Tuesday, May 12, 2015

How to Balance Rising Costs

Recently we posed the question to facility and program managers of how to handle the rise in operating costs. The main concern of rising costs is the ultimate loss of customers. As minimum wage increases, the costs to the customer increase, and often facilities see customers seeking the lowest-priced facilities, even at the risk of lower quality services.


There does not appear to be a single formula of how to respond to rising costs, but four key strategies for responding to the financial climate became evident in our discussion.


  1. Get creative. Since there is not a simple solution for how to reconcile the fact that spending and profits don’t rise at the same rate, it’s important to look at your situation with innovative eyes. Be aware that being creative may mean letting go of certain programs your facility offer.
  2. Shave off the excess. Did your facility incorporate a variety of programs when the economy was strong and wages were low that still carry on today? It’s helpful to evaluate if the programs your facility offers are truly valuable for your revenue.
  3. Choose your strength. There is always competition; decide your niche and focus on that. One manager in our discussion noted that his facility could not compete with the subsidized programs offered by the government facilities, so his facility decided to offer specialized classes that are not offered at the government facilities. Make your programs unique enough so the cost is not the driving factor in the customer’s decision-making.
  4. Educate your customers. Frustration is inevitable when managers see customers moving toward a lower-priced, likely lower quality, competitor. Some facilities have chosen to explain to customers why the cost to them has increased. If the rise in cost is to the rise in minimum wage, the explanation is ultimately education on the importance of quality lifeguards. Facility managers understand how essential highly-trained lifeguards and swim instructors are, but, unfortunately, the importance of lifeguards and water safety are not always the main motivation in decision-making for customers.   

Costs will always continue to rise, but sometimes they can rise suddenly with a change in regulations. These quick changes make it so that facilities are in the position of playing catch up financially. Be innovative and don’t be afraid to try something new to address the effects rising costs have on revenue.

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