Archive Monthly Archives: January 2020

How We Got Started with Profit First

I have to give all of the props to one of my current clients, we’ll call her Jane. On August 24, 2014, Jane e-mailed me the PDF of the first 5 chapters of a book called Profit First by Mike Michalowicz and said, “I would like to implement Profit First process in my business.  Can you take a look at how to break out my accounts into the buckets he describes based on my income and expenses?  I will want to complete the assessment when I get back. This might be something you use with some of your clients.”

She knows me pretty well and it has changed my business in more ways than I can count. But I’m going to try over the next several months through this blog to help you understand how the Profit First process can also change yours.

Back to when I received that e-mail. My mind said, “Like I need something else right now. And yet, I have clients with different needs so why not?”

I sat down Friday afternoon Labor Day weekend 2014, only ONE short week later to see what this was all about.

And I couldn’t stop reading ALL weekend. My family was home to play but I wanted to read, read, read. I’d never read anything about accounting written from the entrepreneur’s perspective so this was enlightening to understand how an entrepreneur thinks, but also how I might really be able to help so many of my current clients as Jane had suggested.

I also couldn’t stop talking to my husband about what I was reading and how it applied to XYZ client or ABC client or Client 123. Every page applied to someone and sometimes it applied to each and every one of my clients. AND IT EVEN APPLIED TO ME! Eeek! Now that was something to think about.

That Tuesday morning I called Profit First Headquarters to learn more about the Profit First Professional Certification and get help with Jane’s Assessment. I scheduled a call with Ron for Thursday and by the end of the week I was on my way to becoming a Certified Profit First Professional.

But first, I had to implement Profit First in my own business. Come back next month to learn why I was excited and a little scared to implement Profit First in my own business and how I did it. Eventually, you might even get an update on Jane to whom I am deeply indebted – I have no idea if or when I would have found this book if not for Jane.

If you would like to receive the first 5 chapters of the book Profit First please contact us and put Profit First, Please in the subject line. You can also learn more directly from Mike, here.

Also, please follow our Facebook page for more regular stories and tips on implementing Profit First in your business.

Connect with Shannon:

www.fitforprofit.com

Facebook Group: Profit First for Fitness Business Owners

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep Your Money Method. Sign up now for our next FREE group by clicking HERE**

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit? Click Here to find out!

Three Essential Business Roles for Success and Balance

In his book, The Rebel Rules: Daring to Be Yourself in Business, author Chip Conley describes what investors look for in a management team when considering providing startup money to new businesses. He says your management team should consist of a “brain trust that includes a passionate visionary, a ‘get-your-hands-dirty’ operator, and a responsible, finance-minded executive.”

Even if you’re never going to seek venture capital money to fund your business, this tidbit of advice makes a great strategy question to consider for your business, especially if you are an entrepreneur. Do you have these three roles in your company?

Passionate Visionary

The passionate visionary is a creative idea person. She has the technical knowledge that supports the service or product that will be created and offered. She sees the market need and just how to sell and position the product so that clients or consumers will want the offering.

The visionary often has more ideas than budget. The finance role can evaluate the profitability of the visionary’s ideas and prioritize the projects. The operator can execute the visionary’s ideas.

The visionary provides strategic direction for the company and keeps the market offerings fresh.
If your business is missing a visionary, you might also struggle to keep your practice full as often (but not always), the sales function could fall to the visionary. You might also find yourself getting stagnant with your service offerings and falling behind the marketplace.

The fix for a missing visionary is to develop a sales and marketing team and/or a research and development team that can serve these functions.

“Roll-up-your-sleeves” Operator

The operator is an action person who can execute. She gets things done. She can find and hire the right team. She is a systems builder who can develop the systems, job descriptions, procedures, and processes that make the company unique.

The operator takes the visionary’s ideas and makes them happen. She needs the visionary’s ideas because she would rather take someone else’s ideas and work with them than create her own. She also needs the support of the finance executive to stay on budget and to focus on one project at a time or avoid hiring too many people.

A business without a good operator never gets the product to market and may also be constantly short of team members.

Responsible, Finance-minded Executive

The finance expert helps to make the dollars work for the company. She can tell us how much we need to sell and how much we can spend. She can also provide capital sources for the company via investors or loans.

The finance executive loves numbers and can help to make sure the company’s operations are profitable. She’ll work closely with the operator to make sure that the right number of people are hired at the right salary levels. She’ll work with the visionary to plan and budget for new sources of revenue and new product lines.

Without a finance executive, a company often spends more than they bring in and may not have a viable profit plan. They may also run out of cash which can cause problems with creditors and investors.

This is the role we can not only help you fill, but also help you build your financial literacy to the level that you need for the stage your company is in now and for the future.

Your Business Success Trinity

As you were reading, which role are you? Which role jumped out at you that might need shoring up in your business? You might be strong in one area and need to outsource another while keeping a strategic eye on things overall.

Take a look at each of these roles and objectively assess your business. How are all three roles being served in your company? Which ones need more development in order for your business to grow?

Getting clear on your company’s roles can very well take you to the next level of success.
Which trends impact your business the most? Which ones speak to you? Feel free to reach out to discuss any of these ideas with us.

Why You Need to Implement Profit First in Your Fitness Business

I was frustrated, feeling like I was letting down my clients until I implemented Profit First in my business.  We’d have a meeting with a client and we’d go over the Profit & Loss line-by-line; I thought they got it and we made good decisions together. Then I’d go away for a month or even a week and when we’d talk again we would be having the same conversation as the month before. This happened month after month, week after week, meeting after meeting.

Prior to implementing Profit First, or even reading it…I’d been working with entrepreneurs for nearly six years and in that time I’d met very few who understood how they could be making money on their Profit and Loss Statement but not have any money in the bank. And even fewer business owners could analyze a balance sheet or even knew a statement of cash flows existed.

Like I said…I was frustrated, feeling like I was letting clients down. And yet, they’d tell us we were doing a great job explaining accounting to them and blamed their own lack of follow-through or impulse decisions. And I wondered, “What else is there? How can I change your behavior?”

Then I read Profit First and realized I didn’t need to change their behavior, just leverage it, but on top of that, if we implemented this system together, then they could understand their own financial position every single day without me being present.

The Profit First System

I love systems. Marketing systems, client onboarding systems, planning systems, team building systems. You name it and I have a system for it. Even our personal finances. But business finances, not really, until Profit First.  I was advising clients using a Profit and Loss, Balance Sheet & Statement of Cash Flows but there was no system for an entrepreneur to implement across all industries or so I thought.

I’d even had my own business financial crisis due to a lack of system. When I prepared our own taxes in Spring of 2014 I had not saved enough to cover our own taxes. Oops!  I had been advising clients to save 10-25% of gross revenue in order to cover upcoming taxes but I was not doing the same.  I immediately started saving 10% of our gross revenue and was able to cover the tax bill in the Spring of 2015. But, that didn’t feel like a system to me. It was the best estimate to save for taxes.  But, it still wasn’t helping cover other expenses let alone make a profit and it wasn’t guaranteed.

Enter Profit First.  A proven system that not only saves for taxes but helps manage and predict cash flow.  It reduces our human psychological and spending tendencies (more on that below).  And, it provides immediate feedback on the health of a business.  Best of all, when implemented 100%, it guarantees a profitable business.

This was a system I was excited to implement into my own business and did so within 2 weeks of reading the book I had implemented Profit First…it was that easy!  I was also excited to introduce this to clients and implement Profit First into their businesses…I also did that within 2 weeks of becoming Certified.

It’s a simple system, collect money, allocate money and spend money, repeat. But that definitely doesn’t make it easy. It’s a learning process and we’re here to support you each step of the way.

The Psychology Behind Profit First

I could have been a psychology major – except I don’t like research. Reading about or listening to lectures on psychology all day is enjoyable for me.  One of my first clients even told me I would have made a good therapist. Early in my practice, I would go to his office every week and he’d come in from the shop floor and talk to me for hours some weeks. We agreed I’d keep working in his books and he’d just talk and I’d listen.

Every once in awhile I’d ask a question and he’d begin to think about his business just a little differently. He always came up with the answers to his own questions after I’d ask a question or two and because he came up with the solution he had more ownership in it. I enjoyed helping in those little ways.

But how does this relate to implementing Profit First?

Mike Michalowicz, the creator of the Profit First system, says studying human behavior and reading psychology journals is one of his hobbies. I don’t think I’d go that far but I do love listening to him teach us Profit First Professionals what he has learned.

And almost the entire Profit First system is based on the psychology and human behavior patterns Mike has learned.  Bank balance accounting leverages our human behavior to believe the balance in our online banking is our available balance to spend on our business.

Parkinson’s Law is the theory that we will spend every penny we have in our bank account or use every second of the time we are given before a deadline.  By creating many different smaller bank accounts for our business we create the idea of eating from small plates.  This limits the human behavior of spending everything we have.

Eating our vegetables first.  Or, set aside the profit for our business into a separate account before we pay any operating expenses – psychology.  Removing the temptation to rob the profit or tax account to cover operating expenses in slow time – psychology.  These are just a few examples of the psychology behind the Profit First system.

The biggest one, though, might be the way we implement Profit First. You are not going to figure out where you are going wrong and fix it 100% tomorrow. We will work with you to figure out the baby steps to get you where you need to be. It’s natural to get scared when the changes are too big, so we take baby steps and make it a little easier and less scary to get your business profitable and healthy.

Just like running a marathon – you won’t do it tomorrow, but you can start to work up to a marathon in just a couple of months. Maybe the only profit you can plan for is 1% tomorrow but we can have you at a healthy, profitable business within 6 quarters if you’ll just start with 1% tomorrow.

It’s An “Accounting System” Written by an Entrepreneur

Profit First doesn’t have any “accounting-ease” in it.  The \accounting words I knew are what I learned in school.  And, while we were trying to make that into everyday language, we weren’t succeeding.

But, Mike isn’t an accountant so he doesn’t know that language either. He has learned some overtime and when he does use it in the book it is explained the way he had to learn it, from no accounting training so it 100% resonates with entrepreneurs and my clients.  And there is an example in the book to go with every single methodology, principle, and practice. I finally had an accounting system written by an entrepreneur for entrepreneurs that entrepreneurs understood.

By implementing Profit First in my business, my life became more fulfilling, less frustrating and simpler (not always easier).  And my clients have a lot less frustration and ridiculously increased confidence when it comes to their finances, both business and personal.  Another win-win reason we had to implement Profit First.

Are you ready to implement Profit First in your fitness business?

Connect with Shannon:

www.fitforprofit.com

Want to learn tips and tricks live with Shannon?  Join the Facebook Group where she goes live every Wednesday at 8 pm EST to talk about these topics.

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep More Money Method. Sign up now for our next FREE group by clicking HERE**

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit?  Click Here to find out!

Understanding Payment Terms

If there is a period of time between when your customers receive your goods or services and when they pay for them, then several things are true:

• You have a balance in Accounts Receivable on your balance sheet that represents how much customers owe you
• You have an invoice process that you follow
• You have granted credit to customers
• You may have some that don’t pay as quickly as you’d like them to

Each invoice you send should have payment terms listed. A payment term is the period of time you expect the invoice to be paid by the customer. Your payment terms should be set by you, not your customers!

Payment terms are always measured from the invoice date and define when the payment should be received. Here are some common payment terms in accounting terminology, and then in English.

Net 30
Payment is due 30 days from the invoice date.

2/10 Net 30
Payment is due 30 days from the invoice date. If you pay the invoice in 10 days, you can take a 2% discount off the total amount of the invoice as an early pay discount incentive.

Due Upon Receipt
Payment is due immediately

If you use Net 30 or Due Upon Receipt, then you may want to change your terms to get paid faster. When people see Due Upon Receipt, sometimes they translate it into “I can take my time.” A more specific term spelled out such as Net 7 or Net 10 will actually get you your money faster than Due Upon Receipt.

Do you have issues with people paying you late? If so, you might want to set consequences. Consider adding a line on your invoice that provides interest charges if the payment is late. Utility companies do it, and so do many businesses. A common percentage to charge is 1% – 2%, however, some states have laws that limit you to 10% or another percentage.

The wording would be something like this:
“Accounts not paid within __ days of the date of the invoice are subject to a __% monthly finance charge.”

You will also need to make sure your accounting system can automatically compute these fees.

If you have questions about payment terms, your invoicing process, or your accounts receivable, please reach out.

Get Organized with This 31-Item Year-End Close Checklist to Prepare For Taxes

January is a busy time of year for business owners and especially Fitness Business owners. With many new members trying to find their way to a better lifestyle, your studios and gyms are hopping. In the midst of all the chaos, the accounting world insists on reminding us that it is time to prepare for taxes! 

What is the first thought that pops into your head when you hear the word taxes? Panic? Dread? Fear? One of the best ways to overcome these emotions is to be prepared. Here at Netbooks, we have compiled a checklist to take away the panic, dread, and fear and replace it empowerment by offering you the steps you need to take to be prepared for taxes.

How can you take advantage of this list? 

  • Highlight everything you have already done. It is nice to strike things off the list right away to help you feel a sense of accomplishment. 
  • Schedule in anything you need to complete on your own. Sometimes it is a matter of gathering the information and putting it in one place.
  • Reach out to us if you need help or have questions. We know it can be overwhelming!

Connect with Shannon:

www.netbooksaccounting.com

Facebook Group: Profit First for Fitness Business Owners

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep Your Money Method. Sign up now for our next FREE group by clicking HERE**

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit? Click Here to find out!

Top 9 Tips to Increase Profitability for Gym Owners

Profitability is key to sustaining any business and gym owners are not an exception.

With as many workout types and preferences as there are people in the world, the most important part of opening a gym or fitness center is to figure out what you excel at and focus there first. But then what, you’ve opened your gym and have your first members, how do you make not just a living but create profitability for your business now and in the future?

Many gym owners are personal trainers who open a gym to make more money. With the growth in the health and wellness industry over the last 5 years and the prediction it will be the next Trillion-dollar industry, there’s definitely room for you to have a piece of that pie, but you must treat it as a business not a hobby or as your own personal gym where you work out with your friends and family.

Here are 9 strategies from leaders in the gym and fitness industry on increasing profitably in your gym. They may not all work for every gym, but find one you can implement today and track the results as you increase your bottom line.

1. Go beyond your Profit & Loss and find other indicators to measure on a regular basis. For example, know what percentage of your revenue comes from recurring monthly memberships vs. one-time purchases. With this information you can determine many other areas to improve in your business. Nick Berry, CEO and Co-Founder of Fitness Revolution, www.frnation.com

2. Diversify. Some of your best clients will want personal training. Others will want group classes and within those classes you will need a range of levels. Provide both, but limit the numbers in your group classes. Your best clients will pay more because they are receiving more personal attention than they will in a large group class. Chris Cooper, Lead Mentor at www.TwoBrainBusiness.com

3. Cross-sell a system. When a client is purchasing personal training sessions, they also need to purchase nutritional services or massage therapy sessions or chiropractic. Fitness professionals can only do so much in the gym. The client’s whole health needs to be addressed. Sell a health system, not just personal training sessions. Also, because we are selling a health system we can market fitness and health, not price, but we can’t be sales people. We are fitness professionals. It is our job to educate clients about why they need all of our products to work together to increase overall health and wellness. Stephanie Joanne, Brand and Business Coach for Fitness and Health Professionals http://stephaniejoanne.com

4. Build Relationships. Support your trainers in building real relationships with clients. Focus on retaining trainers. The relationships trainers build with clients will lead to increased retention of clients. One way to retain trainers is to pay them more than they can earn by taking advantage of other opportunities available in your area. While this may seem counter to increased profitability, it’s much easier and cheaper to retain a current client than to gain a new one. The money you pay an excellent trainer is less than you’ll spend on marketing to obtain a new client. Craig Patterson, CEO MadLab Group, www.madlabgroup.com

5. Know and increase your retention. When a client buys a specific number of personal training sessions, know when that package is close to running out and know what conversations you are going to have with them so they realize the importance of continuing with personal training. Know their goals and work with them to reverse engineer how you’re going to get there together as you sell them a whole health system. If they’ve seen any results at all from their first buy, they’ll buy more. Stephanie Joanne, Brand and Business Coach for Fitness and Health Professionals http://stephaniejoanne.com

6. Increased brand awareness. Create a brand around your facility. Your clients are buying their home equipment, health supplements and fitness gear somewhere. If you can put your name on it and sell it to them for the same price, you make the profit, not the retailer down the street. One low risk model is to find a partner who will put a kiosk in your facility. Your clients can order their merchandise, pay for it and have it shipped to them. You have no inventory costs; your client gets what they’re already buying but with your name on it. You make a profit and your brand awareness will be increased through this client’s use of the product. Bill McBride, President and CEO of BMC3 and ActiveWellness. http://www.bmc3.com/

7. Find the right clients. First, you must understand your own value and be willing to charge for it. Second, find the people who are willing to pay you what you are worth; people you want to work with who want to work with you. When you find this sweet spot, you will be able to serve those clients better, achieve better results and keep them coming back for more. Adam Staneki. https://breakingmuscle.com/coaches/adam-stanecki

8. Get referrals. Get creative. Think outside the box when asking for referrals. For example, for a gym that doesn’t usually give guest passes, let your new client know your guest policy. Offer to reserve a guest pass for their 5 closest friends and family members. Then call their referrals to let them know a guest pass is waiting. Or, when someone is taking advantage of a promotion near the end of the promotional period, offer to extend it to friends and family if they visit within the next 10 days. Stephanie Joanne, Brand and Business Coach for Fitness and Health Professionals http://stephaniejoanne.com

9. Find your niche. There are many types of gyms out there – what makes yours special? Again, this is the first thing you should determine when you open your gym. Once you figure out what makes you special, focus on attracting and maintaining your client base. Your profitability will increase as a by-product of serving a smaller set of clients better – more effectively, more efficiently, more profitably. Shannon Simmons, Profit Advisor www.netbooksaccounting.com

Some of these tips may seem obvious. Maybe you’ve heard them before but hopefully the examples will help you view profitability from a different perspective. It’s not only about increasing the Gross Income of your gym with the next new member. There are many other ways to increase your profitability.

Connect with Shannon:

www.netbooksaccounting.com

Facebook Group: Profit First for Fitness Business Owners

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep Your Money Method. Sign up now for our next FREE group by clicking HERE**

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit? Click Here to find out!

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