Today I shall toss my hat into one of the perennial debates of the Gym Guru Industrial Thought Leader Complex:
To offer year-long pre-paids or NOT to offer year-long pre-paids, that is the question, Hamlet!
My take: I don’t love pre-paids.
Let me share my thinking.
You have three main pros to pre-paid annual memberships:
- You get a quick hit of cash. That can be used (carefully, see cons!) to grow your business by reinvesting in marketing.
- Money has “time value”; a bird in hand is worth two in the bush. Getting money sooner rather than later is valuable.
- When someone pays for a year up front, it’s harder for them to welch on their membership terms. Sure, people can ask for a partial refund. But if you REALLY drive in “absolutely no refunds under any circumstances,” you don’t have to worry about monkey business. They can’t pull their card and disappear into the night.
But there are some cons.
- You get a quick hit of cash BUT this requires good management of the money. Otherwise you’ve spent it all and are still servicing the revenue.
- Related, the quick hit hurts your monthly receivables base. Though admittedly, like above, strong cash management can handle this.
- No matter how much you emphasize “absolutely no refunds under any circumstances,” you’re going to have a client ask. They’ll do it when they move out of town for work. OR are dealing with a dying parent. OR face a life-changing health challenge.
- Finally, the biggest con: if you offer a discount, you hurt your margins. Even a modest discount can hurt if it’s for an entire year.
In most cases, when we think about your marketing message to members and prospects, you’re better off making more compelling – and profitable – offers.
Having said all that, I do understand sometimes things happen that require an influx of cash. Sometimes you made a mistake and didn’t prepare for taxes properly. OR your HVAC went out. OR any number of situations that catch you unawares.
If you ARE going to run this play, here are some things to consider.
1) If you DO offer one for a nominal discount of 3%, it may be worth it. Particularly if you do it at the point of sale and aren’t muddying your valuable marketing messaging. Your client will save a couple of hundred bucks, AND you won’t feel too much of a hit.
2) Alternatively, you could be a straight up killer and just offer a year-long pack of 104 or 156 sessions or classes with no discount and no freezes.
You still run into some of the above issues. But when it’s positioned as a pack, the framing is different for the client. It may also appeal to people who aren’t “joiners.” Plus you’re not losing any margin. This works particularly well in class-based models, and could be worth playing with.
As always, you know your business best.
But overall, I think there are better promos to run!
Check out my favorite offers in this video HERE.
PS: Are you looking to get some REAL personal freedom from your gym?
Want to make a bigger impact and more take-home income while working less?
Does the thought of creating a fulfilling and rewarding job for your team get you fired up?
I’m betting the answer to all three is “YES.” But it’s not just enough to want to achieve those goals. You need to develop the skills to deliver here.
And as gym owners, no one ever taught us these skills.
But don’t worry, we’ve got you covered in BFU’s next course, Management and Leadership for Gym Owners.
Join us on Friday May 6th and Saturday May 7th from 10am est to 4pm est. We’re hosting it on Zoom, so you can attend from anywhere in the world.
To learn more and book your spot before the price goes up on April 16th, click the link below.