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. 

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.

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!

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!

Remember when you were getting ready to launch your business? The excitement that you felt? All the hard work you had been doing was finally coming to fruition. Your space was setup and ready to go. Your equipment was gleaming. Your programming was the best you had ever crafted. Website up and running – check. Billing system ready to go. Time to open the doors!

And people did show up. And it was all good. Until it wasn’t. 

You see the problem with people showing up is that they are, well, people! With all their quirks, problems, likes and dislikes and personalities. We human beings can just plain be hard to deal with sometimes. 

Which is why it is so important that we focus on getting the “right” kind of people through our doors.

Need #2 on the Sales Level of the Business Hierarchy of Needs is Prospect Attraction

But not just anybody will do. 

The right kind of person for your business doesn’t mean that they are a good or bad person. But they might be a less than ideal fit for you and your gym. Every gym I have ever been in has its own unique personality. I’d fit in some, others not so much. It is crucial that you get this right, or you are going to be wasting a lot of time when it comes to selling. If you are a power-lifting gym, and you are getting a lot of interest from prospects looking for Yoga and Pilates, your messaging needs to be tweaked, just a bit. 🙂

In the beginning we just want bodies in the door, I get it. But as your business grows, you’ll want your message to be laser focused on the clients you serve best, AND the clients that will serve your business best. If your space is high energy, with lots of laughing and smiling and joking around, don’t be afraid to show that personality in your marketing. You’ll get more of those type of people in the door, which will only add to your already rocking place.

Look I know this isn’t a new concept. Client “Avatar’s” have been around forever. That’s not in question.

What IS in question is have YOU done the work to create YOUR ideal client? The client who has that specific need that for who your company is the perfect solution?

When you do, and you craft your marketing so it speaks to that person, you’ll attract the right kind of people to your business, save yourself a lot of time and money, make more sales, and create more profit.

Attracting prospects with that “Certain Quality” matters. We can help.

What are your company’s sales goals?

You have one, right? Ok, I am going to go out on a limb here and say you do have a sales goal for your business. If you don’t, no problem. I am going to explain to you the best way to set it.

For those of you who do have a sales goal, how did you arrive at that number? Was it based on past or current performance? What you have seen others achieve? What you thought sounded good? Something else?

I’ll be totally honest. When I set the revenue goals for our gym, it was driven by nothing more than ego. In fact, in the beginning, it wasn’t a revenue goal at all, it was the total number of clients. I figured when I hit 100 clients I’d be golden, never even taking the time to think what that actually meant revenue wise for the business. Or even more importantly, for me. (Yeah, I like to eat too). 

It wasn’t until I actually got to the “cord-cutting” stage until I considered it. In other words, I had been working another job that I relied on to pay the bills. I knew my take home and what I was making from that job. But how does that translate to the business? After all, $10,000/mo in revenue didn’t mean I was going to be shoving $10k into my pocket. But what did it mean?

And that’s where Lifestyle Congruence comes in. Fancy term, simple concept.

All it means is “How much does the business need to be generating for me to take home what I need to?”

In reality it’s probably the simplest of all the Fix This Next questions to figure out. But that doesn’t mean it’s going to be easy.

First you need to figure out the personal income you need to support your personal level of comfort. This is a need based number, not necessarily wants – not yet. For instance, when I calculated this number, I found I actually needed less than what the old job was paying me which meant my goal could be lower.

After you have calculated your personal income number, you need to know how much business sales income you need to be able to do that. Here’s an example:

You find that your personal comfort number is $5,000/mo – a nice round number. 

Then you calculate how much you are paying yourself as a percentage of your business sales income. 

Let’s say your current revenues are $10,000/mo and you are paying yourself $2,000/mo.

That means your Owner’s Pay% is 20%. (($2,000 / $10000) x 100%)

So to pay yourself $5,000/mo at that percentage you would have to generate $25,000/mo in sales revenue ($5000/20%)

$25,000/mo = $300,000/yr. You now have a sales number that is congruent with what your personal lifestyle number is. It is a realistic calculation of what your sales goal needs to be. Not a guess, or a hope or a dream. Real Life.

And of course that number can be adjusted and modified. Think of what can happen if you run your business leaner, and now can pay yourself 25%, or 30% or more? That is where the magic happens.

But you gotta know your numbers first. We have the tools and coaching to help you make that happen. Let’s talk about it.