Understanding a business’s bottom line is key to becoming a successful manager.
Group fitness instructors and personal trainers: are you looking for the next step in your career? If so, you might be interested in moving into management. This move could very well increase your earnings and provide the chance for professional growth in the fitness industry.
Before you make this career change, however, know that you must possess effective business skills. Typically, our skills in the art of teaching or training allow the business side to take care of itself. We teach well, we train well; we take care of the customer, and the dollar signs follow, enabling us to meet our sales goals and/or our desired class-participation numbers.
However, if you are interested in being a manager, you must be able to create and manage systems that allow your staff to use their best assets to meet the underlying financial needs of the facility. The faster you become familiar with the notion that every employee has a “direct line to dues” (meaning every action employees take in a classroom or on the fitness floor influences the total number of memberships within the facility), the easier it will be to make the transition from fabulous front-line staff member to behind-the-scenes business wizard.
The budget is where it all begins. Consider yourself an owner of a company (your department) within a company (the facility); the budget represents your checking account, and how you spend it determines your success.
As a manager, you will be expected to participate in the budgetary process on a variety of levels. Depending on the time of year, you will analyze, develop and manage the budget for your department in relation to the facility as a whole. Here’s how.
To begin to understand a budget, determine if you are a revenue or a nonrevenue department. Revenue departments earn money for the facility by selling products and/or services to the members on top of dues. Nonrevenue departments provide services that enhance the value of membership but don’t directly earn money.
Expectations. If your department is a revenue generator, you will want to know the department expectations:
- How much money are you supposed to bring in?
- Is the revenue divided up by program/service, or is it in one lump sum?
- How does this revenue projection compare with actual numbers from the previous years?
Labor Costs. Whether you are in charge of a revenue or a nonrevenue department, the next step is to review labor costs. What is the projected payroll expense for your staff (including your salary), and how does it compare with years past?
Expenses. Last, you need to review all expenses housed under your department:
- Are you responsible for purchasing equipment? (Note that large equipment purchases should not be included in your department’s budget but rather pulled out as a capital expense. A capital expense is for basic assets, such as property, fixtures or machinery. What dollar amount constitutes a capital expense varies from company to company; be sure to find this out.)
- Are education, dues/subscriptions and professional expenses included for you and/or your staff?
- Are you in charge of paying for business supplies for your department? That is, do you have an allocation of funds for minor supplies?
- Do equipment repairs fall under your jurisdiction (fixing microphones, treadmills, TVs)?
Revenue, labor and expenses are the main “buckets” you will keep your eye on throughout the year as you strive to increase your department’s value in the mind of the big boss. You will look at the year as a whole and at each month’s projections.
As a manager, you must consider how your department can impact the business’s overall financial climate. Once you’ve analyzed a current budget, you can predict the ways you will increase revenue (if you are responsible for this task) or decrease spending to influence the facility’s bottom line.
When developing a budget, look first at a healthy growth curve for revenue. Three percent growth is a solid number, but will that work for you? Do the math; take the revenue projections from previous years and notice the trends. You should at least match the growth from past years. As for labor costs, unless you are planning to take on a lot more work from your staff in order to eliminate employees (which you shouldn’t!), the figures will most likely not go down from year to year. Again, 3% is a healthy increase to factor in for the cost-of-living and annual raises typically expected. Of course, if you are a revenue generator and you’ve expected a 3% growth in money collected, then spending 3% more on labor will not seem like a stretch. But, if you are nonrevenue, you may need to plan how you will convince upper management that the pay raises are warranted.
Adjusting expenses is the best way to make budget changes. Look for places where you can cut expenses (maybe you bought a microphone last year and won’t need one this year, or you no longer provide uniforms for employees, so you can eliminate that expense). Also, look at adding in expenses that will assist you in either increasing revenue or decreasing labor costs. For example, you might want to throw in enough funds to purchase heavy bags for the weight room floor and to pay for a few of your staff members to be trained on how to use them. In exchange, you will project increased revenue from private and semiprivate boxing sessions. Or perhaps you will include money in your budget to reward your top three instructors by sending them to a fitness conference and having them come back and educate your staff about what they learned. You can justify the added expense by pointing out that it will decrease labor costs, as you will leverage the perk of free continuing education in lieu of giving raises.
Once your budget has been approved, your number-one job becomes managing the budget. Keep an eye on numbers daily, weekly, monthly, quarterly and annually. Review reports that pinpoint labor costs (how much commission was earned, how much was paid for teaching classes). Review revenue reports to know what is coming into your department, and make adjustments as needed. Review expense reports to be certain you know what is being allocated to your department. It is important to stay on top of this task to catch mistakes. Funds sometimes get misappropriated; the quicker you can bring errors to the attention of the controller, accountant or general manager, the better you can manage your budget and the more respect upper management will give you.
In your constant reviews, if you discover an unfavorable balance sheet (where expenses are above your projection or revenue is below what you thought), alert your general manager and offer solutions. Be prepared to discuss why the line item was unfavorable; show how it did or did not affect the overall balance in your department; and provide a plan for making adjustments in the weeks or months to come. For example, if a treadmill program you started didn’t pull the revenue you projected, figure out why (the weather stayed nice for 4 weeks longer than normal, keeping runners outside). Then, determine how this has affected the overall budget for your department (you were down in revenue, but you were also able to keep labor costs down because three trainers didn’t have to work those shifts; you pushed the educational workshop for your staff to next month, so the overall budget is still favorable). Then, propose a plan for making up for it (you will rerun the treadmill program next month, so your revenue should be $2,000 more than budgeted).
Every manager has months or quarters where the budget does not make plan, but being prepared to spot issues before they arise and suggest solutions for creating an overall balanced budget at year-end will keep you in your boss’s good graces. One thing to keep in mind is that you do not necessarily want to come in under budget or you could find yourself without much-needed money next year! Budgets are always based on the previous year’s performance. If you come in $10,000 under budget in combined labor and expenses, you could find yourself with a decreased budget next year, with even greater revenue expectations. Of course, you should not frivolously spend to end at 100% of budget, but it is important to spend wisely and justify your needs along the way, while meeting and exceeding your revenue goals at all times.
Trainers and instructors who take a keen interest in understanding budgets before landing a managerial job will have an easier time transitioning to management and will enjoy much success in their new role. Read books on the subject, shadow current managers to find out more about the money side of the fitness business and ask lots of questions. Once you have a handle on the financial particulars, you will be able to ask the right questions when interviewing for a manager’s position. Your ability to articulate how your department can positively contribute to the facility’s overall success (beyond having the best trainers or instructors) will leave you head and shoulders above the competition and provide professional growth opportunities for years to come.