed over the past two years the value of your Student discounts have gone from $1,000 per month (20 student members x $50p/m discount) to $3,500 per month (70 student member x $50p/m)
- Essentially Student Memberships now mean you maximum revenue is reduced by $42,000 pa.
- At this level of capacity and discounting, you could do choose to do any of the following three things
- Leave things as they are for now due to competitive pressures (there are a lot of gyms in your catchment area),
- Reduce the level of discount for new students signing up (thus increasing their price) and assess the impact on your membership sign-up rates
- Reduce the discount available on renewals for students. This is the most impactful, but may also result in some churn. For instance, reducing the discount by $25 means that over the course of the year, your would have an extra $21,000 to reinvest into your products and services.
2. You are not scheduling membership price reviews!
You should be reviewing your membership types and prices at least yearly. But what specifically are you looking for? Basically, where there is a higher demand for one type of membership or service, increase the price for new members signing up to them. It is one of the simplest ways to grow your business, price the most sought-after parts of your business at a premium. As well as improving the profitability of your fitness center or studio, it will also allow you to re-invest into these services so your members can continue receiving an excellent product.
Remember, to do this you need to be tracking this information in the first place. Are you tracking it?
3. You are not correctly tracking non-financial members!
We’ve touched on managing arrears here before. One of the key areas of loss we find in fitness businesses is the number of write-offs they incur but do not record. For example, Tom has a 12-month membership paid monthly. For whatever reason, he misses a payment on the 5th month of his membership but resumes paying next month. On the 12 month, he does not renew. The 5th month of payment was not received. Now, in isolation, this is not a big deal. However, most gyms we speak to do not track how many of these types of missed payments occur across their membership base. Yes, there are many reasons why it is reasonable to skip payments but you should be using your gym software to track the value of these missed payments so you can make informed policy decisions that continue growing your business.
Start by recording and then test your responses to the data
If you aren’t tracking it… how are you going to know if it is an issue? The kinds of reviews discussed above are not daily or even weekly. They should be reviewed every 6-12 months and will help identify areas of low hanging fruit to address to continue the growth of your business. Where the data points to an area that is losing you money, change your process and note the change in your businesses financial performance. For example:
- If you are seeing more and more students signing up for your business, you could reduce the level of discount you offer this membership type and see how it affects signups,
- Look through your membership types and identify the most in-demand services, either increase the price or add a slightly more premium membership that offers some extras and try and upsell your members to this membership, or
- If your member misses a payment, double up their next payment or add it to the end of their membership.
These are a few ideas to help improve the profitability and, therefore, sustainability of your fitness business. One of the prerequisites of this advice is that you have an excellent product that delivers value to your clients. What is the low hanging fruit in your business? How have you improved the financial health of your gym?
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