Business Health Check Up

Business Health Check Up
Image courtesy of Shutterstock

Pay attention to these not-so-common numbers: What’s your retention? Churn rate? Client acquisition cost? Profit margin? 

I have no formal business training whatsoever. No MBA. Heck, I didn’t even take an entry-level management or accounting course in school. In fact, I didn’t even own a laptop or smart phone when I first opened my Affiliate. 

Numbers and spreadsheets overwhelm me. They still do. While I’ve learned what they mean and how to run reports, I still struggle to understand, “So what do I do about it?”

Some business guru on Instagram told me I should have a profit margin of XX%. I’m at YY%. How do I fix that? How do I even translate that to my to-do list for today?” 

I’ve created a list of important numbers I believe are more action-oriented and easier to understand. You should still know your churn rate, profit margin, etc. But these will hopefully be a bit more manageable when it comes to answering “So what?” 

Full Time Staff

Why: The role of founder/CEO is a lonely one. You shoulder all the risk and share only a small fraction of the upside. Full time staff will — by nature — have a higher level of investment in the health of your business. 

Goal: Let’s assume you have sessions starting before the typical workday, some during midday, and then another few in the evening. For most of us this is a 16-17 hour period of “doors open.” That’s two full-time shifts. Having a full-time person cover each of the two shifts will ensure you can pull focus away from the day-to-day and get to the business of growing your business or enjoying the freedom that comes with entrepreneurship. 

Downstream effect: The goal is not full time staff for the sake of full time staff. Full time staff represent a healthy business in many ways. First of all, you will need to find revenue to support them. Whether this means more class times, personal training or a kids’ program, you’ll be forced to figure it out. It will also fix your profit margins. If you’re able to pay someone during times they’re not coaching, it means your income and expenses are in a good balance. Lastly, your members will reap the benefits. Full time professionals trump “it’s just a gig” any day. 

What to do about it today: Run the real numbers. This will be intimidating. Look at what it will cost your business per month to pay you and two other people full-time wages for your zip code. You might be scared by that number, but that’s a good thing. Better to have a clear picture of a sustainable business than to be in denial about barely scraping by each month. 

How Many People are Working Out? 

Why: While it may seem like a no-brainer, your “utilization rate” is typically an early indicator of business health. Simply put, how many people are coming to what offerings and on what days. 

Goal: As Many Workouts as Possible (AMWAP). Chances are you have somewhere between 100 to 400 members which puts you in the “micro-gym” space. This means your business model is built upon as much utilization as possible. The more people come, the better your service. The more they come, the fitter they get. The fitter they get, the longer they stick around. You get the idea. 

Downstream effect: Utilization rate answers a lot of questions very quickly. When will I start to lose members? What days are popular? Which classes should I cut out of the schedule? What coaching style do people like? How’s my programming? 

What to do about it today: Run attendance for the last four weeks by day and by coach. Do you see any trends? Any days more popular than others? Did you see a crazy spike one day? What was programmed on that “spike” day? Next, create a hypothesis as to what could potentially drive that number up. Next week make a change in programming, schedule, or coaching and see if it changes the number at all. The following week choose something else to change and see if that works. 

How much are people spending in the lifetime of their membership? 

Why: This will help you draw connections between what people buy and other behaviors. Does offering discounts get people to stick around longer? Does having a more expensive on boarding convert more members? Do contracts de-motivate people or keep them engaged? 

Goal: There’s no hard-and-fast “Your revenue per member should be $___” here. It’ll be different for everyone. I started to look at this a couple years ago and noticed if an athlete’s first month is 1.5 to 2 times the cost of their ongoing month that they stuck around almost twice as long as everyone else. But this meant our conversion rate went way down and growth slowed, but the increased lifespan of an athlete made up for the difference in spades. 

Downstream effect: Peace of mind. Assigning value to a service can be difficult. You’re putting a price tag on coaching, motivation, education, instinct and behavior change. How could you even begin to tackle that? Look at the numbers and see what they tell you. You’ll probably find that by telling people the value of a service is higher that they actually grow to value the service even more. 

What to do about it today: Look in your membership for unique cases: personal training clients, members on a discount and any other special pricing situation that may exist. Do they attend more often? Do they stick around longer? Are they fitter? Do they refer more people? Your assumptions and “gut” may be radically different than the reality here. 

You don’t need to have an MBA to run a successful business. But you do need to look at numbers. Start out with business metrics that are a little less intimidating than a spreadsheet. By choosing numbers you can take action on — numbers attached to real humans — you’ll be more motivated to make positive change for yourself and your business. 

Matt Scanlon
Matt Scanlon is the owner and founder of CrossFit Memorial Hill and TheHillKC in Kansas City, Missouri. He is also the co-founder of BUILD — a CrossFit program and research project dedicated to improving health outcomes for cancer survivors.  Matt's professional career began in healthcare management. As a result of this experience, Matt is focused on using CrossFit to improve health metrics for a broad population of people historically underserved in the fitness industry.  Located at the base of the National WWI Memorial, CrossFit Memorial Hill was founded in 2011 as a free community fitness resource. After gaining a following of nearly 1,300 participants in community pop-up WODs, Matt Affiliated in 2012.  In 2016, CrossFit Memorial Hill expanded to incorporate a private coaching business, BUILD, a TRX and bootcamp series, and various other specialty programs under the umbrella of TheHillKC.  Contact him at matt@thehillkc.com.