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Crisis in the fitness market: how to save business in a situation of forced lack of demand

Our Ludus Dome fitness and martial arts club is no exception to the current crisis for small and medium-sized businesses. By order of Rospotrebnadzor, the club’s activities were suspended a week before the official “quarantine”, which forces us to radically review our business processes in order to preserve what we have now: a club with an area of 4,000 square meters, thousands of customers and amazing employees.
How to reduce the cost of full-time employees

The fitness industry in crisis conditions, in addition to the obvious ways to optimize processes, often comes to the decision to reduce staff costs.In this case, it is not just a simple cost optimization — we prioritize business preservation, so that people do not leave without work after the quarantine ends. Of course, this is the most extreme and undesirable measure, but now most entrepreneurs in the fitness market are forced to resort to it.

In the case of our company, the following measures were taken:
we have restricted the hiring of new employees;
non-mandatory social payments and compensation were temporarily suspended;
reduced all costs for cleaning services;
we have simplified all business processes to the maximum in order to reduce the cost of services performed by outsourcing companies;
most of the team, not being able to work remotely and understanding the criticality of the situation, took a leave of absence without pay;
some employees were transferred to a reduced work schedule with increased motivation for completed KPIs under an additional agreement;
I myself applied for a month’s leave without pay to allow the company to pay employees ‘ salaries.

How to negotiate with business service providers and contractors

All the actions described above relate to relations under labor law, but there are also relations regulated by the civil code. In our case, these are coaches who cooperate with the club on the terms of IP, and are contractors. In the agreement on their cooperation with the club, there is a clause on the possible postponement of payments for up to two months with the wording “force majeure”, which affect the ability to fulfill obligations under the agreement. In this case, the obligations do not disappear, but you can reduce or exclude liability for forced delay.

Another question that arises in this situation is what about the expenses for the maintenance of the club? Since we are a big club, our expenses include not only rent and employee salaries. We also have suppliers, maintenance of various systems, utility and leasing payments. All this needs to be somehow included in the new budget, provided that the revenue has decreased by 90%.

In this case, we are lucky (if we can say so) that our contractors have all their clients in this situation. And they understand that it is impossible to put pressure and set strict conditions now — the current client simply will not be able to exist in them, and finding a new one with such a downturn in the economy is too labor-intensive and, most likely, the search will not be successful. It is more logical to give the client time to resolve the difficulties, enter into an additional agreement, leaving the minimum payout percentage, and wait for the end of the crisis.

In our case, negotiations and personal agreements, of course, go before the bureaucratic subtleties and mass conclusion of additional agreements. The company tries to “humanize” this difficult process and fulfill its obligations to the best of its ability, because for us, first of all, we are talking about a team and partnership, not a contractual relationship with line staff.
Given that the government has officially announced a list of measures to support small and medium-sized businesses, I, like most entrepreneurs, constantly monitor official websites in search of adopted decrees on this issue. For example, the President announced that it planned a moratorium on the payment of taxes, except VAT.

But there is still no document confirming the entrepreneur’s ability to avoid paying taxes for six months. In any case, we plan to take advantage of all the benefits from the state that concern our company as soon as official documents appear on the resources of the government.
Of course, it is difficult for a fitness club to continue to exist under quarantine, because most of our work takes place offline. People buy subscriptions from us to have access to professional training areas and equipment, and not to train at home on video from the Internet. In addition, in the online format, it is more difficult for the coach to give comments on the technique of performing exercises, looking at the ward through a webcam. Although in the current conditions, there is no misunderstanding on this part — now few people are eager to go to public places, and people are ready to try new formats.

As for the administrative part of the club’s work, there are no problems: sales and marketing departments continue to work online. For collaboration, we use various online platforms like Zoom or Skype to organize calls.

In order to keep in touch, we use work chats in messengers (What’sapp, Telegram). In them, I regularly report on the latest changes in the company’s work and twice a week ask Department managers for statuses on current issues, so that the entire team is in one information field.

Being aware of all the events, employees do not feel isolated, and thanks to regular calls between sales and marketing departments, it is easier for managers to work out the objections that arise from existing and potential customers, and continue to work effectively.

I myself am in touch with the team 24/7 and ready to answer any of their questions as quickly as possible. Our chat conversations do not end with updating statuses — I regularly note good ideas and results, support and motivate the team. I respect and appreciate their willingness to continue working in a crisis and keep the company afloat, and I try to talk about it more often.
In the current environment, it is important not so much to attract new customers as to strengthen the loyalty of current ones. In times of crisis and epidemic, the world has lost stability, people feel lost and do not know what will happen next. It is important for us to take responsibility and show maximum calm, continue to do what we must and support everyone we can reach. Therefore, we do not announce special offers and promotions of the club in social networks now, but try to publish more useful content — a selection of exercises from our coaches or partner discounts from a network of medical centers.

Most fitness clubs have launched a series of live broadcasts with online training sessions for their subscribers. We decided to diversify this approach a little and hold joint live broadcasts, during which the coach of our club trains the blogger, and then answers questions from subscribers about sports and nutrition.

Thus, we solve two tasks — first, it is useful and motivating content for our audience. Secondly, this is how we support our coaches, who now feel the vulnerability of their financial situation. Joint live broadcasts, designed for a wide audience of the club and bloggers, allow them to prove their expertise and develop a database of potential clients with whom they can work offline after the end of the quarantine.

In addition, we actively use interactive formats for communicating with our audience. we ask our subscribers to tell us how they spend their time or what activities they miss the most. People are actively involved in such interactivity, because in conditions of self-isolation, they have a deficit of communication with the outside world. Such surveys help people to abstract from the disturbing background that some media create, unload and process accumulated emotions, and find new ways to spend time.

And, of course, we encourage customers to support us and our team in social networks, because the coaches and employees also read all these comments — and the idea that someone misses them and is waiting for the club to return to normal life, also motivates and warms the soul.
One of the few ways to save income that is currently available to us is through advance payments. In the case of a fitness club, this means creating favorable conditions for extending club cards to current customers. In fact, this is similar to the pre-sale of goods, when, for example, at the stage of building a house, apartments are sold at a 50% discount. Only in our situation, when people are frozen in shock from what is happening and are looking for opportunities to adapt to a new situation, you need to act with special sensitivity.

Each client is led by a specific Manager, with whom they have been communicating for a long time. Now our managers aim to remove the shock, just talk to the client, find out how they are coping, how they see their future life — and tell us what is happening in our country and how we are fighting the crisis. And only the second stage, if the client shows a willingness to look into the future “after quarantine”, we offer them to update their club card on more favorable terms than usual. This is a very delicate job and I am proud that our team has specialists who are able to carry it out.

It is important to understand that you will not be able to get out of the crisis without losses. Some customers may panic and return the club card. Some employees will not want to wait and will go in search of guarantees and stability. These events should not knock the ground out from under your feet, because you continue to be followed by loyal customers and employees, with whom and for whom you can turn mountains.

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