Here’s a scenario I walk through with nearly every studio owner I work with.
Client A holds three sessions per week. In a 50-week year (accounting for holidays) that’s 150 sessions she’s reserved. But by the end of the year, the client’s actual attendance averages 1.25 sessions per week, or 62 total sessions.
The gap in this case is 88 sessions. At $100 per session, that’s $8,800 in lost revenue. All that from one client. In one year.
Multiply that across your roster.
Looking at your schedule, it appears this way: waitlisted on Monday but several vacancies by Friday. Our industry loves to describe this as a utilization problem, and in reports, that exactly what it looks like. Low utilization. But it was held by a standing client before being early cancelled, again and again. So let’s call it what it is: a cash flow nightmare. And for most of us, this problem hides in plain sight.
Our most popular pricing option makes it worse. 10-packs, I’m looking at you. Because when a client buys one, two things happen that feel good in the moment:
You get cash up front
The client books out, filling the schedule
It looks and smells like revenue, but it’s not. Not exactly, anyway. Most of that money is unearned, and until the sessions are taught, and the payroll and overhead subtracted, it’s a liability.
Back to Client A: despite her 3x week commitment, she cancels to for a last-minute trip, then a personal appointment she “booked months ago,” and oh, a sick kid. Before long, her 3x week reservation dwindles to a much lower average, meaning her 10-pack is drawn down over two months rather than one. So you have a financially lumpy month and spots that are near impossible to fill with a prospective client because she’s still holding them through next month.
Adding to the issue, most studios treat that upfront cash as available income and pay expenses from it. This is where ideal accounting conflicts with the realities of a small business. Because rather than putting that 10-pack money into a drip account and releasing it as sessions are earned, we spend it. The difference shows up at payroll or when rent is due, and that’s where it can get painful.
But there’s a model that solves some of this issue. Let’s look at Client B.
She’s on a fixed monthly auto-pay and holds the same 3x week appointments. Life still happens and she misses some sessions, but with her, it’s different. She’s on auto-pay, which means the studio’s cash flow is tied to the schedule she committed to rather than her actual attendance. And as a result, she usually reschedules rather than canceling outright.
Utilization is steady.
Cash flow, even steadier.
It works because you get paid on the same day each month, whether the client keeps their weekly sessions or not. They pay to hold the reservation on a recurring basis. So her commitment becomes revenue you can plan around. The package renewal conversation disappears entirely.
Offering autopay (aka contracts aka memberships) is not about making your studio harder to leave. It is about protecting your income and decoupling it from attendance variance. Your client’s weekly attendance will always vary. Life happens. The client who came three times a week in January might come once in March. In a package model, her spring break vacation hits your cash flow directly. With a recurring model, it often doesn’t.
A note for the contract/member-naysayers: the recurring model has its own friction points. Client vacations, extended illness and months with an extra week all create an extra conversation on how to handle suspensions, out-of-pocket sessions and the like. But none of them are dealbreakers, so long as you dot your i’s and cross your t’s in the sales process. A contract with clearly defined terms handles most of them.
So, where to start? Pull your active client list. For each recurring client, find two numbers: how many sessions they are holding each week, then how many they actually attended. Use a standardized period of time, such as three months, for all clients. The ratio of booked-to-attended is your utilization rate for that client. You can then use that ratio to calculate lost revenue.
The gap for some clients may be significant. You likely already know who they are. But you can only fix what you measure. So begin with this calculation.
And then what? Well, that’s another story for another time!
Thanks for reading!
-Amanda