Does Your Gym Need Account Hierarchy?

In the competitive fitness industry, gyms must strike a delicate balance between delivering exceptional services to their clients and ensuring that their financial strategies support revenue growth.

The customers often choose gyms based on amenities, crowd levels, and contract terms.

Gyms are notorious for long-term contracts with complex cancellation policies, hidden fees, and sign-up costs, making the financial aspect a crucial part of a customer’s decision-making process.

In fact, according to a YouGov survey, the most common reason people gave for canceling their gym memberships was cost.

Other factors contributing to cancellations included dissatisfaction with the gym experience (14%), seeking better options (10%), the gym or studio closing (9%), and inconvenient gym hours (8%).

Given the many factors that can affect a gym’s revenues, a robust financial system is essential for managing these complexities.

One useful strategy for gyms to consider is the implementation of an account hierarchy. This article will guide you through what account hierarchy is, its importance, and whether or not it’s suitable for your gym.

What Is Account Hierarchy?

In the world of entrepreneurship, there is a significant emphasis on developing a solid business model.

However, research from INSEAD highlights that having a good business plan alone isn’t sufficient for success; the organizational structure is just as important.

Startups, in particular, may focus heavily on developing their product or service and neglect vital questions about how work will be divided, who will perform it, and how employees will be motivated.

These oversights can lead to inefficiencies and challenges down the road, underscoring the importance of a well-defined structure, such as an account hierarchy.

Account hierarchy is a system used by businesses to organize financial data into a structured, layered format.

It categorizes accounts into different levels, allowing organizations to see how various aspects of their business relate to one another.

For instance, a gym might have primary accounts for membership revenue, secondary accounts for class fees, and tertiary accounts for merchandise sales.

This layered approach provides a clearer view of the organization’s financial health and performance.

Why Is Account Hierarchy Important For Gyms?

Account hierarchy enables more effective financial reporting, budgeting, and decision-making.

Since it organizes financial data logically and consistently, gyms can ensure that stakeholders have a clear understanding of the gym’s financial status.

The hierarchy also simplifies the process of generating reports, making it easier to track the performance of different aspects of the gym.

Moreover, a well-defined account hierarchy allows gyms to allocate costs and expenses across different business areas.

This ensures that each segment is profitable and contributes to the organization’s overall financial health.

In the case of boutique gyms, Reuters reports that flexible pricing models in the form of pay-per-class packages have allowed the segment to outpace the growth of conventional gyms with long-term subscription models.

Data from the Health & Fitness Association (formerly IHRSA) reveals that boutique brands made up 40% of the $32 billion profit made by US gym businesses prior to 2020.

For gyms looking to manage member accounts and billing more effectively, integrating an account hierarchy with SOFTRAX’s subscription billing software can be extremely beneficial.

SOFTRAX offers a range of features that streamline billing processes, including automated billing, customizable pricing models, and detailed reporting capabilities.

This software is particularly useful for gyms with complex billing needs, which has become increasingly common in the fitness industry.

For example, Planet Fitness has introduced tiered pricing models, allowing customers to choose from different membership levels based on their needs and budget.

The “White Card” membership offers access to a single gym location, while the “Black Card” membership provides access to all locations and additional amenities.

Is Account Hierarchy Suitable For Your Gym?

Determining whether an account hierarchy is suitable for your gym depends on several factors, including the size of your gym, the complexity of your operations, and your long-term growth plans.

Gyms have significantly overhauled their offerings since 2020, with many diversifying their revenue streams beyond traditional membership fees.

For instance, Peloton has reworked its business model to include apps and remote fitness classes, providing different subscription tiers to cater to a broader audience.

If your gym has various revenue streams, such as in-person memberships, virtual classes, and retail sales, implementing an account hierarchy can help you manage these aspects more effectively.

Additionally, if you’re planning to expand your gym or add new services in the future, an account hierarchy can provide the scalability needed to support your growth.

Overall, account hierarchy can be a powerful tool for gyms looking to improve their financial management and support long-term growth.

By organizing financial data in a logical, structured way, gyms can gain better visibility into their operations, streamline reporting, and make more informed strategic decisions.

Whether you’re running a small, single-location gym or managing a larger, multi-site operation, considering an account hierarchy could be the key to unlocking greater efficiency and profitability.