Category Archives for Fix This Next

What’s the Big Deal About “Systems”?

If you've been in business for any significant length of time, you've probably heard and read it over and over - you have to have "systems" in your business. Systems for sales, and marketing, and service delivery. Systems for finances, and hiring, and team management. 

What you may not realize is regardless if you have all these things documented in a fancy manual, you already HAVE systems for each of these. As Mike Michalowicz writes in "Fix This Next", these systems are "In many cases...simply the routines you and your colleagues follow."

The question then becomes "Are the routines we are following efficient and predictable, leading to reliable outcomes?"

If so, the work becomes documenting those systems. You can write them in a manual, take screenshots, do video screen captures of the task being performed, or all of the above. The important thing is that the system is documented and able to followed by anyone.

On the other hand if your systems aren't working, the job becomes to find out why and work on improving it. 

The goal here is not to take hours and hours to write fancy manuals that nobody ever looks at and are hard to understand. 

The goal of creating (if necessary) and documenting systems is to help you Achieve Organizational Order.  

And not coincidentally, that is Level 3 on the Fix This Next "Business Hierarchy of Needs" (BHN). 

The way we define "Order" in this context is important. Order is not only about efficiency, productivity, and getting stuff done faster.

It's about creating a company that is not dependent on any one individual. Including you. Maybe especially you. 

A business that achieves organizational order is a business that runs smoothly when you take a vacation, or your admin is sick, or a key employee has to rush out of town on an emergency.

Here's a challenge for you. The next time you walk into a Starbucks, or Dunkin Donuts, or whatever your favorite place to get coffee is, ask to speak with the owner. Chances are, the team member standing at the counter won't even know who that is, never mind run out to the back to get them. How is that possible? Because these businesses run on systems, not on any one person. That is organizational order.

As we discovered on the Sales and Profit levels of the BHN, there are 5 key questions and needs on the "Order" level as well. Over the next few weeks we will cover each one in, you guessed it, Order.

See you then!

Cash Reserves for the Business Win

Cash reserves in your business are what will not only keep you afloat but also ensure that you have what you need to prevent an inevitable crisis should…I don’t know, a pandemic hit.

It’s something we need to…we must talk about.

If you have a copy of “Fix This Next,” go to page 115 and read (or re-read) that section. In fact it is so powerful that I am going to include the first paragraph here:

“Desperate people do desperate things. This is not a position you want to be in. Cash will help you avoid it, and generally speaking, more cash will help you avoid it more. An adequate reserve of money enables you to navigate unforeseen circumstances with confidence. To allow business operations to continue unabated, or to take advantage of an unexpected opportunity, your business needs two to six months of your average monthly revenue reserved in a VAULT account.”

The last question on the Profit level of the Business Hierarchy of Needs is:

“Does the business have enough cash reserves to cover all expenses for three months or longer?”

Most businesses we start working with would have to answer “no,” even before the present crisis hit.

For many business owners, these are desperate times. And while we can’t change the past, we can learn some lessons in order to help us prepare better next time.

And keep the ensuing panic at bay a bit.

Trust us, there will be a next time. It may not be pandemic level, but even the normal business cycle can cause a cash crunch on our businesses. And we can’t and shouldn’t count on the government to bail us out every time.

The good news is implementing the Profit First cash management system systematically and reliably starts building this long term savings (VAULT) account, month-by-month, by creating the good cash habits your business needs. The initial goal is to be able to cover three months of Operating Expenses, and then three months of Sales Income, into that account.

You may be thinking “no way can I do that,” and frankly you need to check that thinking at the door. Instead, start thinking how life would be different if you had been working on this before 2020.

I’ll wait while you think that through.

It’s not all negative, either. Your VAULT account has two primary functions: to cover expenses in case of unexpected business disruption and to take advantage of an unexpected opportunity. Imagine having the amazing property you have had your eye on forever come up for sale cheap, and you could pay cash for it, or even just put a huge down payment on it. Or paying cash when a closing business has a fire sale on their equipment. It’s a great feeling and so worth the effort.

Now that we have had THIS talk, give me a call and let’s talk about how to set it up in your business. Click here to tell us a little about your business and schedule an appointment.

Dancing With Debt

One of the most frequents subjects/question that has come up with my clients and peers recently is:

"What should I do with my EIDL loan?"

My observation is that many gym owners have moved on from the mindset of using the money for what it was intended - a short term solution to keep the business afloat due to decreased revenues from Covid-19, or as a cash reserve as we move into fall and the unknowns of a "second wave". 

Instead the thought process has evolved to "how can I spend it?" New equipment, building renovations, signage and marketing campaigns are all ways I have seen it being spent. In many cases credit was not previously available through normal channels prior to the assistance programs the government is now offering. Think about that. Your business could not support additional debt pre-pandemic. Revenues are down which triggers loan assistance under new government guidelines, often very large loans for a small business. What makes you think you are going to be able to afford to pay that loan back? 

All too often we are in the "monthly payment" mindset. We've been "taught" by those who are in the business of selling on credit - car dealers and real estate agents come to mind. It's not about what you need, it's "what monthly payment can you afford?" Look I have been sucked into this too. The whole point of the dance with the credit manager is to see what the maximum monthly payment you can "afford" is, and then find a house, or car, or refrigerator that stretches the upper limit. 

I've heard it more than once about the EIDL loan as well. The argument goes "It's only about $700/mo to pay back the $150,000 they gave me." Yes, that's true. Over 30 years and total interest of over $100,000! That's like buying another house. No thanks.

This is a relevant subject as we work our way through the Fix This Next Business Hierarchy of Needs.

Question #4 on the Profit Level is;

"When debt is used, is it used to generate predictable, increased profitability?"

Answering this question requires some discipline and work. When choosing to take on debt in your business, there needs to be a clearly defined and achievable increase in profits in a clearly defined time frame. There also needs to be ongoing measurements so when that isn't happening, you can take action by either adjusting the plan or pulling the plug on any more money being flushed. It''s the difference between "spending", and "investing". When you invest, you expect a return. I would suggest that every dollar you use be approached with this mindset.

My job is to help businesses create cash management systems that guide strategic thinking and decision making around their money. Dancing with Debt is Dangerous. You have to take the lead, not let debt take control. Know what you are getting into and why. Run projections that prove the debt you are taking on is an investment, not just a spend. Know when it's time to cut your losses. And always have a plan for paying it back. 

Are You The Only Choice?

Over the last few weeks we have been digging into the Profit Level on the Business Hierarchy of Needs. Question #3 relates to Transaction Frequency.

"Do your clients repeatedly buy from you over alternatives?"

As I considered how this question related to the fitness industry, I realized there are some layers to work through when it comes to answering that question.

It's no secret that there are many different options and modalities of training in our industry. Weightlifting, Powerlifting, Crossfit, Yoga, Pilates, HIIT; just to name a few. Attracting clients is one thing - keeping clients is a different thing altogether. We as consumers have pretty short attention spans, and are prone to chasing the "latest and greatest". In the fitness business it seems like there is some new fad coming out all the time. How do you keep clients from jumping ship and heading across town to the newest shiny object?

1. Know Who You Serve.

We have talked about finding the "sweet spot" in your business. Sometimes this is called a "Niche", but it's more than that. It's knowing what you do best and why, and finding clients who speak that same language. When you walk into our gym it looks very much like a Crossfit, but a dedicated Crossfitter would be very disappointed after a very short period of time training with us. That's ok. It's just not what we do, and trying to put a square peg into a round hole just isn't going to work. You can't be the only choice to everybody, but you can be the only choice to your ideal client.

2. Think Long Term Relationship

Relationships take work. It's not just a matter of signing up a new client and "setting and forgetting." Live up to your brand promise. Listen to what clients are saying. Genuinely care about your people. Remember details. And educate, educate, educate. If you don't want people "gym hopping" on you, you must be prepared to tell them why you do what you do, how that benefits them, and why alternatives may not suit them. You don't have to bash a competitor to explain why loaded box jumps might not be good for 60 year old knees. And it doesn't cost extra to care.

3. Build In "Longer Term"

There has been a move away from longer term contracts in the industry. "No commitment" is attractive to the consumer, after all. Now I am not saying you have to beat your customer over the head and try to force them to stay because they have a contract, but it does provide you some leverage. And it's more than that. From a training standpoint you know your clients need consistency over the long term to see results. Does it serve them well to offer punch cards and class passes, or would educating them up from about the importance of a training program be more beneficial? I can't answer that for you, however I believe the gyms that are setup for success long term don't just have random classes, they have a unified training philosophy. Yes, this requires more effort from the training staff and commitment from the client. That is a good thing because the client gets better results and you can charge more for those results. 

4. Find Ways To Do More Business With Current Clients

What other ways can you serve the clients you already have? What are they purchasing elsewhere they could be buying from you? Supplements, equipment like foam rollers and bands, and nutrition coaching are just a few of the things you can bring in house and increase your revenue. 

Creating a business where you are the "only choice" in the minds of your prospects and ideal customer will attract better clients, reduce churn, and put more money in your pocket. There are four ideas in this article. Which one can you put into action today?

Your Clients Care If You Are Profitable. Do You?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Can You Afford Your Bills?

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

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

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

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

1) Large credit card or loan debt 

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

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

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

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

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

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

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

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

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

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

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

Make It Happen. We can show you how.

You’ve Got Profit All Wrong

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. 

You’re Not A Charity (even if you are)

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.

  1. Know what your sales level target is in order to support your personal needs as the owner.
  2. Attract enough quality prospects to support the needed sales.
  3. Convert enough prospects to clients to support needed sales.
  4. Deliver on your commitment to clients on time, every time.
  5. 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.

Let's Make It Happen.

Do You Deliver?

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?

Make It Happen!

Finding Your “Sweet Spot”

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.

The result?

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. 

And life is too short for that too.

Make It Happen!

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