Long article, but some meaty content in this article for you today. I'd encourage you to print this out and read it with pen in hand. We often get a lot of questions from folks about EFT, ACH, and credit card billing.

Many fitness business owners ask us how they can set up and benefit from these kinds of billing systems in their fitness business because they've heard 'bits and pieces' about them from others.

This post goes into all of that ... and some things you probably have NOT heard of that you really should be doing.

These are very simple adjustments that are truly are BIG LEVERS for every fitness business regardless of your business model.

Whether you're an independent trainer, boot camp or group training business owner, studio/facility owner, pilates or yoga studio, or health club ...

...you have to collect money from your clients and customers!

So you might as well do it in a way that is easy and ensures you get paid.

We'll break this topic down into a few components today.

1. Sales and Packaging models

This is a very large topic, but let's cover the high notes here.

Generally selling "packages" of sessions but presenting them in terms of 'time' works best for private one-on-one personal training programs OR semi-private personal training (generally 2-4 people in a small group).

For example: a 3, 6, or 12 month program with a client working out 2, 3, or 4x/week with their coach.

We've tested all kinds of things out here, but across the board with all our clients ... this remains the winning model for selling this type of service.

Now for boot camp and group training business models (and really anything else that falls in the "group" category like sports conditioning camps, etc.) we've again tested quite a bit and have seen 2 models work best.

The first model is a web sales version, and it's generally used for groups that are fulfilled exclusively outdoors (although it doesn't have to be).

The model works like this ... prospects are offered to either A) invest in a 1 month of group training or 2) opt-in for a 1 week trial of the group.

The options are strictly limited to just those 2 that a prospect can view or select online.

Then after you deliver a great initial month with your new clients, they're offered the opportunity (offline, in a face-to-face sale) to renew with a 3, 6, or 12 month contract (getting a little discount for the longer term commitment to their health and your program) OR they can continue month to month at the highest rate.

This model for packaging and selling group programs can also be diversified by having 2 options in terms of frequency of visits to the group.

Like 3x per week for $199/month or 5x per week for $299/month (as a side note price has some elasticity here ... we've seen some folks even increase their price point as high as $450/month for some group models in healthy markets).

Because the initial investment you're asking a cold prospect to make online (1 month for only a couple or few hundred dollars) it doesn't demand a more advanced selling process (like large packages of private training does).

Now if you have that sales model working very well, have an INDOOR facility with some private offices, and want to "kick it up a notch" ... then you may choose to transition to a more advanced selling model which can really benefit your business financially and your customer in terms of their full commitment to their health and your program.

But stepping up to a more advanced model takes more training on how to deliver an effective sales presentation and requires a little more time to execute the sales process.

For this reason not everyone transfers to it.. and that's ok.

The web sales model is simple and works just fine ... allowing you to focus on just driving people through it and letting it do all the heavy lifting for you.

How the advanced sales model works is you simply change your online offer to a consultation, pre-qualify all prospects on the phone, and then bring them face-to-face for a private consultation (just like a private training consultative sale).

With this model many of our advanced students are getting commitments for much larger packages upfront (like 6 or 12 months) ... and not having to hassle with a renewal sale after the initial month.

This advanced sales process also allows you to build a stronger sale because you're taking the time to learn more about the prospect/new client upfront, understand their goals, and set clear expectations with them on how to achieve them.

You just don't have time to accomplish this if new folks are just purchasing a month online and then jumping right into a class.

The final model we have folks selling at is really a more of a membership type sale. Initial investment (or not) and a length of time..

i.e. contract. Generally this is structured as tiered pricing with discounts for the longer contract. And even great discounts for 'prepaid' memberships where you collect all dues upfront. This can be helpful if you have an exclusively membership type business and want to stimulate short term cash flow, but some folks also get into trouble here because they're really robbing Peter to pay Paul.

Sales and cash flow can look inflated one month ... then dries up quickly unless you're continually pumping fresh leads through the system at a good clip. And the positioning is bad because you've got nowhere to go but further down in discounts, pricing, and eating your margins.

So this is not really advisable as a long term strategy for success.

2. Billing Systems

Ok, so you've sold something.

Now it's time to get paid.

Let me first explain the different types of billing systems and the 'hierarchy' of what you should use 1st, 2nd, and 3rd. Along with what you should avoid like the black plague.

Cash-You've heard "cash is king" right? Well it is. You don't have to pay any points or fees on cash transactions, you take all the money upfront (which is the best case scenario), and you can even hide it under your mattress unreported ... just kidding.

You should report everything.

And beware the far left wing fringe who are coming for you with their "wealth redistribution" plans. Congratulations on doing what most people won't ... working your tail off to build your own business and create jobs for others.

They're going to reward you with more taxes and takeovers because you should be footing the bill for all the folks that want to sit around and get free handouts in life with entitlement programs.

Shame on you for working hard and earning a living. But that's another topic.

Ok, sorry for the rant. Had to get that out.

ACH is a billing method that most people know nothing about nor do they use. It stands for Automatic Clearing House and it means you draft a checking account directly for funds. This is a GREAT billing model for a few reasons.

First, the fees are generally much lower than standard credit card transactions. And on big transactions and high monthly volumes for your business ... these little numbers can really add up.

Second, anybody that takes credit cards for automatic payments in their business felt the hurt of the economy last year as LOTS of folks lines of credits were either reduced, shut down, or maxed out.

And once a card is declined ... you've got to begin a whole process of collections to get your money. Which may or may not pan out in actually you getting anything at all.

There is more security in drafting a checking account than a credit card because checking accounts are folks source of 'operating funds'. That's where they're always making deposits so they can do all the things they need to do in a month, like buy groceries, put gas in their car, and pay other bills.

Very often even if the amount you go to take in a ACH draft is just a little more then the current balance they have in their account at the time ... the bank will still give you your desposit ... and just charge an 'overdraft' fee to the customer for not managing their balance appropriately.

But the point to you as a business owner is ... you get our money, it costs you less to get it, and it's a more secure source of getting your payment.

EFT (Electronic Funds Transfer)-What was once the holy grail of a business model is simply not the case any more. Sure the automated billing is great, and in most cases is still a very good way to get paid, but it is without a doubt less secure than it was just a year or two ago.

Ask anyone who takes credit cards for their business. Ask them what their bad debt was in 2009 compared to 2008.

I'll tell you ...it's a whole heck of a lot more.

That's why you're seeing a decline in what's called 'soft offers' in selling. Early on the way to stimulate purchases in the soft economy was just to allow extended payment plans and financing. Which worked fine for most businesses ... until it didn't anymore.

You'd have customers cards decline on their 3rd or 4th payment of something they purchased several months ago. All of a sudden you're into a collections scenario.

And if you've already delivered the service ... there is very little leverage other than the customer doing the right thing to get their act together and pay you money owed.

I know some businesses that deal in primarily the internet marketing space that had been through months where decline rates were as high as 50% on payments and subscription programs. These businesses left millions on the table in bad debt for 2009.

Ultimately some survived, but others are wiped out.

Could your business afford to not collect money due to you in membership dues or receivables for several months?

I think most small business owners would say NO.

And nobody wants to deal with this stuff. It's a giant headache.

3. Collections

Alright, well anybody who defaults on EFT is going to end up in this pool.

And I think the most important thing to tell you here is that you've got to have good systems around addressing it.

Luckily there are good technology systems out there that can automate a good bit of this for you.

But even with automated technology ... you've still got to have someone watching it and moving it through the pipeline.

The sad fact is most businesses are not set up to really handle this.

They don't have the systems defined or in place to address the issue, and they don't have the manpower to put someone on it.


But I'll outline the ways to work through this here.

First, you want to have a processing system that will continue to retry charging declining cards. Generally you want this done automatically 1X a day for at least 30 days. Some technology systems do this for up to 180 days or more.

The good news is that once someone makes a payment to their card, and credit becomes available on the account, your charge will be accepted and you can get paid.

But in addition to that you'll want to have some communication with the customer letting them know that you've tried to bill their card and it's not going through. This is kind of a sensitive subject so you want to handle the communication delicately.

Because sometimes it might just be that they lost their card, it expired, the bank issued them a new one, or something simple like that. In those scenarios it's just a matter of getting their updated billing info and re-running the payment.

But if the customer failed to respond to an email and attempted phone communication then it's time to mail a letter.

Generally it's a good idea to do this on a 30, 60, and 90 day interval or something like that.

And someone has to make sure you note in your business operations that service or use of facilities need to be 'suspended' until you receive payment. That way if the customer coming in to train, attend a class, or use your facility ... you can stop them at the front and address the issue that needs to be resolved with them face-toface.

Depending on how much money the customer owes your business, you also have the option of either handing the collections process off to an agency that does this full time.

They generally take a fee plus percentage of collected funds they can reclaim for your business, so they become your 'partner in profit' in the sense that they are paid based on their performance ... or ability to go collect your money.

Some companies are more aggressive than others, and you'll have to decide what you're comfortable with. But there are very professional agencies that provide this service and won't come across like 'uncle louie coming to collect the mark'.

You also have the option of going to court and getting a judgment for default payment. But most people only do this for large amounts of uncollected funds.

It's not pleasant nor fun to waste your time dealing with this stuff, but ultimately if someone owes you a significant amount of money ... non-payment needs to be challenged.

The final scenario is to work out some type of payment schedule with your customer for them to pay. This is often a way to still get paid what you're owed (although slower than when it is owed to you).

Very often you'll increase the frequency of payments to a weekly or bi-weekly schedule in smaller amounts.

Again this stinks even talking about it. But it is the reality of owning a business.

Alright, that wraps up an overview of packaging, sales, billing, and collections systems for your business.

I encourage you to print and read this article with pen in hand and make some notes on at least a couple things you can implement that I've covered it.

Little things can add up to tens of thousands of dollars to your bottom line profits at the end of the year.

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