Check Free IHRSA Tech Summit 2008


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Presentation given by Jeff Skeen, Founder of Titan Fitness, at the IHRSA Tech Summit 2008 about leveraging technology to drive profitability.

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  • Check Free IHRSA Tech Summit 2008

    1. 1. Jeff Skeen Founder of Titan Fitness and accomplished Health and Fitness Industry Leader
    2. 2. Jeff Skeen “I Didn’t Think It Would Be a Career” <ul><li>1992, became partner in Gold’s Gym in Fairfax,VA. </li></ul><ul><li>1992-1998, grew from one club to 11 in four states </li></ul><ul><li>1998, hired PricewaterhouseCoopers to secure capital to purchase GGE now know as GGI. </li></ul><ul><li>1999-2004, served as principal and CIO of GGI </li></ul><ul><li>2004 , founded Titan Management Solutions, a consulting company to assist Gold’s Gym franchisees open new stores and improve operations </li></ul><ul><ul><li>Opened a facility with more than 7,000 memberships in pre-sales </li></ul></ul><ul><ul><li>Turned chain operating at a loss of $1M per year to a projected annual profit of more than $700k within three months; successfully sold the chain five months later </li></ul></ul><ul><li>2007, found Titan Fitness, an investment company dedicated to purchasing and opening gyms under the Gold’s Gym brand </li></ul>
    3. 3. Titan’s Long-Term Vision <ul><li>Build a chain of 60+ clubs in 4 – 6 markets </li></ul><ul><ul><li>11/07 purchased 8 in Minneapolis </li></ul></ul><ul><ul><li>12/07 purchased 6 in Raleigh </li></ul></ul><ul><li>Buy first – both Gold’s branded and non-Gold’s clubs/chains </li></ul><ul><ul><li>3+ locations </li></ul></ul><ul><ul><li>$1.5 million adjusted EBITDA </li></ul></ul><ul><li>Keep management in place to continue to grow out the market </li></ul><ul><li>Then build – establish/enhance brand leadership in acquired markets by building top notch clubs </li></ul>
    4. 4. Leveraging Technology to Drive Profitability <ul><li>Value of Using Technology to Drive Profitability </li></ul><ul><li>Technology’s Impact on Three Components of Club Health </li></ul><ul><li>Setting Up Your Organization for Optimal Club Efficiency </li></ul>
    5. 5. State of the Union: Health & Fitness Industry <ul><li>Our industry characteristics are extremely appealing </li></ul><ul><ul><li>Strong growth / recession resistant / stable </li></ul></ul><ul><ul><li>Highly fragmented </li></ul></ul><ul><ul><li>Excellent economics and cash flows </li></ul></ul><ul><li>Our industry has been discovered </li></ul><ul><ul><li>Heavy inflow of private and public capital in 2000’s </li></ul></ul><ul><ul><li>Run of M&A activity </li></ul></ul><ul><ul><li>Well-funded platforms consolidating and building new gyms </li></ul></ul><ul><li>Our world has dramatically changed </li></ul><ul><ul><li>Continued growth and consolidation – required by private and public investors </li></ul></ul><ul><ul><li>Skill sets required to compete have changed </li></ul></ul><ul><ul><li>Cost to be in the business has dramatically changed </li></ul></ul><ul><ul><li>Technology is critical </li></ul></ul>
    6. 6. Value of Using Technology to Drive Profitability
    7. 7. Value of Technology to Drive Profitability <ul><li>Run your club like any other business </li></ul><ul><li>Focus on operating each club more effectively not solely on revenue </li></ul><ul><li>Technology is a critical element that provides the data and information clubs need to grow as well as tools to leverage staff’s time </li></ul><ul><li>Analyzing the data captured by software and other technologies can help identify ways to maximize productivity, increase efficiency and drive profitability </li></ul>
    8. 8. Data Analytics <ul><li>Data is not useful until it becomes information </li></ul><ul><li>What does the following data mean to you: </li></ul><ul><ul><li>Chain of gyms haa a 40% Corporate EBITDA </li></ul></ul><ul><ul><li>Maximum number of members per square foot in a gym is 4 </li></ul></ul><ul><ul><li>A gym’s payroll is 17% of Revenue </li></ul></ul><ul><ul><li>A 7,000 sqft facility has a four wall EBITDA of $300,000 </li></ul></ul><ul><ul><li>A facility has $5 millions+ dollars in revenue </li></ul></ul><ul><ul><li>50% of a gym’s dues billings are billed using credit card </li></ul></ul><ul><ul><li>Gym purchased for 7 times EBITDA </li></ul></ul><ul><li>Until you have a way to evaluate your gyms performance to others, if you can improve your business. </li></ul>
    9. 9. Data Analytics <ul><li>What are tools you can use to evaluate your data? </li></ul><ul><ul><li>IHRSA – Profiles of Success </li></ul></ul><ul><ul><li>Billing Company – CheckFree has thousands of facilities in their database </li></ul></ul><ul><ul><li>Other operators and consultants </li></ul></ul><ul><ul><li>Business Intelligence – Tool used show data in a useful manner </li></ul></ul>
    10. 10. Business Intelligence Tool Need to blurr data
    11. 11. Billed vs. Collected Rates (Average) Club Size Active Members Average Collection Rate Low Mean (Average Collection Rate of Clubs with Collection Rates Lower than the Overall Average) High Mean (Average Collection Rate of Clubs with Collection Rates Higher than the Overall Average) < 100 94% 72.3% 99.4% 101 – 500 92% 62.8% 99.7% 501 – 1000 90% 57.0% 99.1% 1001 – 5000 97% 89.7% 99.0% 5001 – 10000 96% 89.6% 98.4% > 10000 96% 89.5% 98.7%
    12. 12. Technology’s Impact on Three Components of Club Health
    13. 13. Technology’s Impact on Club Health <ul><li>Business Health </li></ul><ul><li>Member Health </li></ul><ul><li>Societal/Community Health </li></ul>
    14. 14. Technology’s Impact on Business Health <ul><li>Allows you to view performance in real-time </li></ul><ul><li>Running standard daily reports can help identify potential issues and take swift corrective action. Can be as simple as: </li></ul><ul><ul><li>“ No entry” reports </li></ul></ul><ul><ul><li>Credit expiration reports </li></ul></ul><ul><li>Analyzing expense and revenue reports can help you find areas where you need to focus </li></ul><ul><ul><li>Bid where appropriate </li></ul></ul><ul><li>Using data captured through software applications such as accounting, billing and membership management systems to fine-tune club operations </li></ul><ul><li>Accurate records help maximize selling price and save time when in the market to sell </li></ul>
    15. 15. Technology’s Impact on Member Health <ul><li>Clubs must have technology in place to help members achieve their personal goals. </li></ul><ul><li>Caring about members pays off (have them blame you for their success): </li></ul><ul><ul><li>Increased retention </li></ul></ul><ul><ul><li>Protects against when competitor enters market </li></ul></ul><ul><li>There are many tools / technologies a club can use to help members accomplish their objectives and track their success </li></ul><ul><ul><li>Health assessments </li></ul></ul><ul><ul><li>Nutritional / meal programs </li></ul></ul><ul><ul><li>Personal training </li></ul></ul>
    16. 16. Technology’s Impact on Societal/Community Health <ul><li>The poor health of Americans continues to drive the prevalence of chronic disease in the United States </li></ul><ul><li>The increasing prevalence of chronic disease is having an astronomical financial impact on the United States. Costs are in the trillions. </li></ul><ul><li>Wellness and health promotion programs are showing positive results </li></ul><ul><li>An effective health improvement program needs to take an integrated approach and focus on improving lifestyles </li></ul>
    17. 17. Health clubs will become integral to preventive health, disease management, and lifestyle improvement programs <ul><li>Health club works in unity with wellness programs, physicians, dieticians, and other specialists to personalize lifestyle improvement programs </li></ul><ul><li>Utilizes technology to test members, measure progress, and securely share data with appropriate parties </li></ul><ul><li>Results and other data supplements traditional medical data to form a more comprehensive “health picture” </li></ul>Source: Briefing, “The Conexion Solution”
    18. 18. Value Proposition* <ul><li>Assumptions </li></ul><ul><li>Lifestyle improvements reduce medical claim costs by 5% </li></ul><ul><li>10% of the diabetic population can be helped </li></ul>Example *Provided by Deloitte Consulting Impact of Diabetes $132,000,000,000 Number of Diabetics in the U.S. 17,000,000 Cost Per Diabetic $7,765 Reduction In Claim Cost $388 Share In Savings   Share to the Consumer, Employee, Employer, Provider, Health Program, Gym $388 % of Diabetics That Can Be Helped 1,700,000 Total Share in Savings Available ($388 x 1.7M) $659,600,000
    19. 19. Setting Up Your Organization for Optimal Efficiency
    20. 20. Setting Up Your Organization for Optimal Efficiency <ul><li>There are a number of technological products available. Be careful not to overwhelm staff with the implementation of new systems </li></ul><ul><li>Strategically implement proven operational and technological systems </li></ul><ul><li>Evaluate return on investment to determine if worthwhile </li></ul><ul><li>Establish relationship with preferred vendor partners. Vendors have been exposed to many different ways of using their systems. </li></ul>
    21. 21. Challenges Finding Right Software Solution <ul><li>Looking for solutions within the health and fitness industry: </li></ul><ul><ul><li>Software companies are small with low employee count and minimal support staff </li></ul></ul><ul><ul><li>Greater possibility of company failure </li></ul></ul><ul><ul><li>Limited ability to create wide breath of successful product lines </li></ul></ul><ul><ul><li>Limited resources to improve core products </li></ul></ul><ul><li>Looking outside the industry: </li></ul><ul><ul><li>More expensive </li></ul></ul><ul><ul><li>Lack of attention due to perceived limited opportunity </li></ul></ul><ul><ul><li>Not focused on specific health club needs </li></ul></ul>
    22. 22. Choose the Right Tools to Support Your Business, Staff and Members <ul><li>Qualities of a Successful Software Solution. Should assist in: </li></ul><ul><ul><li>Increasing revenues or decreasing expenses </li></ul></ul><ul><ul><li>Making staff more effective in completing their jobs </li></ul></ul><ul><ul><li>Allowing management insight to business performance </li></ul></ul><ul><ul><li>Improving ability to collect dues and keep the money you have earned </li></ul></ul><ul><ul><li>Improving member retention by offering services to improve the member experience </li></ul></ul>
    23. 23. Example of an Increase in Profitability – Nutrition/Weight Management Division Variables: New clients per month Supplements 35 Weight Mgt 11 Supplement Fees: Enrollment $ 75 On-going $ 45 Monthly Attrition 10% Weight Management Fees $ 315 Annual Increase in EBITDA (Beginning 3rd Year): Revenue $ 315,917 Expenses 160,759 Annual EBITDA $ 155,157 System One-time setup Costs: $ 9,545
    24. 24. Example of an Decrease in Expenses – Time & Attendance System (Biometric) Variables: 50 employees $10 per hour wage 1% error factor $1,000 setup fee $2.50 per month per employee fee Annual Savings due to accuracy/labor reduction Human Error Factor Savings $ 309 Auditing Savings 50 Corrected Time & Leave 10 Data Entry Savings 25 Lost Time Savings 267 Gross Weekly Savings $ 661 Gross Annual Savings $ 34,353 System Costs Setup (one time) $ 1,000 Annual On-going: Employee Fee 1,500 Time clock rental 2,400 Total Costs (first year) $ 4,900 Net Savings (first year) $ 29,453 Net Annual Savings $ 30,453
    25. 25. Example of an Decrease in Expenses – Business Intelligence (Replace Excel) Variables: Hourly rates Regional Ops $ 29 per hour GM $ 37 per hour OM $ 11 per hour Note: includes 10% increase for taxes and benefits Time allotment Ongoing Regional Ops 4 hr per month per gym General Mgr 15 hr per month per gym Operations Mgr 30 hr per month per gym Annual Savings Due to reduction in labor: Regional Ops $ 116 GM $ 555 OM $ 330 Monthly Savings $ 1,002 Annual Savings $ 12,020 Does not take into account intangible benefits from real-time visibility into the gym's performance or value created by allowing employees to use their time to service members or sell memberships.
    26. 26. Example of an Decrease in Expenses – Billing Fees Variables: Annual Dues $ 1,200,000 Billing Fees 5% Fee Reduction 10% Annual Savings $ 6,000
    27. 27. Additional ROI Considerations for Outsourced Billing & Gym Software <ul><li>No incentive to steal </li></ul><ul><li>More effective in collecting money </li></ul><ul><li>Significant investment in gym management software & billing systems </li></ul><ul><li>No one person responsible for billing or software functions </li></ul><ul><li>Possible evaluation of business against large database of gyms </li></ul><ul><li>PCI compliance protects against possible fines </li></ul>
    28. 28. Summary - Impact to Value of Business Category Improvement Nutrition/Weight Mgt Division $ 155,157 Time & Attendance System 30,453 Business Intelligence 12,020 Reduction in Billing Fees 6,000   Annual Improvement to EBITDA $ 203,630 Purchase multiple of 4 times $ 814,520 Less: System implementation Costs (10,545) Increased Gym Value $ 803,975
    29. 29. Contact Information IHRSA Technology Summit was sponsored by: