Category Archives for "Income"

Mindset of Paying Yourself a Living Wage

You are committed to the success of your business. Your business’s health and wellness allow you to live a full life, make your mark on the world, and help support the lives of your clients and team. You spend so much time taking care of the things and people who keep your business running, you forgot to financially support one of the most critical pieces of the puzzle—you!

The reality is that paying yourself a living wage is about MUCH more than dollars and cents. Creating a living wage for yourself (and paying it) reflects how you feel about yourself as an individual and business owner. Becoming aware of your money mindset and how it holds you and your business back is a crucial step towards your financial health, success, and freedom.

But do you know how to determine the right living wage for you? It’s important to examine why you’re waiting to pay yourself the big bucks and how to assess where you are now to create a brighter future.

What is a living wage, anyway?

The first step to finding out how much money you need to make a living is to know what a living wage actually is. We’re not talking Ramen noodle living; we’re talking about normal everyday living. Spend some time thinking about what living really means to you and how much you need to finance it.

Ultimately, your pay is about more than numbers and spreadsheets. Mindset shifts around determining your owner’s pay can bring up feelings of guilt and even unworthiness. Depersonalizing your salary is a great way to sidestep any residual emotional issues around money. Determine what you feel is a fair wage for someone else, and pay yourself at least that much—minimum!

Do you want to work in your business for the rest of your life? If you are like most business owners, the answer is probably no. But if you’re not paying yourself a livable wage to do your job, how will you ever be able to hire someone to replace you in the future?

You can’t.

Check out our blog to learn more about how to determine your Profit First owner’s pay allocation.

Why should you pay yourself?

As a mature business owner, you might be waiting to pay yourself until you can sell your business for the perfect ROI. The truth is many entrepreneurs who have waited for the pot of gold at the end of the rainbow never see their payoff.

Living for what might happen in the future compromises your quality of life in the present. Putting Profit First in your business today helps you gain more financial clarity to help you reach future goals.

Fast forward to when you have your Profit First strategy in place. Your business fully supports your desired lifestyle, but you have “extra” money. Your first instinct might be to leave the surplus (the profit) in the business, but the best option is to pass the extra into your personal rainy day fund.

Transferring half of your business profits to your personal accounts on a quarterly basis and essentially paying yourself creates benefits to the owner. Moving your money out of the business and into your personal account creates a buffer if your business gets sued.

Additionally, the act of transferring your money into a personal account has the potential to make you more money in the future if you do decide to sell. On paper, a large portion of the financial value of your business is determined by the amount you have paid to yourself as the business owner. Typically, sellers can determine the sellable value of their companies by doubling or tripling the amount of income they received as the business owner.

By implementing Profit First and adjusting your money mindset in the short term, you are increasing the value of your business in the long term—and improving your quality of life!

If you’re ready to implement Profit First but aren’t sure where to start, reach out.

We’re happy to help.

Prepping Your Wellness Business for the Summer Slow-Down

Summer is getting closer. Days are longer. The sun is shining, and people are out!
With the pandemic (hopefully) in its last legs and the increased availability of vaccinated friends and family to hang out with, your business might once again be susceptible to the dreaded summer slow-down.

Granted 2020 threw any “normal” business pattern out the window. Still, if owning a business through a pandemic taught us anything at all, it’s to always be prepared—even for the unexpected. Of course, maintaining a solid paycheck is important, even when your revenue is on a roller coaster.

By prepping your business today for the future, you’ll be ready for next summer and all the summer slowdowns after that!

Utilize your time

While an influx of free time in your business is a nice change of pace, it can also come with the anxiety-inducing stress of being uncertain of when and if the business will come back.

The best way to combat any down-time anxiety is to get busy. Having a slow season is a perfect time to get those project ideas off of the shelf and put some work into developing your business instead of always working in your business.

Utilize the time you have to create new revenue models—which leads me to my next point.

Adjust your revenue models

The most failsafe way to ensure you never have a summer slow down is by creating a monthly recurring revenue model. When your clients take a week or two off to vacation with their families, you still get paid.

But how do you incentivize your clients to pay even if they aren’t using your services? You might be thinking of a discount, and you’re right. But we are NOT talking about discounting your services.

There are many ways to entice your clients to capitalize on a pre-pay model: retail discounts, faster response time, exclusive access, add-on bonuses. The list goes on.

We have worked with massage therapists who offer a regular monthly massage to their pre-paid clients. If they don’t use their massage that month, they can have two the next month. This type of model was HUGELY helpful during the pandemic—clients were racking up unused credits, and business owners could count on the monthly revenue.

You know your business better than anyone else, so get creative. The important part is to create a way to have an income you can count on even when the lean times take hold.

Create a summer account

You’re still coming up with the perfect monthly recurring offering for your business, but that doesn’t mean you can’t proactively prepare for slower summer months.

Many dance studios will run camps, or gyms can run summer workout initiatives. Those are great ways to keep income flowing. If you find yourself without monthly recurring offerings or the ability to run camps, the next best way to help over the summer is to set up a summer savings account.

Figure out the bare necessities you and your business need to get through the summer. You know you’ll need rent, AC, insurance, admin payroll, etc., so after totaling your amount needed for necessities, divide that number by nine and allocate it into your summer account the other nine months of the year.

By creating an extra summer account, you know your basics are covered. Any additional revenue that comes in is “extra” and will cover payroll. If you have a camp over the summer, your basic needs are covered, and teacher payroll will be covered by camp revenue.

It’s hard to enjoy time off with your family if you’re constantly worried about how rent is getting paid. Ensuring your operating expenses and owner’s pay are accounted for no matter what the season brings, you create a more substantial, more sustainable business for you and your clients.

If this all seems overwhelming, reach out. We’re happy to help.

Don’t be Eligible for the Next Stimulus

As I write this, the latest round of COVID-19 related stimulus checks are starting to hit bank accounts. People and businesses are hurting, and some relief is welcome.

My purpose here is not to debate the merits, the methods, or the size and scope of the bill that allows for these payments.

My purpose today is to start you down a path where your business is so solid, and your finances are in such incredible order, that next time you won’t be eligible for checks like these. To have a business that is resilient and able to weather the inevitable storms that come our way. A business that is able to generate the kind of cash flow that allows you to pay yourself and your team generously, pay your taxes on a quarterly basis, and build a “core capitalization” account that makes sure you have cash on hand when “stuff” happens.

It can be done, it has been done, and you can do it too.

At Fit For Profit, we contribute to building your business like this in two primary ways.

First is world-class bookkeeping. You have got to keep your books in order if you want to maximize the benefits of owning a business. Tax law favors the intentional and prepared. If every time April 15 rolls around you are running around like a headless chicken, stop it. Trying to get a business line of credit without good books? Yeah, good luck with that. Did you struggle to put together the paperwork for EIDL and PPP over the last year? A good set of books could have saved you a lot of hassle. And do you really want to do the books yourself? You could. There’s a lot of things you could do. But should you?

The second way we help you build a resilient business is through implementing the Profit First Cash Management system. Having your books in order is one thing. But having a system that puts every dollar to work in the right place at the right time takes your business to the next level.

When it comes to making strategic business decisions related to cash flow, cracking open QuickBooks doesn’t cut it. It’s a lagging indicator – it tells you what has already happened. At Fit For Profit, we guide you in implementing a system that allows you to see in real-time what is happening, and provide a logical way for forecasting what will happen. All while helping you create a more valuable business, for you, your team, and your clients.

Most of us have some mindset work to do when it comes to money. If you are getting a stimulus check, have you thought about how you are going to put it to best use? What will give you the most bang for the buck? Think invest, not spend. Some may think it’s a lot of money, and some not very much at all. But either way, it’s more than you had yesterday. How you use it can say a lot about how you view money.

Look, you can’t change what has already happened. If you are in a hole, put down the shovel and stop digging. Truth be told, I used to be horrible with money. Truly terrible. Debt out my ears, owed 5 figures to the IRS, the whole thing. There is a way out if you are willing to do the work.

And next time?

Personally, I’d rather there never be a “next time” for pandemics, or business shutdowns, or stimulus checks. But if there is, what are you doing now to be better prepared? To be “not eligible”? Building a better business means building a better future for you and those you care about.

We can help you make it happen.

Revenue Streams or Trickles?

There is a lot of thought/opinion/advice when it comes to diversification and creating different revenue streams within a particular business model. The “don’t put your eggs all in one basket” theory. And it sounds good. If one “stream” starts to dry up, another one will help mitigate total disaster.

Here’s the rub. Too often in a business, I see “multiple streams of income” become “throw a bunch of stuff on the wall and hope some of it sticks”.

When it comes right down to it, how many Revenue Streams does it take to have a great business?

Continue reading

Steady Salary Amid Uneven Revenues

I started my business as a tax preparer before I started serving as a Profit First Professional. One of the major issues of my business was the uneven revenue throughout the year.

From January to April, revenues were strong, so I paid myself a lot–and frequently. But after April 15th, revenues would drop dramatically. I’d be able to pay myself from the excess throughout the summer. But fall and winter months, I was barely able to pay myself anything from the business, if at all.

Here’s how Profit First allowed me to pay myself a steady salary throughout the year WITHOUT having to earn extra revenue:

Set-Up

The Profit First system required that we set up our 5 core accounts, and allocate predetermined percentages to each account. The core accounts are income, profit, owner’s pay, taxes, and operating expenses. Here, we’re going to focus on owner’s compensation because you deserve to be paid for the work you’re doing!

Lifestyle Lock

It’s important to establish a lifestyle lock amount, the amount you need to maintain the lifestyle you want to live. It’s what you will pay yourself each month, consistently.

The lifestyle lock puts a limit on how much you will take from your owner’s compensation account, no matter how much money is in there, to support your lifestyle. My lifestyle lock number was $3,500 a month. So, during tax season, even though my owner’s compensation accounts easily had more than $10,000 in there, I’d only pay myself my lifestyle lock number ($3,500).

Slow Months

Revenue would still come after tax season, but much slower. But because I only paid myself the lifestyle lock number, I was able to pay myself consistently throughout the year from the owner’s compensation account, well into the fall.

The post-tax-season revenue, although much slower, would make sure that money was still being allocated to my owner’s compensation account. And there was extra revenue built up there from tax season to make up for that lower revenue. The end result was being able to now pay myself year-round, as well as greater confidence in my business’s finances, and a much happier wife (true story).

No-Revenue Months

Every year, especially since implementing Profit First, I have at least one month where I do not generate revenue. Using the lifestyle lock helped (and still helps) me to take a month off, but still be able to pay myself in full. This is huge because typically when solopreneurs stop producing revenue, the impact on the salary is normally felt immediately. The lifestyle lock helped me to break the month-to-month, check-to-check cycle.

Conclusion

Profit First works and paying yourself with your own lifestyle lock works wonders for any business owner who experiences high seasonality with their income. It offers peace of mind for yourself and your loved ones and takes the stress out of the question, “Where’s my next paycheck coming from?”

If you’d like to learn more about how to even out your salary or take-home pay using the Profit First cash flow management system, we’d love to see how we can help you. Schedule an appointment, and we’ll talk about it!

Why You Need to Reverse Engineer Your Cash Flow Goals

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:

  1. First, you’ll need a profit assessment to determine exactly what you’re making in your business right now.
  2. 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).
  3. 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.

Pricing Tips from Erin Haag’s Success Story

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! 

It’s a win-win for you and your clients! 

4 Tips for Preparing for Your Year-End Plus a Bonus Tip!

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

  1. 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. 

  1. 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. 

  1. 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. 

  1. 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. 

Top 10 Tips to Increase Profits for Fitness Business Owners

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

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

Top 10 Tips to Increase Profits for Fitness Business Owners

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

  1. Revisit Your Current Prices and Make Adjustments as Necessary

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

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

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

  1. Bundle Your Services or Products Together

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

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

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

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

  1. Encourage Customer Referrals by Building and Nurturing Customer Relationships

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

  1. Cross-Sell Current Customers

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

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

  1. Upsell Current Clients

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

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

  1. Start a New Product or Service Line

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

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

  1. Expand Your Geographic Reach

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

  1. Curb Irrational Spending

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

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

  1. Maintain Your Focus

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

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

Connect with Shannon:

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

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.  

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit?  Click Here to find out!

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

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

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

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

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

Where to Begin When Determining What to Pay Your Team

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

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

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

Determining Your Pricing – The Short Version

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

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

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

Target Amount for Paying Your Coaches

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

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

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

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

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

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

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

Hourly or Salary?? – Pros and Cons of Each

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

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

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

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

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

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

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

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

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

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