Our past three columns provided base knowledge of budgeting and showed you how to create a C.A.S.E. in order to move closer to getting what you want and need. One thing you must understand and track diligently to support any request for budget changes is cost per head (CPH). In this column we’ll dive into this formula and show how you can use it as objective support when interacting with upper management.

Cost Per Head Defined

Cost per head is a simple formula that compares the amount you pay your instructor with the number of participants the instructor teaches in a class. Simply divide the instructor’s class pay rate by the number of participants to determine the CPH. The dollar amount you come up with represents the cost to service each student. For example, if an instructor makes $25 per class and has 30 participants, the CPH is $0.83. Conversely, if the same instructor teaches a different class that has only 10 participants, the CPH for the class is $2.50. For a solid group fitness program, the average CPH will be $1.25.

The lower the CPH, the better. Your goal, as a business owner or manager, is to service more members for less money while keeping everyone happy. When managed correctly, group fitness is the best vehicle for keeping costs down while reaching a large percentage of your membership base. The group exercise rooms typically welcome many people within 1 hour. Compare a class with 50 participants to a treadmill that typically services 1–2 people per hour and costs a considerable amount more to purchase and maintain. Which one seems likely to offer a better payoff?

Tracking CPH

Track class participation daily. Doing this allows you to compare instructors, formats, time slots and more. Being able to identify trends will help you support decisions such as pay raises and cuts, time slot shifts, and instructor and format changes. Accurate data allows you to manage your business objectively and more effectively.

Provide a simple sheet for instructors to record an accurate head count. Count participation about 10 minutes into class to allow for those who are late and those who leave early. Of course, it’s important to spot-check counts for accuracy. If you find instructors being creative with numbers, you may need to find an objective third party to count when you’re not around. Your instructors’ honesty in recording numbers will be directly related to how you communicate the importance of the tracking itself. Class size should not be the only data an instructor’s worth is judged on.

Recording the numbers is just the beginning. Next, you must analyze the data in a variety of ways to assess trends. You may choose to analyze all, or some, of the following:

Data Frequency How Why
Individual classes Daily Simple CPH; divide each instructor’s pay rate by number of people in class that day. Keep a close eye on how instructors, class formats and time slots are performing day to day.
Class formats Monthly Average the CPH of all similar class formats (e.g., strength, cycling, mind-body). Review how various formats are performing, and then compare individual instructors, classes or time slots to this average.
Instructors Monthly Find all classes that an individual instructor teaches and average the CPH. Find out how the instructor performs across different formats, time slots and days of the week for a more accurate view of his or her service ability.
Daily usage patterns Daily Average all individual CPH results for each day of the week. Assess trends based on your members’ daily usage patterns. Take into account holidays, snow days, etc.
Overall schedule Monthly Average all individual CPHs for the entire month. Determine how your program is performing overall, and be able to compare monthly usage trends.

If you are not a spreadsheet wiz, the above table might seem daunting; it’s a lot of numbers to crunch! Find someone to help you build a spreadsheet that can easily calculate the formulas. This will be a tremendous asset in the long run. The information you’ll be able to analyze will help you make smart, objective choices in the following areas:

Pay Raises/Decreases. Instructors with a consistently low CPH are valuable. Monitor this over time, using averages (not individual classes, as these counts might be tied to a time slot or format). A decreasing CPH or low CPH compared with others in the same time slot or format may warrant a pay increase (of course, there are other factors to consider as well).

Performance Action Plans. An instructor with a high CPH compared with others in the same time slot or format might need assistance. After determining it’s not the time or the format, evaluate the instructor and help her find ways to increase class size.

Time Slot Changes. If a class is performing less well than others in the same time slot, take a closer look at what the issue is. How does that particular CPH compare with the daily average or the format average? If it’s still a poor performer, you might think about changing the format, the instructor or the time to make the class more desirable.

Class Cancellations. If a certain format is performing poorly across the board, it may mean the class has run its course. Be sure that it’s not tied to the instructor, time slot or day.

Scheduling Budgets. Monitor your overall schedule from month to month. This will help you make smart choices about the total number of classes you need to offer through certain seasons, based on trends.

Does CPH Really Tell the Truth?

Keep in mind that CPH does not tell the whole truth. As noted above, the data becomes valuable when you average CPH in many different ways and compare and contrast the numbers. Average the numbers and then compare specific situations to the average (for example, compare a single instructor’s CPH to the average of all instructors; compare a single cycling class to the format average). Monitor trends versus individual numbers. Watching how numbers rise and fall from day to day, format to format, week to week or month to month will help you make smart budgeting decisions. Avoid making rash decisions based on a single week of low numbers. We all have those days when the weather is horrible, something good is on television or everyone is on vacation. If you pay too close attention to single numbers versus averages and trends, you may end up making poor decisions.