Recession-Proof Your Business

With the latest employment numbers in the US showing over 50,000 jobs lost in July, the rapid price increases of necessary commodities such as oil and food and the drop in the value of the US dollar, it seems we are indeed in the midst of a recession. What does this mean? More importantly, what are some steps fitness professionals can take to minimize the impact of a recession on business? This article will provide a brief overview on what a recession is and will address some short and long term strategies for how you can recession-proof your business.

As the Rolling Stones state: “You can’t always get what you want, but if you try sometimes, you get what you need.” First, we need to define a few key terms. Economics is a social science that studies the production, distribution and consumption of goods and services. It tries to determine how consumers satisfy their unlimited wants (i.e., flat screen televisions, new clothes or a full tank of gas) with limited means (i.e., their income). Gross Domestic Product (GDP) is the measure of the size of the economy, specifically the market value of all goods and services produced. GDP = consumption + gross investment (capital expenditure) + government spending + export + imports. (If the US imports more goods and services than it exports, this is a negative number that reduces GDP). In short, the GDP is a measure of the health of the overall economy.

A recession is recognized as a decline in GDP for two consecutive quarters (six months). With GDP growth just below two percent for the first two quarters of 2008, technically we are not in a recession. However, the current economic situation is precarious, and if inflation stays on its current course, we could be in a recession by the end of this year. Two metrics that indicate we could be heading towards a recession are unemployment and inflation. As of July 2008, the US job market had lost more than 460,000 jobs year-to-date to bring the unemployment rate to 5.7 percent, according to the US Bureau of Labor Statistics. As unemployment is rising, so is the Consumer Price Index (CPI). The CPI is the average price of consumer goods and services purchased by households and is approximately six percent year-to-date.

Two things are happening at the same time: people are losing their jobs while prices are increasing. This means that there are less people earning money in the form of wages, so fewer people are spending money on goods and services, leading to an overall decline in consumption. Not only do people have less money to spend, but as prices increase, their purchasing power is greatly reduced. This is a vicious cycle: as spending declines, companies will sell less goods and services, so they will be forced to reduce expenses by cutting staff, which leads to greater levels of unemployment and less disposable income in the economy.

Effect of Unemployment on Demand for Private Trainers

Since 1854, there have been 32 cycles of expansion and contraction in the US economy. The average period of growth has lasted approximately 38 months, and the average period of recession has been 17 months. Since 1980, there have been four recessions, the most recent ones happened in 1990 to '91, in which the GDP shrank by three percent and lasted eight months, and in 2001, which lasted eight months as well but only saw the GDP shrink by 1.4 percent. The good news is recessions, like all things, must come to an end, so rather than waste energy worrying about it, accept the fact that a recession is here, be comfortable in the knowledge that it will end before too long and start planning a strategy to structure your business so that it is not adversely affected.

Fitness professionals sell a service: the knowledge and skill in applying exercise program design to help clients achieve their fitness goals. A consumer staple is a good or service that is a necessary expense such as housing, food and transportation. These are goods or services that are required to support daily living. A consumer discretionary item is one that is purchased completely at the choice of the consumer, such as buying a $3 cup of coffee, going to a movie or taking a vacation. These are optional choices for spending. The service of a fitness professional clearly falls into the category of discretionary spending. The first step in developing a recession-proof fitness business is to market fitness services, specifically personal training fees, as a necessary expense and something people can not live without.

In the past 12 months in the US, the manufacturing industry has lost over 380,000 jobs, the information technology industry has lost over 40,000 jobs while the construction trades have lost more than 500,000 jobs since the high in September 2006. At the same time, jobs in the health care sector (which includes fitness) have increased by over 360,000 (see below).

The good news for fitness professionals is, unlike the manufacturing or software/computer services sectors of the economy, our jobs are not capable of being outsourced. Most people have a hard enough time going to a health club in their neighborhood, so there is little chance of them traveling to China or Mexico to work with a personal trainer. This means that our industry is safe from losing jobs to low wage, overseas competition. However, we do need to work harder in an effort to educate consumers on how to structure and follow a healthy lifestyle featuring regular exercise.

The American College of Sports Medicine recognizes that regular participation in an exercise program reduces the risk of contracting a number of diseases such as diabetes, coronary artery disease, high blood pressure or feelings of depression and/or anxiety, therefore following a regular exercise program will promote good health, reducing the number of trips to the doctor, resulting in a savings on medical expenses. The savings can be significant enough that Myrna Brady, the CEO of Qameliyan Fitness and Lifestyle Consulting, refers to working with a fitness professional as a method of preventative health care. Brady’s opinion is that personal trainers are “preventative health care specialists” and play an important role in helping their clients to maintain good health.

The most effective short term marketing strategy to recession-proof your fitness business is to communicate the fact that working with a fitness professional will help to promote good health, reduce the risk of diseases and save money at the doctor’s office. When someone becomes sick or comes down with a chronic disease, the cost for treatment could become very expensive. Communicate this logic as a recession-proof marketing strategy: people can either pay a doctor to get healthy when they are sick or pay a fitness professionals to stay healthy and avoid getting sick. Either way, there is a cost involved in maintaining good health. In short, position your services as a staple requirement for a good health and something that is in high demand.

Listed below are a few other strategies that could be used on a short term, daily basis in an effort to make your business recession-proof:

• As you work the fitness floor, try to meet at least five new people every shift. The more people you meet and interact with, the more chances you have to develop new clients.
• Work with the group exercise department to see if you can offer assistance in the form of spotting during a strength training class or see if you can learn how to teach a group exercise class. Group exercise classes are generally offered at no cost to health club members, but instructors are paid to lead the workout. If you learn how to teach a group exercise format, then you can offer to cover classes for instructors when they travel, or you can teach a class of your own and get paid the class rate while you market your personal training services to a group of dedicated exercise enthusiasts who are taking the time out of their day to work towards results.
• Develop a small group training program. Why limit yourself to working with one person at a time? If you charge $75 per session, that limits how much you can earn per hour. A small group class requires more energy and attention from the instructor, but if you set the price point at $20 per person and have a workout with six people, then you’ve just given yourself a $45 an hour raise for your time (the difference between training one person at $75 an hour or six people at $20 each for the same hour). Some excellent examples of small group training include boot camps or teaching people how to use equipment such as the TRX System by Fitness Anywhere or the Gravity by EFI SportsMedicine.

Here are a few other recommendations for long term strategies that can be used to recession-proof your career as a fitness professional:

• Take the slow time to perform a professional self assessment on your career and define some personal objectives: identify specific goals such as income, the number of sessions to train per week or the number of new clients to generate per month. The purpose of doing exercise assessments for clients is to identify current fitness status and areas for improvement and to develop specific goals based on current fitness levels. The quantitative data gathered during the assessment process is then used to monitor progress during the exercise program. For trainers who might be business averse, think of a professional self assessment this way: how can you measure success without first identifying the current level of performance and creating some specific goals? As a fitness professional, you would hopefully never train a client without first performing an exercise assessment and defining some tangible goals for the exercise program. Apply the same logic to your business, and take the time to assess your performance and create some business goals. If you don’t identify any specific goals, than how can you know whether or not you are successful?
• Identify new skills that are needed in your industry or that could help you to reach out to a new market. Are there any certifications that interest you and would provide education on how to address a specific segment of clients? Taking the time to invest in a workshop or certification for working with a specific population could provide great returns. For example, investing in a workshop or certification on working with pregnant and recently post-partum clients will provide the skills for working with a specific segment: women who want to continue to exercise throughout their pregnancy. While a small segment of the exercise population, it is one that has a defined time goal and a mother-to-be who is motivated to control the stress and weight gain of pregnancy.
• Consider taking a business skills course to develop a better understanding of how to market your business, develop an internet presence or handle finances. The investment in such a course could enhance skills that are critical for the long term success of a business. If you don’t have the time or extra income to take a course, visit the local public library to gain access to guides on how to develop those skills.
• If you own your own training studio or if you are a department manager, take the opportunity to develop new fitness consumers and become involved in advocacy projects such as IHRSA’s support for the PHIT and WHIP legislation currently before congress (for full details, visit www.ihrsa.org). These are important bills that would allow people to pay for health and fitness expenses through healthcare savings accounts or would allow smaller businesses to deduct the costs of health club memberships for their employees, respectively. Taking the time to write elected representatives (i.e., congresspeople and senators) to urge support for the PHIT and WHIP bills could result in legislation to ease the access of entry to our industry for new consumers. The other good news about working on advocacy projects is that they usually involve a variety of local leaders both elected and in private business, people who have the means to afford personal trainers.

When running a business, it is important to develop a long term plan and strategy for success. However, it is also important to be able to recognize how the economy as a whole can affect your business and develop specific strategies to prepare for a slower month, quarter or year. The challenging part of being a fitness professional is that you provide a service that can be perceived as an unnecessary expense when it comes time to adjust a home budget. However, by taking certain steps such as positioning your service as preventative health care or investing in new business resources such as education, you can become an instrumental part of your clients' lives, and your service will be viewed as a necessary expense not at risk of being cut.

References:

1. www.bls.gov: the website for the federal bureau of labor statistics