A club manager or department head in charge of a health club profit center is likely to face a much more difficult job than someone overseeing a department that is not classified as a profit center. Just ask the folks in membership sales. The reason is simple. A profit center department head in your health club is going to have to both increase sales by generating additional revenue and decreasing costs.
A cost center manager (that’s my term for defining most department heads in health clubs), on the other hand, only has to worry about staying within or even cutting budget. A cost center is a club department that is important to the overall success of a health club but its contribution to revenues and profits can be only incrementally measured. A cost center in your health club is an area that typically runs in the red with upfront losses but will result in a much more productive health club if managed correctly. Yet, it is a cost center and not a profit center in your health club that is likely to find itself at the top of a list when it comes to recessionary cut backs.
Many health clubs are tempted to treat all departments (with the exception of membership sales) as cost centers instead of true profit centers. This can be a terrible mistake because if department managers are rewarded simply on cutting costs, they will not make the necessary reinvestment in their department to grow profitably for the future. Therefore, you may eventually end up with outdated equipment, facilities, and staff and your members are likely to go elsewhere because their needs aren’t being met. A profit center approach for your health club departments will blend the need for current cash flow with the desire to grow departmental revenues in the future, making a health club department manager accountable for the long-term health of their department.
Here are some things you will need to get started:
- Quotas for revenue and expense. Expectations need to be established.
- Daily, weekly and monthly tracking. Awareness will help create accountability, plus the numbers will tell you what you should be doing next.
- Training, training, and training. This is no different than what you should be doing each week in your membership department.
- Marketing and promotion. Get a marketing plan of action. Again, this is no different than what you do in membership each month, just at a smaller level.
- Accountability. This program will only be important to your department heads if it’s first important to you. You must follow up. Inspect what you expect.
- Culture. This will start with the club owner and manager. Your staff will follow your behavior. This will be critical for a culture change.
- Opportunities for Department Manager and staff. Now, since you are generating revenue, you can compensate your front desk manager based on production. This will help in recruiting and retention of front desk staff and management.
Revenue Producing Ideas:
- Gift Certificates
- Collecting “past due” dues
- Sell punch cards
- Rent conference rooms
- Sell weight loss products, t-shirts, locks, chair massages, cell phone providers, tanning, etc.
- Sell temporary (or long term) rental space… much like a kiosk in a mall
- Collecting guest fees
- The only real limitation will be your imagination
Starting out, one thing to remember, it won’t take much to move the needle. For example, if the front desk only brought in $50 per day… that would be $1,500 per month…. $100 per day would be $3,000 per month. They can likely do that with gift certificates alone… start adding everything else… it’s a great opportunity.
Doing the above would create a significant financial swing in most clubs. THERE IS A LOT TO DO IN THESE AREAS, but with the proper direction and training these departments can go from being a cost center to profit centers in most cases or at the very least break even.
Now, go create a profit center!
Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting and turnaround firm specializing in the fitness and health club industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars and workshops across the country on the practical skills required to successfully build teamwork and market fitness programs and products. Visit his Web site at: www.fmconsulting.net or www.jimthomsondemand.com