Our experts outline a strategy for effective, cost-efficient buying
It may not be rocket science, but procurement––the buying of all of the goods and services required to run a health club––does require intelligence, planning, and care (i.e., due diligence), observes Greg Lappin, the owner and general manager of the Rochester Athletic Club, in Rochester, Minnesota.
Every club strives to save more and spend more intelligently, and, given the precariousness of the global economy, doing so is now more important than ever.
Purchasing doesn’t need to be an arduous and unwieldy task, Lappin concedes, but purchasing proficiency does require time, effort, and serious study. Sound advice and instructive examples of saving coups scored by some leading clubs may also help to boost your purchasing aptitude.
That said, here are seven sugges- tions from three successful industry professionals who’ve managed to keep profits up by keeping expendi- tures down.
First, there’s Lappin. His facility is an award-winning, 260,000-square- foot, wellness mega-center that boasts numerous group exercise studios, 11 championship tennis courts, several dining options, a full-sized soccer field, a pro shop, and a water park.
Also contributing is Lisa Gorsline, the president and general manager of the Corpus Christi Athletic Club, based in Corpus Christi, Texas. Among this 110,000-square-foot facility’s many amenities are a pool, indoor and outdoor basketball courts, an indoor running track, and a premier spa.
Finally, there’s Vaughn Marxhau- sen, the area general manager for two Houstonian Lite locations in Houston, Texas. Both are companion businesses of the larger Houstonian Hotel, Club, and Spa. Each of the Lite clubs is located in the city’s down- town district and offers state-of-the-art equipment, along with group exercise programming; one mea- sures 16,000 and the other, 20,000 square feet in size.
Combined, these three individuals represent a wealth of purchasing know-how. CBI hopes that you find their seven tips useful.
1. Get Smart. According to Gorsline, “A frequent mistake many clubs make is to not fully understand what they’re buying.” Doing your homework is critical, she insists. Otherwise, there’s a high probability that “you’ll get caught buying things you don’t need, spending extra on bells and whistles you could have done without, or making use of a supplier who you believe is the best, but, actually, isn’t the best fit for your company.” Be aware, Gorsline advises.
2. Think big and small. Clubs, Lappin observes, tend to be fairly fastidious about big-ticket purchases since a significant amount of money is involved. However, the purchase of smaller things, which are less expensive by way of comparison, tends to slip through the cracks. It’s such an easy miss that his own facility, he acknowledges, has some- times been guilty of it.
“About seven years ago, the price of tennis balls rose appreciably,” he recalls. “We hadn’t paid much attention to this expense in the past, but the increase prompted us to finally say, ‘Okay, let’s take a good look at what’s going on here.’ Only then did we realize that we’d missed out on an opportunity—one worth thousands of dollars.”
Now, his club carefully considers every purchase—big and small alike. The experience, he admits, made him more alert, and he hopes, others will learn from his mistake.
“Don’t be complacent. Don’t get into the habit of doing business the same way it’s always been done. Stay tuned in. If you work at it continually, you’ll find there are always ways to save money.”
Marxhausen concurs, also admit- ting that, before his club studied its minute expenditures more closely, money was being spent unnecessarily. “For example, we used to get multiple copies of several different news- papers,” he explains. “Eventually, realizing that many of them weren’t being read, we decided to scale back. Our members didn’t notice the change, but we certainly did. We weren’t suddenly saving hundreds of dollars, but we did achieve a sav- ings. Sometimes, those out-of-sight type of items add up to more than you might realize.”
3. Be a bargain-hunting negotiator. Because “every dollar, and every penny, adds up,” suggests Gorsline, if clubs want to safeguard their bottom line, they must consis- tently ask for more off the top. “Try to get a better price, an extended warranty, or a complimentary upgrade. It never hurts to ask, and the worst that can happen is that the supplier will say no.”
Lappin agrees, acknowledging that, for some, negotiating can be off-putting—“People can feel reluc- tant about trying to beat someone down,” he says—but the outcome, namely significant savings, is well worth the effort. “You just need to have the courage to do it ... or you need to enlist the services of an individual who’s more comfortable when it comes to bargaining.”
It’s also important to have “a sense of what a fair price is before you go to the table,” stresses Lappin. Being well-informed gives you far greater leverage, he believes.
4. Pursue perks. Gorsline and Lappin see eye-to-eye on another matter, as well. Clubs, they point
out, ought to take full advantage of whatever perks might be available. Gorsline, for instance, explains that her club charges as many purchases as possible on the company credit card in order to accrue frequent flier miles. “Every year, we use the miles to travel to the IHRSA convention. It’s saved us a minimum of $5,000 per trip.”
Lappin also relies on reward miles to keep travel expenditures in check. “We just purchased four airline tickets with our miles—it was a very nice savings bonus.”
5. Bulk up. In Houston, the locker rooms at the Lite clubs are brimming with amenities in the form of mouth- wash, shampoo, and other personal sundries. Marxhausen buys less- expensive, off-brand products, but another tactic that he’s found effec- tive is purchasing amenities in bulk packaging. Using these to refill daily- use containers has proven “a quick, easy way to save cash,” he reports.
Lappin also understands, firsthand, how clubs can trim their overhead by purchasing products in volume. “Returning to the subject of tennis balls,” he says, “we calculated how many we’d need for a year. We then told the vendor that’s how many we intended to buy, and that they’d have us as a customer for the entire year. Assured of our ongoing busi- ness, they were more open to giving us a more attractive price.” Bulking up, so to speak, has other benefits, as well. “Usually, if you buy large quantities, vendors waive shipping,” notes Lappin.
6. Don’t cut corners. Lappin isn’t one to spend money frivolously, but he recognizes that, in some situa- tions, spending a little extra is neces- sary and, in reality, quite practical. That notion is especially true when it comes to maintenance.
“Having a clean club, and having equipment that’s in working order, is critically important. Members appreciate the effort and comment on it,” he says. “So our budget, in this case, is whatever it needs to be. We’ll pay what we have to to ensure that we’re offering first-class service. We don’t want to run out of towels or toilet paper, or offer a tennis ball that doesn’t bounce well, so, if we need something, we spend what we have to. It’s a prudent investment.”
Marxhausen also champions the objective of maintaining a high level of service, and suggests that some clubs can maintain a pristine facility while, simultaneously, reducing costs by performing janitorial work in-house instead of hiring an outside firm.
7. Be sure to vet. Suitable ven- dors may be closer than you think. You might even find them among your membership, Lappin points out. “If we have members who are suppliers, I try to give them my busi- ness,” he says. “They’re supporting me, so I try, whenever possible, to return the favor.”
Gorsline, too, prefers to keep her vendors close. “We favor keeping money in our community.” If, how- ever, she happens to find a more attractive proposal further away, she always gives the locals a chance “to match the deal.” But location alone isn’t a determining factor. “We judge suppliers based on what they can do versus what we actually need them to do,” explains Gorsline. “They have to be able to meet our specific demands.”
Being “quick and reliable” are two of the characteristics that Marxhau- sen values. “Deliveries shouldn’t take too long. And they need to be accu- rate; mistakes cost time and money.”
And should there be a mishap, Lappin wants to rest assured that his suppliers will “go the extra mile to correct the situation.” To that end, he strives to only do business with companies that have a solid history and a high level of integrity.