April 11, 2023
April 11, 2023
If you want to make smart business decisions for your club, you need to understand your financial performance.
Tracking the right metrics gives you deeper insight into how your club is performing and where you can improve. We’ve outlined six key financial metrics you should be tracking if you want to make informed business decisions in 2023. Let’s dive in.
Annual Revenue ÷ Clients or Members
Revenue Per Client (RPC), or Revenue Per Member, is one of the most com\monly tracked KPIs in the health club industry. This metric helps put other metrics into perspective, which is what makes it such a commonly used success measure.
RPC is an essential metric when determining an appropriate marketing budget. If you know what one member is worth to your club, you can work out the maximum amount to spend on marketing when acquiring that member.
The one caveat to measuring success by RPC is that it doesn’t provide insight into how or where your members spend their money at your club.
RPC includes money spent on membership fees, group classes, court reservations, and in your cafe. While this metric can give you a high-level view of your revenue, you’ll have to dig deeper to get insight into exactly what is and isn’t working within your club.
Annual Revenue ÷ Square Feet
Revenue Per Square Foot (RPSF) measures how much money you’re generating from the space you’re occupying. Tracking RPSF is becoming more common as club leaders focus more on optimizing the use of their facility’s space.
RPSF shows you which spaces within your club are producing revenue and which are not. It forces you to view your club from a space utilization perspective. Once you tune in to how effectively you’re using your space, you can identify which areas have the potential to provide new revenue streams.
((End Count – New Members) ÷ Start Count) x 100
Member Retention Rate measures how the percentage of members who maintain their memberships rather than canceling.
Your member retention rate gives you insight into your club’s long-term stability and profitability. This metric can be calculated yearly or quarterly for a more granular view.
Tracking your member retention rate gives you insight into your churn rate. A high churn rate indicates a discrepancy between the experience a member expected to receive and the experience they actually received since joining. Poor retention rates indicate that you need to dig into these questions:
Just like Revenue Per Client, your member retention rate shows you where and how much to spend on marketing. After a member churns, you have two options: get a new member in or get that churned member back. You’ll need to put marketing dollars behind both of those options, and your member retention rate can guide that decision.
Member cards decline for a variety of reasons, from insufficient funds to unexpected card expirations. Tracking card declines eases open the door to those financial conversations, which can often be difficult to start.
1 in 3 members will terminate their membership within 30 days of a card decline. When you track card declines proactively, you can quickly reach out to members to resolve payment issues before they cancel their memberships. When your club payment processing is smooth, your revenue is more secure.
(Revenue - Cost) ÷ Revenue
Profit Margin is how much you have left on your balance sheet once you’ve applied your operating expenses to your revenue. To stay profitable, you need to know your club’s Profit Margin at all times.
Profit Margin looks beyond your basic revenue figures. Overall profitability is the goal, but Profit Margin shows you whether all the individual elements of your business are profitable.
Should you launch new programs that have a higher impact on your bottom line? Are there any underperforming areas within your club that can be turned around, or should they be eliminated? Tracking your Profit Margin can inform your answers.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a determination of your club’s current operating profitability. Most health and fitness clubs only review it with their accountant when it’s time to file taxes or if they’re preparing to sell their business. It’s an essential metric, but unfortunately it’s woefully under-tracked and underutilized as a financial KPI.
EBITDA provides insight into how much profit your club makes from your present assets, operations, and products and services that you sell. It can act as a proxy for cash flow and is a helpful metric to refer to when making important decisions for your club’s future.
Your club’s financial metrics are changing on a day-to-day basis. If your reporting software can’t keep up, you’ll be slow to react to fluctuations in the market and lag behind the competition.
Opt for software that generates dynamic financial reports by drawing data from every corner of your club management solution. With an interconnected solution, your reports update in real time based on your club’s performance and member activity.
Dynamic financial reports show you how your management decisions impact your club’s performance in real-time. With the most up-to-date data available at the click of a button, you can make quicker, smarter decisions.
Clearer financial data isn’t the only benefit of an interconnected solution.
Read How Avoiding Integration Stalls Your Club’s Growth to learn how an interconnected set of software tools can also improve your member relations and protect your long-term revenue.
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