Despite recent signals of improvement, the economy is still challenging the fitness industry, particularly in markets where unemployment remains high. If the economy still is not favorable in your market, try focusing on these five areas:
1. Club metrics
Club executives need to rely on timely information to make more regular mid-course corrections. In the past, general managers and department heads relied on monthly information (and often received it in the middle of the following month), but now they can receive data on a weekly or even a daily basis. Some dashboards now provide critical numbers specifically geared to each individual club, such as financial data, membership statistics, member usage and physical plant metrics. This information is power.
2. A meaningful budget with detailed assumptions
When creating budgets in the past, many club owners simply tweaked data from the current year's totals for the next year's budget. Now, more operators are returning to the proper system of creating a budget from scratch, called zero-based budgeting. This method uses the previous year's actual numbers for the year-to-date, projecting the rest of the year in detail, and studying each line item in detail.
The general manager and each department head take on this task. One person should be responsible for each and every item, no matter how small, then create the next year's goals. Further expense reductions over the current year may be projected. Each line item for every month has an assumption written down to support it. Some club operators are more significantly tying their staff's future compensation to achieving the bottom line for the club and their own department. Club operators also should create a separate capital expenditure budget for the new year.
3. Member research
Understanding what your members think becomes even more important when attrition is high, members are spending less on ancillary revenue, member referrals are fewer, budgets are tighter and competition is significant. In effect, clubs have a huge number of free consultants — they are called members. They care about the club and will tell you honestly what they think.
It is critical to have an independent professional club market research company conduct annual member surveys. This can lead to prioritized and inexpensive improvements. By also anonymously surveying former members, club owners can learn why they originally joined your club, why they really left, what they are doing now and what it would take to re-attract them.
4. Deeper cost-cutting
Many club owners implemented real cost-cutting measures last year, some of which will have even greater impacts this year. However, greater savings of another 5 percent to 10 percent of total revenue are possible. Club operators must review the big categories: payroll and benefits, utilities, repairs and maintenance, marketing, outside services, supplies, etc. Then they must work on the fixed costs: rent and common-area maintenance charges, debt, insurance and equipment leasing.
Next are the behind-the-scenes expenses: banking fees, EFT charges, dues and licenses, alarm systems, garbage removal, and office supplies. Finally, look at the little expenses: printing, medical supplies, magazine subscriptions, donations, decorations, professional development, travel and miscellaneous. All items need a champion assigned to study them, understand the underlying assumptions and plan for a different 2010.
5. Thinking long-term but acting in the short-term
Many operators are focused on the immediate period — at most, the current year. Club owners with staying power and plans to be more successful need to think three to five years out. This means considering changes to the physical plant and equipment.
It also means contemplating financial resources and thinking of future debt or equity needs. It means planning for when the marketplace gets stronger so the club reinvests in greater staffing, more marketing, better systems, an improved Web site, new programs and increased pricing. One needs to be ready for the future before it is upon us.
Rick Caro is president of Management Vision Inc., a 25-year-old consulting company that serves the club industry. The company focuses on market analyses, valuations, member surveys, club finances, expert witness testimony and operational analyses. Caro can be reached at 800-778-4411 or at mgmtvision@gmail.com.