Deciding how to collect payments from your clients can be a tricky thing to consider. Whether you’re a small business owner or an independent trainer, you usually find yourself at a crossroads when it comes to payment options: recurring payments or package deals. Which is more economically viable for your business? Which one are clients more likely to choose? Which is more sustainable in the long run?
As if you didn’t have enough to worry about already — marketing, programming, retention of clients, overhead costs — even thinking about how to make sound financial decisions can be a burden. But it doesn’t have to be. There isn’t a one-size-fits-all answer and what might work for your peers may not be the best solution for you. But we’re going to give you enough information so you can make the decision for yourself.
What Are the Advantages of Recurring Payments?
Let’s first look at this from the point of view of a family-owned gym. We spoke to Lucas Floyd, manager of Third Street Boxing Gym in San Francisco, CA, who put it simply, “Recurring payments guarantee predictable revenue for the gym.” You know when your clients’ payments are coming in. You don’t have to chase anyone down to ask for money. The best kind of revenue is the kind that’s steady and predictable. Plus, without having to worry too much about where or when payment is coming in, you have more time and energy to devote to the rest of your job that you probably love more: programming for your clients, one-on-one time with potential clients, training on your own, etc.
“Predictable monthly payments allow the business to forecast revenue and set membership sales goals better,” Lucas added. This gives you the tools you need to make long-term plans and predict whatever changes you might need to make in the future. Because as important as it is to be fully present in your work today, you need to look forward and plan ahead.
What Are the Advantages of Package Deals?
Yotam Israeli, fitness director of Fitness SF Mid-Market, said package deals are a great thing for their business. “The main benefits of clients signing up for a package deal is that you receive all the money upfront,” he said. “Therefore, it is a lot harder for clients to stop their training early because they don’t want to lose out on money.”
He also added, “If anything comes up, you are able to have the additional income to help (if you need to buy new equipment, have anything you need to fix, etc.). Also, you can create a pricing program where the more sessions you purchase, the less the session price comes out. It is an incentive for people to buy larger packages.”
Whether you’re an independent trainer or a gym owner, you can’t deny that it feels pretty damn good to have a large sum of money sitting in your account after a client or two purchases a hefty package. This allows you to make purchases you haven’t been able to in the past — like Yotam said, new equipment, repairs, etc. — and it gives you a little cushion to invest in things like new marketing or a fresh website.
Which One Do Clients Tend to Prefer?
This will depend strongly on what kind of demographic you target. Yotam says most of the people in the tech industry of San Francisco prefer to sign up for package deals. “If somebody is interested in training, they will find a way to make the finances work,” he said. “I believe a lot of people lean towards the full package because it forces them to work out.” And here in San Francisco, where tech salaries are quite high, it’s pretty common for people to have the funds to pay for a full package deal upfront.
However, this may not be the case for the clients in your network. If you live in a smaller town rather than a big city, you likely won’t work with people who have the same kind of income, which means they will approach financial decisions differently.
It also depends on what kind of services you offer. “Most of our clients opt for the membership over packages,” Lucas explained. “This tends to be more economical for members, since our memberships include unlimited classes per month and most members visit enough to make it worth it.” Third Street Boxing Gym, unlike a health club like Fitness SF, offers a specific type of training that people often have a cult-like dedication to. Plus, they feature charismatic, personality-driven instructors who have a close relationship with their members. Fitness SF, on the other hand, is a state-of-the-art facility with all the latest fitness equipment and high-level trainers. This will certainly result in different kinds of purchases from members and clients.
No matter what, what rings true across the board is this: Clients, no matter their financial situation, will only pay for something they feel is worth the value. Yes, they want to save money, but their ultimate goal is to receive a service with a value that far exceeds the money they spent on it. Whether that’s a recurring payment or a package deal, they need to know that you offer something unique and invaluable.
Which One Is Better For Your Business?
“We prefer and value recurring monthly memberships,” Lucas put it matter-of-factly. “Package deals can sometimes be a larger upfront cash amount, but are generally not as frequently purchased.” However, he recommends offering both for your business, especially at the beginning, as this allows you to “track which pricing options sell best for your business.”
Yotam recommends selling package deals if you run a larger facility. “You would like as much revenue to come in monthly in case of emergencies,” he said. “If, as a facility, you are expecting revenue to be coming in and then it is no longer coming in, that can really mess your projections. You may also deal with clients who are upset that they haven’t ‘hit their goal’ (usually because their nutrition is off), blame it on the trainer, and would like to stop training.” To avoid that, he advises facilities push more package deals instead.
However, for independent trainers and perhaps even local gyms, Yotam recommends setting your clients up on monthly payments. “It is tough to have a pay structure where one month you make a lot of money, and the next month, you make very little,” he explained. “As an individual, you want to keep your income steady and constant. I would prefer to receive $10,000 every month, rather than $20,000 one month and then $0 the next. It makes budgeting — and life — very difficult when you’re unsure what your next paycheck will look like.”
It’s difficult to know what the right answer is, which is why it’s important to know your clientele base and try out a few methods before you figure out which one works best for you.