“to a man with a hammer, everything looks like a nail”
This is the next article in our series of ‘Influx Metrics’. The series covers the metrics that really matter to understanding and improving gyms. This article covers ‘average revenue per member’ (ARPM).
See other articles in the series here:
Influx Metric #2: Average Revenue per Member
Why is ARPM important?
ARPM gives you a measure of the amount each member contributes to your revenue. It is also useful for considering what memberships or groups within your gym are responsible for income. As we will see in a later article in this series, it helps inform how much you could be spending on gaining new members, for example through marketing. It could be measured over any period (e.g. one month, two months, or yearly). In this article we will use weekly as an example.
How do you measure ARPM?
For example, imagine you have 100 members, and your total revenue per week is $3,000
Your ARPM = $3,000 / 100 = $30 per week
This means that on average you receive $30 per member each week.
Once you have calculated this amount, you can sort your members into different groups, and apply the same calculation. The most obvious way to group members is by the type of membership they are on. However, there are other grouping methods to consider, for example by age, attendance of group fitness classes, gender, length of membership, profession, or location.
Let's assume that you believe there are three groups that are considerably different from each other: athletes, mothers, and foundation members. Therefore, these are the three groups in your gym that we will calculate ARPM for.
Imagine there are 20 athletes, 20 mothers, and 60 foundation members, and the respective revenue they bring in is:
The individual ARPM calculations are therefore:
This example highlights how there may be groups in your gym that contribute to revenue more than others. Understanding this is an important factor in improving your business.
In the next Influx Metric article we will expand on ARPM to get an even more detailed measure of ‘value’ to your business from different member groups.