Increase your income
Now that you’ve put together your improved marketing plan (as we covered in part two of this Business Performance Series), let’s finally talk about how you can increase your business profits.
Selling more of a product, service (or a particular class, for sports clubs) that doesn’t create much profit for you to begin with isn’t an efficient way to make more money. It can lead to deep organisational problems and burn out your staff.
So, how can you make more money for your business when you can’t possibly take on any more members? Or if it’s simply not feasible to add more athletes to your existing training sessions?
Let’s explore three ways to generate more income from inside your business, without causing any strain. Download our free business performance ebook for expert advice and actionable tips.
1. Increase sales per family
Focusing on bringing in more money per member can bring in a surprising amount of additional income. And you can do this in a variety of ways.
First, a little housekeeping. If you run a sports club, do you track the amount of money you make per family? It makes sense to first make sure you’re keeping that information somewhere. If you haven’t been so far, get out a notebook or make a simple spreadsheet and get started now.
To start increasing the number of products you sell to families, install a kit rack in your clubhouse. You can sell anything from competition / match kit, to training kit, to lower-priced items such as t-shirts and water bottles.
If this is something you already do, but find it’s not making you much money, then try something different. For example, create packages that you can take email pre-orders for, such as a ‘Success Pack’.
This opportunity to take orders through email means you can ensure a customer’s Success Pack is ready for them to pick up when they’re next at the club. It’s so easy to order drawstring bags with your company’s logo on, pack a small hand sanitiser, pre-packaged wristbands etc.
There are many ways to get creative. By taking orders ahead of time through an email campaign via the LoveAdmin app, you can sell small items and not worry about having inventory left over.
Example – A Success Pack is priced at £20. A programme with 200 athletes has 50 families that want to purchase a pack. That’s an extra £1,000!
When we think about increasing services (i.e. classes/training sessions) per family at the club, are you taking the parents and siblings into account? A club can serve the whole family.
Parent rooms or spaces are great places to capture attention. Put up a Family Calendar in the parent area with some fun opportunities for athlete and parent sessions, bring-a-sibling-to-class day, or a dress like your favourite coach day. Many clubs have success with themed days and ask for donations to support the fun. These are great ways to increase income for new services.
Example – An extra athlete and parent session per month is priced at £15. A programme with 200 athletes has 20 families that sign up for the class each month. That’s an extra £300/month and £3,600/year.
Another great way to increase income per family is to increase prices. We know – price increases are scary. So let’s break it down.
Inflation means living costs can go up each year. Vendor costs can go up. It costs you more to run the business every year without fail. So, if you don’t increase prices each year to match that cost of business, you’re going to lose out.
If you consistently raise prices 1%-3% each year, members will get used to the increases and never bat an eye over a rise of a pound or two per month. Here’s what that could mean for a sports club that offers classes:
Example – Current class price is £40 per month. The club has 200 athletes. Current revenue = £8,000/mo. 12-month income is £96k.
With a generous price increase of 5%, that gives the club an extra £400 per month. That’s £4,800 more per year for an increase of just £2 per month, per family.
A 2%-5% increase is an amount that is likely to go unnoticed by members, but will make a big impact on your bottom line, as you can see.
2. Sell your most profitable products and services
Sell more of the profitable services and less of the less profitable ones. This sounds like common sense, but many businesses don’t know how much it costs to run their programmes, or provide their services. Do you?
It’s important to know the costs associated with staff as well as any other direct costs. Then, you can figure out what your profit margin is per class. That is, which products or services make you the most money, and which cost you the most.
Here’s a quick and simple way to find a rough profit margin:
Service profit margin = total money service brings in minus staffing costs/total money service brings in
Let’s say this is a monthly service. You can find your profit margin per service by first subtracting the total staffing costs (plus any other directly attributable costs) from the total monthly income from that service. Then, divide that again by the total amount of income from the service.
Example – £800 monthly income from the Monday 17:00-18:00 training session. It costs you £200 per month to run the session. £600/£800 = 75% profit margin.
Moreover, you should concentrate on identifying the products or services with the highest profit margins and replicate those. You want to minimise the amount of time and resources spent on the offerings with the lowest profit margins.
Are your profit margins healthy? Are you making money per product / service, or do you have any items that are actually losing money for your business? Now is a great time to check.
3. Reduce costs
Another way to increase profit margins without increasing prices is to cut expenses. Often, businesses forget about giving their budget a thorough review, both at a high level and a low level.
Examining direct costs in a service-based business usually means looking at salaries and wages (costs you can specifically assign to a class at a sports club). However, having the least expensive wage base isn’t the goal. You want to reward your great employees, and give them the pay rises they deserve. So, what other costs are affecting your overall profit margins?
Don’t forget about those indirect costs or the things that you purchase for the good of the business as a whole. You could still be paying for subscriptions you don’t use anymore, for example. When was the last time you asked for a more competitive insurance premium? Do you have any miscellaneous items on your budget?
Work with your staff to brainstorm ways to cut costs. They often see things from the ground level that a business owner may overlook, or not use on a day-to-day basis. Maybe there are small changes you can make at a lower level that will save you money in staffing?
Also, there are often opportunities to cross-train staff on new jobs and tasks that could free up needs to bring in a new employee (i.e. spending hours on payroll).
There are so many ways to pull levers from inside your operations to produce more profit. So, take the time to sit down with your numbers, have some patience and a positive attitude, and get started!
Hopefully you’ve found the advice in this Business Performance Series helpful. If you missed the first two articles, you can read them by following these links:
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