From these conversations, I quickly realized that regardless of sport, owners possess an undying passion for the quality of their services and an uncompromising commitment to excellence. I also discovered during the discussions with owners, that regardless of their business’ size, generating revenue with a solid ROI was a key objective.
We have worked hard to help owners develop solid ROI models leveraging skills, unique training protocols and advanced physiologically based technologies and presenting them succinctly through social media, marketing and direct sales. My objective here is to take a wider view and then later in other posts dig a bit deeper.
The Simple Truth About Increasing Revenue
Regardless of a business’ offering, whether selling training services, widgets or tacos, there are really only three ways to grow revenue:
- Increase the number of clients
- Increase prices
- Increase the number of products / services sold
1. Increase the number of clients – Seems simple enough; get more paying customers in the door and revenue goes up. But not so fast. Social media, sponsorships, local ads, reference models all have impact but knowing what to do and when can be daunting. Furthermore, if done incorrectly the drain on finances can be disastrous.
We know of one high end coaching firm that looked very strong to the market but fell apart in less than two years. Lots of reasons but one pain point certainly was a Facebook ad bill for $14,000 – the lack of ROI consideration is never a good thing.
Larger clubs have the resources in the form marketing dollars or an in-house staff person who understands the landscape and as importantly, has the time. For smaller coaching shops, outreach is a big challenge. Increasing what in effect is the top of the funnel activity is a big topic that we’ll dive into in the next blog.
2. Increase prices – Increasing prices can be a touchy subject. My experience outside of the fitness space is that small business owners do not charge enough. We’ll dive deeper on this subject in a later blog, but as a hint think about your differentiators: What separates you and your staff from the team down the street?
As a primer on pricing, it is generally accepted that there are two types of pricing models: First, and probably the most common pricing model, is often termed Cost Plus – I pay my trainer and that costs me $25/hour, my building costs me $15/hour and as the owner I want to net $20/hour (the plus). We then need to charge $60/hour (Oversimplified a bit but I’m hoping to get to a bigger idea).
The Second pricing model is called Market Based Pricing. I look around – I see the guy up the street charges $125/ hour so depending on my position I will charge between say $95/hour up to maybe $160/hour based on services. (This can start to get a bit complicated).
A third method is to develop your position based on what is often termed Value Based or Value Add pricing. This can start to get really complicated, but for now imagine that you had a product, or maybe a training protocol, the use of which would almost ensure your client will cut 30 minutes off their Ironman 70.3. That’s “Value Add!”
3. Increase the number of products / services sold – Increasing the number of products offered, whether additional widgets or packaged services, is a low risk method of improving revenue. Sometimes called Horizontal Integration, it allows you to offer value added products & services across your offering to an audience that is already engaged and with whom you’ve created trust.
An obvious example: a cycle shop adding lines of clothing. For an example with a bit of a twist, a tri club we know of receives 10% every time a club member buys gear from one of three local bike shops. We’ll cover this in the fourth posting.
The objective of this simple primer is to get you thinking on how your business approaches revenue and how thinking through ROI can help you make better decisions.
If you’d like to chat through ideas – just LMK. You can hit contact above and shoot me a note.