What Makes Success
Is this the Holy Grail that everyone seems to be searching for? Well that may depend on how you quantify success. Quite obviously for most organisations success sits directly under the banner of "PROFIT" and the buckets full a club can generate.
Whilst we are all in business to make profit I do not believe it is always the case the profit should be the true indicator of success and whilst it is often true that a well run club is also a profitable one, it is not always the case that a not so profitable club is not actually a more successful one. The levels of profit can be impacted by a wide variety of outside influences and I believe profit alone should never be the single indicator of either a clubs or a manager's success.
Examples of the outside influences would include:
Levels of competition
Age of facility versus its competitors
Costs such as rents and rates fluctuate vastly across the country and even within towns
Financial clout and support of the owners
Location and ease of access
Over the years I have seen many companies compare managers based purely on profit with many very good manager's being "encouraged" to move on to pastures new as their performance is misjudged. As an industry we are generally very poor at looking deep into our businesses to find the real success and very quick to judge. If we really want to critique our businesses we need to look at how we arrive at our profits and the journeys that each club is following. To do so we need to look at the following:
1) Membership Income:
Far too often clubs focus on new member sales rather than the average monthly net gain. I worked for a company like this that never even took notice of the leavers and recall one club being celebrated as the best in the country for its sales in January but actually lost almost a third more members than it sold.
A club who continues to gain members by controlling their attrition as well as driving new member sales is surely a better run club and long term a far better prospect. New sales as with any business are vital for growth but a clubs attrition shows far more about its health than the volume of members coming in.
You should always focus on your net gain and not just new sales. Just as important is the cash value of the new members, think about yield and membership type rather than just simple numbers. Your budget is about cash not physical bodies so try and maximise the revenue each member can bring you. Numbers are a simple way to control sales teams, in reality if we were all smart we would be focusing their targets on membership income and this would encourage better selling, better retention and greater yields
2) Membership vs other income:
Some clubs have a very successful membership base and this allows them to deliver high profits with very little efforts. Quite often it is those clubs with average membership revenues but high secondary spend revenues that are in fact more successful. These clubs are adept at diversifying their businesses to maximise revenues from every source. What skews the figures is their profit percentage is often worse because of the additional cost of sales in the business. This should not detract from their performance though as any club that is able to drive large additional revenue is by far the better of the 2 clubs and in a much better position based on their spread of revenues.
I have seen clubs applauded for their revenues who bring 90% through membership. Imagine the potential in their business when you see others in the same company with a split of 60/40 or even 50/50. In my mind the question has to be what are we missing? If the split was made 70/30 it would be a 20 increase in other revenues and not a decrease in membership. A club in this 90/10 situation often sits back and relax as there is no real urgency to change. Those with a 60/40 split have often been forced to adapt and change to survive and are usually the teams that are constantly looking to change, adapt, and bring new ideas. These are the clubs with smart managers
3) Member retention:
A club that keeps its members will always be successful. It takes the pressure of the need to drive new sales but also happy and loyal members will actually help drive new sales through referrals. Clubs however should not just be managing retention but also thinking about length of membership. With the average cost of recruiting a new member being upwards of £100 it can take 2-3 months before a club makes a penny from its new members, even more so if you consider the free months that are currently part of the package. For a new member to be worth signing up as regards profit we need to be aiming at keeping members for 12 months at least. Retention strategies are now just as vital as new member plans and I believe in the current market an even more valuable skill and asset to a business
4) Members satisfaction:
With retention being so important, all clubs should have some form of Member satisfaction score process in place. Whether this is done internally or through an agency the scores are vital and should form part of any measuring process for a club and its manager. The survey should include in-depth questions about facilities, processes, cleanliness, activities, classes and gym staff.
By measuring its customer’s feedback you will get a true understanding of the health of a business. Customers are not always right (we will discuss that another time!) however they will more often than not give a true insight into a business and how its run. We should embrace this feedback and act on it. By doing so you will make great strides into creating a very loyal club.
5) Measure by percentages and not actuals:
If we are to compare performances we should base it on percentages and not just actual cash figures. There are few clubs with the same number of members, the same cost base and the same payroll costs. Basically no clubs are the same. However, you can compare them based on how they convert these figures through percentages. You can have an agreed payroll percentage, an agreed cost of sales level and an agreed profit percentage. This percentage will be determined by your business model. A budget gym with have a completely different set of percentages to a full service gym. However 2 budget gyms should not and should be easily comparable.
As a manager it should be our job to know our figures both in terms of actuals as well as the percentages and how these compare to our rivals and our compatriots in our own companies. As companies these figures should be shared to allow direct comparison, to encourage learning’s and more importantly encourage competition between clubs.
6) Associate engagement and retention:
Just as important as business performance is the level of engagement and staff retention. This should be measured and success rewarded. A strong manager backed by a happy and engaged team will lead to success. Our industry does not place enough emphasis on evaluating this major aspect of our business and should learn from other industries in the hospitality world such as hotels. Ultimately we are in a service industry but we are still slow on the uptake of this notion
7) Standards surveys:
Mystery audits are always a great way of seeing exactly where a business sits. A club that is well run should never fear a mystery audit as it should always be run to audit standards. It is rare that a club that is well run would fail an audit due to them arriving on a day that everything goes wrong. Failed audits are due to the club not being run to the standards expected by the owner/organisation.
I believe every business should carry out unannounced audits on a 6 monthly basis. They give a real insight into where a business is, whether they are following the standards set out and that they are clean and well run. As a Manager I do not fear audits and I set my clubs up to run daily to these standards. Do we achieve this level 100% of the time, no of course not but the fact that we are all aware what those standards are ensure we do almost all the time.
By delivering the company standards, you will ensure all expected processes are in place alongside the expected service delivery. Challenges with cleanliness, equipment breakdowns etc will be rare and customer engagement should be high if carried out effectively
There are other ways to measure success in a club and in its manager but the above named points is what I believe will give you the strongest indication of whether there are challenges in a business or not. Cash success is a very unreliable source as a single indicator and does not show the efforts and endeavours that may have gone into achieving that outcome. I have seen too many managers lose jobs purely on this criteria and it is a very short sighted approach.
The responsibility of ensuring all the above is measurable is as much down to the manager as the company as a whole. No, the manager cannot organize blind audits but they can ensure they know their business that they know their percentages and how they compare to other clubs in their area and to their compatriots. It is a manger's responsibility to ensure success and to do so he/she needs to understand what success means.
Do they know how their business did last year, how they compared, what their member’s think, what are their key challenges. Do they have a business plan, sales plan and plan of attack for solving the key issues? No one will sing your praises as a manager and you are there to be shot down when things go wrong. My suggestion is arm yourself with information. Most importantly the information will allow you to be successful by knowing your business but it will also allow you to celebrate success with you teams and develop plan to build on successes or turn around your failing.