As you probably know, sports facilities aren’t cheap. They are huge amounts of space that require a lot of money to keep up. However, they can also be very lucrative; it is important to be strategic when running a sports facility. Understanding profitability is key when running a sports business, and this post will lay out exactly what it means and how to optimize profit margins for your sports facility.
We’ve outlined 5 ways to increase your profit margins. But first, how do you calculate your gross profit margin?
How to Calculate Profit & Profit Margins
You may see that your business made a profit in Quarter 1 – you made more money than you spent. This is what we want for our company, right? Yes! However, just because you made a quarterly profit does not mean your business is profitable in the long run. This is why it is important to understand profit margins.
You can calculate your gross profit by subtracting your expenses from the revenue you made from your goods and services.
Gross Profit = Total Revenue – Total Expenses
We will use this example to calculate gross profit if we made $10,000 in revenue and spent $7,235 on expenses.
$2,765 = $10,000 – $7,235
Now, why are profit margins important? Profit margins give us a percentage of how much profit we are taking from revenue. Investopedia explains that depending on your business, a healthy profit margin is anywhere between 20% to 40%. Profit margin is found by dividing profit by revenue.
Profit margin = Total Profit / Total Revenue
We will use the same numbers from the last example to determine the profit margin. To find the percentage, multiply your profit margin by 100.
.2765 = $2,765 / $10,000
Profit Margin = 27.65%
And there you have it! The profit margin for our example is 27.65%. Profit margins are one of the biggest key performance indicators (KPIs) for a sports facility, and the higher the percentage, the more profitable your business is.
We’ve put together a free template to help you calculate your gross profit margin. Download your copy today!
5 Ways to Maximize your Sports Facility Profit Margins
Now you understand how profit margins work and what needs to be done to maximize them – increase revenue and decrease costs. But how exactly can you do that? Outlined are a few different ways you can optimize your profit margins.
Plan ‘Off- Season’ Events
One important aspect to note is that athletes will likely spend time at your facility during their ‘off season,’ where they can take specialized lessons and refine their skills. During the other half of the year they will be attending practices and games, which you may consider your ‘low season.’ It is vital to plan for the fluctuations your facility may experience, and plan accordingly.
Planning for your low season is crucial to ensure financial stability. By setting aside a cash reserve specifically for rent, staff salaries, electricity, and other essential expenses during the warmer months, you can navigate potential fluctuations in revenue more effectively. This proactive approach allows you to maintain the quality of your services and operations without compromising the overall financial health of your sports facility.
Though setting aside money is a great way to be prepared, there are other ways you can bring in revenue during lighter seasons. Adding a new sport that can use your facility during these low season months is a great way to ensure revenue streams are consistent. You can also optimize your space utilization by offering camps and clinics. Since you already pay for the space, utilizing it for these activities helps maximize your resources and generate additional income. By providing specialized training programs or recreational activities during this period, you can attract new customers and retain existing members.
Implement a Membership-Based Business Model
One effective strategy to generate recurring revenue for a sports facility is to implement monthly or yearly memberships that offer various benefits. These memberships can include discounts on private lessons or camps, the use of space, and other services. By providing these incentives, you can encourage individuals to commit to long-term relationships with your facility, ensuring steady revenue throughout the year.
To better understand and predict your recurring revenue, Upper Hand built Membership Analytics within its sports facility software. This helps you to track your revenue in advance, understand factors that drive change, and make informed decisions when planning your quarter.
Update Your Spaces to Accommodate New Offerings
Another key asset of your sports facility is the physical space itself. You can leverage this asset by renting out larger areas for events such as birthday parties, corporate gatherings, or graduation parties. Collaborating with local businesses to host pop-up shops, tastings, seminars, and other events can further expand your revenue streams. Offering discounts to friends and members of your facility can incentivize them to utilize these services, enhancing customer loyalty and generating additional income.
To diversify your sports facility’s offerings, consider adding new sports or activities that align with your target audience’s interests. Adding a few new paint lines on your courts can bring in a whole new sport, attract a different clientele, and provide an opportunity for increased revenue. By expanding your range of sports, you can attract a broader customer base and cater to various preferences and preferences. By using data to understand your customers, you can confidently make decisions about your business that reflect the interests of your key stakeholders.
Marketing Surveys are a great way to hear from your most valuable asset – your clients. Consider sending out a survey to all of your clients asking them what kind of training they would like to see, or how their experience could be improved. Need help creating a marking survey for your business? Check out Upper Hand’s free Marketing Survey template download.
Promote High-Margin Products
Advertising high-margin items such as retail/ merchandise is essential to capitalize on their profitability. Promoting these offerings through targeted marketing campaigns, social media platforms, and within the facility itself can increase awareness and drive sales. Additionally, providing exclusive discounts for friends and members can incentivize them to purchase these items, further boosting revenue.
Consider selling sports apparel or equipment for your athletes, parents, and members. Putting your facility logo on a shirt, sticker, or water bottle is a great way to advertise your business. By capitalizing on these high margin products and building brand awareness, you are attracting new business and bringing in a new line of revenue.
Invest in a Software
Moreover, investing in a user-friendly and efficient sports facility software like Upper Hand for scheduling and managing activities can attract customers who value convenience and seamless experiences. If a potential customer is deciding between two sports facilities, they will likely choose the one that is user-friendly, more flexible, and easier to access.
In conclusion, understanding and optimizing profit margins is crucial for the success of your sports facility. By calculating and monitoring your profit margins, you gain valuable insights into the financial health of your business. To maximize profit margins, focus on increasing revenue through strategies such as offering yearly memberships, utilizing space for camps and clinics, and renting out your facility for events. Additionally, cutting costs and planning for the off-season can help maintain financial stability. Investing in user-friendly software and leveraging technology can further enhance efficiency and attract customers. By implementing these strategies and continuously evaluating your profit margins, you can position your sports facility for long-term profitability and growth in the dynamic and competitive sports industry.