Ski School: Measuring Financial Success

The most important figure at the end of the season is the gross operating profit, the bottom line after income and expense has been compared. It can be further reduced to net operating profit or adjusted gross profit after taking into consideration the percent of overhead contributed to the area’s fixed overhead expenses, (See Chart I.)

The next step is to break down income into two major areas: lessons and special programs. (See Chart II.) In the lesson category, you want to know how many lessons the school has taught, the amount of income derived and its comparison to the other programs offered. This tells you how much each program has earned and the amount spent to operate them. These comparative figures show what percent of total income each program contributes and also helps you determine which are most profitable and should be emphasized during the next season.

For example, on Chart II, under private lessons, you’ll see that 4% of the total lessons taught returned 14.5% of the lesson income and 13% of the total income. Therefore, if more private lessons can be sold, the returns can be excellent. Looking to next season, a possible objective may be to increase private lesson sales. Walk-in lesson percentages indicate another area that produces high income compared to a lower percentage of lessons indicating that attempts should be made to boost this program as well.

Once you’ve calculated your results, you’re in a position to decide which programs you’d like to improve and then develop a marketing strategy to meet those goals. In addition, with this analysis, you’re able to show the area management logical figures that reinforce your requests to develop certain programs. For example, private lessons could be promoted through a PA system set up at the ski school desk, by offering financial incentives to instructors who actively solicit additional private lessons.

Your financial analysis also provides warning signals. In Chart II, the Childrens’ Ski School is a program where money has been lost. An investigation reveals that it is difficult with the amount of service you provide to make a reasonable return, or that there was a lack of organization and development that resulted in a non-profit program. Here is an opportunity to determine whether the program should be cancelled or re-structured for next season.

Finally, you can compare your ski school with results from other ski schools. Ski schools are labor-intensive departments so the percentage of payroll expense compared to income is an important figure. In the example presented here the income is $100,000 and payroll expense is $40,000—a 40% payroll. Very efficient ski schools may have a percentage as low as 20%, while others may be as high as 70%. Their percentages are controlled by many factors; i.e., pay scale of instructors, class size averages and number of employees. This percentage will be reflected in the bottom line and often is the cause of an unprofitable season. If your percentage is above 60%, a close evaluation should be made.

You can also measure your ski school’s performance compared to the area’s final tally. If the percentage of ski school to the area total was in the range of 10-15%, it could be considered very good. If it is less than 5%, an evaluation of why not more is recommended. The type of resort and clientele influences this figure, but creative marketing and a good product can increase this percentage.

Financial indicators will differ, of course depending on the area’s philosophy, type of clientele and geographic location. Regardless of these factors, the use of an analytical system helps you improve performance based on facts rather than conjecture.