Get Out of the Red!
How to assess—and address—what's not working when your fitness facility is losing money.
Is your fitness business not performing as well as you’d like? Maybe your fitness facility is experiencing too much turnover, so you’re constantly training new staff instead of taking time to grow your business. Or perhaps your clients are leaving, and you’re losing money because of it. Challenges like these are tough for a business owner. The good news is that you can turn things around. The first step is to determine exactly what your problem is. The second step is to create a plan for change.
Assessing Your Business
Begin at the same place where you start with your fitness clients: with an assessment. Try my 3R Assessment. Every successful business has these 3 R’s.
This concept applies not only to recruiting customers but also to recruiting your team. If you don’t consistently recruit new customers, your business runs out of money. If you don’t recruit new talent, you are stuck in the business rather than working on the business.
Once you’ve recruited those customers or staff members, you need to retain them. Without retention, you have a hole in the bottom of your business that can sink the ship.
The reality is that you wouldn’t have to look for so many new customers if you could figure out how to keep the ones you have. Plus, you would be able to get off the floor and into the offices of your business if you could keep talent on the floor training clients.
After you figure out your recruitment and retention strategies, you can focus on revenue. Revenue is your business’s lifeblood. If you have poor or declining revenue, you won’t be in business for long. If your revenue is growing, you have a healthy, thriving business that supports your mission and your lifestyle.
The top reason most business owners struggle with retention, recruitment and revenue is that they lack a SYSTEM, which stands for Save Yourself Some Time Energy and Money. To get the time and money freedom you want, you need to make sure all SYSTEMs are in place.
See also: An Assessment Makeover
Taking the 3R Assessment
So how do you identify missing SYSTEMs in your business? It’s simple. Take the following 3R Assessment to identify areas of improvement. Mentally check off yes or no after each question.
- Does your company have a vision statement? yes / no
- Do you know all the job functions necessary to operate your business? yes / no
- Do you have only one person accountable for each function? yes / no
- Does your business have an accountability chart? yes / no
- Do you have a system for regular employee reviews? yes / no
- Do you have a system for hiring the right employees? yes / no
- Do you have a systemized internship process? yes / no
- Do you have a system for onboarding and training employees? yes / no
- Do you have a progressive growth system for employee advancement? yes / no
- Do you celebrate employee birthdays and anniversaries? yes / no
- Do you have a continuing education system for your employees? yes / no
- Do you have a consistent onboarding system so new members feel oriented? yes / no
- Do you have a consistent system for tracking members’ results? yes / no
- Does your business celebrate members’ birthdays and anniversaries? yes / no
- Does your business celebrate your members’ important fitness achievements (such as 20 or 50 pounds of weight lost)? yes / no
- Do your members receive at least two nurturing emails per week? yes / no
- Do your members receive at least two nurturing texts per week? yes / no
- Do you have a system for managing potential membership expirations? yes / no
- Do you have a system for managing low attendance? yes / no
- Do you have a system to reward consistent attendance? yes / no
- Do you connect with your members away from your facility? yes / no
- Do you host regular member appreciation events? yes / no
- Do you plan and follow an annual marketing calendar so you’re not winging it throughout the year? yes / no
- Do you have more than five platforms for marketing? yes / no
- Do you have a set phone script so each caller gets the same experience and information every time? yes / no
- Do you have three or more lead capture systems? (If you don’t know what a lead capture system is, the answer is no.) yes / no
- Are you currently generating more than 20 leads per month? yes / no
- Does your business have a conversion rate greater than 60% (leads to appointments; appointments to sales)? yes / no
- Do you have a systemized sales tour so each prospective member gets the same experience and information every time? yes / no
- Do you track your Key Performance Indicators (KPIs) so you have real-time data helping you to understand the trends in your business? yes / no
- Does your business generate a monthly Profit and Loss (P&L) report to monitor expenses and adjust sales targets? yes / no
- Do you currently set 3-year, 1-year, quarterly and monthly goals and budget numbers for your business? yes / no
- Do you currently know your business’s average profit percentage? yes / no
Evaluating Your Scores
If your business were perfect, then you would have answered yes to all these questions. All SYSTEMs are key to a successful business. Remember that SYSTEMs run the business, and people run the SYSTEMs.
Each yes answer is worth 3 points. When you have finished answering the questions, add up your yes answers and multiply this number by 3 to determine your score. The best possible score is 99—to show that there is always room for a little more.
- 0–30: Your business needs to be rescued. This is like someone in your gym needing an automated external defibrillator (AED).
- 31–60: Your business needs a lifeline. You are in the water, and you will drown if you don’t take the rope that’s been thrown.
- 61–99: Your business needs a boost, but you’re on your way to fitness business mastery.
Now for the good news! You can right your sinking ship! The 3R Assessment has given you the information you need to create a customized plan that will systemize your business for success.
Saving Your Business
So how exactly do you improve your business and get out of the red? Use this three-step process to create rapid positive change.
STEP 1: IMPLEMENT MISSING SYSTEMS
To figure out which SYSTEMs you’re missing, look at your 3R Assessment responses to see where you answered no.
The first dysfunction I usually see is employee turnover. Having too much turnover in your business causes you to stay on the floor, doing the job of employees who are leaving and having to train new help instead of working on tasks that will grow your business. To solve this problem, improve your hiring and staff development SYSTEMs.
The second dysfunction I see is attrition rates that are too high, which means you are losing members too fast. A 3%–4% attrition rate per month is normal. If you are losing more than this amount, you will want to stop this loss with better client-nurturing SYSTEMs—such as the emails, texts and celebrations mentioned under “Retention” in the 3R Assessment.
The third dysfunction I see is that there’s no plan for growth. Not planning is planning to fail. To address this problem, you must devise a plan for success. If you are going to grow your business, then you must plan an annual marketing calendar.
There is one more dysfunction I see: no tracking of performance. Every business should generate a KPI (key performance indicator) report that tells the owners how they are performing. A KPI report allows you to react to indicators on a weekly basis.
STEP 2: INFUSE YOUR BUSINESS WITH CASH
When a business becomes unstable, some people think about applying for loans, finding investors or taking on a partner. That means more debt and less profit. The best answer is to look to your clients. They want to see you succeed.
At our gym, a member is worth about $2,000 a year. We have conducted various programs that offer members an opportunity to pay for a year upfront. We have seen these programs create over $100,000 in added revenue. Programs include anniversary sales, tax-time sales and a founding member program that can be run with a grand opening or a “re-grand opening.” Typically, we offer 13 months for the price of 12, plus a bonus month that members can give to a friend or family member who is not a member. The bonus month helps us get a trial to replace the loss in recurring revenue. We also give clients who sign up for a year a special shirt and other goodies, such as diet supplements and items donated by other local businesses that want to promote themselves to our members.
STEP 3: RUN A CORPORATE CHALLENGE
In my experience, the best way to get new members in your door is to organize a corporate challenge for a local business, school or hospital.
Our corporate challenges cost only $25 per person to register, and we use these fees to purchase a grand prize for the winning team. Team sizes are typically three to five people, but size may vary depending on the size of the corporation. The challenge runs for 21 days, and the team that loses the greatest percentage of body weight wins. We keep the challenge fun by offering 1% advantages on the scale for naming your team or creating a team T-shirt. As many as 150 people at a time have participated in these corporate challenges, and we have had conversion rates above 70%.
Steps 2 and 3 can also be done simultaneously so you’re giving your business a cash infusion with paid-in-full memberships while also aggressively recruiting new members with a corporate challenge.
Got challenges? Assess, plan and then execute a new plan to pave your way to success. Good luck!