Diversifying the services or products your business offers can either be your Achilles heel or your ticket to success. Having multiple profit centers or revenue streams (whichever you prefer to call it) is critical to the viability and growth of your business, but if not executed correctly, can cripple the growth of fitness businesses or independent professionals.
Any entrepreneur or independent fitness professional should periodically revisit their revenue streams to determine what's working, what's not and brainstorm new revenue opportunities. Here are three simple steps to ensure you are getting a positive financial return on the investment of your time, money and energy.
1. Create your money map
The best place to start is to create a simple "money map" for your business. A money map looks much like the brainstorm maps or webs you did in middle school when you had to brainstorm essays and reports. In this case, the center circle of your map represents your business and each extension from the center is a separate revenue stream. Your revenue streams are any product or service category that generates cash flow, whether present or future. For example, a group fitness studio's revenue streams may include memberships, special programs, personal training, coaching, retail, drop-in fees and special workshops. An independent personal trainer's revenue streams may include one-on-one training, small group training, supplement sales and online training.
2. Differentiate and categorize each revenue stream
Differentiate your revenue streams into three categories: your primary sources of revenue, your secondary sources of revenue and your potential sources of revenue. I suggest you prioritize by using your real percentages of total revenue. For example, a studio's primary sources of revenue may be memberships and special programs which make-up 60% of total revenue; the secondary sources being retail and other auxiliary services at 40%. Potential sources of revenue may include health coaching and corporate programs not yet offered by the studio.
3. Solidify your business systems and design execution plans on future opportunities
Before you tackle potential revenue streams (which always seem most exciting and are often most tempting), make sure the systems you have set-up for your primary revenue streams are rock-solid. You can't afford to sacrifice revenue from your primary profit centers at the cost of the time, money and energy required to market and support a new stream. Only explore new profit centers when your primary and even secondary revenue streams have solid systems and can maintain sustainable growth systematically.
Whether you're an independent fitness professional, own a 50,000 square foot health club or are somewhere in between, you must have a clear understanding of your current and potential revenue streams. This will not only give you a more methodic way of plotting out your business' growth, but perhaps more important, will keep you focused on maximizing profits and being meticulous about which new opportunities you invest your time, money and energy.
