The Key To Your Success Lies In Your Numbers

by Justin Tamset (Director- Active Management)

The Key To Your Success Lies in Your Numbers.

Everybody has different opinions on all aspects of the world and that is what makes the world an exciting and unique. More often than not these opinions are what we call subjective. In fact they may be either educated or uneducated views but the key is it is a personal view based purely on how you or I interpret the facts.

For example discussions occur every night in pubs around the world on who is the best in the world at various sports. Who is better Sachin Tendulkar or Steve Waugh? Who is a better runner: Jana Pittman or Cathy Freeman? Is Tiger the best golfer the world has ever seen?

People will always say that there are a number of variables and it is unfair to compare the players. However, the sporting world uses statistics to help in comparing the players. Cricketers use batting averages and strike rates; footballers hit up, tackles, line breaks; athletes compare times and distance; golfers use handicaps and also compare putts, shots to the green and drive length.

For some players they even negotiate their contracts based upon performance. This means they receive bonuses based on wins, runs, goals or another variable the management and coach decide upon to compare or judge performances.

The statistics take away all the subjectivity or opinions of who is better. This makes you able to judge the player’s performance objectively and based upon facts! Hence, these statistics are key performance indicators (KPIs)for each player. And the objective results of these KPIs determine whether players receive a bonus or in deed keep their position in the Team.

We cannot hide from the fact that statistical information gives us a very clear picture of the state of our business. In fact, as Jim Collins states in his book Good to Great, the statistics give us the ‘brutal facts’ of our business.

I have no doubt you already track some statistics in your club. For example most of you would know how many members you have; some would know the number of participants in group fitness classes; and others the number of new sales. While these figure are important, KPIs can give you far more information.

Benefits of Tracking KPIs.
A major benefit of KPIs is they allow for successful people management in your club. Just like in the sporting analogy the KPIs allow you to be objective about staff performance. You may already do this by tracking class numbers and if they drop below a certain number you may change the instructor. And our instructors are ‘kind of’ trained to understand that poor numbers could mean losing a class.

KPIs take out any personal issues for discussion with staff. A ‘brutal’ but factual statement is that statistics don’t lie. This means that when looking at Team appraisals, you can justify decisions on Team members based upon facts rather than perception, gut feel or observations. AN individuals KPIs take away the subjectivity and allow you to look at performances based on results.

An exciting aspect of KPIs is that they allow you to compare performances between individuals and club – just as we compare footballers or cricketers. For example, clubs within chains or clubs that meet on a regular basis, can compare performance levels and results. The proviso is that each club tracks the same KPI’s and they are gained by the same formula.

The Australian Fitness Roundtable have been tracking KPI in their clubs for nearly 10 years and using their figures and those from the US Fitness Roundtable they have been able to set benchmark KPIs. They compare results and find this a huge value because if one club has a much better KPI then the fellow members can find out what they are doing to make this such a good figure! They then use the information in their clubs to help increase profitability and improve specific aspects of the club operation.

It is essential that you acquire your KPIs the identical way if you are going to compare them. If not, you are not comparing the same figures and this will void the comparison.

KPIs To Focus Upon.:
Many clubs have systems within a club to look at every action and set a KPI for it. But if you have too many the staff will be so focussed on all the numbers that they achieved nothing – they were too confused. A great example is a sales person: we track everything and some systems even track when they leave their desk. As a result the sales person may not know what you are truly looking for and expecting.

I suggest establishing one or 2 KPIs for the club that the staff can focus upon and one for each department. This means each Team member has just 3 figures to focus upon. You as the owner or manager may well have lots more figures you need to keep focussed upon.

Club KPI’s.:
These KPIs look at the financial status of the club. To complete many of these you will need access to a profit and loss statement – if you want really accurate KPI’s.

Some high priority KPIs for judging club performance:

Membership Income: Total Revenue – this figure tells you how much the ongoing viability of your club relies on the sale or renewal of memberships. A goal would be 70%, which simply takes the pressure off sales, and makes you work harder on building other profit centres or income producers in the club.

Attrition or Retention Rate – this is the number of members who drop out or stay with their membership. There are many ways to establish this figure out and each method has it’s own advantages and disadvantages and as different aspects of growth and attrition are included or not. To keep it simple for you and your staff: once you take the cancelled members from the new members of the month, did you grow? If you did you will have positive retention and if you didn’t you will have attrition and this becomes an area you need to work on.

Wages: Revenue – this figure compares your total wage bill, including on-costs, to your total revenue. Ideally, this figure is around 38% but from my observations in the industry this is difficult to achieve. I think 43% is more realistic but this figure can be effected by whether you do personal training in house or not. For example, if your PT is in house and split 50:50, your KPI is not where would like it because it has been affected.

Revenue per metre: You divide your total revenue by the size of the club and this tells you how much income you make per metre. There is no ideal or benchmark figure, but it had better be greater than your rent or you are in trouble.

Revenue per member: I love this figure because it tells me what each member is worth. A good indication on how much you need to spend to get a member or keep a member. You simply divide total revenue by the number of members.

Visits/week/member: This KPI tells you if all your members are using the club. The higher the figure will mean the greater retention but the more use of your club and therefore wear and tear on the facility and equipment. In fact the results of a recent BFIA study shows that if we increase member usage from 1 visit per week to 2 visits in their first 4 weeks, we could increase our retention by up to 40%!

Remember that looking at statistics is very confronting. It tells you the true story of the status of you business and your staff performance. Most importantly, it will give you an area of your business to work on and manage to improve. The KPIs are critical to your success, your profitability and even your sale price, should you wish to sell. So get close to your numbers, monitor them and mange them to close the gap between what you have and what you want.

Justin Tamsett is the Managing Director of Active Management. He is the facilitator for the Australian Fitness Roundtable program. For more information go to www.activemgmt.com.au