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.
