Expense Management

Blog readers: Future postings will be much shorter that this one.

Expense Management and the TAG Club Network

Clubs tend to focus too much on revenue rather than the whole revenue/expense equation.

Expense management is the most immediate step to improving your bottom line, so it should be the first step – especially at this time when growing revenues is harder than ever.  In recent years the number of clubs in North America has grown at a much faster rate than the number of members and, in fact, membership growth has slowed significantly for several years.   There are more competitors in every market but not more potential customers.  It is like rolling a rock uphill to try to grow your membership base as the only way of growing profits.  Non-dues  revenues have come “front and center” as a partial solution, but these revenues are closely connected to the number of members available to purchase programs and services.

For us at TAG,  it is clearly the time  to focus on the side of the equation that clubs can make the most immediate  impact namely –  “EXPENSES”

Historically  few clubs have really focused on lowering expenses?   Maybe that clubs have focused more on the revenue side than many other small businesses  because when we sell a membership there is not a direct cost of goods as in retail sales and we haven’t considered of the profit margin in each membership we sell leading us to be less disciplined regarding expenses.  The voice in the club operator’s head often repeats these words “If we can just sell 100 more memberships” (pick your number) the business will be in good shape.   In the past this was often a viable solution and disciplined expense management took a back seat.  But the game has changed and we at TAG believe more than ever, operators also need to focus on –  EXPENSE MANAGEMENT.

So welcome to the world of fighting on two fronts; the war on expenses and the battle for revenues.  Clubs these days must focus on both sides of the equation.  To be successful today you’ve got to have a stronger balance between expenses and revenues.

Let’s look at the EFFORT/IMPACT comparison when it comes to Expense Management versus Revenue Building.  Yes, we need to focus on both, but revenue building takes creativity and sometimes hitting it just right (luck matters here); while containing or reducing expenses is really just applying a simple set of disciplines.  Of course you sometimes make a bigger dollars difference on the revenue side, but every expense dollar saved goes straight to the bottom line.  So $100 of revenue at 10% profit = $10 profits, but save $100 = $100 profit.

Expense management does take some discipline and occasionally courage, but the effort almost always pays dividends and there are really only four simple questions to ask about any expense:

1.       Do we need it?

2.       Do we need that much of it?

3.       Can we get it for a lower price?

4.       Is it the best quality we can get for the price?

Most clubs rarely review their expenses and most clubs ask these four questions only when they bring on new vendor or have a new expense.

The last two questions are the primary work of the TAG Network.  TAG is becoming the purchasing agent and expense advisor for Clients in the Network.  TAG’s job is to get our clients the lowest price and the best quality to directly save them thousands of dollars each year.  Although TAG will continue to work on a range of consulting issues to help clubs perform better; the primary focus going forward is Expense Reduction.

We formed the TAG NETWORK to create an immediate impact on our clients’ bottom line through group purchasing, and to generate a continuous stream of reminders that EXPENSE MANAGEMENT IS ALWAYS THE FIRST STEP to long-term profitability.

You can find out more about expense management  on the TAG Network section of our website.

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