If your love of fitness is what drove you to start your own business, producing exercise programs that get results is what you do best. But owning a fitness studio or gym is about a lot more than helping people get in shape. For Gina Mancuso, founder of CoreFitness in Philadelphia and a licensed physical therapist and trainer, getting started was a “major ‘learn-on-the-job’ adventure.” Yup. Really major.
One of the steepest learning curves you’ll face as a studio or gym owner is staying on top of the finances—the expenses, the revenue and the seasonality of it all. One of the smartest things you can do—especially if managing money isn’t your thing—is find the right tools and experts to keep your business running efficiently.
“When it comes to understanding financials and tracking revenue, the best advice I have is this: Identify your strengths (and get really good at those), and then identify your challenges (know what you don’t know),” suggest Mancuso. Here are 4 ways to stay on top of the money as it comes in and goes out:
Look Beyond Overall Revenue
Analyzing overall revenue alongside profit is a given for any business. But to get a real sense of the financial health of your studio or gym, you’ll need to look at net profit. That’s what remains after accounting for all expenses, debts, operating costs and any additional income streams.
Once you establish a trend of how your net profit looks, it’s time to do a deeper dive into revenue. For example, if your studio offers Pilates and barre, how does each class compare from a profit standpoint? Is there a day of the week that brings in the most money? “In addition to looking at the revenue of my business as a whole, I analyze revenue per studio location and class type to stay on top of the financial performance of each part of the business,” says Catharine Rose, co-founder and trainer at Physicore in Australia.
Try ClassPass’s Studio Forecasting Model to generate a custom analysis and prediction of annual revenue, including how your individual classes perform. Learn more here.
Use the Right Tracking Tool
The easiest way to stay on top of your accounting is to use a tool that does the heavy financial lifting for you. Utilizing reporting features from your scheduling platform, such as MindBody or ClassPass, allows you to generate custom reports to see how much revenue a certain class brings in on a daily, weekly or monthly basis.
There are tons of accounting options out there so figure out your goals before choosing the one that will meet your needs. “I recently switched to Xero and so far it’s proving to be a user-friendly way to stay on top of my business accounting,” says Rose. The software streamlines invoicing, bank reconciliation, bookkeeping and more in one place, while also incorporating contact management and inventory management software, along with payroll capabilities and automated features. Quickbooks, one of the most popular small business financial tools out there, has many of the same features plus invoicing capabilities and a more established mobile presence.
Looking at the statements monthly to draw year-over-year comparisons will give you the perspective you need to continue to grow or diagnose problems.
No matter how busy you get, it’s important to regularly evaluate your financial statements. “I look closely at net revenues, gross profit and net profit for the month, to track how these numbers are trending over an extended period and draw comparisons between historical performance,” says Rose. “I also look carefully at costs, where they are being incurred and whether they can be reduced to improve the bottom line.”
Stay on Top of Your Cash Flow
Even with a healthy amount of revenue, you can still run into issues paying employees or vendors on time if you aren’t properly managing cash flow. You need to know when money’s coming in so you can budget when it can go out. Where do you begin? For starters, set up a schedule of when you expect money to come (i.e. monthly when you bill members or weekly when you process class payments). You should also schedule out when you plan to pay expenses—everything from salaries to utilities, rent, insurance and beyond. Then look at the cash you have in the bank, add in the money you expect to receive and subtract the funds you’ll need to spend for operating costs to come up with cash flow projections.
Once you get into the habit of making projections, you’ll be able to capitalize on busy seasons and manage anticipated shortfalls. Debbie Wolff, owner and director of Fusion Fitness and O2 Yoga, says she evaluates cash flow on a monthly basis, doing year-over-year comparisons so she can note changes in membership, online purchasing, and traffic in the studio. “We do a more thorough review of all finances which has led us to changes such as pricing increases and changes in our packaging,” Wolff says. “ Unlimited packages, which are nice to offer, are a financial strain and a drain to the bank accounts.”
Rose makes short- and long-term financial plans so she can forecast how her business should perform as well as account for anticipated costs. “In my experience, any potential cash shortfalls can be more smoothly navigated with advance financial planning,” she says.
Hire an Accountant for the Complicated Stuff
When it comes to complex financial questions, even the savviest business owners know there’s no replacement for a financial expert. Wolff and Mancuso use accountants who analyze the finances both monthly and annually. That kind of analysis is key when it comes to decision-making, strategic planning and finding opportunities to save.
“When it comes to financial literacy, we’ve connected with a well-versed accountant who specializes in small business development,” says Mancuso. “We have learned to look at specific metrics in a systemized fashion so that we can make necessary changes in a timely manner. She has been instrumental in guiding our company to financial health.”
To find an accountant in your area, ask around for recommendations from people you trust. It’s important to find an authority who has experience working with small businesses. Bonus points if they’ve worked with gyms or studios in the past as well!