However, it is equally important to study what allows the creation of the operational side of a fitness centre, namely the annual budget and the Balance Sheet.
The Balance Sheet
Restructured balance sheet
- 1. It allows the most significant parameters to be highlighted for an immediate evaluation and analysis of any anomalies or strengths (gross operating margin, operating income, etc.).
- 2. If pursued over the years, the restructured balance sheet guarantees an effective comparison with the activity data of previous years. Furthermore, it allows a comparison between companies in the same sector or in different sectors, highlighting the medium and long-term trends.
- 3. It separates operating costs and revenues from financial and extraordinary costs and revenues, allowing a rapid understanding of the problems, leading them immediately to specific management.
- 4. Isolates any elements of the budget that are necessary for legal purposes, but of little use to management
- 5. It is structured to highlight the amounts used to calculate the various margins and indices (such as ROE, ROI, RONA, EBITDA margin, etc.)
The role of revenues in a restructured balance sheet
These kinds of data are essential to obtain EBITDA or GOP (Gross Operating Margin), obtained by subtracting fixed and variable costs from revenues. From GOP, subtracting the amortization, it is possible to obtain the RO (Operating Income) or EBIT, from which it is possible to calculate the profit of the activity subtracting finally the expenses of financial management and the taxes.
Not all of these items will have important values, and it is up to those involved in developing and interpreting the reclassification to highlight this aspect in order to elaborate subsequent strategies on revenue sources.
The final draft of a restructured balance sheet does not necessarily have to maintain high level of detail. On the contrary, it is advisable to provide for a consolidation in the two following macro-items of the various revenue streams:
- 1. Primary revenues: represented mainly by subscriptions
- 2. Ancillary revenues: represented by all other items
Although primary revenues represent the income that guarantees the stability of the business, they are also the revenues with the highest marginal costs. In fact, spaces and time slots impose a maximum ceiling of members (therefore primary revenues sources), which would be very costly to increase. For this reason, it is important to work on ancillary services that, in addition to increasing the amount spent by the individual user, attract new customers, even occasional ones, and create new experiential opportunities, increasing the perception of users and therefore positive word of mouth.