7 Financial No-Nos for Fitness Clubs and Studios
Health club owners often spend their days looking for new members and serving existing ones—not to mention managing staff, maintaining equipment, and more. However, staying on top of your business’s finances is just as important. But, if you’re like most health club owners, bookkeeping and managing money is not why you went into business or where you want to spend time.
If you don’t stay on top of your finances, the rest of your time won’t matter.
By avoiding these common small business money mistakes that many gym owners make, you can keep your business running smoothly and ensure its financial fitness.
Not having enough cash on hand
A lack of cash is one of the leading causes of business failure. Startup fitness clubs and studios often overestimate how soon they’ll make money, and more often than not, underestimate all the expenses they’ll incur from rent to equipment to staffing to marketing and more. But startups aren’t the only gyms and studios that fail due to having insufficient cash on hand to cover expenses. Once you have a steady flow of memberships and ancillary revenues, you can still run into cash problems if you have unusual expenses and no financial cushion.
Not taking the time to budget
As most people know, a budget gives you insights on income and expenses for a set period of time making it easier to manage your club’s or studio’s finances. If you don’t have a budget –or don’t utilize the one you have – it becomes easy to lose sight of future expenses or overspend based on anticipated income without knowing what is actually expected.
Waiting too long to access funds
By the time your gym needs an infusion of cash it is most likely too late. If your fitness club or studio is behind on payments or is failing to meet other financial obligations, it will be close to impossible to get the funding. The time to seek funding is when your business looks solid enough to get a lender to give your a loan or line of credit.
Overspending on startup costs
To avoid overspending on startup costs, it is imperative to create a realistic startup budget. Base the budget on facts, research, trends, and industry benchmarks. How did others in the fitness industry get their business off the ground? How long did it take to get to break-even? What about profitability? When did they hire employees? Where do they advertise? It is wise before starting up to work with a financial or management consultant that understands what it takes to get a fitness club or studio off the ground without busting the bank.
Mixing business and personal finances
While there is a time to mix business and pleasure, it is never smart when it comes to business and personal funds. Assuming you are the sole owner, it is key to have a separate bank account for the business and separate credit cards or line of credit or you’re going to have a tough time tracking how much money the business actually is making or losing throughout the year.
If there are times when you have to use personal funds for your business or business funds for personal expenses, the correct way to do it is to make a formal transaction and make a record of it. And, of course, if you have business partners, get them to sign off on the transaction as well.
Not tracking expenses
Recordkeeping is not nearly as fun as taking a HIIT class, but as a fitness club or studio owner, it is vital to the success of your business. Too often, receipts get shoved in a folder or drawer. E-mailed invoices wind up in your inbox with dozens of other daily messages and lost in the cyber clutter.
Then, once you finally get around to recording your expenses in your accounting software you may not have the information you need. Even more troublesome is that if you don’t keep impeccable records as you go along, you may find out too late that the cost of your cleaning supplies went up and the number of hours your front-desk staff worked increased, but you never raised your prices or collected an annual maintenance fee to help cover the costs.
Not charging what you are worth
Today’s fitness club and studio member is very price-sensitive, leading to competition based more on price than on services. Competition is fierce, but so is the need to charge the right amount to keep the doors open. Charge too much, and you could lose members to a $10 club that just opened down the street. Don’t charge enough, and you won’t cover the costs of the new group cycling studio you built.
The key is to charge a price that matches the costs to run your club or studio and turn a profit, as well as the perceived value of what you offer. Once you have done the study, which includes a demographic and geographic overview, as well as analyzing the competition, you can then figure out what you can charge and what you can offer for that price.
By avoiding these financial missteps, you can keep your fitness club healthy and growing. Need help with budgeting, analyzing the competition and setting prices, the Atwood Consulting team can help. Check us out at www.atwoodconsultinggroup.com, and take advantage of our free consultation.