As a fitness business owner, you may not have heard of Profit First yet. Or, maybe a fellow fitness biz buddy told you about this awesome book they read that changed their life. No, joke some people really say that! Well, Profit First is not just the title of some book! It is a method that when implemented correctly could be a life-changer in your business too with one flip of an equation.
Instead of taking your profits after paying all of your expenses, and therefore always having an excuse as to why you can’t draw an income, you should be taking your profits before paying for those expenses. Once you begin utilizing this equation for the finances of your business, you will know where your money is going each month, while seeing a profit and even growing an emergency fund.
How the Profit First Method Can Position You to Withstand Changes in Your Market
When you create the Profit First percentages for your business, you will be going through and cutting all unnecessary expenses. This step will already put you ahead of your competitors if there are any changes in your market. While other fitness businesses might start struggling, because they still have those extra expenses to cover, you will still have money in the bank.
Since you are always set aside a percentage of your income for taxes with Profit First, you will never need to know where your next tax payment is coming from. You simply just add a percentage of your income to this account each month and use it when it comes time to pay your quarterly taxes.
Utilizing Profit First will ensure that you are always setting aside a percentage of your income as profit. While you won’t want to use this money for anything else, and I don’t recommend using it as a rainy day fund, it can help if there are changes in your market.
If you want to truly protect yourself when there are changes in your market, you need to create an emergency fund. This will ensure you have money set aside for when you aren’t bringing in the income you need to. While you will want to always have different income streams, an emergency fund can buy you a little time to create a new one if necessary.
There are so many other ways that Profit First can help you withstand changes in your market. I would love to set up a time to chat, so we can get Profit First implemented in your business. And if you are utilizing Profit First already, we can make sure you are doing everything you can to ensure the best results when changes in your market do occur.
The last couple months have been pretty tough and while we’re not out of the wind yet…I’m sure you’re getting sick of all of the recession posts out there. Don’t worry this isn’t going to be one of them!
Instead of continuing to focus on the current situation I think it’s time that we shift our mindset and start looking at the future and what can we do better next time so when the next pandemic, earthquake or attack from Mars happens again, we’re in a much better situation than this time around.
At Fit For Profit we want you to be prepared for anything that may come up…the good and the bad. What if one of your kids got sick or you got sick? What if you won some crazy contest and want to move to an island? Maybe your business scales overnight and you have no idea what to do with all of the extra money? Some of these ideas might be a little crazy to imagine right now but the point is…we don’t want to prepare you for catastrophe, we want to prepare you for anything.
I know, I know, you probably knew this bullet point was coming but honestly let’s be real for a minute. Our clients who fully embraced the Profit First method, the ones that drank the Kool Aid and fully committed are weathering this current recession better than other clients we have that are sort of half in half out, dragging their feet and don’t believe in the process.
The beauty of the Profit First system is it sets your business up to be running efficiently so even when the next recession hits or some other personal life change you’re prepared for anything. The strategies you’re seeing out there for recession proofing your business are just normal day to day stuff to Profit Firsters.
Sometimes the idea of hiring someone else to do a task we hate gets us so excited that we just go a little hiring crazy. Or maybe we have some extra money one month so we start purchasing a bunch of luxury items we won’t be able to afford consistently each month. Do your members really need the lavender purple hand soap with fresh toilette at each sink or will a hand air dryer work with some antibacterial soap? Do you really need to get the super premium Stars, HBO, multiple upgrade package or can you just get away with basic cable for each of the TV’s on the gym floor?
When you take a hard look at your operating expenses all year round and are disciplined to only spend a certain amount, you will be more prepared for anything life throws at you. So before your next purchase think…do I really need this?
You may have hit a time in your business where everything was looking great and you had more than enough money rolling in. I call it getting complacent and it is something that every business owner like yourself does from time to time. I understand how it happens and don’t blame you for taking a break and riding your wave of success.
However, if you truly want to bulletproof your fitness business, you are going to need to get creative now and in the future. What other streams of income can you create or keep going?
So many of you were forced to move online in mid-March, some of you had wanted to do it for a long time and kept putting it off and quarantine was the deadline you needed. Others of you jumped in without having done any research and are learning there are people out there who like it just as much, if not more, than your brick and mortar. How do you feel about it? Can you keep some sort of online membership going (it’s good to have in your back pocket for next time) or maybe it’s time to add a nutrition program?
After all, you should always have more than one income stream for your business to be successful and I recommend focusing on the ones you know will offer you the most bang for your buck. You may want to create a couple different options at first and then turn your focus on the one that gives you the biggest ROI, or return of investment.
You can also be creative with your operating expenses. Maybe instead of hiring a fitness trainer, hire an intern. We have one client who has an amazing internship program with a local university – it’s a win-win-win! Not only do you save money, you help someone hone their skills, while learning a few new things yourself at the same time!
Emergency funds are not just for your household expenses. Your business needs an emergency fund too. When you work with us at Fit For Profit we’ll come up with a customized plan for you and your business to determine just how much you need to have stashed away.
If you need some quick numbers though, the suggestion is usually three to six months of operating expenses saved depending on how much revenue your business is generating each month.
Just like with your car, you never know when you’re going to get into an accident…that’s why we have car insurance. The same applies to your business. You never know when the next catastrophe, life event, or lottery win might happen. Following Profit First is the insurance for your business.
You can plan for any type of catastrophe or main event ahead of time, so you are ready if and when it does occur. It might be too late to do anything for your business during the current recession so instead focus on preparing for the future.
I recommend that you start utilizing the ideas I mentioned above and if you need help, book a call with my team so we can help you bulletproof your business. It’s not going to be easy, but a few changes can have you surviving and thriving long into the future.
Are you confident that you are making the best decisions and working on the right things to move your business forward, especially during these turbulent times?
Face it. The "Coronavirus Crisis" is real. I don't use the word crisis lightly. Small business is suffering. Fitness businesses are suffering. Your business is very likely suffering to some extent. Some of my clients have seen revenues drop 50% or more. I don't care how stone cold you are, that can cause a crisis of confidence.
The reality is that for many businesses, COVID-19 revealed shaky foundations. For over a decade, we have seen a largely thriving economy, credit has been easy to get and is cheap, and consumers have had a lot of disposable income. Because of that, many of the basics of good business got ignored; keeping a low debt-load, running expenses lean, building an emergency savings fund. All things that would make a big difference now. It is my hope those businesses that survive learn those lessons for next time. Yes, there will be a next time.
It is not my intent to pile on. We can't change the past. But we can chart a better path forward. The question is not "what did we do?", but "what can we do now to create even better businesses as we recover from the present crisis?"
During the best of times the biggest challenge business owners face is not knowing what their biggest challenge is. That certainly has been true in my business. We are subject to the "tyranny of the urgent", running around trying to put out fires, while never getting a handle on what should be the priority. This is called "The Survival Trap".
Does this look familiar?
There is a crisis in your business. You have run into a cash crunch. Your bank account is getting low and you need to raise cash fast. The obvious thing you need is more sales, right? So you try a bunch of different things to generate cash, focusing all your efforts on sales to cover your bills - for now. But you can only run so many sales, or deal with so many crappy clients, or hire so many outside experts. What are you going to do when it happens again next month, or a couple months down the road? Are you SURE it was a sales problem to begin with?
You can be.
A couple of weeks ago we posted an article about the Business Hierarchy of Needs, which outlined the five different core functions found in every business, and every fitness business.
Sales - The Creation of Cash
Profit - The Creation of Stability
Order - The Creation of Efficiency
Impact - The Creation of Transformations
Legacy - The Creation of Permanence
The goal is to have each one of these core functions working together seamlessly, so you can achieve permanent, healthy growth and move toward your company's vision.
In our example above, the low bank account may not have been a sales problem at all, but a cash management problem (the Profit level) or an efficiency problem (the Order level).
So how do you know? How can you create the confidence that the action you are taking is actually solving the real problem, not just covering it with a band-aid?
That's where the "Fix This Next" Assessment comes in. This powerful tool identifies the Next Vital Need in your business, so you can immediately know where to focus to level your business up. THAT is how you create confidence during crisis. Once you have identified your vital need, you can immediately put into action a plan to resolve that need.
So here's my ask. Take the Fix This Next assessment by clicking the button below. It's a series of 25 questions that covers all the levels of the BHN, and it won't take you more than 10 minutes. Stop guessing what your fitness business needs to level up and take action now.