Archive Monthly Archives: September 2020

Your Clients Care If You Are Profitable. Do You?

I'll bet that you have clients that really love what you do. They understand the hard work you put into serving them, appreciate it, and prove it by sticking around and paying you month after month. Those are the clients you want and need more of, right?

And they may not say it, but they really do care if you are profitable. Why? Because these clients also understand that if you aren't, you won't be around very long to serve them and to keep them happy. 

In the midst of the Covid-19 pandemic, businesses that were running on razor thin margins are disappearing by the hundreds. Where I live, we have seen restaurants and shops close down because they just can't make it on current income, and they had little to no reserves built up to withstand the current economic reality. 

It's happening in the gym industry too. Gyms are closing down, never to reopen. That stinks for the owner, but it also stinks for the community they served. People NEED the service you have now more than ever. It is your responsibility to make sure you are here for the long term.

It is your responsibility to operate a business that is as profitable as it can be. 

Question #2 on the Profit Level of the Business Hierarchy of Needs is:

"Do you have healthy profit margins within each of your offerings and do you continually seek ways to improve them?"

In other words, are you charging enough for the service or services you provide?

When I am working with a client who is going through the "Pumpkin Planning" process, we analyze each service to determine how much it is really making the business. Some gym owner's I work with have multiple service offerings; group training and semi-private for instance. All too often the pricing is really random, without understanding how it's affecting the bottom line.

For instance if my group training offering is $99/mo and I can train 15 clients with one coach, that's $1485 generated. If my semi-private is $300/mo and I can train 4 clients per coach, that's $1200 generated. Even though semi-private costs 3 times as much it's not generating as much income per session. And that's not the only factor to consider. For example what is the time it takes to write semi-private programs vs. group? Are group instructors compensated differently than a semi-private coach? What other overhead considerations are there?

Often we set our prices based on what others in our area are doing, or what we perceive the market will bear, or based on some head trash we are dealing with around our value. Sure, you can consider those (the first two anyway), but they can't and should not be the only way you determine your prices. Build your profit margins in right from the beginning. The Profit First system includes percentage targets for your Profit based on your sales income generated. For instance a healthy business doing between $500k and $1M a year should be generating 15% cash profit. Between $250k and $500k the target is 10%. If they aren't there now, what is your plan for getting them there? Do you even know what your overall profit margin is, and then have you broken that down?

If you haven't, you are not alone, and this is not an indictment on your character or your ability to run a business. The truth is that almost none of us have taken the time to figure it all out, because we are running around doing a thousand and one other things in our business.

And at some point, it's going to come back to bite us. Like it has so many businesses over the past 6 months.

Here's why healthy profit is so important in the context of the times we live in. When you have a healthy profit margin you can create a greater "business viability and survivability" margin. How much less stressful would your life have been over the last few months if you had 6 months of living and operating expenses saved up? That's doesn't just "happen". You need a cash management system that puts every dollar you earn to work in the right places at the right time, and a plan to help you reach your targets. You really can't afford to not put your Profit First any longer. It's time to take action and build the profitable business you (and your clients) always wanted. We can help.

Top 10 Tips to Increase Profits for Fitness Business Owners

As we approach Q4 now is the time to push to end the year strong.  It’s the perfect time to revisit old business strategies from last year so that you can increase your profits for 2020. If your financial numbers were fantastic last year, that’s great! Keep the strategies that worked for you and cut the ones that didn’t.

If your financial numbers weren’t amazing last year, or maybe you’re just interested to see how you can increase your profits even more, we have you covered.  Every business has a gold mine in its current customer base. But not all business owners remember to mine this gold, because they are too busy trying to attract new customers or developing new products or services. This is the perfect time of year to step back and remember the easiest ways to increase your profits is using your existing customer base.

Top 10 Tips to Increase Profits for Fitness Business Owners

As an entrepreneur, you are responsible for shaping your business success, so here are 10 tips you can use to increase your profits this year:

  1. Revisit Your Current Prices and Make Adjustments as Necessary

Many people will tell you that increasing your prices will increase your profits, but that’s not necessarily true.  Increasing your prices by a small amount might increase your profits without turning away existing customers, but make sure you research your competitor’s prices and adjust based on what makes sense in your market.  

Keep in mind that if it has been awhile since you have raised your prices, it is definitely time to do a little research and make the adjustments that are best for your business.  Review the price list for your services and products to determine what you need to do to bring all of your numbers back in balance.  

It is important to note that customers do expect periodic price adjustments, so don’t let procrastination or fear hold you back from making a good solid business decision here.  

  1. Bundle Your Services or Products Together

Make your products or services more attractive by bundling them together and pricing them at a better deal than purchasing the services or products separately. Customers that only want one particular product or service should still be able to purchase the product or service à la carte, but offering different packages of increasing value makes it much easier to upsell to clients and increase your profits.

  1. Make Your Online Presence Known and Manage Your Online Reputation

Everyone uses search engines and social media to find the right business to serve their needs, so make sure you can be found online. Create a website for your business and make sure you have business pages on social media platforms like Facebook, LinkedIn, and Twitter. You’ll have to develop some marketing strategies and optimize your site to rank high, but, when done right, these channels can dramatically impact your profits for the better.

When you have many good reviews, your credibility goes up and your business is more appealing to potential clients and customers. If your clients leave you an amazing testimonial, it’s a good idea to ask them to post it online as well—especially on Yelp, your Facebook Business Page, and Google Reviews. On the other hand, negative reviews will look bad to potential clients and can negatively impact your profits, so make sure you respond appropriately to the review and show potential clients that you care about getting things right.

  1. Encourage Customer Referrals by Building and Nurturing Customer Relationships

Connect with clients and build strong relationships through effective communication, providing exceptional service, getting feedback, addressing concerns, and showing appreciation. Doing so can increase repeat customers, customer referrals and your profits.

  1. Cross-Sell Current Customers

Restaurants practice this the most, asking us if we want appetizers, dessert, or fries with our entrée, and you can apply this to your business too. If you offer two services and a client is only participating in one service, make sure they know about the other service you offer, and find out if they have a need for it.

This is called cross-selling, where you offer a current customer a service or product that they don’t already purchase from you. For example, a salon will want to offer waxing services along with haircuts. A gym who also offers nutrition coaching will want to follow up with the newer members to encourage nutrition after the gym habit has been established. An online business who sells a DIY course and also has a group accountability program will want to offer customers that program as well.

  1. Upsell Current Clients

Offer steady customers a product or service with more features than they usually purchase. Examples include moving a client from coach to first class, from a budget vacation to a luxury one, from a standard model car to a luxury version, from group classes to private training, from an off-the-rack suit to a designer suit, from the standard service to an all-you-can-eat version, and from a regular meal to a super-sized one.

Some customers simply need to be given permission to splurge on themselves, so why not by you? Others have outgrown the standard package but find it hard to break routine. With a gentle nudge from you, a percentage of your clients will purchase the upgrade, therefore boosting your sales with little effort on your part.

  1. Start a New Product or Service Line

If you’re limited to just a few products or services, it might be time to expand. Be sure you’ve analyzed the profitability of these moves first and have the first service line operating profitably on its own. Then it might be time to add nutrition coaching if you don’t already offer it, or child care for some classes, or a smoothie bar to your reception area. Expanding the scope of what you’re selling will provide you with additional revenue and if priced appropriately will lead to added profit as well.

This is a great way to then start upselling or bundling products and services to your customers!  

  1. Expand Your Geographic Reach

If you’re still only offering services and products locally, consider expanding your reach, especially because the internet is so readily available nowadays. Think about which services you can offer virtually; some may require you to invest in cloud-based delivery systems. If you only sell products at a physical location, e-commerce is a huge industry and you could definitely increase profits by having a storefront online.

  1. Curb Irrational Spending

Invest in things that will last, such as your own education, great systems, team training, and assets that you really need. Avoid spending on items that are used up quickly, such as elaborate entertainment expenses that don’t generate significant revenue, excessive utilities, and stopgap equipment.

This area can be a tough one to evaluate objectively because there can be emotion and attachment involved in the spending. Let us know if you need help in this area; we can help you look at your spending with fresh eyes and provide a new perspective using the Profit First system.  

  1. Maintain Your Focus

Great entrepreneurs have clear focus. If you have too many projects going on at once, you end up delaying all of your project completion dates, and nothing gets finished. Ask yourself, what’s the most important thing I can do today? And work on that until it’s done. Then ask yourself the same question again, and wash, rinse, repeat your way to success.

All ten of these tips will help to raise your average profits per customer and boost your overall profits without a lot of additional work on your part. Try these tips today, so you can enjoy a more prosperous 2020!

Connect with Shannon:

If you are interested in learning more or joining a community of like-minded fitness business owners, check out my free Facebook Group: https://www.facebook.com/groups/PFforfitness

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!

Can You Afford Your Bills?

Being in debt sucks. I hate debt. I despise car payments, mortgage payments and credit card payments. I don't like borrowing money for anything!

If you want to know how I really feel about debt, just ask me sometime. 🙂

Seriously though. I know there is a concept of "good debt" vs. "bad debt" that we will actually talk about in a few weeks. But if you are in debt, you know it doesn't feel very good. I remember a time I was in debt to the IRS for five figures. That REALLY didn't feel good, and that experience largely shaped my perspective on debt to this day.

Debt is a huge problem in many of the businesses I consult with, and it shows up in two primary ways:

1) Large credit card or loan debt 

2) The inability to pay monthly bills with current cash flow

Even worse is the correlation between these two. #1 gets worse because the business owner is in situation #2, and keeps using credit cards to cover. STOP IT ALREADY!

In my last post (You've Got Profit All Wrong) we introduced what Profit is and isn't as an introduction to the Profit level of the Business Hierarchy of Needs. 

The debt load in your business has everything to do with the Profit you can achieve, which is why question #1 on the Profit level is;

"Do you consistently remove debt rather than accumulate it?"

Answering "no" to that question usually reveals a business that has a pretty short runway when it comes to both stability and viability.

It won't surprise you debt is one of the very first things we work on when implementing Profit First into your business. First we look at what the sources and amount of debt are, then create a plan to systematically pay it off. And we also record total debt at the end of every month. Without this awareness and keeping it in front of you, it's easy to ignore. 

At the same time we are going to take a good hard look at expenses. I know, I know, you are running "lean", but are you really? I can tell you first hand that you alone cannot be objective when it comes to reducing expenses. If you didn't "need" it, you wouldn't have purchased it in the first place, after all. Reality check. We ALL spend money on things we don't really need. And as Mike says, "If you can't pay your bills, you can't afford your bills". Having an outside advisor who can be non-emotional and objective about expenses is critical at this stage. 

The beauty of the Profit First system is it puts an automatic debt reduction strategy in place using your Profit Account. If you have outstanding debt, we use most of the funds in this account to accelerate your debt payoff. Why the Profit account? Because you are not truly profitable when you have debt. 

The freedom you will feel when you get out of debt is worth the short term pain of cutting expenses and running lean. Spending money is fun, I like doing it too. I racked up thousands in credit card debt for stuff I "needed". And it took years to get out of debt when I finally woke up to how foolish I was being. 

You can't change the past. But you can make better decisions now that affect your future and the future of your business. Think about it. How will your life change when every dollar you are paying in debt becomes a dollar that goes into your Profit account? 

Make It Happen. We can show you how.

How to Pay Your Team a % of Revenue and Why You Might Want to

It’s the end of August and it is super hot outside! I have been starting to spend more time inside, due to the incredible heat. Plus, I am getting back into a normal routine, because my kids are back in school. I’m not sure how long they will be there, but they are there and I will take the normal routine feeling for now. 

In this week’s blog post, I want to address how to pay your team. I am not talking about all of those details like direct deposit. I am talking about considering hourly and salary pay rates. Basically, how to determine how much to pay your team. 

How to Pay Your Team a % of Revenue and Why You Might Want to

I am focusing on this topic this week, because so many of you have been reducing your teams over the last few months and are starting to bring them back. Everyone seems to be asking about how to do this the right way with our new normal. 

Where to Begin When Determining What to Pay Your Team

Before you can even start paying your team, you must have a client to service. That means you must have made a sale and you must be aware of your pricing. Some people will say pricing and how much you are paying your team is like a chicken or an egg thing. Which one comes first??!! 

Pricing has to come first, because as I said, you must have a sale before you can really start thinking about how much to pay your team and your coaches.

It’s not as easy as looking at what’s going on in the world around you and saying $99 a month. While that sounds good, you need to make a few calculations to see if that pricing really works for your business. I’m not going to use too many specific numbers right now, because that can open a whole other issue. After all, I am an accountant and I do have a habit of geeking out with numbers and trying to solve what appears to be a puzzle in front of me. 

Determining Your Pricing – The Short Version

You should make sure you have your pricing right before you do anything else in your business, including paying your team. I am going to give you the short version here with a little reverse engineering. As you are determining your pricing, you must know what your expenses are and what you need your revenue to cover. 

A little hint, your team payroll is one of those expenses that your revenue must cover. This is when you must make your decision of how much you are paying your team. I say that you must do this now, because you need to make sure your revenue is covering your payroll and all of your other expenses. Once you know that your pricing is right, you can go sell and then pay your team. 

It is important that you are paying yourself as the coach as well. And the amount you are paying yourself must be a market based wage, because you may be the only coach in your business in the beginning. Therefore, you must make sure you are paying yourself the same amount you want to pay all of the coaches you bring on in the future. 

Target Amount for Paying Your Coaches

The target for how much you should be paying your coaches based off of your revenue is 25%. That means 25% of your revenue is going directly into your coach pay account. With the Keep More Money Method, we recommend that you have a separate account for coaches and that you place 25% in there to cover those payments. 

I will remind you that the 25% is a target, or a goal, that many people cannot hit when they are starting out. We do have people who are at the 25% revenue for coaches pay, so we know it can be done. We also have people who are at 44%, because they are paying commission or part of a member’s revenue if the coach is responsible for that member. It basically depends on your business model. 

As with your profit, taxes, and owner’s pay, your team pay should always be in a separate account. 

You can see that I definitely believe in paying your team a livable and professional wage. You may think you can skip this payment, if you are doing all of the coaching. However, if you are not paying yourself that market-based wage, then it is going to be really hard for you to bring in somebody else later and start paying them a livable and professional wage. 

You can also compensate your team by giving them a portion of your profit bonuses. That money will come directly out of your profit account when you take your quarterly profit distributions. That should not be included in their livable wage pay. That money should be considered a bonus to encourage them to help you become more profitable in your business. 

Of course, the only way you can make sure your team understands and is actually helping you be more profitable in your business is to be completely transparent with your numbers. This is also something we strongly encourage. You should be sharing some sort of numbers with your team, at least monthly if not weekly. This will allow them to see where the business is and what they need to do to get on track to receive their bonus. These bonuses also work to get your coaches to reduce expenses wherever they can. 

You can choose to pay your team a livable wage based off of how many hours they work or how many members they have. We do have some clients who base all of their coaches pay off of their “book of business” and how many clients they have in the gym. You can easily do that with software. It works really well for some people and the profit distributions bonuses incentivize the team to keep members there as long as possible.

Hourly or Salary?? – Pros and Cons of Each

As you are determining how much to pay your team, you will need to decide if you are paying them hourly or salary. There are pros and cons to both. I can’t even say there is a right or a wrong answer. I believe it is what you, as the business owner, is most comfortable with. 

When you decide to pay a salary, you know exactly what your payroll cost will be every single week and month. The amount is always going to be the same. However, it is very difficult to change somebody’s salary, especially if you don’t change the responsibilities. 

I have a non-fitness client that does this frequently. He is always changing his employees’ pay from salary to hourly and back again. I told him that his team was probably not very happy with him in that situation, because they wanted to be on salary since it is predictable for them too. They still know they are going to be paid a specific amount, even if they don’t work as much one week. They also know that they will be paid that amount if they work more hours for a few weeks and in the end it should even out.

While switching to hourly helped him reduce his expenses, his team was finding it hard to depend on their paycheck. 

As a business owner, you can control how many hours an hourly person works. That means you should be able to budget and plan what your payroll cost is going to be within a couple hundred dollars for every single pay period. Yes, you need to manage this closely, so you know no one is going over their set hours. 

Our clients that pay their team based on a commission feel like they have this figured out. Those team members might not own the business, but they feel like they do because they take care of their members or clients and your business. They have an incentive to do it too, because if one person leaves, their pay goes down. 

Those team members will reach out to clients they have not seen in a while to make sure everything’s okay. They are like a personal marketing team, because they get even more pay for bringing in new clients. While it all depends on your business model, we have seen it work well, even with group coaching. 

These are all of the different ways to determine how much you can pay your team. You must make sure your pricing is at the point where you can pay your team the amount you should. Everyone working for you should be receiving a livable wage, or market-based wage. The goal for that wage is 25%. That means your pricing must cover 25% payroll, plus all of your other operating expenses at the percentages that they should be at for your targets with Keep More Money. 

Start working on those numbers and then see where you should be when it comes to paying your team. Plus, share this with anyone who is struggling to determine how much to pay their team. Also, feel free to comment with your thoughts or questions. These conversations are the best way to see what is working for other businesses and get ideas on how we can improve on our own businesses.

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