How to run a healthclub

A health club has 5 major components. Those being the building, the equipment, employees, software, and members.

There are certain guidelines that should be followed in order to maintain profitability in your business. Of course there are certain exceptions or variables depending on the size of your facility, member demographics, location, etc.; but if the basic strategies are applied you will have a better financial outlook. The majority of health club owners are passionate about fitness and know just what equipment to purchase and what programs to offer to maximize fitness results; but need help to make successful financial decisions.

The first step towards profitability is to know where you are at and know where you need to go. If you know how to use Microsoft Excel set up a spreadsheet of all your monthly fixed expenses such as rent/mtg, equipment lease payments, payroll (including taxes), insurance, utilities, maintenance/supplies, marketing/advertising and professional services. Now you know how much you need to make each month just to break even. If you have an existing fitness center than you already have a figure for monthly dues that you are currently receiving. For example, if you have $20,000 per month in expenses and you have 300 members paying $40 per month (use pre sales tax dues) than you know you have $12,000 in income that you can count on. The difference of $8,000 needs to be made up this month from new membership sales. Most clubs charge an initiation fee, which is recommended. This fee covers your cost of getting that new member in your door and their start-up costs (membership card, orientation appointment, etc.) An average initiation fee is $99 - you should investigate the competing fitness centers so you are within the acceptable range for your area. One idea is to provide one free training session and a body analysis with each membership - that allows you to charge a slightly higher fee plus gives your trainers the one on one opportunity to sell personal training. The way to compete with a neighboring health club that has low fees and dues is to include different services and programs and not try to compete with price. The large chains are mostly interested in new membership sign ups and less focused on retention. In order to compete - excellent service and unique programming will help retain your members even at a higher monthly rate. If you sell 50 new memberships a month, you will collect almost $5,000 in initiation fees income. That leaves you with a $3,000 deficit to break even. When signing up new members it is always a good idea to prorate the current month dues and collect them with the initiation fee. Some clubs also charge the last month's dues and require 30 days notice for cancellation after the contract period. If you do that not only do you increase your current income but you avoid difficult collection following cancellation. If a member cancels you already have their last month and avoid all member objections. If your monthly dues are $40; those 50 new members have paid $2,000 in last months dues. The prorated income should easily cover the final $1,000 to reach your break-even point.

Once you have reached that goal than any additional memberships represent profit. As your membership grows your monthly dues will cover more of your fixed expenses and the numbers each month will be easier to achieve. As with any business a percentage of profit should be allocated to business growth in the form of marketing. At the beginning it is a good idea to save any profits to cover any shortages in future months due to slow sales or unexpected expenses. Remember health club sales are seasonal and you need to prepare for your slow season.

Pre-Sales

If you are opening a new facility set up a pre-sale period approximately 3 to 6 months prior to opening. The more members you lock in at the beginning the easier it will be once you open your doors. Offer reduced membership or reduced initiation fees during the pre-sales period but remember you must increase those fees upon opening. Members should be rewarded for signing up early. Offer a limited amount of charter memberships that lock in rates for the life of the membership. Charge a one time fee for this privilege and put up a plaque in your reception area with their names. These fees help with those large start-up costs and give your club a "family atmosphere".

PIF vs. Monthly

It is very tempting to accept PIF memberships but too many will negatively impact cash flow in future months. Once you have reached your monthly goals or your monthly membership dues cover your fixed expenses then it is okay to accept a small amount of paid in full memberships. The quick increase in cash flow from PIF's should be looked at as "extra income" and cannot be counted on each month. The most important task at the beginning of your business is to build up your monthly dues revenue to cover your overhead. Remember - as members cancel you have to make up that number - so these figures need to be reviewed each month and new goals set accordingly.

EFT vs. Pmts

The method that is recommended for fitness centers to collect monthly dues is electronic billing for checking and/or credit cards. Just because that is the popular way of charging dues does not mean it will work for every fitness center. You have to know your members, your area and your competition before making this important decision. The important thing is that you do what works for your business and offer your members options. If you do have to offer a "pay at club" option then you need to charge an additional fee ($5.00 - $10.00/month) to cover the administrative costs associated with collecting dues.

You have a few options when using QuikCheK with regard to your dues collection. If you are using QuikCheK Pro than you can process your own EFT files for both checking and credit card accounts. You need to set up an ACH relationship with either your bank or a third party billing company such as Money Movers (800-861-5029) in order to process checking files. QuikCheK will assume that all dues are paid for checking accounts. The bank & Money Movers will also assume that and deposit the total file amount in your account less any associated fees. If an account comes back insufficient (NSF) or closed you will see a debit to your bank account for all returned check payments. Those returns must be posted in QuikCheK in order to reflect the correct member balances.

For credit card accounts you need to set up a merchant account. We recommend X-Charge (800-584-3523) for your processor. They provide free processing software that interfaces with QuikCheK for billing and POS credit card transactions. The credit card payments will process immediately and you will see the results in your batch report.

If you choose to accept payments at the club there are two ways to handle this. For billing accounts you need to post those payments through payment on account. For month to month memberships you can set QuikCheK up to bump up the expiration date as payments are received.

Outsource billing?

An important decision that must be made is whether to handle your billing in-house or use a full service billing company like Coral Springs Software. If you decide to handle the billing in-house you need to have a full time employee to handle contract entry, billing processing, collection and member inquiries. You have to weigh the cost of the employee vs. the cost to outsource billing along with the level of involvement you want to have in the billing process. Many health club consultants will recommend you to take the billing out of the club in order to separate the sales process from dues collection. It is easier for a third party to maintain strict company billing policy's as they are not emotionally involved and never see the members. If you are interested in receiving more information about our full service billing procedures and fees please contact us at 800-827-2567.

Marketing

There are several successful marketing techniques to increase your membership sales. Your current members are your best source of referrals - so good service and a clean facility is imperative. In order to boost referrals start a buddy referral program. Offer a free month at the back end of the contract for any member that refers someone that signs a minimum one-year agreement. Another idea is to hold a contest offering a prize for the member that refers the most friends in a month. Remember - giving time is the least expensive way to reward referrals!

Other marketing options include:

Lead Boxes: (lead generators placed in neighborhood businesses). Offer a free membership drawing to entice people to fill out the lead form. The most important factor for lead boxes is remembering to retrieve the leads from each location. Each salesperson should be responsible for a territory and pick up and follow up on those leads. Check out www.future-fitness.com <http://www.future-fitness.com> for more information and sample lead / VIP boxes, flyers, door hangers and direct mail and email blasts.

FYI: You can send email blasts and postcards directly from QuikSales! You can purchase mailing lists and import the list into QuikSales and then follow up with a phone call. You can use QuikSales to monitor all leads, phone calls, tours, etc….Stop using index cards!!!

Print Ads: Local newspapers are most successful for print ads as they are distributed for free and are also available in many neighborhood businesses. The Welcome Wagon and other national and local coupon direct mail campaigns are also extremely effective. Make sure there is always an offer on your ads - offers should always give additional time rather than discount price.

Corporate Partners: it is important to make lasting relationships with other businesses in your area. You can offer a discounted membership for larger corporations and even bill them directly if they have a fitness incentive program. Many companies are now rewarding their employees for staying in shape as it lowers health insurance rates and increases productivity. For smaller businesses focus on companies that cater to women - remember the more women at your facility the more men you will see join! Many clubs get caught up in having the latest and greatest equipment and forget that excellent service and happy members drive membership sales up. If your membership is family based - separate the men's free weight area as it turns off many women especially during tours. Trading for services is a wonderful way to get decrease costs. Perhaps one of your members is a plumber or electrician…trade for memberships! A few memberships costs you nothing but having an electrician on call will save you thousands each year. The most important trade you make is to find a computer technician and trade for his services. He can service your network and hardware and you can be assured that QuikCheK is operating all the time. Remember QuikCheK runs your business so don't let it go down!

Personal Training: Your trainers should be trained to sell memberships. They have the best one to one opportunity with your members not only to sell additional training; but to sell your club as the best in town. They also have the perfect situation for selling supplements and products. Offer an incentive program for your trainers for each membership/product sold and you will see sales increase quickly. Always make sure that training clients are paid members.

Front Desk: Your front desk employees give your members their first impression of your business. It is critical to train your front desk staff to be courteous and professional. Reward your front desk staff as a group for membership growth. Whether it's a free lunch or a small bonus each month your front desk staff will surely be pleased. They are the lowest paid employees yet they are extremely important to your success. All guest should be registered and sign a waiver upon entry. No guest should ever leave without receiving a tour…that is a cardinal sin in the health club business! Train your front desk to check members in and see who is red. Many workers let members that do not have valid or paid memberships into the club to avoid confrontation. Teach them to get a manager who can pull the member aside to discuss their account.

Retention

Once you have members now the trick is how to keep them. Yes - they have signed a contract but is that the only reason you want them to stay? You need to give them reasons to remain members and recommend you to their friends. There are retention companies out there that will charge you hundreds of dollars each month to do what you can do with QuikCheK with a few simple clicks!

Thank your new members with a postcard - it goes a long way. Make sure all new members get a phone call after joining to make sure they are enjoying their membership.

Always send out birthday cards….run a quick filter in QuikCheK and print out labels or postcards each month to the members that have a birthday the following month. Again make an offer on the card…free smoothie for your birthday and 10% off on any supplement sales, free guest to bring on your birthday, free personal training session, massage, tanning session for each package purchased..

Check your usage reports. Phone calls or emails should be sent to any member that has only checked in less than 4 times a month. New members should be checked more often. Remember health club memberships are usually an emotional purchase. Make sure your new members are using the club or they will never renew.

Members that are coming up for renewal should be sent offers via email or phone calls at least 30 days prior to expiration date. Remember your competitors are waiting for your members to not renew and join their club - so don't forget to contact them early.

Use your Quikchek quick filters to see how your software can help you retain your members!

Miscellaneous tips:

Visit your states website to get information on health club regulations. Each state regulates paid in full memberships differently. Some require a bond if you take PIF's longer than a year. There are also strict rules for smoothie bars, tanning, kids club and your contract detail. Some states such as Florida require your contract to be approved so be informed to avoid fines and possible lawsuits

Some clubs hire personal trainers as employees - some use independent contractors: There are pros and cons for each so make the decision that best suits your financial position. With contract trainers you give up some income but are guaranteed a rental income. Require anyone who trains to be members of your facility and make sure they all sign waivers! Independent contractors should carry their own liability insurance. Personal trainers as employees are valuable to give a first session as orientation and help sell training packages. They also can be utilized to keep equipment clean and operating in between sessions.

Membership contracts can be structured to have definitive membership periods with end dates or they can be auto renew. Either way is fine as long as it is clear to the member. You can use either type of membership contract in QuikChek but the key is to be consistent. Remember your members talk to each other and you don't want to have negative gossip in your facility.

Collection/ cancellations: Cancellations and declined or returned payments can be handled several ways. Even though the money is due - you have to weigh the negative publicity that can result from sending a member to collection. Everyone joins the club for different reasons but if they truly cannot afford it wouldn't it be better to charge a small cancellation fee and let them out of their contract? If a member leaves unhappy when they are ready to come back they will come to you and tell their friends how wonderful they were treated. You lose 30 - 50% of the dues to collection fees if you pursue using an outside agency. On the other hand you don't want people just signing up and canceling without valid reasons. Each of these members should be handled individually to avoid mass cancellations. Your billing company can help with this task. Many billing companies charge clubs their percentage even if you allow the member to cancel or if you write off bad debt. Coral Springs Software understands the need for a flexible policy and we do not penalize our customers for cancellations unlike the majority of our competitors.

Yearly enhancement fees are gaining popularity in the fitness industry. An annual payment of $10 to $25 per member can be charged yearly to collect a lump sum amount. Remember - use some of that money to enhance your facility… buy some new equipment, update the front desk, add some new products to the juice bar, etc…
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