You Need To Dig Deeper Into Your Sports Facility
Go Beyond The Basics For Your Sports Facility
For any company to be successful, someone in the organization needs to have a strong understanding of financial principles and how to navigate the company using financial strategies. A CEO/CFO/President/Owner’s role is so much more than just looking at financial reports and keeping a pulse on how much money comes in and out. We often find ourselves taking on this challenging role for our clients as we understand that this can be a daunting task.
When we look to help sports facilities one of the first areas we focus on is the financial components to how they operate. We want to make sure they have systems to collect money, track sales, and create tangible reports to base decisions of off. For so many of the people we work with there is no “normal” day or routine. We work with entrepreneurs that are on the go, managing, networking, operating, negotiating, and branding their companies. Dedicating time (energy) to focus on the financials is often put on the back burner.
What Numbers Do I Need?
It goes without saying that the financials of a sports facility or recreational franchise are important. However, what many of our clients aren’t sure of is how to best use this financial information to help them grow and operate their sports business. After all, anyone can run a P&L report or print out a current balance sheet. The question is “What set of numbers do you use to make decisions for your sports facility?” And what we really want to know is, “How do you use this information once you have it?”. You should be doing a P&L/Balance Sheet (basic reporting) on a regular basis but you cannot make strategic decisions based solely on these reports. In order to take your sports facility to the next level you’ll need to dig into some more detailed numbers.
We are currently working with a fantastic Yoga Studio in New Jersey that is approaching 1 year in business. Similar to the majority of sports facilities we work with, Amanda started the studio on her own without any Parkview Sports help. Fast forward about 11 months and now we’re going to help push her studio through to the next level. She is starting to hire staff, focusing on branding the company, and removing herself slightly from the operational side and more to the managerial side of running her studio. A transition that ALL sports facility owners must do in order to scale their companies.
She’s concerned with making sure she treats everyone fairly in terms of incentives, what incentives to provide, and what to base those incentives off of. These questions are essential in determining the best way to move the company forward.
Your Sports Facility Needs a Strategy
Without a clear understanding of the studios financials it would be really difficult to motivate, train, and bonus staff for their great work. As a company, you need to have a deeper understanding of your numbers than just the basics. As Kevin O’Leary on Shark Tank says, “Know your numbers!”. Not just the basics, the really important, tangible ones that help you make the best decisions possible for your sports facility. To make decisions that will effect your company positively you need to understand what your trying to improve. You need to find your weaknesses. Most sports facilities hate this process and refuse to put themselves through it. However, in order to move the company forward you need to know where you started, how you got to where you are presently, and how to keep going. That means you need to find your weaknesses.
Here is what we did for Amanda to give her an idea of how her company financially operates and then provided to her a plan on how to bonus her staff for future achievements. We wanted to make sure we had the numbers that would best help us figure out how to get the company moving forward, otherwise we’d just be guessing.
By going through her online scheduling software and working off her Quickbooks we were able to determine the following:
18 Classes per Week x 4 weeks= Approximately 72 total classes per month
Total Classes in 1 year=864 Total number of visits to classes= 4,801
856 unique clients came 4801 times for an average of 5.6 visits per person over the year
5.5 participants per class on average
Currently Yielding = $77 per class
Current fixed expense per class= $28
Current Gross Profit per Class=$49
Average Class Price = $14
What Does It Mean?
Many sports facilities take a “holistic”approach to growing their company. They “feel” like the business should be doing better so they add new programs, teams, classes, and memberships. They’ll raise prices of existing programs or spend money on different types of advertising unnecessarily or without a game plan. If they would take the time to figure out their real numbers they wouldn’t have to “feel” anymore! They would have real evidence staring at them in the face with real answers on how to grow the company!
For example, Amanda’s weakness isn’t in her price of $14 per class or her profit margins. Its crystal clear that her clients are only coming in 5.6 times per year and their average class size is 5.5, roughly 1/4 of the studio capacity. These are certainly red flags, but given she hasn’t even been open a year, these numbers allow her to pay her bills, take care of payroll, pay personal expenses, and put some money into her own pocket. Most first year companies would love that! In fact, when going through the numbers, most sports facilities fall drastically under the ideal 60-70% efficiency rate they need to be at to become truly profitable.
With analysis like this she can now start to implement some basic growth strategies to become more efficient and profitable as a company.
How to Effect Real Change In Your Sports Facility
We need to improve participation across the board and we also need people to come in more often once they start. This means the instructors need to be more engaging with their classes and as a whole the company needs to do a better job of marketing classes and their instructors. So to effect this change, we had to come up with a way for instructors to benefit as individuals and as a group for the successful growth of the studio.
A great way to accomplish this is through a basic bonus structure that outlines ways to receive a bonus by improving the participation of every class. By doing so that means people come more often, purchase more classes, and in turn will directly improve the studio efficiency rate by getting closer to full capacity classes more often.
Quarterly Bonus Schedule-Over the course of the quarter, if the average class size goes up, bonuses are triggered both as a group and individually.
Avg Class % Increase Group Individual
6 Expected No Bonus $0
7.5 20% Catered Lunch $100
8 25% Company Lunch $200
9.5 37% Casual Dinner $300
11 45% Expensive Dinner $400
The above structure, while very simple, is extremely effective. Now that the staff can share in the success they will be driven to use social media more often, give out free passes, and tap into their own network of people to help grow the company. They will prepare better prior to teaching, be more engaged while teaching, and attentive to clients needs now that their bonus is directly tied to how many people enjoy going to their class.
You’d be amazed at how both successful & struggling sports facilities do not have a structure like this in place. Even the ones that are successful don’t have incentives established for their staff to shoot for! Sales would explode if they just had the right numbers to base decisions off of!
How Do You Make Decisions?
It’s important when you look at your finances and perform analysis that you’re doing something similar to this with your sports facility. Not every sports facility can use the exact same structure or data to determine how they’ll effect change, but some sort of analysis specific to how your sports facility operates is necessary in order to scale and grow. This might mean incentives for instructors, coaches, front desk staff, and even your management or executive team.
We see so many sports facilities that are in the financial situation to hire a GM, COO, or CFO yet never take this approach with them either. There needs to be incentives in place for the entire organization. Without an understanding of your financials it’s impossible for you to create the structure necessary to grow the way you want!