KING OF THE HILL

Paying attention to the competition keep your club in top form.

When student artists are learning their craft, they study the masters. They spend hours in countless museums noting how Picasso fragmented his images, or the use of the color yellow in a Van Gogh. They also visit each other's exhibitions to see what the other artists in their community are up to.

The same truth applies to business. Running a business successfully is an art form. And in order to be a master of your craft, you need to look outside your own club doors, and study your competition.

“This is an unbelievably important article,” says Kirk Galiani of Gold's Gym International. “You'd be amazed how little many of the owners really know about the competition.”

Considering the amount of small businesses (including clubs) that close within the first two years of operation (according to the most recent statistics from the American Institute of Small Business, 590,000 new small businesses were started in 1999. At the same time, 530,000 closed), maybe this fact is not so amazing after all.

“I would say less than 50 percent of the owners have visited their competition in the past year,” Galiani continues. “This is the equivalent of a pro football team not having viewed films on the competition before they play them.”

So, if you do visit your competition on a regular basis, keep doing it. And, if you don't, then you'd better start. And while you're visiting, keep in mind the following:

Club owners need to visit their competition, but so should the management, sales people, and other key personnel. “Every new staff member that comes to work here visits the other clubs,” says Dan Horan, co-owner of the Hatfield Athletic Club in Hatfield, PA, and a board member of the Delaware Valley Alliance of Health & Sportsclubs.

“I always visit clubs on a regular basis,” Horan continues. “Anytime I'm near a club I have to jump out of the car and go see it.” In Horan's case, this works out to be about once a week.

“My goal is to eventually visit every club in the country,” he says.

But visiting another club is more than just a sight-seeing tour. You need to be evaluating the staff, the energy, the atmosphere, the pricing, the equipment, the programs — see what the clubs are doing better than you, or learn from their mistakes. Visiting another club is an invaluable educational tool.

“Knowledge is power, information is power,” explains Horan.

Club owners need to understand how to compete with the competition. It's not all about price. “Price is always a factor in the health club industry, just like in any other industry, but price is not the only thing that customers look at,” Galiani says.

In fact, clubs that operate by running price wars with their competition are just hurting themselves, and the industry in general, in the end. “Nobody really wins in a price war. There are two losers,” says Galiani. “But you do have to be competitively priced] with a club that is similar to yours.”

According to Horan, “Should you compete with your competitors based on price? Absolutely not. How should you compete? On service.”

“I am the highest priced club in my market. When I was only a couple of dollars more than my competition, it was honestly a harder sell.”

His philosophy on raising his club's dues was so he could appeal to the non “gym rat” portion of the population. These are the customers that don't base their decisions on joining a club based on price, but, rather on what the club has to offer.

“[The customers] are not going to leave on price because they didn't join on price,” Horan rationalizes.

Understand your competitions' membership base, and separate your club by appealing to a different niche market. Let's face it, only 10 percent of the population currently belongs to a gym. Club owners need to think outside of the box so that they can target portions of the leftover 90 percent. “You can't be all things to all people,” Horan says.

Agrees Galiani, “I see too many clubs that try to be everything to everybody. Basically, in my opinion — especially in a compact market — you need to have a niche.”

But this is not always a hard-and-fast rule, he says. “In smaller markets, you want to be a little broader, because there is not as much of a customer base.”

As an example of niche marketing in the face of a competitor with more clout, Galiani explains a situation in which a large YMCA was opening up just a few miles from their 30,000-square-foot club. This new YMCA was 70,000 square feet, had four different locker rooms, a large pool, day care, soccer field, and a basketball court. “They had everything,” Galiani says.

So, in order to compete with this very family-oriented club, Galiani's club decided to narrow their focus into appealing to those members that “didn't want to go to a Y and have a lot of kids running around,” Galiani says knowingly after analyzing the competition.

“We decided to go after the age 20 to 40 people who wanted to go to a gym, work out, and be seen a little bit.” They also did some basic remodeling and added a day care component to capture the members with children that may have opted for the Y for their children's services.

“When the Y did open, yes we did lose some members,” Galiani continues. “But we've since stabilized and now are starting to get more members than before.”
— L.S.

BUDGETING BASICS

Better business budgeting for a better bottom line.

It's hard to get where you're going if you don't know where you are. This is why travelers carry maps. And for any good business the same is true. But in this case that map is the company's budget.

Sure we all know the meaning of the word budget — a systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period — but do we really know what a budget means?

“A budget really is an exercise in planning that gives you the opportunity to think through all the events that you can expect to occur during the year,” says Steve Schwartz, president and CEO of Tennis Corp. of America (TCA). “Once you and your staff have figured out these possible events, you then need to decide a plan of action and execute it.”

Budget for success. The first thing that must be figured out is what type of budget will work best for your situation, according to many experts.

“Budgeting is different for clubs based on a number of factors, such as if it is a new facility or an existing one,” says Doug Ribley, director of fitness & wellness, Akron General Health Systems. “It is decidedly different working from a history or not.”

Ribley adds that it is possible to put a sound budget together for either scenario, but both take a little work and a lot of estimating.

“A new facility, you have to build the budget on assumptions and industry statistics leading to line items being based on good guesses,” he says. “But there is enough research and budgeting is enough of a science that you can come very close regardless.”

When it comes for budgeting existing clubs, Schwartz says that there are two ways to look at it, at least.

“When setting a budget you can either set a conservative one or one that stretches the goal,” he explains. “The more realistic one is easier to achieve, while the second one can be an effective tool; if you achieve your goals you'll be ecstatic, and if not you'll still probably be happy.”

One drawback to an overly ambitious budget, according to Schwartz, is that it can backfire in an institutional setting. “Somewhere along the line, someone will rely on those numbers,” he says. “And, they will be very unhappy if they are not met — even if the results are still good compared to a more realistic budget.”

Know your numbers. The key to building a solid budget is having a solid foundation of information whether it is from industry statistics or your facility's own history.

“You need to quantify the numbers for your business,” says Schwartz. “Looking at the last few years can help those making out the budget to see what as helped them reach current goals and then reach the ultimate objective of the organization for the new period.”

But to quantify your budgetary decisions you need to know what has worked — or not worked — in the past, then build on that knowledge figuring for the future.

“It is vital that you collect good data and keep good records,” advises Ribley, noting that that goes for both departmental and overall budgeting. “That way you can go back and look at the history of your business so you can look ahead and help you make educated guesses for the next year or whatever period of time you are budgeting for.”

Plan for the unplanned. Despite meticulous record keeping, analysis of data, and a look at historical information things happen that you may not have accounted for or planned on such as maintenance expenses, insurance and utility price changes. Additionally, the effects of the overall economic climate can impact both the revenue and expense sides of the budgetary ledger. These unexpected and often uncontrollable factors are what make sticking to a budget is its most challenging and its most important.

One way to beat the unexpected is to plan for it. “You should always put in a contingency for problems that may arise,” says Schwartz. “The one thing you can always expect is the unexpected. Problems always arise.”

Ribley says that while the unexpected will occur you need to plan for things you can account for like new programming, inflation, staffing needs, etc., while sticking to your budget in the tough times.

“You really have to set a budget and stick to it no matter what may happen,” says Ribley. “The management team must meet and think of creative ways to handle the problems or unexpected shifts the best they can within the constraints of the budget.”
— J.A.

EYE ON YOU

What to watch when visiting your competition

1. Pricing

2. Services

3. Cleanliness

3. Programming

4. Equipment

5. Club layout

6. Club design

7. Club membership

8. Club size

9. Club's exposure to the main road

10. The sales program