Crank Down Sale Costs To Maximize Gym Membership Revenues

Selling more gym memberships is a good thing in principle, but do you know how much it costs you to get that sale? There are two parts of the expense required to generate revenue in any business, the cost of sale and overhead cost. Those costs you can attribute to making each sale and everything else, which you pay to vendors, but which you cannot assign to a particular transaction.

One of the great features of the fitness business is that to bring members on board you do not need to spend much at all. While elegant starter packs are great as your business matures, your prospects probably understand that, if you are not a big box brand or franchise, you have to keep the costs down.

So, while you’re bootstrapping your way up, adding new memberships should only cost the time and attention you give to closing the sale and on boarding the new member. On the plus side, clients deal with you as the owner directly. The personal touch is refreshing to anyone who’s struggled with the customer service and C-Y-A attitude of any corporate gym company.

Why The Margin Matters

Beyond new memberships, you should be selling additional products and services. If you’re thinking about selling something like branded merchandise or fitness nutrition and supplements, make sure that it is a positive for your financials. When you expand your operation, there is no point in purchasing stacks of wholesale goods if the margin is lower.

If membership subscriptions cover the cost of doing business, that is, it keeps the doors open and pays bills and salaries, then any further sales are only worthwhile if they add significantly to your profits.

The Limits Of Return On Investment

The potential for return on investment varies widely. If you put your surplus cash in certificates of deposit, it will earn between one and three percent per year, that is not an acceptable investing outcome for a business owner. At the other extreme, restaurants expect to make three to four dollars for every dollar they pay for the ingredients that go into meals they create for diners.

If you are selling merchandise and equipment at your gym, you should earn a margin closer to that of a restaurateur than a CD holder, right? After all, you are taking the risk and putting many hours of hard work, in return your money should work for you.

A List Of The Tricks Of The Trade

Selling physical items on consignment is an alternative to holding expensive stock. Of course, you still have to pay suppliers for goods and possibly at a higher rate as a commission. The difference is you don’t have to tie up cash or credit as inventory.

The unwritten rules of smart business practices dictate that you pay less pay later, or some combination of the two. Another trick is to trade like-for-like.

  • Defer costs and other lateral moves
  • Reduce the cost of gym membership sales
  • Raise margins by raising your prices
  • Sell at a lower margin and boost the volume way up
  • Deduce overheads too

Go For The Premium Model

Successful companies in the fitness industry make add-on sales that maximize both the income and the margin. The premium fitness membership strategy has made CrossFit very successful, as well as luxury fitness centers like the Equinox brand.

You can earn a healthy profit by focusing on delivering exceptional experiences and service to customers who are not price-sensitive. While the cut-price big boxes depend on efficiency to survive, luxury brands seem to be thriving right now. The marginal cost per sale is the key factor to measure in all of the data that you collect about your business.

Selling gym memberships is a low-cost activity, which means that the margin is very high; the same is true about selling services such as coaching and classes. When you consider the goods and services to add on to your fitness enterprise, keep the premium gym business model in mind and make sure the additional revenue you earn is always worth the price and the effort.

Bibliography

Fagan, Lawrence. 9 Tips To Keep Your Gym Business Lean And Healthy. October 5, 2016. https://blog.gyminsight.com/3999-9-tips-to-keep-your-gym-business-lean-and-healthy/ (accessed October 31, 2016).

—. Health Club Sales. https://blog.gyminsight.com/307-health-club-sales/.

—. What The Top Fitness Clubs Say About The Gym Industry. May 22, 2017. https://blog.gyminsight.com/4429-what-the-top-fitness-clubs-say-about-the-gym-industry/ (accessed August 1, 2017).

ProjectionHub. A Powerful Financial Model for a Startup Gym. June 14, 2014. http://blog.projectionhub.com/a-powerful-financial-model-for-a-startup-gym/ (accessed August 1, 2017).

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