A club manager or department head in charge of a health club profit center often has a more difficult job than someone overseeing a department that is not classified as a profit center. That is because a cost center manager (that is my term for defining most department heads in health clubs) only has to worry about staying within or even cutting budget. On the other hand, the head of a profit center must not only stay within budget and decrease costs but also generate additional revenue by increasing sales.
A cost center is a club department that is important to the overall success of a health club but its contribution to revenues and profits can be only incrementally measured. A cost center in your health club is an area that typically runs in the red with upfront losses but will result in a much more productive health club if managed correctly. Yet, it is a cost center and not a profit center in your health club that is likely to find itself at the top of the list when it comes to recessionary cut-backs.
Many health clubs are tempted to treat all departments (with the exception of membership sales) as cost centers instead of true profit centers. This can be a terrible mistake because if department managers are rewarded simply on cutting costs, they will not make the necessary reinvestment in their department to grow profitably for the future. Therefore, you may eventually end up with outdated equipment and facilities. If that happens, staff and your members are likely to go elsewhere because their needs are not being met. Instead, you should implement a profit center approach for your health club departments, which will blend the need for current cash flow with the desire to grow departmental revenues in the future, making health club department managers accountable for the long-term health of their department.
One of the cost centers that can be turned into a profit center is the front desk. To get started turning around this department, you will need to do the following:
- Create quotas for revenue and expense. Expectations need to be established.
- Do daily, weekly and monthly tracking. Awareness will help create accountability, plus the numbers will tell you what you should be doing next.
- Train, train and train. Make sure you keep up on training new and existing staff members. This is no different than what you should be doing each week in your membership department.
- Actively market and promote. Put together a marketing plan of action. Again, this is no different than what you do in membership each month, just at a smaller level.
- Establish accountability. This program will only be important to your department heads if it is first important to you. To show them that it is important to you, you must follow up. Inspect what you expect.
- Establish the right culture. Creating this culture starts with the club owner and manager. Your staff will follow your behavior. This will be critical for a culture change.
- Create opportunities for department managers and staff. Since you are generating revenue, you can compensate your front desk manager based on production. This will help in recruiting and retaining front desk staff and management.
The front desk can generate revenue by having this department take on the following:
- Sell gift certificates
- Collect “past dues” dues
- Sell punch cards
- Rent conference rooms
- Sell weight-loss products, T-shirts, locks, chair massages, cell phone providers, tanning, etc.
- Sell temporary (or long-term) rental space, much like a kiosk in a mall
- Collect guest fees
The only real limitation will be your imagination
It will not take much to move the needle. For example, if the front desk starts bringing in $50 per day, that would be $1,500 per month. If that department brings in $100 per day, that would equal $3,000 per month—something that group likely can do by selling gift certificates alone. Start adding up everything else, and you can see that it is a great opportunity.
Doing the above would create a significant financial swing in most clubs. There is a lot to do in these areas, but with the proper direction and training, these departments can go from being cost centers to profit centers in most cases.
Now, go create a profit center.
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.