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Jeff SkeenFounder of Titan Fitness and accomplishedHealth and Fitness Industry Leader
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Jeff Skeen “I Didn’t Think It Would Be a Career”
1992, became partner in Gold’s Gym in Fairfax,VA.
1992-1998, grew from one club to 11 in four states
1998, hired PricewaterhouseCoopers to secure capital to purchase GGE now know as GGI.
1999-2004, served as principal and CIO of GGI
2004 , founded Titan Management Solutions, a consulting company to assist Gold’s Gym franchisees open new stores and improve operations
Opened a facility with more than 7,000 memberships in pre-sales
Turned chain operating at a loss of $1M per year to a projected annual profit of more than $700k within three months; successfully sold the chain five months later
2007, found Titan Fitness, an investment company dedicated to purchasing and opening gyms under the Gold’s Gym brand
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Titan’s Long-Term Vision Build a chain of 60+ clubs in 4 – 6 markets
11/07 purchased 8 in Minneapolis
12/07 purchased 6 in Raleigh
Buy first – both Gold’s branded and non-Gold’s clubs/chains
3+ locations
$1.5 million adjusted EBITDA
Keep management in place to continue to grow out the market
Then build – establish/enhance brand leadership in acquired markets by building top notch clubs
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Leveraging Technology to Drive Profitability
Value of Using Technology to Drive Profitability
Technology’s Impact on Three Components of Club Health
Setting Up Your Organization for Optimal Club Efficiency
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State of the Union: Health & Fitness Industry
Our industry characteristics are extremely appealing
Strong growth / recession resistant / stable
Highly fragmented
Excellent economics and cash flows
Our industry has been discovered
Heavy inflow of private and public capital in 2000’s
Run of M&A activity
Well-funded platforms consolidating and building new gyms
Our world has dramatically changed
Continued growth and consolidation – required by private and public investors
Skill sets required to compete have changed
Cost to be in the business has dramatically changed
Technology is critical
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Value of Using Technology to Drive Profitability
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Value of Technology to Drive Profitability
Run your club like any other business
Focus on operating each club more effectively not solely on revenue
Technology is a critical element that provides the data and information clubs need to grow as well as tools to leverage staff’s time
Analyzing the data captured by software and other technologies can help identify ways to maximize productivity, increase efficiency and drive profitability
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Data Analytics
Data is not useful until it becomes information
What does the following data mean to you:
Chain of gyms haa a 40% Corporate EBITDA
Maximum number of members per square foot in a gym is 4
A gym’s payroll is 17% of Revenue
A 7,000 sqft facility has a four wall EBITDA of $300,000
A facility has $5 millions+ dollars in revenue
50% of a gym’s dues billings are billed using credit card
Gym purchased for 7 times EBITDA
Until you have a way to evaluate your gyms performance to others, if you can improve your business.
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Data Analytics
What are tools you can use to evaluate your data?
IHRSA – Profiles of Success
Billing Company – CheckFree has thousands of facilities in their database
Other operators and consultants
Business Intelligence – Tool used show data in a useful manner
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Business Intelligence Tool
Need to blurr data
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Billed vs. Collected Rates(Average)
Club SizeActive Members
Average Collection Rate
Low Mean(Average Collection Rate of Clubs with
Collection Rates Lower than the Overall
Average)
High Mean (Average Collection Rate of Clubs with Collection Rates Higher than the Overall Average)
< 100 94% 72.3% 99.4%
101 – 500 92% 62.8% 99.7%
501 – 1000 90% 57.0% 99.1%
1001 – 5000 97% 89.7% 99.0%
5001 – 10000 96% 89.6% 98.4%
> 10000 96% 89.5% 98.7%
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Technology’s Impact on Three Components of Club Health
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Technology’s Impact on Club Health
Business Health
Member Health
Societal/Community Health
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Technology’s Impact on Business Health
Allows you to view performance in real-time
Running standard daily reports can help identify potential issues and take swift corrective action. Can be as simple as:
“No entry” reports
Credit expiration reports
Analyzing expense and revenue reports can help you find areas where you need to focus
Bid where appropriate
Using data captured through software applications such as accounting, billing and membership management systems to fine-tune club operations
Accurate records help maximize selling price and save time when in the market to sell
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Technology’s Impact on Member Health
Clubs must have technology in place to help members achieve their personal goals.
Caring about members pays off (have them blame you for their success):
Increased retention
Protects against when competitor enters market
There are many tools / technologies a club can use to help members accomplish their objectives and track their success
Health assessments
Nutritional / meal programs
Personal training
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Technology’s Impact on Societal/Community Health
The poor health of Americans continues to drive the prevalence of chronic disease in the United States
The increasing prevalence of chronic disease is having an astronomical financial impact on the United States.
Costs are in the trillions.
Wellness and health promotion programs are showing positive results
An effective health improvement program needs to take an integrated approach and focus on improving
lifestyles
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Health clubs will become integral to preventive health, disease management, and lifestyle improvement programs
Health club works in unity with wellness programs, physicians, dieticians, and other specialists to personalize lifestyle improvement programs
Utilizes technology to test members, measure progress, and securely share data with appropriate parties
Results and other data supplements traditional medical data to form a more comprehensive “health picture”
Source: Briefing, “The Conexion Solution”
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Value Proposition*
Assumptions
Lifestyle improvements reduce medical claim costs by 5%
10% of the diabetic population can be helped
Impact of Diabetes $132,000,000,000
Number of Diabetics in the U.S. 17,000,000
Cost Per Diabetic $7,765
Reduction In Claim Cost $388
Share In Savings
Share to the Consumer, Employee, Employer, Provider, Health Program, Gym $388
% of Diabetics That Can Be Helped 1,700,000
Total Share in Savings Available ($388 x 1.7M) $659,600,000
Example
*Provided by Deloitte Consulting
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Setting Up Your Organization for Optimal Efficiency
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Setting Up Your Organization for Optimal Efficiency
There are a number of technological products available. Be careful not to overwhelm staff with the implementation of new systems
Strategically implement proven operational and technological systems
Evaluate return on investment to determine if worthwhile
Establish relationship with preferred vendor partners. Vendors have been exposed to many different ways of using their systems.
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Challenges Finding Right Software Solution
Looking for solutions within the health and fitness industry:
Software companies are small with low employee count and minimal support staff
Greater possibility of company failure
Limited ability to create wide breath of successful product lines
Limited resources to improve core products
Looking outside the industry:
More expensive
Lack of attention due to perceived limited opportunity
Not focused on specific health club needs
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Choose the Right Tools to Support Your Business, Staff and Members
Qualities of a Successful Software Solution. Should assist in:
Increasing revenues or decreasing expenses
Making staff more effective in completing their jobs
Allowing management insight to business performance
Improving ability to collect dues and keep the money you have earned
Improving member retention by offering services to improve the member experience
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Example of an Increase in Profitability – Nutrition/Weight Management DivisionVariables: New clients per month
Supplements 35
Weight Mgt 11 Supplement Fees:
Enrollment $ 75
On-going $ 45 Monthly Attrition 10%
Weight Management Fees $ 315 Annual Increase in EBITDA (Beginning 3rd Year):
Revenue $ 315,917
Expenses 160,759
Annual EBITDA $ 155,157
System One-time setup Costs: $ 9,545
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Example of an Decrease in Expenses – Time & Attendance System (Biometric)Variables: 50 employees $10 per hour wage 1% error factor $1,000 setup fee $2.50 per month per employee fee
Annual Savings due to accuracy/labor reduction Human Error Factor Savings $ 309 Auditing Savings 50 Corrected Time & Leave 10 Data Entry Savings 25 Lost Time Savings 267 Gross Weekly Savings $ 661 Gross Annual Savings $ 34,353
System Costs Setup (one time) $ 1,000 Annual On-going: Employee Fee 1,500 Time clock rental 2,400 Total Costs (first year) $ 4,900
Net Savings (first year) $ 29,453 Net Annual Savings $ 30,453
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Example of an Decrease in Expenses – Business Intelligence (Replace Excel)Variables: Hourly rates Regional Ops $ 29 per hour GM $ 37 per hour OM $ 11 per hourNote: includes 10% increase for taxes and benefits Time allotment Ongoing Regional Ops 4hr per month per gym General Mgr 15hr per month per gym Operations Mgr 30hr per month per gym
Annual Savings Due to reduction in labor: Regional Ops $ 116 GM $ 555 OM $ 330 Monthly Savings $ 1,002 Annual Savings $ 12,020
Does not take into account intangible benefits from real-time visibilityinto the gym's performance or value created by allowingemployees to use their time to service members or sell memberships.
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Example of an Decrease in Expenses – Billing Fees
Variables:
Annual Dues $ 1,200,000
Billing Fees 5%
Fee Reduction 10%
Annual Savings $ 6,000
Additional ROI Considerations for Outsourced Billing & Gym Software
No incentive to steal
More effective in collecting money
Significant investment in gym management software & billing systems
No one person responsible for billing or software functions
Possible evaluation of business against large database of gyms
PCI compliance protects against possible fines
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Summary - Impact to Value of Business
Category Improvement
Nutrition/Weight Mgt Division $ 155,157
Time & Attendance System 30,453
Business Intelligence 12,020
Reduction in Billing Fees 6,000
Annual Improvement to EBITDA $ 203,630
Purchase multiple of 4 times $ 814,520
Less: System implementation Costs (10,545)
Increased Gym Value $ 803,975
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Contact Information
IHRSA Technology Summit was sponsored by:
www.checkfreecompete.com