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The Trends Don't Lie



Reactionary owners are the ones who let emotions and a sense of feel guide their business decisions on a daily basis. In this group, the gathering and tracking of relevant numbers are avoided because either the owner doesnít know what to track or simply avoids the numbers altogether since the reality of those numbers might contradict their sense of what is going on in their own business.

Trends lines represent how the key indicators track over time. In our business, usually anything over a year is so far out of date as to be worthless. Our reality in the fitness industry is what is happening now and if the indicator we are currently tracking is up, staying flat or declining slowly.

Intense owners, and might I add usually financially successful owners, normally track dozens of key indicators on a daily basis. These indicators reflect the current health of the business and give the owner clues as to not only how the business is working today, but also how the business will work in the near future. The key indicators also illuminate the performance of your current staff and whether they can perform at the necessary basic level necessary to sustain your business.

At the basic level, you need to only track these foundational indicators on a daily basis:

      Daily traffic: potential business through the door (leads)

      Conversions: How many of your leads became members over a 30-day period of time (closing rates)? Keep this for individuals and for the team.

      Average EFT: What is the average of all the payments in todayís memberships? Always split couples into two separate contracts. Your goal of course is to keep the average higher than the monthly payment for an individual.

      Gross amount of membership contracts.

      Gross amount of training membership contracts. We never used to track gross contract amounts but our goal now is to have a receivable base based upon training revenue that is higher than the receivable base derived from just simple memberships.

      The daily number: The amount we need to hit each day through the register to hit the target deposit minus the net receivable check.

      Retention numbers: Track the total possible for the month and the total saved.

      Daily traffic and the usage rate, which reflects the average per member visit spent in the club each day in the clubís profit centers.

      Total annual memberships for the month

      Total training memberships for the month

      Closing rates be the assessor, which is the person that spends an hour with most of the new or potential members getting them properly placed into the club. See prior blogs on this. This is probably the single most important thing I am teaching these days.

This list reflects some of the most basic indicators that highlight how the business is doing. Most of these numbers are taught in the workshops or are in my books. What we are looking for in this blog is what these numbers represent as trends.

Trend line # 1: Slight downward numbers slowly eroding over a 12-month period but notable if lasting for a minimum of three months. Many owners never feel the bullet that killed them. Death for most fitness people in business is a slow process that quietly creeps up on an owner until it is too late to make significant change.

The example here is the insidious death of the frog story used by many motivational speakers. In this example, it is noted that a frog that jumps into hot water will jump right back out while a frog that sits in cool water that is slowly heated to a boil will die and not jump not realizing that its world is changing for the negative. I donít know if this story is true but it makes a great example and as a side note who was the nasty bastard that decided to boil a frog to see if he could validate this theory?

Anyway, most owners that fail go the way of the frog. By ignoring downward trends over time they eventually reach a point where the business is distressed but it is now too late to jump out of the boiling water that is killing you.

Letís take lead generation for example and letís say that your leads trend downward for a period of three months, which is the most important time frame to take action. The typical owner looks at the numbers (maybe) and decides to maybe add a little more marketing or to start marketing if he hasnít been in the market. Mostly his reaction is too little too late because what he is really doing is just stalling with the hope that the numbers will turn around next month. It is important to note here that:

Trend lines never reverse until they are

reversed by immediate and severe action by the owner

 

Three months is the key here. If you are declining in any key area for three months straight your business is in trouble. Subtle reaction would not be the key here but rather an immediate and concentrated response by the owner will be the only thing that changes the trend.

 

Trend line #2: Flat line over time. In 2009, designated by the financial gurus in this industry as the single worst year in the modern history of the fitness industry, flat line would have been a good thing. There was a story in the financial magazines where Subaru celebrated a year in the recession where they grew the company by only a point and a half. In tough times, just hanging on is a success.

 

But we are past that point now and flat line is no longer a badge of merit but rather a sign of a unhealthy business. In small business, there are only two speeds: you are either kicking ass and growing your business at an annual clip of at least 5% over the same period last year or you are in reverse and losing ground. Flat line is just another way to say you are losing ground because while your numbers are the same everything else went up. Gas, food, utilities, wages, equipment, printing, toilet paper and virtually everything else rose while you just hung on.

 

The same rule applies here: if you are flat for three months and trending that way toward a 12-month period, you are in some deep boiling water my soon to be cooked frog friends. Flat line is still death just like the declining trend although it is slower. It is, however, in many ways nastier in that owners gather false hope because they feel they are at least holding their own in the market. The reality is that a year later that end is still near as the expenses rise to cancel out whatever income you still might be generating.

 

These are also the clubs that have equipment that is just a little too old, paint that is a little too stale and all the other signs that the business is still there an functioning but not healthy. Go out and look at your cardio. If it is over four years old, you are a frog and the water is getting a little hotter.

 

Trend line #3: Steady growth over time. We all like to see this one but only if it represents total growth of at least 5% over last yearís numbers. Growth that is 2-3% is nothing more than an extended flat line that canít keep up with the rising expense of doing business but in reality many owners live at this sustenance level for years.

 

The only accepted trend for any indicator except new sales, which will always top out due to market limiters, is growth of 5% or more. Anything less than that and you are in some form of extended failure.

 

You can be an owner that tracks all these numbers and still miss the train that is bearing down on your overextended ass. Numbers based upon one month at a time, which is the way we teach them, give you a quick picture but fail to give you the overall reality of a business. The difference is like looking at a photograph or a video. For example, you might have looked at a still photo of the plane that crashed into the river in New York. A picture taken just 10 seconds before it hit the water would have shown a plane in normal flight, as at least as you could tell from a still photo. That same plane as part of a two-minute video, however, would have shown a totally different reality for Captain Scully and the passengers.

 

Numbers without a trend are nothing more than a still photo of short-term reality. Numbers tracked over time and trended out give you the ugly truth of the video.

 

Comments
Rick Mayo 3 years ago
Poor Comment Good Comment
Love the new site! Great post about numbers. I always have to remind the team that anything less than 6% is no growth. Kinda puts those "awesome" months/quarters in perspective. Thanks for the reminder
Thomas Plummer 3 years ago
Poor Comment Good Comment
Clean up the club. I am sending more your way this week. Thanks for making me look so good
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