5 KPIs to keep track of as a Health and Fitness business owner.

Having a proactive accountant is a key part of maintaining the long-term success of your business. While preparing tax returns and monitoring spending and budget are important functions of the role, an effective accountant needs to be actively involved in your business and have a deep awareness of your business goals, strategies and processes.

Having worked with a number of gyms across South East Queensland, we understand that as the owner of a health and fitness business, being confronted with accounting jargon like retained earnings, dividends and EBIDTA (Earnings Before Interest, Taxes, Depreciation, and Amortization) can seem like a foreign language. While these indicators are important, at Super Nice Advice we like to give our clients practical approaches to accounting and business management, and have identified 5 KPIs to keep track of as a health and fitness business owner:

Yield

It is vital to understand the total yield from each of your individual members. Some members may be paying for a weekly gym subscription, others will be paying for group fitness classes and some will be paying for a combination of both. It is important to never undercharge for your offering and to constantly think about how you can add value to your gym memberships. 

Direct Debit/Upfront Ratio

Direct Debit provides financial certainty and the ability to forecast for your finance team, allowing you to accurately and conveniently measure your cash flow. For your business to grow it is important that you have an effective and sustainable business model which subscription based Direct Debits provide. As well as being a very flexible payment method option, allowing you to quickly and efficiently notify your customers in the instance of a price change, Direct Debit limits the administrative headache of chasing up late payments. 

While incentivising upfront payments may be tempting, having a minimum of 75% of your clientele on Direct Debit ensures the healthy growth of your business. 

Max Capacity

Understanding the number of members you can service in your gym space is a key metric in recognising whether your business will be profitable. Consider the size in square meters of your space, the different requirements of your individual service offerings and your staffing requirements. As a rule of thumb it is a good idea to be conservative with your estimates, as an exorbitant max capacity can often reduce the quality and safety of your offering.

Retention

The key to maintaining the success of your fitness business is not in acquiring new customers but in retaining existing members. The foundation of any health business is its revenue from membership fees, and even a small decrease in membership retention can result in a drastic drop in profitability. A focus on retaining current members also saves costs on advertising, discounts for new members and “free trial” incentives, which in turn results in higher profits. Aim for a retention rate of at least 35% in order to adequately account for this loss in revenue. 

Usage

Retention and Usage work hand-in-hand and a healthy combination of the two helps to increase your business’ growth. A consistent membership base results in a close knit community at your establishment and fosters meaningful relationships amongst regular members and between members and your staff. It is this sense of community that adds to your retention rates and also encourages current members to attend regularly. There is also the added bonus of word-of-mouth referrals, happy customers are more likely to recommend your business to their friends and family. Try to encourage a usage rate of 2-3 times a week, this number competes with some of the best brands in Australia. This can be tracked through sign-in systems and club management software which will help you monitor the behaviour of your members.

Need Help Establishing KPIs?

By monitoring these KPIs, you give you and your business practical methods to assess and grow your business. At Super Nice Advice, we have worked extensively with businesses in the health and fitness sector. If you are looking to improve your financial processes, get in touch with our friendly team to discuss your accounting and finance needs.