Software companies have improved their products and developed new ones to meet the needs of growing fitness facilities, and one of the major areas of growth is in non-dues revenue, or profit centers.
Most everybody has heard that humans use only 10 percent of their brain. It's a shocking statistic, and guess what - it's false. You actually use 100 percent of your brain, which is good news since you're a business owner in the fast-growing fitness industry. The bad news is, it's far more likely that you use only 10 percent of something else: your billing software.
Software companies have improved their products and developed new ones to meet the needs of growing fitness facilities, and one of the major areas of growth is in non-dues revenue, or profit centers. It's become increasingly difficult for a club to make money with dues revenue alone. "Profit centers offer club owners an opportunity to collect additional revenue from existing members, which is much more cost-effective than securing new members," says Ron Poliseno, health and fitness director of client development for CheckFree, Dublin, Ohio. "This is why many clubs across the country are quickly developing or expanding their personal training operations."
"If you look back at the past 40 years, the price of a health club membership has not changed or increased much at all," explains Dudley Extrom, vice president of eFit Financial, Denver, Colo. "The average monthly dues for health clubs today is about $38 per month, which is only about $3 or $4 more per month compared to the early 1970s. Health club membership dues have not kept pace with inflation - however, the cost and expense to run and maintain a club has continued to rise. Profit centers play an important part by providing additional sources of revenue beyond just membership dues. Many clubs could not survive in today's market without these profit centers."
Fitness facilities are adding profit centers left and right, but the key to keeping them successful is in the tracking data. "Monitoring profit centers is essential to determine if they are viable for the club long term," says Poliseno. "Maybe the group exercise class the club started last fall is not profitable, but if the software is not tracking that data, it is difficult to make a decision to eliminate the class."
Many clubs already own software that has the capability to track their profit centers, but they don't all use it. "Most of the companies offer technology and systems that will do far more than what most club operators know or take the time to learn or find out," says Paul Schaller, president of ABC Financial, Little Rock, Ark. "Plus, with staff turnover and the reins changing so regularly within the business on a day-to-day basis, they just forget or they don't take the time to learn."
Failing to take advantage of the bells and whistles in today's billing software equals a missed opportunity for club owners. "Reporting capabilities give them the detailed data necessary to make good business decisions," says Schaller. "I think many times club operators make decisions based on feel or the input of an employee or member, and they don't take the time to go back and research to see if the data supports what the feel or the opinion is."
Point-of-sale (POS) reports can divulge important information. "A few key reports would be a POS transaction report, which shows all POS sales for a specific time period," Extrom adds. "There is also an inventory report which lists current inventory levels. This is helpful for re-ordering products and tracking employee theft. A POS sales volume report will show which categories are selling the best and how many specific inventory items were sold in a specified date range."
"Owner/operators should be able to track both member data and financial data in real time," says Poliseno. "As a club owner for more than 15 years, I needed to know how much revenue my various service offerings were bringing in on a daily and sometime hourly basis."
Tracking profit centers revenue with your billing software does introduce more room for error. "Most systems historically bill once a month for everything, dues and non-dues," explains Andy Widgerson, vice president of sales and marketing, CSI Software, Houston, Texas. "But a lot of facilities are going to daily billing, where they're billing every 14 days; they're billing some on the first, some on the fifteenth; membership on the first, personal training on the tenth, some other service on the twenty-fifth. That does complicate things in terms of having to run billing more than once a month."
The best way to prevent money mishaps is to stay alert. "You have to make sure that accounts receivables are working properly," Widgerson says. "You have to make sure your system is really, truly managing accounts receivable properly. That's the downside with offering all that flexibility."
Having a staff member specifically assigned to this task is essential, according to Widgerson. "If you have a lot of different services besides membership, and you want to go to multiple draft dates throughout the month, you definitely need somebody to manage it," he says. "There can be issues with declines that can create accounts receivables that need to be properly managed."
However, Widgerson adds that though having a staff member dedicated to the task is important, he doesn't think it's a full-time job. Extrom agrees that club owners should look for simplicity in their software: "The most sophisticated programs are no help if they are complex and require much hands-on training."
Once you have the data from your profit centers in hand, the possibilities are endless for improving your relationship with members. "Effective revenue tracking software allows staff to identify each member's key areas of interest and communicate every new service that fits within those interests," says Poliseno. "As individuals, we want to be sold a service in which we have an interest. If a club owner/operator effectively markets a new service to members who have already benefited from similar services, the new service will be successful sooner."
"The goal of club management technology should be to enable club staff to spend as much time with members as possible," Poliseno continues. "Utilizing back-end accounting functions, scheduling systems, inventory control and point-of-sale modules, employees can decrease the time they spend on the administrative tasks associated with tracking non-dues revenue."
New club owners or those in the market for new software should consider a number of factors when choosing the best product. "The two words that best describe what owners/operators should be looking for in software are flexibility and security," says Poliseno. "The software needs to be flexible enough to run any type of club with any type of service offering. [And] personal member financial data contained in the software should be secure at all times." Security is essential when credit card or bank account information is stored or transmitted, Poliseno explains. "A club should also make sure the company that provides their software understands the intricacies of The Privacy Act and PCI compliance."
"Talk to other club operators that are already established to get their opinion as to what system out there might be best for them," advises Schaller. "Owners need to sit down and ask themselves what's important to them. How are they going to structure the billing for their profit centers? They should determine what their needs are, then match that to a product or service that would best support that."
Extrom again recommends simplicity: "Is the billing system and software simple and easy to use? Does it meet the needs of the your club? Do you have a large pro shop and do a high volume of sales, or do you just sell bottles of water and some basic sports drinks?" He also suggests asking, "What do you get for the price? Is every software feature an additional add-on module or are most software features included? Are software training, tech support and upgrades included in the price, or do you pay extra for those services?" Also, software companies are not one-size-fits-all. In the research process, be sure to ask what kinds of clubs they work with most, and see if that matches up with your facility.
Most fitness facilities have at least one profit center, usually personal training. But with non-dues revenue becoming a bigger part of club profits, new challenges arise. "One challenge club owners/operators are facing today is how to grow non-dues revenue," says Poliseno. "Industry experts estimate that clubs should aim for approximately 30 percent of revenue to be generated by non-dues sources."
"The idea is that you're not getting $30 a month per member, you're getting $50 a month, but it's over three or four different profit centers," says Schaller. The secret is in the software. "Once you've got the billing piece in place, you can handle any type of non-dues revenue department," Widgerson adds.
Take some time to play with the bells and whistles on your billing software. See what it can do for your business, and how it can help your profit centers grow in ways you never imagined.