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:
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.
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.
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.
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.
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.
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.
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!
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.
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.
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!
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!
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?
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.
Do you have a visceral negative reaction to the word "Profit"? Do all the stories of companies who maximize profit at the expense of quality, or people or the environment give you an icky feeling when you think about making profit in your own company?
Let's get real. You have to get over it. Don't let the negative stories about what other companies do block your pursuit of owning and running a profitable business. It's your choice how you are going to run your company. The vast majority of companies are run ethically and responsibly. Be one of them, and feel good about it.
As we move from the Sales level to the Profit level on the Business Hierarchy of Needs (BHN), it's important to have a clear understanding of what Profit is, and what it isn't.
Here's how Profit First and Fix This Next author Mike Michalowicz defines Profit:
"Cold hard cash that the shareholder(s) (the owner or owners of the business) can use for themselves in any way they want, such that using it will not negatively impact the continued healthy operations of the business."
My definition of Profit is: "Your reward for a business well run."
As the owner of your business, you are the primary investor and shareholder. You have taken the risk to own and operate a business. The risk is failure, and a lot (most) small businesses do. The reward for your investment into your company is your company giving back to you in the form of Profit. This is not greedy, it is fair. 100%.
Notice I wrote giving back to you. As in you the business owner(s). To do what you want with it, outside the business. Save it, spend it, bury it. Your choice. It's your money. There is an important distinction to be made here; you cannot "reinvest profit back into the business". It's either profit or it's an expense. Once you spend cash the business has earned for business purposes it is an expense. There is absolutely nothing wrong with doing that if you choose to do so. But it's not profit. Faking your margins to feel good is not cool.
"Ok, Ok" you say, "what's the big deal? Who cares if I call it profit, expense, or blue cheese? It's my money after all".
It makes a difference in a couple ways.
First, profit is a habit. When you get used to taking and distributing profits it is an amazing way to operate your business. On the other hand, if you keep trying to "create" profit with more and more sales, it almost never happens. Why? Because spending is also a habit. And if you can't curb the (over)spending habit, you can never be permanently profitable.
The second reason taking profit regularly is so important has everything to do with the value of the company you are building. The reality is your company is probably not going to be acquired at an outrageous price by some tech or dot com investor. If you want to build a company that endures and has value to someone else, you have to demonstrate, on your P&L's and Balance Sheet, that you have a history of being profitable. This is what my business broker called "Benefit To Owner". In other words, when someone buys your business, they want to know what their immediate potential earnings will be. When we sold one of our gyms for top dollar, it was because we had demonstrated over a number of years a high benefit to the owner. We ran a profitable business, and when we were ready to sell, it netted us more money.
Even if you have no plans to sell anytime soon, you need to have this on your radar now. Some of the best advice I ever got was from Nick Berry of Fitness Revolution who told me; "You need to be ready to sell your business way before you want out." Exactly right.
Work on building a "Profit Mindset". Get rid of the trash in your head that says profit = greed. If you want a business that you truly enjoy and make the impact on the world you want it to, you have to be profitable.
Next time we will dig into Need #1 on the Profit level of the BHN, and discover what you need to do next to build your own profitable company.
This week, I wanted to share another case study with you. I am so happy that I was able to connect with Austin Mitchell in recent weeks and listen to his success story. Before I share his successes though, let’s learn a little more about Austin.
Austin is the owner of Somnium Fitness in Norfolk, Virginia, right outside Virginia Beach. He fills the role of CEO at the gym. He looks at the bigger picture every day and how he can increase profitability and growth. His team handles many of the day to day tasks of Somnium. While his core fitness focus is CrossFit, he switched the name of the gym to Somnium Fitness to target a different clientele than regular CrossFit. His gym currently has 250 members and he thinks everything’s going great!
Somnium Fitness opened back in May of 2015, so they have been open for five years now.
Austin has four full-time team members, as well as one part-time social media manager. His social media manager creates the one voice of their brand for consistency. The acquisitions manager does all of the sales and memberships, as well as assessments. The manager also makes sure that everything is being tracked in house.
The three coaches on the team do so much more than coaching. They all maintain a high retention rate by making sure they check in with members weekly. Austin realizes he has a small team, but they all work together to check off all of the day to day stuff.
Now that you have the background on Austin’s fitness business, it is time to check out his numbers. This past July, I happened to notice that Austin’s business had a $10,000 increase in revenue. I thought this was slightly strange with how this year has been going. So, I decided I had to talk to Austin about what happened a few months earlier to hit this revenue increase.
The increased revenue started with steady growth Somnium Fitness saw back in February. The team had set goals during their weekly meetings. They had projections of the goals they wanted to hit during the first quarter of 2020. Everything had been on track, and their momentum was amazing, until everything happened in March.
They didn’t let the shutdown affect them though. Instead, they managed to get everyone online in a week. Somnium Fitness didn’t lose any members and their business stayed steady.
It was easy for Austin and his team to create the online platform, because they had that type of structure in place beforehand. They had always checked in with each and every member every single week. They began the shutdown with Zoom workouts, but after a few weeks, they began to send out personalized workouts as well. They knew that those personalized workouts were what their members needed to stay engaged.
Somnium Fitness was able to reopen their doors towards the end of April. Between that time and the beginning of June, they had 125 new members sign up. Every one of their new members are what Austin considers annual members, so they will be around for a while.
Austin attributes those new members to their marketing and the systems they have always had in place. Austin was in the marketing game for five or six years before he opened the gym, so he knew that he had to match the marketing with what the gym provided in house. One specific marketing model will never work for everyone, because not every gym offers the same things in their gym. Austin is very aware of that and he focused Somnium Fitness’s marketing model on what they are offering and staying consistent.
It is important to note that Austin is not focusing on one specific person for his marketing. While he does know that demographics are important for marketing, he understands that everyone at his gym is different. So, he focuses on people who want to live their best life by working out and adjusts his verbiage accordingly. Past that, he doesn’t like the micromanaging that would be needed to cater to all the different people who walk through his doors.
Austin implemented Profit First into his business back in February of 2019, because his business was basically bankrupt in that month. It was at that time he started to take financials very seriously. Once he discovered Profit First, it’s been like night and day.
I would like to point out that Austin didn’t have a background in fitness when he started Somnium Fitness, nor did he have any finance training. He actually went to Old Dominion University to study engineering. He lasted for two years before realizing that he didn’t want to do that job long term. He switched to exercise science and knew that he could spend the rest of his life being the best trainer he could be. He got all of the degrees, all of the certificates, and everything else he could think of at the time. Austin even did one semester of grad school before he realized he didn’t want to continue with that. Instead, he decided to open the gym and dropped out of school.
Most fitness businesses open in the same way Austin’s did. The owners simply like to train and they love helping others on their fitness journey. However, not all businesses make it past the five year mark. This is where Austin has marked a major milestone and that milestone was only possible because of Profit First.
Austin remembers implementing Profit First into his business. While he says it wasn’t that hard, he does say that it wasn’t as easy as he remembers. He had to make some difficult decisions like raising his rates and letting go of some staff members. Austin also had to cut a lot of expenses. Those three things were not easy, but he knew if he didn’t do it, the gym wouldn’t survive. While Austin did collect a paycheck before implementing Profit First, it was not the paycheck he would have liked to be getting.
Prior to implementing Profit First, Austin was getting between $1,700 and $1,800 bi-monthly. Now, he is taking home around $2,800 bi-weekly plus his profit distributions. The first quarter provided about $4,000, while the second quarter was around $7,000 in profit distributions. The third quarter looks like between $7,000 and $8,000. According to Austin, his $42,000 from last year will increase to $85,000 this year and that doesn’t include any fourth quarter distributions. He is predicting a $130,000 quarter with a 13% net profit, so he will get another $8,000 there if everything goes as planned.
Austin knows that Profit First has changed his business for the better. He can easily share his quarterly projections with certainty, instead of not knowing how much money he has available. He meets with his team every week to go over the financial statements and continue to look for things they can improve on. At the same time, these meetings allow them to always know their profit margin, gross margin, revenue, and even expenses.
Austin just took everything out of his profit account at the end of June and distributed it between all of the team members and himself. He knows how hard his team members work to keep the gym successful and he wants to reward them accordingly.
So, now that you know all about Austin’s success, I would love to hear your thoughts! Share what you love about Austin’s journey and what you might have done differently for your business. Let’s learn from each other and celebrate everyone’s ideas!
It's pretty safe to say you didn't get into business to be a bill collector (unless you actually are a bill collector of course).
One of the most frustrating aspects of running a business is chasing people down for money, if you let it be.
Need #5 on the Sales Level of the BHN is "Collecting on Commitments", and the question we ask is;
"Do your clients fully deliver on their commitments to you?"
If you recall from past articles, the service provider/client relationship is a two-way street, and both parties need to be happy with the exchange. It's hard to be happy when people owe you money, it just is.
You are a nice person, I get it. You want to offer a little leeway when someone is behind on their payments to you. Stuff happens.
And you aren't wrong, stuff does happen. But at what point and to what level of frustration does their problem become your problem? if this is happening more than just occasionally, it's time to get serious about fixing it. You don't need the added stress.
The fact is, if we have done the work up to this point, and are attracting the "right" clients that fit into your sweet spot, collections is usually a non-issue. Sure, once in awhile someone will have a credit card problem, have an account hacked, that kind of thing, but it won't be over and over and over. Yes, I have had a client (or two or three) like that too.
Not only are you not a bill collector, you aren't a banker either. If someone owes you money for a service rendered, you have now become a lender to your client. A double whammy you don't need.
So what to do about it?
First and foremost, get every client on EFT, or automated payments. In the fitness business it is now industry standard, most people expect it, so just do it already.
Have clear terms of payment in your contracts, as well as terms for non-payment. In your terms their should be a "cut-off point", or an upper limit to how much a customer owes you at which point you will no longer service them.
Track your receivables every month and make sure every client is current. It's really uncomfortable to go back to a client and say; "Ummm, sorry Cathy, but I just noticed your card hasn't gone through for the last 6 months". Oops.
Enforce your terms. Every time.
Contrary to popular opinion, I am not cold and heartless. I care about my clients very much, but I am not a charity. And even if you operate as a not-for-profit, you still have bills to pay.
Remember, fulfillment of the terms of the agreement by both parties is included in and an integral part of the sales process. Selling to the right people matters.
Here's a review of the Sales Level of the BHN.
Know what your sales level target is in order to support your personal needs as the owner.
Attract enough quality prospects to support the needed sales.
Convert enough prospects to clients to support needed sales.
Deliver on your commitment to clients on time, every time.
Every client pays on time and in full.
Is your company fulfilling every component of the Sales Level of the BHN? If not, it's time to Fix This Next.
I will be the first to tell you that things don’t always go as planned. During one of my recent live videos, I was supposed to be sitting all cozy in a coworking space. However, the coworking space was closed and I had to figure out a way to go LIVE using the tools I had available. If you didn’t see the live video, let’s just say I made it work with my cell phone and one of the seats in my car.
Now, I am hoping that when things don’t go as planned in your business, you can find unique ways to figure it out and keep moving forward. But I also know that there may be a time when you decide to permanently close your doors. We have had a couple of clients come to us recently with that decision. And let me tell you, it didn’t mean that they didn’t have amazing plans and even better backup plans.
They had everything they needed for a successful business model, so closing was definitely not anywhere on their radar. But I can definitely say they have valid reasons.
One of our clients that is closing has managed to work her way out of debt, a lot of debt, and she decided she wasn’t willing to go back into more debt for her business. She hasn’t closed yet, but she is going to be closing.
Another client had planned to sell her business back in January. When the government shut down businesses like hers, that sale fell through. She managed to find a new buyer recently, but the price she is getting for her business is now a lot less than she had hoped she would be getting. Yet, she’s still seeing profits and she has decided that this is the right time for her to get out.
There are so many different scenarios out there, but I know there are a lot of people in the fitness industry who are considering this. There are also a lot of questions around what you need to do when you close a business.
I have managed to come up with 10 things today that you need to think about when you are closing a business. A few of them are practical and need to be taken care of in order, while others cover the emotional aspects to close your business.
10 Things You Must Think About When You are Closing Your Business
Contact an Attorney and Your Accountant
You will need an attorney throughout this process, because you could face some legal ramifications when you close. Hopefully, you have a relationship with an attorney, so you can go to them and ask questions. This will especially be helpful if you need to cancel a lease.
The good thing about doing this with an attorney is they will keep all of this information confidential. They won’t be spreading rumors that your business is closing.
Tell Your Clients You are Closing
Once you have begun the process of closing your business, you need to speak with your clients. You must tell them directly, because they have been your biggest supporter over the years.
Take Care of Your Clients
Since your clients depend on you, I recommend planning on taking care of them after you make the decision to close your doors. As a fitness business owner, you want to make sure that your clients’ health is a top priority. You may find that you can refer them to a competitor or even sell your client list to a competitor for a small fee. This will allow you to make a little bit of money, while taking care of your clients at the same time.
Sell Your Assets
Any equipment you own can be sold to get some of your cash back. This will keep you from paying to store it all and losing out on even more money in the future.
Cancel Your Contracts with Vendors
Before you can close your business, you must cancel your contracts with vendors. I recommend doing this sooner than later, so you can have those final payments clearing your bank accounts. This is also the time to thank your vendors for their time and even give them a testimonial if possible.
Start to Close Your Bank Accounts
If you implemented Profit First into your business, this is when you can transfer all of your money into your operating expenses account. You can then close all of the other bank accounts you have open for your business. I would make sure all payments that were coming out of those accounts have cleared first.
Close Your Last Bank Account
Once all of your automatic debts have cleared your operating expenses bank account, as well as payroll checks and other charges, you can close that account. You can transfer any money that is left in there into your personal account first.
Contact Your Secretary of State to Begin the Dissolution Process
The dissolution process is different for each state, so I can’t speak to all 50 states. But you will be able to find the process on the Secretary of State website for your state. You must go through this process, because not every state is as good about automatically closing your business after a couple of years. Some states, like California, will continue to charge you every single year if they do not have your dissolution paperwork. This is also the time to cancel your business license if you have one.
File Your Final Tax Return
Your final tax return won’t be until the following spring, so you may have a little time to complete this step. Simply take the same documents that you always take to your tax preparer and make sure they mark the box that states “final tax return” on it. You definitely want to make sure they check this box, so you don’t get penalties for not filing tax returns in the future when you don’t have to file tax returns.
You are going to go through many emotional stages when you close your business. You are going to feel grief from closing your business. While I am not an expert on grief, I can tell you that grief comes in stages. There are five stages of grief in all. The first stage is denial and that is followed by anger, bargaining, depression, and finally acceptance. There is no rule that states how long each stage will last or the right way to grieve.
We just need to be aware of the stages and practice self care, while continuing to take care of yourself and your body. Also, let the people around you, who are supporting you, take care of you.
I know I just covered a lot of information there, but I would love to know how you are feeling about what I just talked about. I feel it is important to process everything, so you make sure you get all of the things right.
Of course, you may not be considering closing your business right now, but you might know someone who is. Feel free to invite them into this group, so you can tag them and let them see this important information.
Let’s keep these conversations going, so we can all learn from one another. Feel free to send me a message if you are struggling and need to set up a time to talk or if you have a topic that you need me to share my thoughts about in a future post.
After I got out of the service in the early nineties (1990's, not 1890's wise guy) I got a job as an assistant manager at a Domino's Pizza.
Back then Dominos had a very specific brand promise - Deliver your pizza in 30 minutes or you get $3 off (it used to be 30 minutes or free, but that only lasted a couple years, as it turned out to be a very unprofitable strategy).
This was a huge differentiator in the marketplace. Instead of waiting for what seemed like forever, you could ring up Dominos and you knew you were going to be chowing in 30 minutes. And if they didn't, you could tip the Pizza Driver $3 more, right you cheapskate?
So what's that got to do with your fitness business?
Well you have a brand promise too, even if you don't formally call it that. People seek your services based on your advertising, or even better, word-of-mouth because of all your raving fans. There is an expectation every customer has when purchasing your service, based on what they have seen or heard about you.
Need #4 on the Sales Level of the BHN is Delivering on Commitments, and the question we ask is;
"Do you fully deliver on your commitment to your clients?"
The quickest way to lose business reviews and get a poor reputation is to let your customers down - to not fully deliver on your commitment to them.
There are subtle ways this can happen. If you advertise high energy, high intensity group fitness classes and play polka music, not only are you going to let people down, you are probably going to have someone suggest counseling.
Seriously though, this is part of the sales cycle we don't tend to think about as much, and we tend to be "either/or" rather than "both/and".
As in, either I am focusing on sales or I am focusing on service, rather than having the systems in place to make sure both are being done, all the time.
One way you can identify if you have a problem delivering on your commitments is by measuring your churn rate. If you have as many people going out the door as you do coming in, you have a problem that you need to hone in on. Customer acquisition is a huge time and money suck when this is happening, and it can be pretty emotionally draining as well.
As an aside, we were always pretty pleased with ourselves that our retention rate was about 97%, until we realized that even at that, we were losing over 35% of our clients a year. Ugh.
Delivering on your commitments means doing what you say you will do, every time. and if for some reason you can't, you need to communicate why, every time.
Are you delivering on your commitments? Do you have the feedback system in place to prove it? Do you have systems to make sure sales and service are not mutually exclusive?
Need #3 on the Sales Level of the BHN is Client Conversion, and the question we ask is;
"Do you convert enough of the right prospects into clients to support your needed sales?"
Last time out we talked about what the "right prospects" for your business are. We know that not every lead we get in the door is going to become a client, that's just business. But if you have truly taken care to make sure you are attracting quality prospects for your specific business, you should be converting them at a predictable rate.
In the book Fix This Next, author Mike Michalowicz writes "Conversion is consideration of both sides. What do they want and what do you want." When those two things are in alignment, conversion naturally becomes easier.
We tend to focus on what the clients wants, which is natural. But have you put as much consideration into what you want out of the deal?
When we work with our clients using our Pumpkin Plan tools, one of the things we determine is your Sweet Spot. Do you get the most joy out of selling on price, convenience or quality? (hint: you can't successfully do all three). What type of clients do you really enjoy serving? What products or services do you really love delivering?
Is that what your company is doing, right now?
It may seem strange to introduce the "joy" component so deeply into a discussion revolving around sales and client conversion. But life is too short to serve customers you don't like with an offering you hate delivering at a price point that you know is too low. You didn't start your business to get the life sucked out of you, but that's sure to happen if you don't nail your Sweet Spot down, like right now.
I'll come out and say it. I strongly dislike delivering personal training, I like semi-private better, but I love coaching group fitness. Don't be a hater, it's just what I like doing. We'd been open a few years and were being encouraged by a coaching program I was in to start doing more semi-private and personal training, and I let myself get pressured into it.
We failed to get any traction, and it's not a secret why. I didn't like personal training, and I was convinced our group training was just as high quality as anything I could do semi-private. My heart wasn't in it, I didn't feel good about marketing it, and it didn't get the attention it deserved.
Bottom line. I found no joy in it, so I self-sabotaged the effort. What a baby, huh?
Now you may love training clients one-on-one and have the most incredible semi-private offering ever. That's awesome. You do you. And don't let some expert tell you otherwise.
And once you find out what "doing you" means, ask these questions:
Is my company story consistent with it?
Is my pricing consistent with it?
Is the experience I deliver consistent with it?
When these consistencies are achieved, when you have found your Sweet Spot and are living by it in your messaging, marketing and sales process, converting prospects into clients becomes a much, dare I say it, sweeter process.
And I'll go one step further. If you don't find alignment between the customers needs and your needs, you will continue to waste money on marketing that doesn't work, a muddled sales message, and a stagnant business.
Have you been wondering how to keep more money from your business for your personal life?
If you said yes, you are not alone!
After all, that is the mission of for-profit fitness business owners! As an owner, you want to keep more of your money and have a lifestyle that you have dreamt of since you decided to start your business. This is the reward you deserve after all of the heroic work you do, as you support your members and clients in wellness.
I would love to go over accountability today, as well as your money. These two things really go hand in hand. In your business, you help your members set health goals. Your members then use accountability to keep moving towards that health goal.
Well, when I talk about accountability and money in your business, I want you to do the same thing. Here at Fit for Profit, we can help you set the money goals you want. We can help you with your vision and figure out what you want from your business financially.
Once you have that figured out, you will need to use accountability to keep moving towards your goal. You will use that accountability to figure out what the baby steps are to back out of that big goal and figure out what the next step is. The following steps will also be created, so you have a flow to keep you motivated.
Of course, there may be a time when you get to Step A and then decide that Step B isn’t really the best way to tackle the next step. However, you can use your accountability to review all of your options and then figure out what the next best step truly is.
You can also use your accountability to reassess, if the steps you have decided on are not producing the results you desire. Maybe Step B wasn’t right. Maybe you should’ve tried Step C first or you should have placed an intermediate step into your plans.
If you are working on your accountability with someone who has been successful with it before, they can help you do it right. This is the same thing you do with your members. You can help walk them through their accountability steps, because you have seen so many other members take the same steps with success.
While everyone might not have the same experiences, you can still learn a lot from them. Those who have similar experiences can let you know what has worked for them and what has not. Those people with different experiences can still be a wealth of information, because some of what worked for them may still work for you.
I can’t emphasize enough how working with people in an accountability group can be so helpful. You can use this group to get fresh ideas. This is really good when you feel a little stuck and unsure of which direction to take for the future of your business.
In our accountability groups here at Fit for Profit, we always have past members coming back to check in. They are further ahead in their business than you are and they can help you see what is possible.
Remember, accountability is reminding yourself what is possible and why you decided to do this in the first place. You know, we say, we want to keep more money. We want a bigger lifestyle. We want a better lifestyle. We want a different lifestyle. It doesn’t have to be bigger or better though. Maybe it is just different.
What does different mean to you?
Decide what your different means and remind yourself of that constantly. See what other people have accomplished and see what is possible in your business. Your accountability will keep all of this information fresh in your mind, so you are willing to put in the work. This work is not always going to be easy, because change is never as simple as it may seem.
Holding yourself accountable is going to require different actions than what you were doing before. These actions can feel hard at times, so you must keep your goal in front of you in the form of accountability.
When you are on your own, it’s really easy to forget. You begin to think, “Why am I doing this??”. You get stuck in the mud and you can’t see what is ahead. A group of people who are going through the same things, or at least having an accountability person, can keep reminding you of why you are doing what you are doing.
You will see that the accountability you help your clients with is very similar to the accountability you will use with your finances. I would love to know what has resonated with you throughout this post.
Are you looking for accountability?
How do you respond to accountability?
Do you normally have excellent internal accountability?
Since you are trying something very different involving money, you may realize that you need some sort of accountability group. Or at least an accountability partner to keep you moving towards your new goals.
I can’t wait to hear what your thoughts are on accountability and how you think you can be accountable in the future. Leave me a comment to share your thoughts or drop me a message on social media.