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Economic Worth – What’s Yours?

 
By: NCSF  on:  Aug 4 2015
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One of the many challenges facing any professional is finding an enjoyable job while getting paid the money they want or perceive to deserve. Many people go to work every day, enjoy what they do, but would like to be paid more often feeling they deserve more money for the time they spend performing daily tasks and responsibilities. But if a person goes to the same job, performs the same or similar tasks, which end up generating the same money for the business or company there exists an economic conundrum; there is no additional increase in revenues to justify an increase in pay. Regardless of how well the tasks or responsibilities are completed, if a position does not increase the money coming in to the company, then an increase in money going out towards the position is not justified. This brings up the point that some positions function as an asset with negative implications or financial liability, whereas other roles can be viewed as positive assets due to their income generating potential. Many jobs represent the concept of the “negative” assets, meaning as an employee they are an asset but cost more than or equal to what they generate for the business. The term negative reflects the cost versus revenues the position generates. A paramedic, for instance, does not generate any money for the municipality they work in, and therefore based on the above definition would be classified as a “negative” asset; they do though save lives and make a community a more desirable place to live because someone is always there to help you when you need it. For this reason the positions tend to pay a set wage, with or without specific benefits, which often depend on the wealth of the community. In the fitness industry, front desk personnel represent a key position in the perception of service, but unless they also actively participate in sales and marketing these individuals do not generate any additional income for the club or fitness center. So while these employees contribute to an important aspect of the member experience, they typically do not warrant additional monies beyond an economically established budgetary point. Even if they have the best personality in the business, if they do not generate income they are a necessary cost with a ceiling of value.

Revenue generating jobs differ in that they have the capacity to influence the company’s bottom line. In most fitness facilities these positions are responsible for some kind of sales – usually in the form of memberships, programs, products, and services. Personal trainers actually have the potential to be key positive assets; but they also have the potential to function as a capped budgetary value. Consider these two scenarios:

Trainer one is sound in technical skill, provides safe and effective workouts, and has good rapport with his clients. He trains 35 hours a week with one-on-one clients who are charged $80 per session, for which he is paid $45 per session. This suggests the trainer generates $2,800 in gross revenues for the club and earns $1,575/week. He has been doing this consistently for 24 months – does he deserve more money for what he is doing? From a business perspective he is generating the same income, with the same costs, therefore it would be economically unwise to pay the employee more even though he or she consistently produces what is asked for – which is waged at $45 per session. It would be economically unwise for a business to pay more for the same revenue generation regardless of how long the person works for the company doing a “good job”.

Trainer two is very similar in that he has 35 hours of training time. However, he encourages his clients to take advantage of all the club has to offer, outwardly promoting the goods and services that would benefit them from a perspective of health and positive experience. He trains one-on-one clients 30 hours a week of which he is also paid the $45 per session ($1,350/wk) at the $80 per session client rate. He also does partner personal training (3 x $120 per session client rate) and 2 small group instruction classes generating $150 each. In addition, he helps his clients understand the need for caloric expenditure and cardiovascular health motivating them to take additional cost-per-classes once or twice a week, along with an occasional massage when warranted for recovery. He promotes the club’s wares and gets people to feel part of the broader experience but still trains only the 35 hours. After analyzing the income generated from this trainer it would suggest he is a positive asset, generating more in training dollars ($3,060) and more in general revenues (estimated increase of $1,200) from additional pay-for-services and products per week. Clearly trainer two deserves a raise.

An easy way to identify whether or not a person should earn more money is to look at their productivity state from an employer’s standpoint. The reason the word “should” is used is many people are of the opinion they deserve more for time served, or loyalty, or for doing a good job. But the facts are, an employee is paid to do a good job, paid to be a loyal employee, and reasonably ensured to be paid to work for as long as they are willing to do the prior two. Income has nothing to do with how nice a person is or how much they affect the environment above what is expected, it is simply a revenue-cost equation. When the employee costs more than the value of their service they become a liability and are often replaced to prevent a drain on the business economy.

With this said, there are strategies for employees (and businesses) to earn more money. Not surprisingly they all come from generating more money. Referring back to the second paragraph, opportunities for revenue in the fitness industry stem from “sales of memberships, programs, products, and services”. These may be originally generated in the form of a program such as weekend boot camp or weight/behavior modification program or may be a strategic partnership with an outside company – such as setting up a 5K with the local business association or providing services to a regional junior high school for after school activity opportunities for kids. A consistent theme is: people who work at generating revenues make more money. This should be obvious at its foundation - because a person that produces the outcome that generates the revenue have the highest financial value to a business. Individuals who perform the daily tasks that fulfill an infrastructure requirement for the goods or service are not a generator, but rather serve as a necessary expense to the revenue generating outcome – even though they do a good job, have a great personality, and provide better than normal customer assistance.

Therefore for a professional to create an opportunity to make more money in the same position one of two things need to happen. The first option is for the professional to expand their competency and/or the capacity to increase services offered. This usually occurs by increasing competency in a supportive area or adding some skill that commands greater revenue for the same time worked. The second is to offer a program or service that reaches more people or in some fashion generates more income for the same time served.

When setting up a revenue-generating strategy to implement or present to a supervisor for support, some common elements must exist to be successful. This is where some business savvy comes into play. Revenue generating means income is higher than expenses. It is suggested to lay out a plan that accounts for all the resources to best identify the needs for success and what they will cost – in time and real money. Next, it is important to realistically analyze the number of participants or amount of product sales necessary to break even. To aid in this process look for added value or connected services to increase funding and to increase the positive experience. In the 5k suggestion this would mean identifying how many people would need to pay participation fees to cover the event and how much product (i.e.; water and Gatorade) could be sold at the event. Added revenues would come from local corporate sponsorships with further goodwill coming from getting participants to also collect for a good cause such as helping out a family or group in the community. Naming it an annual event would also set precedence for the future as inaugural events usually grow in popularity.

This example is mildly grandiose for a first effort but realistic in that it works. It is normally recommended to start a bit more simplistically. Consider adding a new money-generating program at the club, gym, or personal business to start as the trial and error at a smaller level is easier to manage and less costly if there is a misstep. Here the same principles apply to cost vs. revenue, but the key is surpassing expectations of the consumer. When programs start off they get a level of introductory participation from first adopters. First adopters tend to be a bit more adventurous but are also vocal about the experience. Since word of mouth drives this type of business it is relevant to stay focused on the experience. Too often trainers and exercise professionals are focused on the technical aspects or the caloric expenditure benefits. The reality is most people don’t care – while they are there to workout those expecting advanced fitness results are the <1%. Most people want (perceived) leader competence, social interactions, motivation, and a sense of belonging. To be clear a very small percentage care about the adaptations and those who do are often called personal trainers. Make the programs engaging with a defined length, goal, and objectively measured sign of success – which in today’s world is level of participation and commitment. Attrition will occur without objectives and milestones; hence the need for a specific length. Make the length consistent with the goals of the adaptation or need for time-related outcomes. Next, create a second tier to the program – people who complete level one want level two – this is why Karate uses belt colors to denote commitment. Everyone starts at level one (white) but have defined colored milestones up to the pinnacle of black belt – which itself has multiple levels. Each level has new challenges and must be earned – no one can skip levels, making it inclusively exclusive. Again the cost vs. revenue equation will indicate participation rates to offset costs and identify if more marketing is needed to expand the program or if it should be tabled for a more popular program selection.

The next time the thought of a raise comes to mind consider all these factors. Rather than being disappointed due to lack of economic justification, create your own economy. And an economy that scales suggests great revenue potential and continued personal financial gain. Complacency often breeds apathy and an extended period of more of the same so look at the current resources and opportunities – go after the low hanging fruit first. Once a level of success is attained, set up a year round plan to further expand potential. From an annual perspective there will always be something going on with the potential for greater earnings. Seasonal themes can help with the process as will strategic partnerships when the opportunities arise.

 
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