As a gym owner or someone working in the health and wellness industry, you know that revenue fluctuates throughout the year.
During the fall and the holidays, clients aren’t as responsive or working out as much–either because they’re busy with work and family or because they don’t want to feel bad about not following their health plan. At the beginning of the year, things pick up as people set resolutions and goals…but then taper off after a few weeks or months. Then, of course, there’s beach season where clients are ready to dive back in. And around and around it goes.
All this fluctuation in client commitment results in a fluctuation in revenue. And it’s enough to give you a headache.
After all, your operating expenses don’t fluctuate that much, and you’d like to collect a regular paycheck that you can count on.
That’s why reverse engineering your cash flow goals can help you stay on budget month to month and ensure you’re spending (and saving) the right amount to meet your operating expense needs.
This is why it’s so incredibly important to have a bookkeeper on your team to help explain your financial data to you and what your financial reports mean. A bookkeeper can also ensure that you’re staying within your budget each month, even on those slow months.
Here’s how reverse engineering works:
First, you’ll need a profit assessment to determine exactly what you’re making in your business right now.
You also need to take a good look at your P&L statements–over the course of a year. Determine what your average operating expenses are each month (total OPEX for the year ÷ 12 = average OPEX each month).
Are you making your average OPEX each month?
Typically, the answer is no. But the idea is to allow your busier months to make up for your slower months.
And if you’re spending more than 45% of your revenue on OPEX, chances are you’re not paying yourself enough. It’s time to find ways to lower your operating expenses.
But I can’t lower my expenses any more than I already have.
That’s what you’re thinking, right? I get it. Ask yourself this: Are you legitimately getting 100% value out of everything you’re spending on right now?
Do you need two team members covering the front desk when the gym is slower?
Is it necessary to buy that equipment this month?
Can you negotiate a better rate on your insurance?
Is it possible to let go of some of your equipment leases?
Can you reduce the frequency of equipment maintenance because usage is lower?
With your Profit First advisor, go through your expenses line by line and look at ways to reduce spending so you can get your OPEX more in line with where it should be. You’ll be surprised at where you can find money!
We’re happy to help you with this process. Schedule a call with us today and let’s reverse engineer your cash flow so you can start hitting your goals.
Here’s the thing about quarterly profit distributions: They’re meant to be used. And by “used,” I don’t mean reinvested in the business–as much as you might want to do that.
Every time you do your Profit First allocations, you should be taking 5% and depositing it into a Profit account. This the target distribution based on the Profit First system, and what we recommend to most clients.
Being a business owner is challenging. Being a business owner in 2020 has been exhausting. You’re working long hours, adding extra responsibilities to your plate, stressing over quarantines and lockdowns, and possibly even having really difficult conversations with staff and clients.
Through all of that, we hope you’ve still been setting aside your profit allocations. Because at the end of the day, you deserve it. You’ve done something that not everyone is born to do: you own a business.
The profit distribution is meant for you, the owner. It’s designed to reward you for your work; it’s not designed to reinvest into the business (that’s for a different account).
At the end of each quarter, take half of the balance in your profit account as a distribution and use it for something in your personal life. Something fun, something meaningful, something necessary. You get to pick!
You might be wondering… “But how do I spend it?” Here are some ideas, depending on how large that profit account is:
If your distribution is less than $250
Treat yourself! It’s okay if your profit distribution is just enough for a celebratory dinner with your partner or a friend. Go somewhere you wouldn’t normally go and order something fancy.
Visit the spa (or car spa). You deserve a nice massage or a facial, away from the office for the day. If that’s not your thing, treat your car to a detailing job that makes it feel brand new.
Invest in learning. Here at Fit For Profit, we’re all about learning new things–personally and professionally. What’s something you’ve been dying to learn that you haven’t taken the time to do yet? Sign up for that gardening class or take that Rosetta Stone class so you’re prepared when we can travel again.
If your distribution is less than $2,000
Beautify your home. There’s a lot you can do around your home for $2,000 and less, including some small remodeling projects or buying some new furniture or appliances. We’re spending a lot of time at home these days and we should enjoy it!
Take a road trip. If you’re able, take a weekend away at a nearby destination. Sometimes getting out of our normal four walls for a few days is enough to rejuvenate us for months to come.
Pay down debt. Personal debt can change how we think about money in our business too. We love the thought of using profit distributions to pay down (or off!) some personal debt so you can feel better all the way around.
If your distribution is more than $2,000
Divide and conquer. Consider gifting part (or all) of your distribution to a favorite cause.
Invest and save. If you’re not ready to spend the money, open a separate account and save it for a planned vacation or so you can pay cash for that new car. You may also want to invest it in a college fund for your kids.
I personally don’t always have a solid plan for my profit distribution. In fact, I really like to save it for a larger purchase. I’ve saved up for a car before, and I’m currently remodeling my kitchen with several quarters’ worth of distributions.
Whether you choose to spend it or save it, if you’re following Profit First you do need to remove it from your business accounts and put it elsewhere.
Not sure where to get started? Book a call with us and we can help!
In this week’s post, we are going to be catching up with Erin Haag, whom I have known for a couple of years now. We met when Erin owned a fitness studio and she needed to implement Profit First to make her business better than ever.
Erin’s Success Story
Erin owned a pilates and yoga studio in South Florida for nine years, but prior to that she worked for a whole bunch of different companies in corporate sales. You name it, she did it! We’re talking the weight loss industry, wellness centers, nutrition, medical spas, cosmetic surgery centers, and laser hair removal. She helped make millions of dollars for other people and then she was laid off during the financial crisis of 2008.
At that time, she decided she was done making money for other people and that is when she used all of her strategies to open her pilates and yoga studio. Erin had a pretty successful business. She paid herself from day one and her business was profitable. However, about five years in, she had two kids under the age of two. She was working 50 plus hours a week and hadn’t taken a vacation, let alone a day off in forever.
The final straw for Erin was when she was hospitalized twice within four months. The first time was for a kidney stone that brought on an infection and the second was for viral meningitis. She was released from the hospital on her oldest daughter’s second birthday and she realized something had to give.
She began to make shifts within her business. She did that mostly with her pricing and by automating her systems, but she basically changed everything. When Erin and I began to work together, she went from a 4% profit margin to a 47% profit margin. She also started to pay herself a six figure income and began to work only five days a week.
Erin began to work with me about eight or nine months before she sold her studio. In that time, she saw her biggest growth. In the six months from the time she listed her business until the time she sold it, her business became completely debt free. Erin also sold her business for forty times her original investment.
That was all cash in her pocket!
Since that time, Erin has been helping other boutique fitness studio owners, gym owners, and people within the wellness industry do the same within their business.
I love hearing success stories like Erin’s! But you know that she had to have a few points in her story that were not all that glorious! And that is what allows everyone else to relate to her story!
Making Changes to Your Business Model
One thing that Erin loves telling people right now is that if you are planning to start a business, now is the time to do it. She started her business during a financial crisis and everyone thought she was insane. But her business thrived and the businesses that are lucky enough to make it through and get to the other side are going to be so profitable and successful.
And if you currently have a business, now is the time to make the necessary changes in your business. You now have the perfect excuse. One of the biggest changes you can make right now is pricing. You really have to analyze your pricing and take a look at it over the last eight months.
Then ask yourself, “Have you really continued to maintain a profit margin? Have you continued to have a steady flow of cash?”. If the answer is no, then Erin and I can both tell you it’s due to your pricing. If you are still charging a per session class pack, then you must change it to a recurring revenue model. Switching your pricing model is the only way you can guarantee sustainability.
You may not believe that your business problems are tied to your pricing, but ask yourself if you did the proper analysis when you created your pricing. Did you analyze your pricing or did you simply charge whatever your competition was charging or less than what your competition was charging? We have seen the latter so many times and those owners are simply not making a profit.
How to Find Your Pricing
There is actually a formula for creating profitable pricing for your business. The first step you have to take is determining what your minimum monthly sales goal must be. You will find this number by adding in all of your operating expenses, your payroll, your liability, your debt, and your owner’s pay.
This will give you your monthly sales goal. Once you have that number, you will need to do an analysis on your capacity. Then your capacity will tell you what your monthly client value needs to be. This is basically how much each client needs to be worth to your business based on your capacity.
Let’s use $150 for an example. The $150 will be the pricing point for your mid-range package. You would then create pricing that has a weighted price for single services, which will be intentionally high. This will discourage people from purchasing a single class.
The larger commitment packages will be your bottom line number.
Conquering the Sale
Erin uses what she calls the client flow when conquering the sale. The client flow basically goes from when the client first contacts you all the way through to the collection of money. It’s going to be unique for every business and it must be individualized for every client. By the time you are collecting the money from your client, they will know exactly what you have to offer for their life, how you fit into their budget, and how you fit into their schedule.
Remember, that your goal is to solve a person’s problem, not simply collect their money! If a client begins to object, answer their question, reconnect with their pain point, and position your service as the solution that will solve their problem. You’re only asking them to commit to solve their problem.
Both Erin and I recommend using a checklist type script, so you make sure you remember to share everything with your clients. You don’t have to go down this checklist in order, but you do need to make sure you cover all of the points. This will ensure a potential client has all of their questions answered when it is time for them to make a final decision.
A client will contact you because they are interested. Therefore, if a client ends up saying no to you, something happened within your client flow. A step was missed and you allowed the client to slip out. This is why you need to be confident that you have everything your clients need.
Your Ideal Client and Pricing
You have the choice to be the best, the cheapest, or the most efficient. You can’t be all three though. When you are setting up your pricing, you’re targeting your ideal client. Your ideal client is going to be able to afford you, especially if you are doing the right type of marketing.
Profit Margins
Once you have your pricing in place, it is a good idea to do a profit analysis. Determine what your current profit margin is, so you know which direction you are headed in. This will allow you to make adjustments to your pricing and expenses, so you can be where you should be with your profits.
As soon as you have everything where you want them to be, you can work on the systems you have in place. This will ensure that everything is ready for when clients are walking through your door. Those systems will also allow you to re-engage with existing clients and transition those clients into more profitable packages. Those steps alone can help you increase your profit margin by 95%.
The reasoning behind that is those clients are your cheapest clients. They are already in the door and you don’t need to convince them of anything. They love you and want to continue to work with you.
You may be worried about increasing your prices right now in our current situation, but Erin says now is the best time! People are actually expecting price increases right now. Since you may only be operating at 25% or 50% capacity, your clients understand that you need to charge more.
Besides, you should have been increasing your prices every year since you opened and most likely, you haven’t been. A 3% to 5% price increase is normal. After all, your rent likely increases 3% every year and your taxes and expenses increase, so why shouldn’t your prices? So, now is the time to get your prices into current market value.
Learn from Erin’s experiences and price your services properly. You will have a healthier profit margin, can pay yourself more, and hopefully have systems in place that will allow you to work fewer hours than ever before!
This week, we are going to be focusing on the year end. It is coming up faster than you think, since it is already the middle of October! I have four tips for you to be thinking about as you plan your year end. Well, I actually have five, but the last one is a bonus and it definitely won’t apply to everyone.
I think it is best to dive right in and talk about the things you can be doing right now. Basically, how you can prepare your finances for year end.
4 Tips for Preparing for Your Year End Plus a Bonus Tip
Get Your Bookkeeping Up to Date
I know a lot of you have been putting this off. You’ve had a lot of other seemingly more important things to do this year. And I agree, I probably told you before that I don’t always do my bookkeeping every month or all of my financial tasks every month. They sometimes fall behind! But NOW is the time to get those caught up!
The way I would recommend you getting caught up right now is to actually start doing September’s bookkeeping. Just start there and then you can stay current. Then in November, you do October and December, you do November. In the beginning of January, you do December.
I’ve also done a little calculation for you. There are 11 weeks left in the year now. Let’s say you haven’t done any bookkeeping yet in 2020. So, you basically have January through August to do. If you do one month per week, you can take almost all of December off, because you will be all caught up by then. Or since there are holidays in there like Thanksgiving, Christmas, and New Year’s, you might want to plan to get your bookkeeping completed in the weeks around those holiday weeks.
So, figure out the weeks you are going to do bookkeeping. It is super important that you get it done before the end of the year. If you don’t do it before the end of the year, you are going to pay your tax preparer more to get your taxes done.
You can reach out to us to learn more about us doing this for you. We are currently doing a lot more historical transaction work right now. People want to be caught up before they get to their tax preparers and tax return.
Talk to Your Tax Preparer at the End of the Third Quarter or the Beginning of the Fourth Quarter
This is something you need to be doing right now if you haven’t done it already! We always recommend our clients and every business owner, myself included, talk to their tax preparer at the end of the third quarter or the beginning of the fourth quarter. Do this when your bookkeeping is up to date, so they can look at your financial statements and give you a projection of what your tax bill is going to be. They can also tell you if you will be getting a tax refund. That would be really good news to have right now. The earlier you know this information the better. After all, if you’re going to owe money, you have the rest of the year to save that money up.
If you haven’t already been saving, or you haven’t been saving enough, we can make adjustments and get you on track.
When your tax preparer gives you an estimate in April or when they do your taxes, that’s based off of what they think is going to happen. Well, we all know that 2020 has not given any of us what we thought was going to happen!
So, take your financial records to your tax preparer and have a conversation with them about what they really think your tax bill is going to be based off of the actual results you have had in 2020.
This is also a good time to talk to your tax preparer if your revenue has significantly increased this year. That has happened with some of our clients. If that happened to you, now is the time to consider becoming an S Corp. It can be beneficial to change from an LLC or sole proprietor, depending on the numbers.
The bonus tip applies here, but only if you are already an S Corp. This designation requires you to pay yourself via payroll. (You cannot pay yourself via payroll if you are in a partnership, an LLC, or a sole proprietor.) If you haven’t been doing this yet in 2020, now’s the time to start and talk with us or your tax preparer. You might need to do some catchup payments as well.
The IRS is starting to crack down on that and they need to see reasonable compensation to you as the owner.
Set Your 2021 Revenue Goals
We all definitely need to be setting 2021 revenue goals right now. I think we all had revenue goals for 2020 and we’ve had to readjust those. This is the time to look at what 2020 was actually like and make whatever predictions are reasonable for 2021. Set those revenue goals and then start to reverse engineer all of the things you need to do to hit those revenue goals.
I always start with the revenue as my goal and then say, “Okay, that means I can pay myself this.” Or maybe you start with your pay as your goal and reverse engineer it into your revenue.
Either one of those options is okay since they are interchangeable. It depends where your pay is currently, but then how many new clients does that mean you need and how many new leads does that mean you need? How much marketing should you then be doing to generate those leads?
Hopefully you have data to back it up. Say you want to get 48 new clients in 2021. That’s 4 new clients a month. So, how many leads do you need to sign up 4 new clients? It may be 8 or it may be more. Hopefully, the data you shows you exactly how many leads you have needed in the past to obtain the number of clients you want. Use that data to back up your goals for 2021.
Take the time in the fourth quarter of 2020 to be the CEO of your business and set those goals. Then reverse engineer to get all of those quarterly and monthly goals for 2021.
Find an Accountability Partner
Finding an accountability partner is probably the most important thing on this list. Once you have your goals for 2021, you can report them to your accountability partner or group. If you don’t have an accountability partner or group yet, find one. They are the only thing that’s going to make sure you hit those goals. I have a blog post that shares how to find accountability partners, so give it a read if you need a little help finding your accountability partner.
These are the four things you must be doing in the rest of 2020 to end the year on a positive note and to make sure 2021 is as close to what you plan for as possible. Obviously, we have to readjust when things happen, as 2020 has taught us. But we can only adjust if we have a plan in the first place. If you don’t have a plan, you are only flying by the seat of your pants all of the time and that won’t be very helpful.
If you are struggling with ways to end your year in a good way and start 2021 strong, contact us today. We can catch up on your bookkeeping for you, so you never have these struggles again in the future.
I know that 2020 has thrown us quite a few curveballs. Normally, I have conferences to attend at least twice a year. Those conferences are ones where I meet like-minded people and learn things I do not already know. This year, I must do those conferences virtually. And to be honest, I’m going to miss my tribe of people!
Just the chance to kick back, relax, and have fun talking about all the things!
I know there will still be many speakers for me to gain extensive knowledge from during my virtual conference. Donald Miller, John Jantsch, and Mike Michalowicz are just a few of the speakers I will be learning from this time.
I’m even looking forward to the networking time in this conference, despite it looking different this year. The time when I am talking one on one with another person always provides eye opening experiences. Over the years, I have discovered there are fellow business owners, accountants, and bookkeepers who have really pushed me to grow personally and professionally. They have held me accountable, so I would do what I said I was going to do in my life and my business.
And that is what I wanted to share and go into detail with you today. Even as a bookkeeper or accountant, I need someone from the outside to be looking at our business and our finances. These people have been helpful in seeing the forest through the trees.
After all, we get bogged down in the details of what we are doing. The blinders go on and without a little push from others, we can miss so many things. Right???
A little confession here… We don’t always review our own finances. Yes, sometimes it gets done, but other times, well, let’s just say it slides into the background. This is where the mastermind group I am in has been really helpful and super important in the last year.
We have now started to review our numbers together as a group on a high level every single month. And let me tell you… When you have to report that to somebody else, you get to know your own numbers more intimately. You also see things that make you say, “Oh, I don’t like that. I want that to be different. That should be different.”.
Of course, that stirs up a bunch of other questions that include, “How can I change this? What are you all doing?”.
All those questions allow me to create a plan. This plan is necessary, because I am in the spotlight once a quarter in my mastermind group. I have to tell them what my plan is going to be and what I’m going to do. I then meet with some people from the mastermind group every single week, so I stay accountable.
We have a sheet with the quarterly goals listed on the top. Each week I go and tell everyone whether or not I did what was needed to meet my quarterly goals. The worst weeks are the ones where I have to admit I didn’t do what I said I was going to and why.
The best weeks are the ones where I can say I did what I set out to do. Those are the weeks I love, because I can see what is working and what isn’t. That allows me to make changes if needed.
All of this shows what being held accountable does. While the quarterly goal is right at the top of my sheet, it sometimes takes another person to remind me to do what is necessary to reach it.
Once a quarter each of us in the Mastermind group sits on the “hot seat.” I went in with a question that had nothing to do with my financial or marketing goal for the year. My Fix This Next assessment showed me that those were the two things I should be focusing on in my business for 2020.
This assessment is available on the Fit for Profit website if you are interested in seeing what you should be doing for your business.
My question was totally unrelated to what I should be focusing on. Thankfully, the members in the group told me that it wasn’t on the level of the business needs hierarchy I was supposed to be focused on. It was exactly what I needed to hear at that moment!
I knew I had to go back to the drawing board. But that is exactly what accountability is and what it does.
Accountability…
Reminds you of what you’re supposed to be focused on
Reminds you of why you’re doing it so you don’t get off track
Reminds you why you are doing all of the work you are
Reminds you to stay on track
Reminds you to keep your goal front and center
All of these things are the favorite things that we get to do for our clients. And I know in the fitness industry, it’s what you do for your clients. You hold up the people who are making the best progress and you show them to people, so that they can see what’s possible for them. And when people don’t show up for workouts on a regular basis, you get on the phone, or text or email, and communicate with them. You tell them you miss them.
You ask:
How can we keep you coming back?
What can we do for you?
Is there something going on that we can help you with?
That’s what we do for our clients with finances too. We have that call at least quarterly with our clients that are making the best progress. We meet quarterly and go over financial reports with them. We look at what has happened in your business and what’s going to happen in your business. What does the past tell us about what’s going to happen and what adjustments do we need to make right now to change the finances. Change how that plays out in your business.
What can we do proactively?
Yes, a lot of accounting and bookkeeping is reactive. From looking at the history, we can see what has happened in the past. With Profit First coaching and advising, we can then look at what is going to happen.
We can’t guarantee what will happen. Obviously! But we can determine what we think is going to happen.
In 2020, who knows what’s going to happen in October, November, and December. It’s going to be different and we don’t even know how different. But is there anything we can do right now to prepare?
In October, you normally look towards the holiday parties in November and December. I don’t know what those are going to look like this year or if they are even going to be possible. But you know you will want to reward your team.
Your teams have put in a lot of work this year. It’s been very different from what you thought they were going to do. What they expected to do. The people who have stuck by you, most of you will want to find a way to reward them.
Now is the time to think about what you can do in December for them and make it easy. This is one of the proactive things we can do. We can make those necessary changes now.
Every time I meet with a client, we set up the due dates for the changes they are going to make and then they email me on that due date to tell me they did whatever they said they would. If I don’t hear from them, I reach out to them. That is accountability. I know we don’t always like it, but that is how change happens. This is how we grow and our business gets better.
If you don’t currently have a group of people, a group of business owners, or a business coach, now is the time to find one. You can always reach out to us for help. That is what we do!
You don’t have to pay someone for this though. You can easily find like minded business people to do this with you for free. Many people will recognize the benefits of everyone helping each other be accountable. The goal is to find people you have a lot in common with, so you can push each other to be better in life and in your business.
While an accountability group is great, one on one works well too. You can have set meeting times, but also check in as needed in between. You can then reach out if you don’t hear from someone when you are supposed to.
If you don’t already have one, find an accountability partner or group today and change how your business looks in the future. Yes, your team can be helpful with accountability. But sometimes you need someone on the outside.
Our Fit for Profit Facebook page and Instagram are an excellent place to start. You can meet other business owners like yourself and I am there to add to the conversation too. You never know, you might find your accountability people right in that group!
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!
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.
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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.
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!
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.
Grieve Accordingly
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.
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.
