Staying Strong in a Weak Economy

In recent months, we have all heard these unnerving terms in the media: economic downturn, recession, weak market. The fact is, we are hearing these phrases so often because it’s true: we are in a feeble economy, characterized by sluggish consumer spending and rising unemployment. In fact, according to the Kiplinger Business Resource Center, “The United States economy in 2008 should limp along, with little or no growth in some quarters and a lousy feeling to many businesses and consumers” (Idaszak 2008).

When economic conditions create a difficult market, the fitness industry must respond quickly in order to weather the storm and prevent financial problems. The good news is that without drastically altering the way you run your facility, you can shave off unnecessary costs to make it through tough times. So where should you start? Begin by reviewing your budgets and identifying costs that appear superfluous or redundant. Pay special attention to four key areas: staffing, equipment, Internet service, and marketing and advertising.

Scrutinize your current staffing level. Do you employ the proper number of employees, placed in appropriate roles, working the necessary number of hours—no more, no less? Staffing your business’s needs at an appropriate level provides significant savings.

If you are overstaffed, or if some employees work more hours than required, take steps to remedy the situation without hurting employee morale. First of all, do not downsize. One of the biggest unintentional effects of layoffs is that the proficient employees who remain on staff quickly leave the company for greener, more secure, pastures. Here are some better solutions:

Streamline Employee Hours. You can streamline hours by slightly reducing employee shifts during slow periods. These times include the summer (when more individuals are exercising outdoors) and nonpeak hours during the day. Restrict overtime to only the most critical needs. Overtime should be the exception, not the rule.

Provide Cross-Training. Cross-training employees is another effective tool during weak economic times. If employees can handle more than one job, you can combine positions or avoid hiring temporary help during peak periods.

Hire Interns. Interns can do some of the front-desk or administrative work. Look to your local high school or college for students pursuing careers in the fitness industry. These students will be thrilled with the work experience, and you will save on your staffing budget.

Implement Incentive Pay for Employees. Rather than setting a fixed salary, offer employees compensation that is tied to performance and results (Winters 2000). Providing a base salary that is approximately 80%–85% of overall compensation, with the remaining pay being based on performance, motivates employees to become involved in the success of the business.

Exercise equipment ranks high on the list of health club costs. Fortunately, you can save significantly on equipment. Most commercial manufacturers sell both cardiovascular and strength training equipment. Making all of your purchases from one company can lower your overall price tag. Alternatively, consider leasing your equipment. Many manufacturers offer competitive commercial lease programs that will considerably lower your monthly costs.

Another option is to purchase used, refurbished or remanufactured equipment. Although some dealers use these terms interchangeably, the terminology can be defined as follows:

Used. The equipment is sold “as is” with no guarantees that it will function properly. Look for demo models, as these pieces were likely not used very often.

Refurbished. The equipment has been cleaned up, lubricated and tested. It works, but there may not be a warranty or return policy.

Remanufactured. The equipment has been completely dismantled and rebuilt to factory specifications. The paint has been sanded off and reapplied. The gears, cables, bearings, upholstery and electronics have been replaced.

There is no piece of equipment that must be purchased new, as long as you can buy it used through a reputable dealer. Do some research, and ensure that the company you select has after-sale liability insurance in case of possible mishaps with the equipment (due to poor product remanufacturing). A respectable company will also offer a warranty on all parts and labor. Six months on parts and labor is the industry standard (Eason 2007).

When it comes to purchasing fitness equipment for your facility, weigh several factors: the comfort and safety of your members, your profit margins and your facility’s image. By taking the time to research various resale companies, you can strike a nice balance with a combination of new and not-so-new equipment for your club.

Although you may have had your Internet service for years, now is the time to see if other providers offer the same service at less expense. Sizable competition exists in the Internet market today, so check the prices; chances are, with a little investigation, you can find a service provider that can offer the same hosting services at a much lower cost (Gerson 2003). Switching to a new company is usually a simple process.

When considering changing providers, be sure that your hosting service is reliable and secure, delivers good value and has a commitment to quality. In doing your research, ask potential hosting providers to let you view several websites, as references; read hosting reviews before you sign up; and confirm that the overall price will actually be less than what you’re currently paying.

More specifically, here are three factors to look for:

Web Space. This is the amount of space on the provider’s server. The company should be able to provide you with ample space, especially if your website is rich in graphics or has video clips.

FTP Access. Some providers will require you to use their personal Web builder to design your Web pages. Look for a provider that offers FTP (File Transfer Protocol) access. FTP lets you modify your website using your choice of software and then quickly upload the changes. This ensures that you can expand your site at any time as your business grows or if you choose to enhance your online business capabilities.

Tech Support. You should choose a provider that offers 24/7 support and responds rapidly to a problem. This service is essential, because if your website is down for even an hour, you are losing potential customers and frustrating members.

Even when your budget is tight, you need to keep promoting your facility. You may think you need big bucks for marketing and advertising, but you can employ many creative strategies to promote your club on a fairly small budget.

Use the Barter System. Develop relationships with owners of local businesses that serve the same target market as you do; for example, sporting goods stores, sports injury clinics and spas. You can partner with these organizations by displaying your marketing materials at their locations and, in exchange, letting them post their materials at your gym (Metcalf 2004). Another idea is to swap ad space in your newsletters. Joining the local chamber of commerce can help you network with local businesses to start building these relationships.

“Another great way to minimize advertising costs is to support or create a local race or fun walk,” explains Andrea Metcalf, creator and host of Fit Today and owner of MBC Fitness in Westmont, Illinois, who organizes an annual 5K race that starts outside her club on the Saturday after Thanksgiving. “The relationships with the community, chamber [of commerce] and local stores build upon each other.”

Help Yourself by Helping Others. It is a well-known fact that schools and community centers are cutting back on physical education classes. Use this information to your advantage by volunteering your staff to teach exercise classes at local schools or community centers. Additionally, arrange field trips where students come to the gym, work out and learn about careers in fitness. This act raises your profile in the community and introduces your club to parents and teachers, who are potential members (Mullich 2003).

Use the Right Media. Probably one of the most crucial ways to save on advertising is to ensure that you are using the right media. You can spend thousands of dollars on ads that are simply not targeting true prospective members. Rather than spend significant dollars on large television ads or national consumer magazine spreads, focus on targeted media in your community; for example, local lifestyle publications; local cable talk shows; or inserts in newspapers in your geographic area (Mullich 2003). You will not only reach more potential members but also save money.

Examining your club’s expenses may take some time, but the benefits of decreasing spending in challenging economic times are crucial to the survival of your business. You will be amazed at how some little cost cuts here and there add up to major savings for your facility—keeping your budget strong.