10 Ways To Increase Gym Revenue Without Selling More Memberships

Most gym owners drive business growth in two ways: by finding new members and by keeping the members they already have. While marketing and retention are great for growing your community, they represent only a fraction of the ways to increase gym revenue. By shifting your focus to maximizing every available revenue stream, you can uncover ways to improve your earnings overnight.

Consider how your pricing, service offerings, and operations impact your bottom line. Imagine being able to capture every payment reliably; selling memberships at a fair price that reflects the value of your services; and members who are engaged and enthusiastic about your brand.

In this ideal scenario, your business captures the maximum amount of revenue from every member. You can relax while your gym rakes in profits from multiple revenue streams. No more struggling to attract more and more new members each month with expensive and complicated marketing campaigns.

Realize the full potential of your business by using these 10 methods to increase gym revenue:

 

1. Reduce payment declines

According to publications released by major credit card issuers, 15% of recurring credit card payments decline. For some industries, the decline rate can reach as high as 30%.

To put this in perspective, if you have 100 members paying $50/month, you’d expect to receive $5,000 in monthly recurring revenue. However, credit card declines will cost you $750 to $1,500 per month. That’s $9,000 to $18,000 in lost revenue each year.

Credit card declines can prevent loyal members from paying what they know you deserve. These payments weren’t lost to poor customer service, low-quality classes, or high prices. These losses are completely out of your control—that is, until you put a process in place to avoid payment declines.

Use a combination of technology and customer service processes to recover declined payments and add back revenue to your bottom line. Choose a software solution that offers payment reminders and automatic retries after failed payments. While you can hire staff to collect declined payments from your members, third-party companies offer the most cost-effective service solutions. Well-trained managed billing professionals can increase recurring revenue by up to 25% for a minimal fee.

 

2. Raise your prices

Are you charging what your services are worth? Many gym owners panic at the thought of raising prices because they immediately envision a mass exodus of even their most loyal members. In reality, a carefully calculated price increase will improve your gym’s financial health and profitability with little impact on member retention.

Consider the following scenario: Your gym has 100 members each paying $50/month. You plan to implement a modest 5% price increase of $2.50/month per member. Given the new price of $52.50/month, you expect to keep 95 of your existing members. Following the price increase, you’ll earn an extra $2,850 per year.

No clever marketing tricks or slick sales pitch required. Your simple price change has increased your revenue all on its own.

To keep member attrition to a minimum, communicate your new pricing appropriately. Give members plenty of notice. Explain why the change is necessary to continue the high-quality services that they value from you.

 

3. Use paid trials

Most gyms offers free trial memberships or guest passes to prospective members. These freebies pay off when they result in new members, but sometimes you end up spending money to support non-paying guests who never return.

Paid trials help to secure a return on your investment. Payees are more serious about keeping initial appointments. They’re more invested in learning about your gym, understanding your value, and building relationships with your staff.

Consider using a combination of free and paid trials in a way that makes sense for your business. For instance, you might offer a free trial of your basic gym access, but a paid trial for your premium classes or training sessions.

 

4. Offer premium memberships

Do you offer tiered membership options and pricing? If not, it’s time to start. Rather than forcing your members into a one-size-fits-all model, structure pricing options around their needs and preferences.

If you’ve tracked purchases and attendance in your membership management software, you can use reports to investigate spending patterns and identify popular services. For example, your members may fall into three categories:

Once you’ve categorized your members and set your pricing model, you can send targeted promotions to each group to entice them to upgrade their membership package.

 

5. Sell retail items

Do you know how often members get to the gym only to realize they’ve forgotten something that will prevent them from working out? Stock essentials like earbuds, water bottles, and socks in your retail store to make sure members can get what they need.

If you’ve built a loyal following, invest in branded merchandise. Use an online service to print your logo on t-shirts, hats, yoga mats, bags, and more. A beautiful, eye-catching design goes a long way, so if you’re not confident in your logo or layout, try an online graphic design service.

 

6. Book private training sessions and lessons

Almost all fitness businesses offer one-on-one sessions, and most of them wish they could book more of these money-making services. The trick to maximizing this revenue stream is a combination of staff training and communication with existing members.

Market your private sessions to members using low-cost, easy-to-use communication channels. Put signs throughout your facility, post on social media, and send emails with special offers. Your goal is for every member to know that you offer private sessions.

From there, leverage your staff’s relationships with members to close the deal. Teach instructors to observe members’ behaviors and to discuss goals with them. An instructor may notice a member who puts forth great effort and attends regularly, but her technique holds her back. With a bit of coaching the member could excel. In seizing this opportunity, you’ll help a member meet her fitness goals more quickly and open a new revenue stream for your business.

 

7. Childcare

If lots of parents visit your gym, you may want to consider adding childcare services at your facility. A busy mom or dad who doesn’t want to give up gym time will gladly pay extra to know their child is happy, safe, and nearby during a workout.

Before introducing childcare services, be sure to review the legal requirements for your staff, facility, and business. While these services can bring in a significant amount of additional revenue, you’ll need to plan carefully to make sure you’re able to provide high-quality care.

 

8. Host events and workshops

Members love workshops, boot camps, and fitness challenges because they help them stay motivated and reach goals more quickly. These paid events provide a lump sum that has an immediate positive impact on cash flow.

To make the most of this revenue stream, think strategically about the needs of your business and members. Review the calendar for times when an event could provide extra cash during a seasonal downturn. Add events to help members meet a common goal, like staying fit through the holiday season.

Need some fresh ideas? Browse this event list to get started.

 

9. Nutrition and health coaching

According to IHRSA’s senior research manager Melissa Rodrigues, 25% of fitness club revenue comes from ancillary services. Your members aren’t just looking for a place to work out. They’re looking for all kinds of services to help them stay healthy, fit, and confident.

Most members would be happy to pay extra for services to help them eat better, make healthy choices, and track their fitness progress. These services will make your bottom line happy as well. By adding health coaching or consulting, you can increase the amount of revenue generated by each member.

 

10. Sell advertising

Looking for an out-of-the-box way to increase gym revenue? Try selling advertising space in your facility or email newsletters to local businesses. If you’ve done a good job building your membership base, you’ll have a fitness-conscious audience that’s attractive to an array of advertisers. Create a list of local grocery stores, specialty shops, salons, spas, venues, and restaurants who might be interested in your new advertising opportunity.

 

Go beyond marketing and retention to increase gym revenue through alternative revenue streams, new services, and operational efficiencies. In doing so, you’ll allow members to strengthen their relationships with you, giving your gym its greatest potential for growth.

7 Ways to Handle Late Member Payments

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Asking your students for money is never easy. When a member of your martial arts school doesn’t pay on time, it’s tempting to let the delinquency slide to avoid confrontation. But you run a business. You deserve to be paid for the valuable services you provide. Still, how can you ask for late payments without sounding cold or impersonal? These seven tips will help you navigate how to collect and prevent late member payments:

1. Automate member payments

Automating credit card and ACH payments through your member management system is an easy way to prevent late payments. Talk to your members about switching to one of these methods if you notice them struggling to pay on time. Be sure to highlight the added convenience of auto-payments and address any concerns about data security.

2. Set expectations with new students

Review key points of your membership contracts with new students and families. Make sure students or parents sign off on payment amounts, due dates, and the membership duration. Be honest and open about your expectations for on-time payments. Just like your members expect consistent, high-quality martial arts instruction from you, you will expect prompt, full payments from them.

3. Charge fees for late payments

If late payments are a chronic problem for your martial arts school, you might decide to add late fees to your contract. Some gyms and martial arts schools charge late fees of $5 to $25 per overdue payment. For some individuals, the extra incentive will motivate them to stay on top of payments.

Before deciding to use late fees at your school, consider how this will impact your relationships. Ask yourself how new members will react to hearing about late fees before they’re even a part of your community. In the end, you’ll have to determine the best balance to protect your business without harming your relationships.

4. Send email reminders

You probably already use your martial arts software to automatically remind your members about upcoming payments and due dates. Hopefully, these reminders help prevent late payments before they occur.

Once invoices become past-due, you can use another type of email reminder to collect late payments. Create a short series email scripts to ask for late payments. Be polite but direct. Make sure to clarify any consequences of late payments, including interest fees or deactivation of the membership.

5. Make a phone call

Because phone calls are more difficult to ignore than emails, they’re particularly effective for collecting late payments. Be friendly but firm on the phone. Clearly and calmly explain the details of the past-due invoice and ask for the payment in full. While on the phone, you may uncover new information about your member’s situation that reveals the true reason for late payment. Use these insights to find a long-term solution to help you and your member avoid future missed payments.

6. Be kind, not argumentative

Your students are only human. They make mistakes. They forget to update expired credit card information or to check their bank account before payments are due. There are hundreds of reasons students miss payments. Avoiding financial disputes is crucial to maintaining a strong, long-lasting relationship. Before jumping to conclusions, see if a friendly reminder is all that is needed.

In some cases, your student may be dealing with a difficult or complex situation that has impacted their finances. Use good judgement to come to an agreement that’s fair and mutually beneficial to you and your member. It may make sense to be flexible or forgiving in order to preserve your relationship and retain your member.

7. Call in an expert

Collecting late payments is complex and challenging. To truly be successful, you’ll need to dedicate resources to make sure someone is responsible for follow up and collections. If you handle this follow up in-house, make sure to incorporate this task into one of your job roles so it does not become an afterthought for one of your busy employees. You can also outsource payment collection to a team of managed billing professionals to bypass the awkward conversations and eliminate the complicated follow up process.

If you follow the steps above, you’ll see your overdue invoices decrease while your relationships with your students improve. In the long run, the combination of these two factors is what will keep your martial arts school financially stable and successful.

Have you tried these tips? How do you encourage students to pay on time? Tell us your thoughts below.

How to Avoid Financial Disputes with Your Gym Members

Member-owner relationships are a bit like marriages. You work hard to cultivate strong, long-lasting bonds. You do all you can to show you care and provide what your member needs. Despite that effort, you can still find yourself dealing with absences, arguments, and painful breakups caused by disagreements about money. Among married couples, financial disputes are the second leading cause of divorce. Likewise, uncomfortable conversations about missed payments can make members feel like your gym is not the right place for them. To avoid losing members, put a plan in place to prevent financial disputes and strengthen your relationships.

What can you do to avoid financial disputes with your members?

At Member Solutions, we have over 25 years of experience providing billing services and collecting member payments. Think of us as a financial counselor who wants to help alleviate some the strains money puts on your member relationships.

Follow these 5 tips to avoid financial disputes and keep your billing practices running smoothly:

1) Talk about your billing policies

Clear billing policies allow you and your members to stay on the same page. Put yourself in your members’ shoes. Would you enjoy surprise charges to your credit card? While surprises can be fun, financial surprises can damage your relationships.

Create a membership welcome packet that clearly details what your members can expect financially. Address the when and how of payment processing, late fees, cancellation policies, payments dates, and how members will be notified if fees change.

2) Be flexible when members have money problems

Eventually, one of your members will show up to your gym after months of racking up an unpaid balance and overdue fees. They’ll say they had no idea it was happening. They’ll ask you why you didn’t remind them and possibly tell you they can’t afford to pay.

While it’s important to enforce your policies, sometimes it’s important to find a middle ground. Ask yourself, “What’s best for my long term relationship with this member?”

Sometimes it’s in your best interest to give a member a break. You may decide to waive fees or set up a payment plan to get a member caught up. When you make an exception, let them know that you’re doing it because they are a valued, long-term member. Explain that your policies are in place because newer members—who don’t have strong relationships like yours—might try to avoid paying.

This method has a variety of benefits:

  1. You were likely going to receive no payment. Now that you have made an exception, you are likely to receive some compensation.
  2. You increase the odds that this member pays on time going forward.
  3. If this member is leaving, it’s more likely that he or she will return to your gym.
  4. The likelihood that member talks highly of your gym will increase.

Every gym owner is unique and has different opinions on this situation. All we recommend is that you consider the value of each customer on an individual basis.

3) Automate member payments and billing

Automated billing services virtually take you out of the dues collection process at your gym. All you have to do is set up client accounts, due dates, and payment amounts. Voilà! Your clients’ accounts will be billed automatically.

What does this mean for you? It means that you no longer have to directly collect member payments. This saves time on administrative tasks and reduces strain on relationships with your members.

4) Offer secure online payment processing

The convenience of online payments has obvious appeal for both businesses and members. However, when it comes to online payments, choosing a service with maximum security is critical. The last thing you want is for your or your members’ financial information to be compromised.

Choose a Level 1 PCI compliant provider to protect your business. Providers that follow these data security standards offer the highest level of protection against credit card fraud.

5) Enlist a professional team to bill your members

In addition to damaging relationships, tracking down member payments is confusing and time-consuming. Pursuing missing payments can take up to 10 hours every week. That’s time you could spend with your members, growing your business, or relaxing with friends and family.

Outsourcing to an affordable managed billing service that specializes in tracking down delinquent accounts can reduce stress and help preserve relationships. Billing professionals have an in-depth understanding of the payment processing business and are better able to troubleshoot issues with failed credit card payments or delinquency. In fact, members are more likely to settle monetary issues with a billing company than a gym owner.

If you decide to collaborate with a third-party billing provider, choose a team that will uphold your policies while still offering flexibility to your members. A good billing company will be able to advise you on when to make exceptions for members who are having trouble paying.

Overcome financial disputes to strengthen relationships with your members

Financial disputes are one of the main reasons relationships end—whether it’s between spouses, business partners, or band members who pursue disappointing solo careers. To beat the odds, you need to be proactive. Talk to your members about your expectations regarding payments. Be open to a financial partnership with your members. If you decide to partner with a billing company, choose a team with the same commitment to customer service and fairness that you do.

How do you manage the financial aspects of your member relationships? Share your comments below.

Webinar: Uncover the Hidden Profit Center Inside Gyms & Martial Arts Studios

Can you turn a profit on your billing expenses? Expert sales consultant and school owner Erik Charles Russell says yes.

Members love convenience. In this webcast, Erik Charles Russell shares how to create a new revenue stream by appealing to members’ desire for convenient billing options. Through this model, you can generate higher income from fewer members as you reduce administrative costs. What you’ll learn:

  • How to create a profit center from service and transaction fees
  • How to raise prices and retain current members
  • Why low prices do not lead to more members

Presented by Erik Charles Russell.

Erik Charles has been in the Martial Arts and Fitness industry for more than 25 years and is the owner of Premier Martial Arts and Fitness in Watertown, NY. In 2015, he published a book based on his successes called The Art of Selling Memberships. The book became an international best seller—hitting number one in three categories in the US, Australia, and Germany on Amazon.com.

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10 Ways to Reduce Your Delinquency Rate & Increase Cash Flow

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In the 26 years that Member Solutions has been in business, we’ve discovered that there are ways to alter member payment behaviors to ensure prompt and predictable cash flow to your facility. Here are 10 tips to reduce your delinquencies and facilitate collections with our managed billing services.

1. Avoid statement or coupon billing methods whenever possible.

Customers that pay by statement or coupon are 23% more likely to become delinquent than those who sign up for auto-pay. Enroll customers for bank draft or a credit card option. It’s a double win for you. Customers are more likely to pay on time and electronic payment options save you money.

2. Acquire e-mail addresses for every customer.

Email is one of the fastest ways to communicate with your customers. It has become an effective tool in delinquency management. When we send email reminders as part of our payment collections service, we provide a direct link to our customer-only website where your members can make payments and update their billing information.

3. Provide a contract copy promptly when requested.

Your agreement is legal proof of the customer’s obligation to pay. The quicker we receive the agreement, the better chance we have in recovering your funds.

4. Select due dates early in the month.

If a customer does miss a payment or has a declined or returned payment, Member Solutions has a better chance to recover your funds within the same billing cycle. We recommend setting the 1st or 5th of the month as the due date for all of your members.

5. Know who’s delinquent.

Our most successful clients know how and where to find this information online. Here are ways to stay informed:

  • Review the delinquency report at least twice per month.
  • Sign up for Email Alerts. We’ll email you and any staff member you designate whenever a customer has a returned or declined payment.
  • Examine the Activity Report on a weekly basis. Not only will it provide you with a list of new accounts and funding activity, it will also list any customers with an active follow up that is preventing or delaying billing.

6. Work together with Member Solutions.

The clients we see with the lowest delinquency percentages work with our team to make it easy for members to manage their accounts and make payments. Some clients prefer to be direct with their members, while others prefer a subtle approach. Either method will increase collection results, so long as you’ve communicated your preferences to our team.

Once you know who is past due, you can simply hand your customer a Member Solutions’ business card and say “Member Solutions has informed us that they have been unable to contact you. Here’s a card with their website and contact information.” Once a customer is aware that you may know that they have a billing issue, they are more likely to pay on time to avoid embarrassment.

7. Ask your customer to provide you with their most accurate billing information.

Have them provide it to you directly, rather than obtaining it from a driver’s license or previous billing account which may be outdated. Ask the customer to verify their vital billing information when they are signing the agreement.

8. Make sure that your customer knows that Member Solutions is servicing the billing portion of their agreement to avoid having payments charged back.

Your endorsement of Member Solutions provides your customers with a reassurance of your professionalism and commitment to quality service. Place the Member Solutions Decal in your business and hand out Contact Cards, both provided free of charge. Talk about our Customer Account Access Website, designed specifically for your customers to make payments, update their billing information, print payment history, or contact our Customer Service Team.

9. Offer settlements to members who have trouble paying.

The longer an account remains delinquent, the less likely you are to receive payment. When a customer is no longer attending class or using your facility, they are more likely to stop paying altogether. Once an account reaches 90 daysdelinquent, we recommend automatically offering the customer a settlement for a percentage of the remaining balance. This could bring you income in the form of a lump sum payment, and leave the customer on better terms which could result in new customer referrals or re-enrollment in the future.

10. Don’t accept payments at your business.

Generally, we discourage our clients from accepting payments at your place of business. Accepting payments creates more work for you and increases the likelihood that your customer will receive delinquency phone calls and correspondence when they are not past-due. Worse yet, it also increases the chance of double billing your customer when the payment is not reported immediately to Member Solutions. Finally, once you accept that first payment, chances are it will occur again and diminish our authority when the customer decides not to pay.

New Chip Cards, New EMV Rules for Merchants: Are You Ready?

Whether you realize it or not, a major change is happening in wallets throughout the U.S. Perhaps it’s already happened to your wallet. If it hasn’t, it soon will.

The magnetic stripe credit card you’re used to using to make purchases has been – or will soon be – replaced by what is called a chip card.

Actually, there are a bunch of names for it: chip card, smart card, smart chip card, chip and PIN credit card, chip credit card. And you’ll often hear the cards referred to as EMV chip cards, EMV smart cards, EMV cards.

E…M…what?

EMV. It’s an acronym you should know. Named after its original developers — Europay, MasterCard, and VISA — EMVis a global standard for the cards equipped with computer chips and the technology used to authenticate chip card transactions.

You see, not only is a change happening for you as a consumer (where you’ll use a chip card instead of magnetic stripe card to make purchases), there are big changes ahead for you as a merchant too. All U.S. merchants are being urged to use EMV-compatible payment terminals in their business on or before Thursday, October 1, 2015.

Why the migration to EMV technology?

EMV chip technology is proven to significantly reduce card fraud resulting from counterfeit, lost and stolen cards.

Currently, when you use the magnetic stripe card, data is exposed. It’s decrypted and then encrypted several times through the transaction. Also, data from a magnetic stripe card does not change. It’s static.

Because the data from a magnetic stripe card doesn’t change, it can be skimmed easily which leads to fraudulent use and the production of counterfeit cards.

The chip card, on the other hand, is much more secure. Data passes through the same stops as the standard methods, but data is NEVER decrypted and therefore NEVER exposed.

On top of encryption, each EMV chip card transaction is also assigned a unique one-time-use token, which is then destroyed once the transaction is complete.

Change for Consumers, Change for Merchants

Changes to chip cards mean a new shopping experience as a consumer. No longer will you swipe your card. You’ll insert your card into an EMV-compatible terminal. The card must stay inside the terminal while the chip information is accessed and updated.

As a merchant, the switch to EMV means adding new EMV-compatible payment terminals—and—complying with new liability rules.

For everyone, it means greater protection against fraud.

3 Things Membership-Based Businesses Can Do Today to Step Up Cash Flow

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With all the different types of payment processors and ways to accept payments, it’s important to figure out what is right for your business. Here are three things you should know about payment processing to help secure your business and step up cash flow.

1) Set up automatic, recurring payments.

Setting up recurring, automated payments has many benefits for your business and members. First, members don’t have to remember to pay you. Payments deduct automatically from their savings accounts, checking accounts, debit cards, or credit cards of their choice for the amount and frequency you have agreed upon.

You also can provide members with an online payment portal to update profile information, payment information, and make payments on past-due accounts 24/7. You’ll receive real-time alerts of delinquent payments so you know as soon as a payment fails. And best of all, you can harness the power of Member Solutions full-service customer call center to personally follow up with declined and disputed charges on your behalf if you choose.

Capturing recurring payments is crucial to your business. You can be away on vacation or in the middle of a family emergency, and payments will continue to go through without you having to collect or to process them manually.You will have reliable month-to-month cash flow deposited directly in your bank account. Recurring payments also help guarantee future purchasing of your members. If you do not have a way to accept automated, recurring payments, there is no guarantee all of your members will return next week, month, or year, which puts your business at risk.

2) Take credit cards at your business.

If you do not currently accept credit cards at your business, you should start. It is important to give your customers payment choices. If you are only accepting cash or checks at your business, you are missing out on immediate cash flow.

Close to 50 percent of Americans carry $20 or less each day, including nine percent who don’t carry any cash at all. “Consumers prefer to pay with plastic, debit, or credit or some other type of mobile technology,” says Greg McBride, Chief Financial Analyst for Bankrate.com.

Those with credit cards tend to purchase more as well. Setting up a merchant account for your business is easy and less expensive than losing potential clients because you cannot take their money.

3) Take mobile payments.

Whether at the gym, at a park, or anywhere outside of your physical location, you’re in business when you are able to collect and process payments right on your phone. Instead of getting a payment application for your phone that is separate from your day-to-day payment processing business, you can harness the power of a merchant account, along with a mobile application, to accept payments anytime and anywhere.

With a merchant account, you can accept credit, debit, and ACH transactions through your front desk software, through a physical terminal at your location and through an application on your iPhone or Android device. All of the payments are processed through the same account so all of your financial reporting is in one place for all of your one-time payments. Through Constellation Payments, Member Solutions’ sister company, you can set up a merchant account easily to accept secure transactions 24/7 at your location.

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Get Fit Holiday Promotions: How to Calculate Your Cost of Service

I do not know if holiday seasonal stress disorder is an actual condition, but if it doesn’t really exist, it certainly should. Every fitness business out there is being pushed this time of year to offer some sort of special or deal in order to entice people to sign up or make that first leap into health and fitness. Given that our wonderful industry also has some of the tightest profit margins, it can cause a greater amount of stress to try and exceed the expectations of the consumer.

Retail businesses can offer an 80% off discount, or a “buy one, get one free” promotion. They’ll still make a profit. But most of the fitness businesses we work with are service-based. If they offered these outrageous discounts, it would mean they would be paying people to work out. Not a bad promotion if you can swing it; “Come to my personal training studio and I will pay you to get fit!” You may get hundreds of clients, but those doors will be closed before they can even get in.

One of the best things to understand before you offer a special promotion is the cost to deliver your service. Determining your cost of service will assist you when you offer any promotions to existing and new members.

Calculating the Cost of Service for a Fitness Business

  1. Overhead Costs ―These are the indirect costs to your fitness business in providing services to customers. Examples include labor for other people who run the fitness facility or Martial Arts school, whether administrative assistants or a director of a department. Other overhead costs include your monthly rent, taxes, insurance, depreciation, advertising, office supplies, equipment lease, utilities, etc. A portion of all these costs will need to be included as part of your fees.
  2. Material Costs ― Material costs refer to stock or inventory required for the service. These are typically not huge additional costs for the average fitness business. For example, an automotive center would need the cost of brake pads and brake fluid when calculating a brake job. In our training studio, I add in the cost for our towels, laundry detergent, soap, shampoo, and razors. We purchase and supply these to our clients. They could just as easily be considered overhead expenses. In our training studio, I know that these toiletries add up to around $3 per client session, so I will use that number when calculating the cost of service and determining a promotional offer.
  3. Labor Costs ― Calculating labor costs for fitness businesses is usually pretty straightforward. Wages are typically the same per service per staff. That said, it is good to keep the average cost per service on hand and up to date. Also remember that when you give a raise to staff members, be sure to change this number to keep your costs in line.

We use our Member Manager software to calculate most of this for us with just a click of a button. I can see exactly the percentage of revenue per service that is going to labor for all staff or on a per staff person basis. Member Manager also calculates the revenue that I generate per service and pinpoints members that pay below my rack rate so I will know when it is time to raise their rates. All of these costs are important numbers to have handy when determining the discounts you want to offer. I can quickly add my costs together, along with my desired profit, to formulate an accurate price for a special.

Next week I will apply this cost of service calculation to a few fitness business models and show you some cool specials that help increase member attendance and still keep profits high.

Why Credit Card Processing Makes Good Business Sense

Imagine a brand-new member anxiously walks into your facility, eager to buy whatever is in sight. As he stocks up on gear, ready to make his purchase, you have to break the bad news: “Sorry, we only accept cash“. The member races to find some money but only has a few bucks in his pocket. He has a credit card on hand but you don’t take credit cards. Your member leaves disappointed and you lose a sale.

Is this you? Are you missing out on opportunities to grow your business? People rarely carry cash anymore; and when is the last time you saw someone with a checkbook?

To stay competitive in today’s marketplace, you have to provide what customers demand, and that includes the convenience of paying by credit card.

In fact, many people prefer to pay with credit cards to accumulate reward points and miles. Credit cards also help customers organize their transactions and provide buyer protection services, which make them a preferred payment method in many cases.

Accepting credit cards also provides several benefits to businesses:

    • Cash flow typically improves — regardless if there’s an increase in sales
    • Rather than sending an invoice and waiting for that invoice to be paid (or anticipate a check to clear), the money from the sale goes directly to your bank account
    • You decrease the likelihood that you won’t receive payment by capturing the funds as close to the time of sale as possible
    • And last but not least, an increase in sales

Many small businesses shy away from credit card processing because of the fees involved. However, numerous studies have shown that the average size of credit card orders can be as much as three times greater than those paid by cash or check. All said, the increase in sales heavily outweighs any expense incurred — making it a wise investment. Also remember … if you don’t accept credit cards, are your competitors doing the same? Or are they allowing credit cards and providing an advantage that you aren’t providing?

How to Get Started with Credit Card Processing for Your Business

In order to take credit card and debit card payments on-site at your place of business, you will need to do the following:

Step 1: Get a Merchant Account

A merchant account is a special type of bank account that allows your business to accept payments by credit or debit card. Merchant accounts also provide the ability for you to receive monthly statements detailing your business’ processing volume. To learn more about merchant accounts, visit csipay.com/overview.

To obtain a merchant account, you will need to apply under a merchant agreement with a reseller or bank. The application process is fairly simple and requires that you provide some background information about you and your business, along with some supporting documentation.

What you can expect to pay: The processing fees you will incur usually represent a small percentage of the transaction and a set amount. When shopping for a merchant account you will often see rates advertised that try to lure you in with a cheap transaction fee. Make sure you review ALL of the fees that you will pay. Many times, in addition to the low-cost fee, advertised, you can expect to pay different rates depending on whether you swipe or key in the customer’s credit card number. These fees combined together make up what you can expect to pay for credit card processing.

Step 2: Work with a Level One Payment Card Industry (PCI) Compliant provider.

The PCI Compliance standard was created by the credit card industry in 2006 as a way to prevent sensitive credit card information from being compromised to avoid credit card fraud. To comply with the requirements you need to make sure you work with a secure, certified processor to ensure the credit card information is securely stored and that the payment requests are processed in a secure manner. The processor, who provides you with your merchant account, will be able to explain this more fully and educate you on best practices when accepting credit cards at your business.

Step 3: Establish a way to capture transactions.

This is accomplished with a credit card terminal or reader. You are probably already familiar with them when you have shopped in a retail location and used your credit card. The reader can be configured to work with other software solutions, such as a front-desk system to help manage your Fitness facility. Once you start processing credit card transactions, the transaction amount will be sent to your bank account minus the transaction fees that are withheld.

There are numerous readers that exist and you can shop and select the best reader based on your needs. Some are even wireless if you want the flexibility to move around when processing payments.

Remember earlier when I mentioned that you can expect to pay processing fees when accepting credit cards? These fees will actually change depending on the manner in which you capture the credit card transaction. You should try and swipe the actual credit card whenever possible since that will help provide the cheapest processing rates for your transaction.

Getting started with credit card processing may seem a bit daunting. Don’t worry ― it is easier than you think. There are many great resources out there to help you get started. Make sure you pick a reliable, dependable partner; and in no time at all, you’ll realize the many benefits that credit card processing can bring to your business.

About the author: Steve Pinado is the CEO for Member Solutions. Recently, Member Solutions launched a new affiliate business, Constellation Payments, to deliver secure and reliable payment processing for merchants. For more information, call 888.248.7060 or send an email to sales@csipay.com.

Can You Continue to Fund Your Business Growth? A Look at Your Balance Sheet

Can your membership business continue to fund its growth? The balance sheet can answer this for you right away.

By knowing how to read a balance sheet, you’ll also be able to have a relevant discussion about it – or a discussion about the balance sheet of a business you’re interested in acquiring.

In addition, the balance sheet has two other uses: 1) Vendors and lenders can use the balance sheet in considering the creditworthiness of the business. 2) Owners and potential investors can use it to help determine the value of the business.

Let’s look at the balance sheet to get a picture of your financial health.


Getting to Know the Balance Sheet

First off, the balance sheet is a snapshot that helps you identify and analyze trends in the health of your business. The balance sheet reports on the financial condition of a business at a specific point in time.

Balance sheets are often shown with information from two or more dates, such as year-end information for the last two years.

Other key financial statements, such as profit and loss statements and cash flow statements, report financial activity over a given period of time.

Breaking It Down: How to Read a Balance Sheet

The balance sheet is made up of three parts:

  1. Assets — what you own
  2. Liabilities — what you owe
  3. Owner’s equity — the owner’s stake in the company

Take a look at the example balance sheet below. The company and amounts are fictional.

Balance-sheet-example-showing-assets-liabilities

 

All About Assets

Let’s look at the left column first titled Assets.

What are assets? Assets are the things that the business owns that have monetary value, such as equipment. The assets are listed in order of liquidity, which is how quickly the items can be turned into cash.

Here’s an explanation of each line item:

Current Assets — assets that can be turned into cash within one year of the balance sheet date. The most liquid asset of every business is of course cash.

Accounts Receivable — amounts owed to the business by customers who made recent purchases on credit terms.

Inventory — items purchased by the business for resale to customers.

Prepaid Items — items that have been purchased but will be used and expensed on the profit and loss statement in a future period. A good example of a prepaid item is paying an insurance premium six months in advance.

Fixed Assets — sometimes called Property, Plant, and Equipment (PP&E), fixed assets are not considered very liquid and are therefore excluded from the current assets. Except for land, fixed assets depreciate over a period of years. They are listed at their purchased amounts, less accumulated depreciation to arrive at their net amount. Land is thought of as never losing value and is therefore not depreciated over a period of time.

A Look at Liabilities

What are liabilities? Liabilities are what the business owes to the various creditors and vendors. Like assets, liabilities are shown in current and non-current sections.

Again, an explanation of each line item from the top:

Current Liabilities — those amounts that must be paid within one year of the balance sheet date.

Accounts Payable — monies owed to vendors and suppliers for items acquired on credit.

Wages Payable — owed to employees and taxes payable amounts due to governmental taxing authorities.

Unearned Revenue — an item that is often not well understood by non-financial individuals. Unearned revenue is money received by the business for services not yet rendered or product not yet delivered to the customer. A good example in the member-service industry is membership fees paid-in-full by a member for the next year. The money has been received but the service for which the member is paying has not yet been rendered. Examples would be a one-year Martial Arts membership or a six-month Personal Training package. The service is still owed to the customer and therefore the revenue is unearned and reported in the liability section.

What Financial Analysts Look for When Reviewing Your Balance Sheet

One of the most common ratios that analysts use when viewing a balance sheet is called Working Capital, which is defined as current assets less current liabilities. The current ratio tells the reader whether or not the company has the liquid assets required to pay its obligations owed during the next year. If current liabilities exceed current assets, the company has no working capital.

Current Ratio is another common ratio used which is current assets divided by current liabilities. Higher ratios indicate more liquid companies. It is possible to be too liquid as investors would view the company as sitting on idle cash that could be invested elsewhere.

Non-Current Liabilities — amounts owed to creditors beyond one year ahead. Non-current liabilities are also referred to as long-term liabilities. The most common long-term liability is bank loans which are paid over several years.

Owner’s Equity — this equals assets less liabilities. The equity is comprised of the investment made by the owners into the company and the earnings retained by the company (versus distributed to the owners as dividends).

When All Is Said and Done

So now you have a basic understanding of what a balance sheet is and what the terms mean.

Remember that the balance sheet only shows a snapshot of the company at one particular date in time. It’s a useful tool to ensure your business finances are properly managed — and it can help uncover the true worth of your membership business.

To get the complete story on the health of your business, you must review the balance sheet, along with the profit and loss statement and cash flow statement.