Avoid the Desire to Fly South


On this gray autumn day, birds fly by my office window, noisily calling to each other as they prepare to head south for the winter. I consider joining them and leaving behind the writing, the editing, the deadlines, the invoices, the e-mails, the phone calls, the questions, the budgeting for 2009. Sometimes, escaping to a sunnier place that promises a carefree existence is tempting. But I know those promises are just lies. No place is free of the stress and the day-to-day issues of work and living.

My stress, like yours, has been compounded by the uncertainty of the economy and the credit crisis. As I write this, Congress still hasn't decided what to do about the situation, and the market is falling.

So I turned to Rick Caro, president of Management Vision and one of our advisory board members, for his thoughts about how this situation could affect the industry. He'll be moderating a panel session, “Fitness Business at a Crossroad: How to Hold on in Today's Economy and Prosper in the Future,” at this month's Club Industry show. So, who better to ask?

According to Caro, members will undoubtedly face tough economic choices, including which expenses are necessary and which are discretionary. Club membership will be discretionary for some. Some club owners are already seeing fewer prospects. As that scenario spreads to more clubs, it could lead to fewer new members. That means club owners will need to get more revenue from existing members by promoting ancillary programs. However, getting this extra cash from members could prove more difficult, too. As a result, more club owners might cut costs to offset any revenue flatness or decline, so they can at least hold their bottom lines.

People who are new to the industry and do not have a track record in it will find it more difficult to get loans and financing for their clubs, Caro says, as lending institutions come under greater scrutiny and implement more stringent lending criteria. Club owners who want to expand or remodel might find it more difficult to get loans, or they might not get the same great terms on their loans that they received in the past. Some club owners might put off capital expenditures and use their money for working capital instead. In addition, club owners who want to leave the business may not be able to get the ideal purchase price for their clubs.

However, it's not all doom and gloom. Now might be an ideal time for people who have adequate resources to seek better locations for their clubs at lower prices. As some businesses pull out of retail space due to the economy, real estate developers may be more willing to offer better deals just to get someone new to fill the vacant space. Owners with capital also might be able to buy struggling clubs in hopes that once the economy turns around, the clubs will prove profitable again.

So, it comes down to what kind of club owner you've been during the past several years. Are you someone who has reached beyond your means, not setting aside capital for the downturn that always comes after the peak? Or did you put some money aside that will help you weather this storm and actually take advantage of it?

If you didn't plan far enough ahead, those birds flying south might start looking good to you, too. But don't join them just yet. On our blog and in next month's issue, we'll share some of the ideas that the panelists at this month's show offer for getting through this economic downturn.

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