Effective methods of business spending.

With the calendar year coming to an end, it's time to give serious thought to how you plan to divvy up your business spending for 2001.

- Have a vision. That means look at the short term vs. the long term. "Are you trying to position yourself in your market as something that will take two or three years to develop?" asks Rick Caro, president of Management Vision, in New York City. If so, you can spread out your spending over that time frame.

On the other hand, if you're determined to make 2001 the year you become a more family-friendly club, then you'd better allocate a large chunk of your spending for kids' programming and the staff and the promotions to make it happen.

Also, look at the big picture, advises Caro: Where do you want to be in five years? What kind of club do you want to be? How do you want to differentiate yourself from your competitors? "Once you know the answers to these questions, you can ask yourself the harder question: `How are we going to get there?'" says Caro.

At Gainesville Health & Fitness, in Florida, management knows exactly where each year's spending will occur: "Our rule of thumb is we try to keep our club very modern," says Mike Kline, CFO. "We want the club to look brand new. We want the latest equipment. (It's replaced every three to five years.)"

For that reason, Gainesville makes sure its yearly capital budget allows for a "certain percentage of depreciation," says Kline. "The thinking is that every year you are writing something off, you should be replacing it."

- Institute a 12-month plan. According to Caro, this plan should be divided into your annual operating budget and your capital expenditure budget.

Your operating budget should be broken down by month and, ideally, by department "with real accountability," says Caro. "Theoretically, your department heads and your general manager would put together their request lists for the resources they need to succeed in that plan."

Your capital expenditures budget should consist of monies that would take more than one year to get a return on, such as fitness or computer equipment, the renovation of your facility or expansion.

- Prioritize. Each department head may have three or four items on her wish list. "Maybe eight or 10 requests turn out to be the priorities you focus on for the year," says Caro. "The rest may be things you consider in the future."

-Don't overlook staff. "If I bring in an expert who runs wellness classes and weight-loss programs or programs for seniors, that sounds like something that could lead to all kinds of joiners," says Caro.

- Have a marketing budget. "We try to keep ours as a percentage of gross revenues," says Kline. "From there we develop what the dollar number is and see how we can make it fit. Sometimes we adjust it upward or downward. We have a good handle on what we are going to market and spend in the advertising area."

- Tie your spending plans to the season whenever possible. For example, Gainesville is a college town, so August is a big month for college students returning. "That's when we hit all the apartment complexes," says Kline. "We go drop off flyers and meet with the fraternities and sororities."

- Spread out the wealth. Rather than unveil all your new 2001 equipment in January, phase it in. Introduce a few pieces in January, one or two in March, another two pieces in September and another two at the end of October. And publicize the installation of each new piece.

- Give your staff its financial due. Service businesses have got to create performance-based compensation, according to Caro: "They need to tie decision-makers - meaning department heads and above - to measurable criteria so if someone creates additional bottom-line results, they should benefit."

- Listen to your members. Before you decide where you are going to put your money, survey your members. Read the suggestion box. Have staffers talk with members.

- Be thrifty as well as philosophical. "My philosophy has always been `Sock away the money during the good times to have it during the slow times,'" says Kline. "We've been pretty successful doing that. When I talk to people from other clubs, they may have a great summer and they go gangbusters and spend it all, and come January, February or March, they don't have the money. They don't put it away for a rainy day."

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