How to Protect Your Fitness Business from Inflation

Inflation. Even a mention of the word is enough to send a chill down the spine of every business owner. While an inflation rate of around 2% signals a healthy economy, the current rate in the US exceeds 8%—a figure not seen for about four decades.

If you hadn’t already guessed, inflation represents a tough challenge for fitness business owners, as it harms consumer spending power and discourages people from spending money on non-essential services such as gym memberships. It’s no wonder that around 88% of small business owners say inflation is impacting their ability to turn a profit.

Is all this economics jargon leaving you a little confused? Fortunately, the principle behind inflation is relatively easy to grasp. Inflation describes an increase in the prices of goods and services throughout the economy. A range of factors cause this phenomenon, including increased demand for certain goods, increased production costs for businesses, and a loss of value in a currency compared to other currencies.

How is inflation impacting the fitness industry?

What fitness industry players need to know, therefore, is that the cost of their gym equipment and other expenses are likely to rise in the coming months, while their customers are likely to face financial struggles. Combined with the havoc COVID-19 wrought on the fitness sector, it’s fair to say the current economic landscape is less than ideal. At the same time, 71% of consumers surveyed say they don’t plan to cut back back on fitness and wellness.

So, how can you handle inflation as a fitness business owner and ensure your clients continue receiving the excellent service they deserve? Your initial instinct may be to hike prices, lower investor margins, or cut operational costs. However, these strategies may impact the quality of your offering and damage your business in the long term. Fortunately, we’re here to guide you through tough times with our smart inflation-busting strategies.

Frequently analyze your business data

If you’re feeling a little panicked about the current economic climate, take a deep breath and avoid rash decisions. Any changes to your pricing structures or business model should be backed up by data to ensure they’re as effective as possible.

Figures from the Small Business Association demonstrate that 75% of business owners who only review their financial data once per year will fail within five years. This figure falls to 25% for businesses that conduct monthly reviews.

Of course, you should also ensure your reviews are thorough and track valuable metrics. One of the best ways to ensure your financial reports drive positive change is to invest in high-quality business management software with a built-in reporting system. WellnessLiving, for example, can produce everything from high-level revenue data to detailed churn risk reports. By tracking client attendance rates and spending habits, you can predict their next moves and apply targeted tactics that reduce their risk of quitting.

Manage your cash flow

Keeping track of your cash flow with a tool like Cube or Vena will help you avoid any nasty financial surprises. We recommend establishing a minimum cash flow threshold and doing everything you can to avoid going below this figure. Contingency plans to avoid cash flow issues could involve dipping into your personal savings, borrowing money from family members, or pursuing low-risk credit options.

Factors to track and review when assessing cash flow include:

• Business expenses: How are you investing in your business? Are there any expenses that aren’t worth the return on investment? If so, cut them out! It’s also well worth negotiating more favorable contracts if you have a strong relationship with your vendors.
• Payroll: A Payroll Summary Report will tell you information such as how much you’ve paid to staff members, how many bookings you’ve received, how many clients have cancelled appointments, and much more. If there is a large number of cancellations, try investigating the issue alongside staff members.
• Product inventory: Do you struggle to shift certain products? Perhaps some have much lower product margins than others? Assessing and rejigging your stock with an Inventory Management Report could save a surprising amount of money.
• How much you’re spending (and how fast): Does money flow out of your account too quickly? remember to comb through every expense and cut out unnecessary costs.

Target high-income households

It probably goes without saying that high earners tend to weather economic storms better than those with lower incomes. As such, targeting the luxury fitness segment could help you seduce people with cash to spend.

Rather than raising your prices (however tempting!), focus on promoting your business as a premium lifestyle product. Create a few customer personas to help you get the message right. What’s their average age, gender, income, pain point(s), and fitness goal(s)? Adapting your brand to suit wealthier clients is a great way to attract a new base of loyal customers.

Leverage flexible, recurring memberships

You can analyze which memberships are the most and least profitable by adjusting your offerings. While raising prices should be a last resort, it’s not always avoidable. If you’ve made the difficult decision to increase your membership costs, you need to justify the adjustment by adding value to your offering. One of the simplest ways to deliver this value is to tailor your pricing model to an existing clientele. Here are a few methods you could use to create the perfect pricing strategy:

• Recurring memberships: These subscriptions allow clients to use your fitness services by signing up for virtual, in-person, or hybrid memberships.
• Pay-as-you-go: Perfect for occasional gym-goers, pay-as-you-go models mean clients only pay for the services they use. The easiest way to organize this system? Ask clients to buy credits they can use to purchase products or services.
• Bundle memberships: This pricing method allows clients to personalize a standard membership with add-ons. Personalization strategies are great for fostering loyalty and allowing the client to feel in control of their spending.
• Dynamic pricing: Based on supply and demand, this model allows clients to pay less for fitness classes during off-peak hours.
• Third-party subscriptions: Partnership with corporate fitness platforms like ClassPass or Gympass allows you to showcase your business to new potential users and expand your audience base.

Deliver consistent value

Although finances are strained, many consumers are willing to accept price increases for high-quality goods and services that genuinely improve their lives. If you want to maintain a loyal base of customers, you must understand what features they want from a fitness service. Potential options to consider include:

• A virtual fitness platform: A recent survey found that almost 70% of participants would be more likely to return to the gym after lockdown if it included online fitness classes in its membership deals. Why not explore livestreaming and on-demand options that allow clients to work out at a time that suits them?
• Additional resources: Provide your clients with regular content an effective, low-cost way to build community and reduce churn rates. What are some ideas? Nutritional advice, detailed workouts, informative newsletters, and menu plans.
• Flexible booking options: Figures show that 94% of consumers are more likely to switch to a new service provider if they offer online booking options, with some local businesses boosting revenue by up to 120% after installing online booking systems. If you’re still organizing bookings via phone and email, it’s time to act and embrace the digital revolution!
• Loyalty rewards: Nurturing a loyal community will help you retain clients and weather tough financial times. A cost-effective way to keep clients engaged is to reward them for hitting their fitness milestones. As we explored in a previous blog, there’s plenty of evidence to support the implementation of reward schemes, such as the fact that 75% of consumers favor businesses that offer incentives.
• Offer challenges: Fitness challenges are enjoyable to run and help to attract visitors, boost engagement, and reduce client churn rates. If you’re wondering where to start, take a look at these smart fitness challenge ideas for inspiration!

Embrace mobile technology and be upfront with clients

Did you know that around 70% of consumers are signed up for SMS marketing alerts? Or that the open rate for text messages is about 99%? Today’s consumers are glued to their phones, providing the perfect opportunity to communicate with them quickly and effectively. Use mobile technology to send push notifications and SMS messages detailing the following information:

• Time-sensitive offers that encourage them to renew their memberships or sign up for classes.
• Alerts that encourage clients to update their credit card details.
• Upcoming changes to your pricing model. Just make sure to send these at least a month in advance to avoid shocking or offending your client base. Honesty is key when it comes to nurturing community and loyalty!

Anxious about inflation? Secure a healthy financial future with the right business management software

There’s no getting around the fact that inflation will hit everyone’s finances. However, as we’ve explored, there are many options available to help you get through difficult times, none of which require you to compromise on value or let down your existing clients.

The first step in this process is to get a strong grip on your finances, keeping a close eye on your outgoings and revenue. One of the simplest ways to recession-proof your business and balance the books is to invest in tailored business management software. WellnessLiving represents the perfect solution for business in the fitness industry, featuring a range of tools to help you track financial data, manage client memberships, improve your value proposition through flexible booking options, deliver virtual services, and much more.

If you’ve been wondering how to deal with inflation as a small business, we’re here to help. To find out more and start your growth journey, book a free, no-commitment demo today!