Creating a Financial Benchmark for Your Swim School Program

For any swim school business, financial health and quality programming go hand-in-hand. It is impossible to effectively operate your swim school, support teachers and managers, and invest in your company without being strong financially. At HINGE, we’ve worked alongside swim school owners to develop a benchmark that will help operators see what financially healthy schools their same size are spending in each expense category. See an overview of our financial model below.

Income
Tuition Income
Other Income
Other Charges
Discounts
= Net Revenue

Expenses
Staffing Costs
Program Costs
Facility Costs
Administrative Costs
= Net Income

First, nothing else matters if you don’t have a healthy level of revenue coming into your business. This means your class enrollment is high and you are maximizing group sizes and ratios to align with your quality standards. It also means that your rates are set to reflect the cost of services. You can’t cost cut your way to financial health, so here are a few recommendations to boost your bottom line:

• Be the trendsetter for rates in your market. Comparing your rates with local “competition” can be dangerous as someone operating in your market is not necessarily a competitor. A competitor is someone in your market that is providing the same quality services in the same quality facility.

• Increase your rates annually at a minimum to cover inflation and in years of heavier increasing costs, reset rates at a cost of services rate.

• Consider adding other income streams like competition teams, summer camps or party hosting to your services.

• Add fees for registration, makeup lessons, late payments or returned checks.

• Reduce the number of discounts you offer. Sibling and multiple lesson discounts are no longer industry norms and can have a huge effect on your bottom line.

Second, you must maintain a healthy expense percentage to gross revenue by setting operational expenses within industry standards. Here are our recommended expense percentages for swim schools to ensure a healthy cashflow for reinvestment into your business:

• Staff Costs – 36.8% for a Large Swim School (average monthly enrollments >= 1,350) and 43.8% for a Medium Swim School (average monthly enrollments between 725-1349)

• Program Costs – 3.7% for a Large Swim School and 4.7% for a Medium Swim School

• Facility Costs – 13.7% for a Large Swim School and 20.1% for a Medium Swim School

• Administrative Costs – 3.5% for a Large Swim School and 3.7% for a Medium Swim School

Achieving these percentages will allow you healthy cashflows of 42.3% for large swim schools and 27.7% for medium-sized swim schools.

As you breakdown each expense category further, you can be more mindful of which expenses might be easiest for you to manipulate first to achieve a healthy expense percentage.

For example, in calculating staff costs, salaries and the number of team members drive payroll taxes, employee benefits, staff training and other miscellaneous costs. Payroll taxes are the employer’s share of Medicare and social security alongside all costs of unemployment insurance. And because payroll tax expenses are a percentage of salaries, as salaries rise so do payroll taxes. Employee benefits include anything you provide to your staff at your cost, from life and health insurance to retirement plans. And miscellaneous costs are the very important culture-building strategies you do to show your appreciation to your team. See this breakdown here.

Program costs include swim school supplies, advertising/marketing, and dues and subscriptions. Facility costs include rent and property taxes, building and equipment maintenance, security, utilities, and insurance. And administrative costs include credit card fees, payroll processing, office supplies, permits and licenses, etc.

If you want to learn more about how to achieve financial health for your swim business or would like a copy of our financial benchmark, please don’t hesitate to reach out to our team at info@hingeadvisors.com for a consultation. We’re also happy to provide a confidential business valuation for your thriving school. Our team looks forward to hearing from you!