I recently spoke with a health club owner who was thinking about changing his club management because sales had stalled, expenses were higher and some people in key positions seemed complacent. I spoke with him about the key things to look for when evaluating his situation so he could recognize warning signs earlier in the future since minor issues often can be resolved before they become major problems.
I thought it would be helpful to share with you the questions I asked him so you could see how you would answer each with regard to your health club. If you answer yes to most of these questions, it is time for an intervention.
Has your health club lost market share? Your membership sales may be growing, but your share of the market may be falling. As competitors enter your market, you have to work even harder to maintain your share or your health club may get into trouble.
Do you have declining member purchases? Membership sales may be holding steady, but fewer and fewer members are making other purchases in your health club. Your other members are spending more, possibly because of price increases. You have to find a way to attract more business from your existing members or your health club is headed for trouble.
Do you have high attrition and low referral business? You need strong member retention because it is much less expensive to keep a health club member than it is to get a new one. It also shows that your health club is still meeting the needs of a core base of members who will refer other people to you. If your members are not coming back, your health club may face trouble.
Do you have declining membership sales? If your membership sales are falling, your health club is definitely headed for trouble. To figure out the best way to handle this problem, you need to isolate whether it is a problem with your health club or the health club industry as a whole.
Are you experiencing disproportionate sales to a small group of corporate clients? A few years ago, we had a club owner whose club was dependent on one corporate client providing an annual corporate membership purchase of $100,000. He was at the mercy of that corporate client, so if that client decided to leave, that club would be in trouble.
Does your health club have high employee turnover? When you lose employees, health club members are affected. They deal with less experienced staffers who do not know your health club or the members’ needs as well as longtime club employees. If you cannot retain club employees, your health club likely will face trouble.
Are costs rising faster than sales (declining profit margins)? Costs in a health club rise for a number of reasons. As your membership and ancillary sales rise, so will your costs. If they do not, why do you need that cost at all? Rising costs in your health club are expected. However, costs that increase faster than club sales means your health club will face trouble at some point because you will have less and less profit for each dollar of sales.
Do you have an increase in member delinquency? Membership sales are great, but not if you do not get paid. That is worse than not making the membership sale at all because it costs you money to make a sale. Slow-paying members also create problems because you cannot pay your bills with receivables. If you do not control your account receivables, your health club may be headed for trouble.
The first key to getting out of this situation and getting your health club back on its feet is to have very specific and defined goals. Your most important goal is to fix your health club.
Based on your background, you may choose to seek out proven and professional assistance. This should not be guesswork. You must start immediately to give your health club its best chance to survive.
Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars and workshops on the practical skills required to successfully build teamwork and market fitness programs and products.