At your club, you’re constantly looking to the future. You make financial projections, and you put tracking in place to ensure your team meets those goals through membership packages, group ex programs, retail, and other revenue streams. But what happens when that tracking stops giving you the insight you need to be flexible and creative with your profitability?

We've outlined five key financial metrics that are essential to reinvigorating your financial tracking and strengthening your health and fitness club management. Let’s dive in:

Revenue per Client

Annual Revenue ÷ Clients or Members‍

One of the most commonly tracked KPIs in the health club industry is Revenue per Client (RPC), or Revenue per Member. It’s a basic calculation that takes annual revenue and divides it by the number of clients or members. This figure provides clarity and helps put other metrics into perspective, which is what makes it such a commonly used success measure.

The RPC KPI is also important in determining an appropriate marketing budget. If you know what one member is worth to your club, you’ll know the maximum amount to spend when it comes to Cost Per Lead in your marketing.

The one caveat to measuring success by RPC, though, is that it doesn’t provide insight into how or where your members spend their money with you (more on that in the next section, Revenue per Square Foot). RPC includes money spent in the cafe, group classes and court reservations, as well as their membership fees. So, while RPC is an important metric to track for a high level view, you’ll have to dig deeper to get detailed information about what’s working and what’s not within your club.

Revenue per Square Foot

Annual Revenue ÷ Square Feet

Revenue per Square Foot (RPSF) measures how much money you’re generating from the space you’re occupying – an incredibly useful data point that is becoming more of a focus for club leaders in optimizing the use of a facility’s space.

RPSF is an easy calculation you can perform by dividing your annual revenue by the square footage of your facility. RPSF tells you the spaces that are producing for you and those that are not. It forces you to view your club from a space utilization perspective and, once that occurs, you will readily see areas that can literally be turned into profit centers.

Member Retention Rate

(End Count – New Members) ÷ Start Count

Retention is an important metric for your club, because your club survives through recurring revenue. It’s typically calculated annually by dividing the number of members on the last day of the year by the number of the same group of members on the first day of the year, multiplying by 100 to convert to a percentage value. You can also easily calculate this rate quarterly for a more granular view. This metric is critical to your club’s long term profitability for two key reasons:

The first is that a high churn rate can indicate a discrepancy between the experience a member believed they signed on for, and the experience they’ve received since joining. Are you delivering on your brand promise? Is your pricing aligned with your offerings? Does your member experience meet member expectations? Poor retention rates are typically an indication that you need to dig into the answers to these questions.

The second reason you need to track retention rate is that, just like the RPC metric, retention rate gives you information about how much to spend on marketing and where to spend it. After a member churns, you have two options: get a new member in, or work to get that churned member back. And as you know, whichever of those two options you choose, you’ll have to put money behind it.

Card Declines

Did you know that 1 in 3 members will terminate their membership within 30 days of being contacted regarding returned payments from expired or invalid cards?

Financial conversations are some of the most uncomfortable communications you have to engage in with your members, and in our current reality with COVID, we know that clubs are having to navigate this situation even more frequently than normal. Member cards decline for a variety of reasons -- from insufficient funds (NSF) to unexpected card expirations.

But when a card decline drives a member to terminate, your club loses more than just that membership revenue. Learn more about what credit card declines are costing your club, and the importance of considering them in your financial tracking.

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Profit Margin

(Revenue - Cost) ÷ Revenue

Every business selling anything needs to know its profit margin at all times. Calculated as a percentage of revenue, profit margin is simply how much you have left on your balance sheet once you’ve applied your operating expenses to revenue.

What profit margin must also do is look beyond the numbers. Overall profitability is the goal, of course, but are all elements of your business profitable? Are there areas that can be turned around, or should they be eliminated? Should you launch new programs that have a higher potential to deliver more to your bottom line? You should always have a pulse on gross profit margin.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization

EBITDA is a company’s Earnings Before Interest, Taxes, Depreciation, and Amortization, and while it’s an extremely important metric, it’s woefully under-tracked and underutilized as a financial KPI. If you’re like most health and fitness clubs, you only review it with your accountant when it’s time to file your taxes or if you’re preparing to sell your business.

One reason to stay on top of EBITDA regularly and not just when tax season rolls around is because it’s a determination of your club’s current operating profitability. It provides insight into how much profit your club makes with its present assets and its operations on the products and services it produces and sells. It also provides a proxy for cash flow, and we’ve talked before on the importance of cash flow statements. This insight is invaluable when making important decisions for your club’s future.

Partner with a Team of Experts

You likely have a solid financial tracking process in place for your club, but consider adding a few of the KPIs mentioned above that haven’t been on your radar. Looking at your revenue streams, member engagement strategies, and space optimization is a kind of kaleidoscope of perspectives for your team that can help color a fuller picture of your club’s success.

And consider how health club management software could change the game for your club. Get in touch to get started.

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