With a total market size of $33 billion, the US fitness club industry has become very competitive, requiring gym business owners to track specific metrics (KPIs) to grow while maintaining profitability.
Indeed, with significant upfront capex (renovations, fitness machines) and high operating costs, it’s even more relevant than ever for fitness clubs to measure and track certain KPIs to maximise growth and profitability.
From revenue per client, retention rate, member lifetime value, etc. this article discusses the 10 most important KPIs any fitness club owner must track. Let’s dive in!
1. Revenue per Client
Revenue per Client (RPC) is probably one of the most important KPIs for fitness clubs.
This is the amount of revenue your gym generates per client (or per member). This number goes a long way when analysing 2 different fitness clubs, it offer insight into pricing, the type of gym (membership vs. class-based) and the additional add-ons (private trainers, etc.).
In addition, if you track this KPI over time, you can get ideas on improving it, like selling more premium memberships or introducing other services to existing customers.
Revenue per client = Total revenue / average # of clients
For instance, if your membership gym generated $500,000 last year and the average number of members was 400:
Revenue per client = $500,000 / 400 = $104 per member per month
2. Revenue per Square Foot
Revenue per square foot is very similar. Instead, we look at space here: indeed square feet are an essential aspect of the gym business, and this for 2 reasons:
- The more space, the more revenue opportunities (you can add machines, etc.)
- The more space, the higher the rent (or the upfront cost if you decided to buy the real estate)
Therefore, you must ensure you maximize the use of your space to boost earnings. You should determine what are the most valuable activities / machines / services / classes of your business.
For example, should you add 20 bikes in a 500 sq. ft. extra space or dedicate this to a sauna room? Both will attract different customers and with that different revenue opportunities.
To calculate revenue per square foot, you will divide monthly revenue by total available space.
Revenue per square foot = Revenue / Total available space
If your gym space is 5,000 sq. ft. and monthly and your monthly revenue is $50,000, then revenue per square foot is:
Revenue per square foot = $50,000 / 500 = $100 per sq. ft. per month
3. Lead to Conversion Rate
This is an important KPI that measures the fitness center’s effectiveness in turning leads into clients.
Factors influencing this metric include the customer base, the sales team’s efforts, and the gym base. With this metric, you can assess the performance of the sales team and evaluate the specific initiatives that are more effective.
The conversion rate offers pointers on the number of prospective leads you turn into new clients over a specific period. You can calculate the metric by dividing the total number of new clients by the total leads over a certain period (usually 90 days).
Leads can be tracked as the number of signups on your website, the number of emails you receive from external people, etc. As such, it’s very important to clearly define the conversion funnel: what are the steps a typical lead takes before she/he becomes a member? Somewhere in this funnel you must track the number of leads (the signup form for example).
Conversion Rate = # of new clients / # total leads
For example, if your website receives 100 leads in a month and you successfully manage to convert 30 of these leads into members, then the conversion rate is:
Conversion Rate = 30 / 100 = 30%
4. Member Retention Rate
Retention rate is the number of members returning to your fitness center. The KPI is very crucial for the gym business as it informs you if you are losing clients, implying something is not right. It will also help you enhance tactics, marketing strategies, messaging, and time to bring new clients to replace those leaving.
Therefore, to calculate member retention, you need to track those clients that cancel or fail to renew memberships and then compare that to the total number of clients. You can easily measure success if you track this metric over time and implement strategies to bring in new members.
Client retention rate can be calculated from one quarter to another for example. If we were to calculate member retention rate for the month of June vs. March we would calculate:
Member retention rate (June) =
# repeat members / # total members
# repeat members = members who were already members in March
For example, if you had 300 members in June, of whom 200 were already members in March, then:
Member retention rate (June) = 200 / 300 = 67%
Churn is the inverse of retention. For membership-only gyms, churn is the number of members that leave and cancel their subscription over a period of time. Therefore, churn rate is:
Churn rate = Churn / # members
Churn rate = 1 – retention rate
In the example above, if we lost 100 members from March to June, churn rate is:
Churn rate = 100 / 300 = 33%
Churn rate = 1 – retention rate = 1 – 67% = 33%
6. Average membership lifespan
This is the length of time a client remains enrolled as a fitness center member. If the average membership length is high, clients are happy with the services you offer. But if this metric is low, you need to evaluate the measures and understand what makes members not continue their membership.
To calculate this metric, we usually use churn rate as follows:
Average membership lifespan = 1 / churn rate
Using the same example above, if churn rate is 33% per quarter, we have:
Average membership lifespan = 1 / 33% = 3 quarters
In other words, an average member stays customer for 9 months before she/he cancels her/his membership. In addition, you could also track attendance frequency: the number of times a member visits the gym over her/his lifespan and assess drop out patterns to better retain your members.
7. Member Lifetime Value
Member lifetime value is the amount of value you generate per member over her/his lifetime.
As such, member lifetime value is the exact same thing as customer lifetime value for SaaS and other subscription businesses.
To calculate member lifetime value, we usually use gross profit per member (including trainers salaries and other variable costs):
Member lifetime value (LTV) =
Gross profit per member x Average member lifespan
For example, assuming your gym has the following financials:
Assuming you have 200 members and average member lifespan is 9 months, gross profit per member is $145 per month and:
Member lifetime value (LTV) = $145 x 9 months = $1,305
In other words, your members spend $1,305 in total before they churn, over a period of 9 months.
8. Customer Acquisition Cost (CAC)
Customer acquisition cost (or “member” acquisition cost) is the cost of acquiring a customer / member through sales & marketing. It’s one of the most important fitness KPIs as it dictates how much you actually spend to acquire a member who will eventually leave at some point, especially in the current context where gyms have become increasingly competitive to attract and retain customers.
You can use annual or quarterly averages to calculate the indicator based on your preferred marketing choice. This will be the amount you spend to bring each client to your business. You can divide marketing and sales costs by the total number of new clients each month to get the cost per new client.
CAC = Sales & marketing costs / # new members sign ups
For example, if you spent $30,000 on marketing and promotional campaigns over a period of 6 months for your fitness business and you signed up 100 new clients, the cost per new client will be:
CAC = $30,000 / 100 = $300 per new member
CAC should always be read in conjunction with Member Lifetime Value or Gross Profit per member (CAC payback, see below).
Using the same example above, if you spend $300 per new member and that member brings $1,305 over her/his lifetime, then you marketing strategy is profitable. Let’s now have a look at CAC payback.
9. CAC Payback
CAC payback is the number of months it takes you to recoup your original investment to acquire a member. This KPI can be calculated either using Revenue per member (easier) or gross profit per member (more accurate) as we’ve done earlier.
CAC Payback = CAC / Gross profit per member
For example, if you earn $145 gross profit per month from each member and the cost of acquiring that member is $300, CAC payback is:
CAC Payback = $300 / $145 = ~2 months
In other words, you make profits 2 months after signing up a member on average. Now, knowing that the average lifespan is 9 months, you make profits for the next 7 months (excluding other salaries and operating costs).
10. Average Class Attendance (ACA)
ACA tracks the percentage of clients attending fitness classes each day.
The metric is critical for gyms that offer classes on top of the membership access.
Understanding your fitness center’s ACA is essential because it determines each group class’s profitability and breakeven point. As a result, you can adjust the class frequency and offerings to maximize returns.
ACA = # of class attendances / total # of members
For example, if you have 40 members attending fitness classes daily and the total number of members is 120 over that period, then:
ACA = 40 / 120 = 30%