A Simple Guide For Calculating Retention- It’s Easier Than You Think!

« Blog | | | (0) Comments

The last thing we want to do while on the job is crunch numbers. However, the fact of the matter is, for a business to succeed—especially in the fitness industry—calculating your retention rate is vital, and this means we need to do a little math.

Calculating retention rates can be VERY confusing, but we’re here to break it down to some more manageable formulas. The key thing to take away from all this is, regardless of the equations you use, keeping members satisfied is a sure way to keep your retention rate high.

What Is Retention and Why Should I Care?

In laymen’s terms, retention is the percentage of the members that stayed in the past year or 12 months. It costs a LOT more to attain a new client than it does to keep loyal members, so it’s pretty safe to say that membership-based facilities should focus energy and resources on retaining members to be successful. Although reaching sales quotas and getting new faces in the door are important parts of the business, if you are not keeping those members, you’re working harder for the smallest profits.

How Do I Calculate My Retention Rate?

One of the biggest mistakes club owners make is they just total cancellations in a year and divide this by the membership total at the end of the year. Don’t make this mistake. Instead use any of the methods listed below.

By far the easiest way to track retention is by using the following steps:

1. Start with a 12-month chart and record the beginning monthly membership for each month.

Use the equation:

Previous month’s beginning membership + number of sales in previous month + number of reinstated (unfrozen) memberships.

PMBM + SPM + RM

2. Subtract the number of canceled memberships and the number of frozen memberships.

3. Total the canceled membership for the last 12 consecutive months.

4. Total the beginning monthly membership for the last 12 months and divide by 12 which indicate the average beginning monthly membership.

5. Total the number of canceled membership for the last 12 consecutive months. Divide this number by the number of average beginning monthly memberships in the previous step. This answer is your annual attrition.

For annual retention, take the number from step one and subtract attrition. The process is pretty easy, but make sure you are meticulous in your calculations.

Another popular formula for calculating retention rates:

Member retention rate = ((ME-MN)/MS)) X 100

ME = number of members at end of period

MN = number of new members acquired during period

MS = number of members at start of period

I know you’re probably starting to get painful flashbacks of high school math class, but don’t be intimidated. These formulas are actually pretty simple to use. Think about it:

If you start with 100 members in your club’s first month, and factor in the 15 members who canceled their contracts and 20 new members, then you are left with 105 members at the end of the month. Using the numbers above, your equation should look like this:

((105-20)/100)) X 100 = 85 percent of your members are still active.

Both formulas work for large clubs and small boutique facilities. Tracking retention rate is the foundation of growing a business. Whichever method you choose, make sure to take a serious approach to keeping members loyal and reducing your attrition.