Biz Tips

ADDITIONAL PROFIT CENTERS – ICING ON THE CAKE - by Diane Barron

Years ago, many gymnastics clubs were started with a focus on team gymnastics. Recreational classes were offered to feed students into the team and to support the cost of running a competitive program. It was viewed as a coaches’ hobby more than a business. With the advancement of USA Gymnastics and owners who were business savvy, gymnastic clubs started converting to a real business model with a strong focus on educationally based instructional classes. In some clubs, competitive teams were not even offered. Thanks to forward thinking owners, other profit centers were added including birthday parties, field trips, open gyms, activity nights, performances, camps, clinics, competitions, gift shops, etc.

Now today we see Kids Activity Centers, child based schools that not only offer additional activities for their gymnastics students but independent businesses separate from the gymnastics. Karate, Ninja, Dance, Aerial Arts, Educational Pre-School, Music, and Swimming are common businesses being offered. These businesses are held in large facilities, in some cases reaching over 100,000 sq. ft. In many instances these very successful businesses are run by owners who started out with a very small program in rented space with the hobby concept.

Have you ever seen a child eat a piece of iced cake? The first thing they devour is the icing. Even though the cake is the main component, the icing is not to be forgotten. Our gymnastics classes are the cake of our business but additional activities are the icing on that cake. They can sweeten the deal and make the entire business more profitable. There is no doubt that offering additional income producing programs can add to the bottom line and sweeten the deal, but they should not be offered at the expense of losing focus on the largest return on your investment, the instructional classes. Gymnastics schools must be mature enough that when adding programs, they bring value to the entire business. Learning the art of getting customers to buy something else alongside of your main product can be incredibly effective for increasing revenue. The percentage of profit for each activity could be small, but when you group numerous activities together as a special activities department the percentage can be substantial. At Barron Gymnastics, in addition to our competitive programs and our instructional classes we offer 8 activities/profit centers that bring in a total of 14% of our profit. Our company depends on this revenue. Pricing of these programs and evaluating their value is a top concern. Here are some guidelines for pricing and evaluating programs.
  1. Does your business have the time, space, and staff?
  2. How often will they be offered?
  3. Price vs Tuition - % of the price charged for the special activity vs class tuition.
  4. What are the anticipated expenses?
  5. What are the number of students needed for your break even?
  6. Staffing
    1. Payroll including administration time
    2. Experience of staff needed
    3. How many front office staff are needed?
    4. Student to Teacher ratio
    5. Will this be a profit sharing program?
  7. Facility
    1. Specific time and day offered. Prime time vs Non-prime time
    2. What is the amount of space used?
    3. Can it share the gym with other activities?
  8. Review other businesses and competitors.
  9. What is the current Consumer Pricing Index?
  10. Perceived value of program
  11. Do you want to control numbers with an accelerated price?
  12. Do you want to encourage numbers with a low price strategy?
  13. What is the expected % of profit?
  14. If this program has been offered in the past, run a 3year P/L history.
  15. Be attentive to your customers concerns and request for activities and services.
It is far easier to sell additional products to existing customers than it is to acquire new customers. Choose activities and services your customers would genuinely have an interest in. Customers appreciate cross selling if it is relevant and makes life easier. Build your business to accommodate additional profit centers. Go ahead and bake that cake, ice that cake and eat it too.