1. Triple F Health Club
Group 2
Kelly Cornett, Jenna Dietrich, StacyGerke, Jean Gilles, &
Michelle Martin
2. Outline
• Evaluating the Membership Structure
• Revenue Projections
• The Effects of New Membership
• Additional Analysis
• Advantages of Implementing a New Membership Plan
• Conclusion
3. Evaluating the Membership Structure
• Consider cost, reception of new clients, & rate of return
• Planning ahead for shortages
• A fee schedule analyzes shifts in income
4. Evaluating the Membership Structure
• Increases in cost from hiring and training new staff, purchasing supplies,
updating marketing materials
• Factors will shift the bottom line
• Understanding buyers
7. The Effects of New Membership
• A new fee schedule = Consistent stream of income
• Allowing for ebb and flow of revenue
• Reduction is time and costs of staff and training
8. What canTriple F Health Club do to go beyond
budgeting?
•Forecasting, rolling forecasts
•Balanced scorecards
•Customer relationship management
•Benchmarking
•Shareholder value models
•Enterprise wide information systems
•Activity based management
9. Forecasting Compliments Budgeting
• Bottom-up exercise tool
• Implement rolling forecasts by creating them every few months to roll
beyond the year-end.
• Forecasts will include theTriple F Health clubs key variables.
• Forecasting will improve budgeting for the future.
10. Advantages of Implementing a New
Membership Plan
• Allows for planning of future revenue
• Lays ground work for possible additional revenue based on membership
level
11. Disadvantages of Implementing a New
Membership Plan
• Creates a significant increase to marketing and other resources
• Current clients will be affected by the change
12. Conclusion
• Cost, clientele, and rate of return were taken into consideration
• Review of business changes and what alterations would take place
• Revenue projections observed
• New membership effects
13. References
• Braun, K., &Tietz, W. (2015). Managerial accounting (Fourth ed.).
• CEO to CEO: Pros and cons of yearly versus rolling membership cycles. (2014). Retrieved from
http://www.asaecenter.org/Resources/AMMagArticleDetail.cfm?ItemNumber=11385
• Chartered Institute of Management Accountants. (2004). Better budgeting or beyond budgeting? proceedings from better
budgeting forum. London, England: Neely, Bourne & Adama. Retrieved from
http://www.cimaglobal.com/Documents/ImportedDocuments/betterbudgeting_joint.pdf
• Napoletano, E. (2015).The pros and cons of a member-based business model. Retrieved from
https://www.americanexpress.com/us/small-business/openforum/articles/pay-to-play-pros-and-cons-of-a-paid-membership-
based-business-model/
• Prepare a Cash Budget. (2010). Retrieved from
https://www.tdbank.com/small_business/workshops/CashBudget/textcash_bud.htm
• Rate of Return. (2005). Retrieved from http://www.investopedia.com/terms/r/rateofreturn.asp
Editor's Notes
Today we are reviewing the different elements and potential outcomes of evaluating and changing the membership fees and plan structure into the Triple F Health Club. Our presentation today will cover evaluating the membership structure, revenue projections, the effects of new membership, additional analysis, advantages of implementing a new membership plan, and our conclusion.
A few of the important factors the Triple F Club should consider when evaluating the conversion to a new plan are things like cost, how accepting existing and new clientele are, the rate of return and the expected sales for the various price points. The rate of return is defined as, “The gain or loss on an investment over a specified period, expressed as a percentage increase over the initial investment cost” (Rate of Return, 2005). It is important for the business to also understand and prepare for periods when there will be shortages of cash and when there will be surplus. With the new fee schedules understanding how the different rates affect the ups and the downs of income are extremely important. Likewise, understanding and accurately predicting how sales would be affected at various rates and weighing the pros and the cons associated with each is very important.
As with any changes within a business, there is a cost associated with that change. Changing the rates for membership is no exception to this. The increases in costs come from things like new tools (both physical and technological), staff, instruction and directions for staff, the cost to update any printed materials, etc. Since many things would need to be updated, changed, or refreshed it is important for the business to understand how these costs will affect their bottom line and if that cost is less than the benefit the business would experience from change. Finally and arguably the most significant factor is the clientele. If the existing and potential new clients aren’t accepting of the changes, it can be detrimental to the future of the business. Being able to predict their buying behavior and also understand how the changes will affect the overall experience of the members is important (Rate of Return, 2005).
Triple F’s revenue budget for 2017 shows the annual projection for membership fees under the new structure, broken into quarterly segments (Braun & Tietz, 2015).
Triple F’s cash receipt budget allows the company to ensure that they will have enough revenue to cover their projected adjustments with their new business plan. Different payment allocations are taken into consideration to ensure that they are financially prepared to make the change. With a new business venture, Triple F will need to ensure they have enough revenue to cover any unexpected costs or allow for adjusting if estimations were not as projected (Prepare A Cash Budget, 2010).
When Triple F Club introduces a new fee schedule it will produce a more consistent stream of income. This in turn should help the staff and management better predict and plan for times of surplus and deficiencies in income. In addition, the management team can plan for temporary investments to acquire additional income during the times of surplus. Likewise, they can plan for temporary financing when there are shortages in income. Having less transactions with the new fee schedule can allow some of the positions to be simplified. This means less training may be required, less staff may be needed, and the record keeping may be reduced significantly.
Other types of analysis that the Triple F Health club could utilize in their business beyond the financial and strategic budgets we discussed earlier are the following methods: Forecasting and rolling forecasts; Balanced scorecards; Customer relationship management; Benchmarking; Shareholder value models; Enterprise wide information systems; Activity based management
Triple F Health club would benefit from all of these methods if management put them into practice with their schedule 1 and 7 budget plans. Forecasting especially, will assist the health club with their changing environment; such as members dropping their contracts, the number of new members that join on a monthly basis, the effect of surrounding current or new competitors, and the changing upkeep costs of equipment, building expenses and new products.
Forecasting is a tool that many firms have adopted from the very beginning, in order to grow and expand their business. Previously, the tool was a more centralized top-down process and now it is looked as a bottom-up exercise (Chartered Institute of Management Accountants, 2004).
Triple F Health club can implement rolling forecasts into their business plan by creating them every few months to roll beyond the year-end, so that the tool does not impose on their financial budget's fiscal year. The forecasts will include the health club’s key variables, such as the number of members joining on a monthly basis, the amount of revenue that each new member brings or takes away when they join or drop, and the online marketing revenue. By utilizing these key variables in their rolling forecast, the Triple F will be able to develop a more flexible and time efficient forecast to improve their overall budgets in the future (Chartered Institute of Management Accountants, 2004).
Triple F Health club’s management will have to utilize their shareholder value models and customer relationship focuses, in order to compare their company’s targets and goals to their forecasts; which are only based on their businesses facts and assumptions (Chartered Institute of Management Accountants, 2004).
By putting the new membership and fee plan into place, Triple F will have the ability to know where a large portion of their quarterly and annual revenue will land, by knowing how many membership enrollments they have and at what fee structure with which they are being charged. From reviewing this data, Triple F can then look at future projects, such as developing perks or add-ons to the different membership levels. Upon analysis of current client usage, a plan can then be considered for future endeavors (CEO to CEO, 2014).
With any list of pros come cons to implementing new business plans. Creating a new membership and fee plan will mean that Triple F will need to restructure and update its marketing scheme and other items tied into promoting the new venture. This can be extremely costly both in regards to financing and time, which when the time comes, could be more than Triple F can handle in regards to resources. A major concern will be explaining the changes to their current clients and working with them through any concerns or questions they may have regarding the change to their current memberships and fee structure (Napoletano, 2015).
In conclusion the evaluation of membership structure, revenue projections, the effects of the proposed memberships, analysis, and the advantages of implementing the new membership plan have been laid out. The evaluation of the membership structured the costs, the possible clientele reaction, and the rate of return were considered. Additionally, while evaluating the membership structure the business changes were reviewed and how they would change. Next, the revenue projections were analyzed and added clarity to our analysis. Finally, the effects of the new membership helped align the staff and management predictions. The analysis showed that the new memberships may be slow to show the results in the current time frame. However, as a long term plan the new membership plan will produce higher profits and lower costs.
