Let’s
look at a typical buying situation.
A fitness center needs to add 10 more pieces of cardio equipment
before the new year rush.
They can order these machines “brand new” or
“refurbished.”
Example #1: The
decision is to spend the $35,000 to buy the 10 cardio machines needed,
brand new. But let’s look
at the investment after the money is spent.
You fill a need; your members are happy.
You also get a little depreciation value come tax time.
In 5 years when you want to get new equipment you will get about
$5,000 for your old equipment which originally cost you $35,000.
But that’s it! Other
than this your money is “dead” or has served it’s purpose and has
nothing more to offer you. In
other words, $$money = equipment needed.
Example #2:
Pay close attention to this example and you can solve all your
operating capital problems.
This gym owner decides to buy his 10 pieces of cardio refurbished
like new for only $21,000. (a $14,000 savings)
Let’s look at what he gets. A need is filled, and the members
are happy (they think the equipment is brand new).
He also gets a little depreciation value come tax time.
In 5 years when he wants to get new equipment he will get about
$4,000 for his old equipment which originally cost him $21,000.
And over the next 2 years he will have approximately $2,000 in
maintenance costs($100 per year each) due to a lesser warranty
than new equipment.
But this gym owner is taking advantage of all the opportunities
his business can offer him. He takes his $14,000 savings and uses it to implement an easy
membership generating program. In
other words, he is keeping the fitness equipment transaction “alive
and working for him” because
he is using the savings to grow his business.
Here
is what he did with the savings.
He took his $14,000 savings and implemented a 50,000 postcard
mailer giving away a “FREE WEEK” membership to his gym.
First, because he is a customer of Worldwide Fitness,Inc.
he was given the 50,000 mailing contacts in his marketing area for only
a $250.00 processing fee. (see customer benefits page 7)
Next, he had 50,000 postcards printed that looked like a
“PASS” with instructions how to take advantage of a free week.
He had the labels affixed to the postcards and mailed them out
bulk rate. The cost
was approximately .28 cents a piece mailed.(or around $14,000)
“So now his money is alive and in the mail.”
Here are the powerful results:
50,000 postcards went out offering a FREE WEEK pass.
The response rate was 1% or 500.
These 500 people came into the gym to activate their free week
membership.
At the end of the free week the sales staff was able to close 25%
of the “free weekers” for a total of 125 paid new members.
(These 125 members are the direct result of the marketing
program financed by the savings earned from the refurbished fitness
equipment purchase.)
These 125 new members will bring the club an average of $480
gross profit at the end of the year.
So that’s an increase in gross profits by $60,000.
But it doesn’t stop here.
12% of these 125 new members will sign up a referral bringing in
15 more new members. This
earns another $7,200 by the end of the year.
And then 25% of these 140 new members (35 members) will renew
their membership for 2 more years (total of 3 years).
This generates another $33,600 at the end of the 3rd year.
“The total profits generated from the $14,000 savings was $100,800.00.
Less the $14,000 investment
in the mailing makes a grand total of $86,800.00”
Wow,
now that’s what I call working for you.
I call it maximizing your leverage to gain exponential growth.
The potential is huge.
You need to look at all of your operating expenses this way and
maximize the leverage for your business.
My guess is you never looked at your fitness equipment purchases
in this manner. But
it makes for smart business.
And what a sense of control this technique gives you over your
expenses. It makes you feel
like a Super Hero.
This is why buying all your fitness equipment brand new is
a waste of money! It’s
a waste because the money has so much more potential to help your
business grow.
.
. It’s like owning a farm that has the capacity to produce 3
profitable crops every year and you only planted 2.
That’s wasting your resources as a business operator. . .
When you have a fixed amount of operating capital, you have to
maximize its potential. When
you buy brand new fitness equipment, your money stops generating profits
for you.
When you buy refurbished equipment, your members think the
equipment is brand new and it works like brand new.
You’re not sacrificing your image, you’re just filling an
equipment need as cost effective as possible.
All the while achieving the same end result.
The fun part is when you’re able to sign up more members who
utilize your products and services. It feels good when you know this profit is a result of money
saved buying refurbished equipment allowing you to implement the
postcard marketing program. And
when these members are happy using your refurbished equipment, you know
you’re running a smart business.