When looking at improving your business, your net profit is absolutely critical, as it determines the fiscal success of your business. Obviously, net profit is when you take all your revenue generated and subtract all your expenses, including taxes and depreciation. In part one of this two-part series, I discussed how to maximize revenues, and we looked at several ways to improve cash flow. The purpose of this article is to examine ways we can control expenses, increase revenue and maximize the profitability of your successful personal training business.
Let's first take a look at some areas you may be able to trim costs:
Marketing
Are you currently paying for marketing that is just not working? I recently terminated an advertising campaign I was using to drive more people to my website and, ultimately, our facility. Although we had used this service for quite a long time (more than six months), I was paying $69 per month. Because we now track where and how our new clients come through the door, I realized that this advertising wasn't working. Although $69 doesn't sound like a lot, that is $828 per year. The fact that we didn't have one client find us through this service made this an unjustifiable expense. I don't know about you, but there are a lot of things I can do with more than $800.
The lesson here is know your return on investment (ROI) on everything you invest in, especially marketing. Track your success. What areas do you need to investigate whether they are working for you? Some common areas that you need to examine when it comes to ROI include money spent on direct mailers, web-site search engine optimization, and print advertising in magazines, trade journal advertisements or local newspapers. As long as you are seeing a return on investment, great. I believe you may need to do one form of marketing for three to six months to be able to adequately gauge its success. I also know that your hard-earned money that goes into advertising needs to see a return in order for you to continue that form of marketing. While I prefer to see instant feedback from money spent on advertising, you are going to have some information after a few months.
I have often found that internal marketing strategies are excellent forms of advertising. It tends to be less expensive, you have already captured some of your key clientele, and you can make them your marketers. Client newsletters, thank you cards, referral cards, etc., all promote your services and often serve as a strong source of "word of mouth". Other great forms of inexpensive marketing include donating gift certificates for silent auctions, sponsoring a youth athletic team or volunteering your time for a local school.
Facility Expenses
For those of you who own or run a studio or business, you know that operating expenses aren't cheap. Between rent, electric, upkeep, cleaning and maintenance, new equipment, payroll, and amenities, the expenses can add up. A few simple things to remember to control these costs:
· Have staff turn out lights in offices when not in use — electricity is not cheap!
· Handle all equipment with care. It drives me nuts when I see trainers and clients "throwing" or "tossing" BOSU's on the ground or leaving an X-Vest in a place it doesn't belong. They don't know that each BOSU costs $129 or that each piece of equipment has a "home". Drive into your staff and clients the procedures and systems of how to handle your equipment. The cost of replacing equipment and supplies because of poor handling is pure apathy, and lack of understanding that all costs money. Own it, use it, clean it and respect it!
· Share your operating expenses with your staff. When your staff understands how much you pay for certain items (equipment, electric, repairs, cleaning service, etc.), I believe it gives them a greater sense of "ownership", that they realize just how "expensive" it is to run and operate a business. Then you can get buy-in from your staff to offset these costs by taking care of some of the things they can control.
Benefits Package Expenses
I absolutely love offering a competitive benefits package to my outstanding staff. A lot of time, effort, research and experience have gone into offering a solid package that gives them great benefits, yet it makes sense, from a business standpoint. Several years ago, when everyone at Fitness Quest 10 became "employees," I asked them as a team to rank what was most important to them: vacation time, pay/salary, 401K, health insurance, educational allowance, paid vacations, bonuses or other. As an organization, you must evaluate what makes the most sense to you. One mistake that I made in creating an extremely competitive package was that I was too aggressive in how much I offered in bonuses.
Despite being a studio with about 15 employees at the time, I learned the hard way to not overshoot what you can do when it comes to these expenses. Although it was great to provide some of my hardest-working staff a real nice bonus check that year, we had to amend that portion, because that expense was way out of proportion to what it should have been, from a small business perspective.
Employee Turnover Costs
Let's face it — a successful team is imperative, if you want to create a great organization. Employee retention is a big aspect in creating the continuity, energy and culture that you strive to attain. Additionally, it is extremely costly to turn over employees when they leave your organization, or when you fire them. The cost of advertising in trade journals or in the newspaper, the time it takes to review and interview prospects, the cost of training new employees and the transition time to ramp new employees up can cost you thousands of dollars. Measures to improve employee retention include:
· Ongoing education to staff
· Ongoing feedback on performance of staff
· Ongoing motivation for your staff
· Opportunities for growth for your staff (increased responsibilities, teaching opportunities, corporate opportunities, DVDs, etc.)
· Improved leadership to your staff
· Team-building events (annual parties, informal or formal gatherings, softball games, team retreats or any other ideas that the team produces)
· Staff acknowledgment and recognition in front of clients and meetings, catching them doing great things and providing positive feedback when they are doing a good job.
While it is never fun to control expenses and spending, it is absolutely imperative to have disciplined habits. This will ultimately increase your business profitability. Here are a few proactive measures and reminders to help your business generate revenue and thrive while accruing successful habits:
1. Know thy numbers. Personal training is a business, and it is imperative that you have a great tracking system that can print valuable reports to track your progress. If you don't have an efficient tracking system, invest in one that will ultimately save you time and money. In addition, hire a great accountant, so that he/she can provide invaluable feedback.
2. Create multiple streams of revenue. It is said that you should try to have at least five revenue streams coming through your business to maximize revenue. Examples to augment personal training may include group sessions or classes, Pilates, massage therapy, life coaching, retail items, developing affiliates or having a website designed to generate revenue.
3. Create a great website. In order to sell on your website, you must have a website that is designed to generate revenue. Invest in a website that delivers content, can communicate to your clients your message and can systematically handle credit cards, payments and the rest. Although a website may cost up to $5,000 or even $10,000, a great website is an investment that can do wonders to enhance your image, share your culture, educate your clients and drive in revenue.
4. Invest time and energy into developing your systems. In Michael Gerber's book, The E-Myth, he spoke of the importance of systems for your entire business, whether it is selling products on your website, how you give a tour of your facility, answering the telephone, opening/closing procedures for your front-desk staff, client payments, payroll or any other system at your studio or work. Writing your systems down will greatly enhance the efficiency and profitability of your business.
5. Focus on delivering a great customer experience. This is called creating "culture" and great service. Whether it is hand-writing thank-you cards, referral cards, birthday cards, following up with providing in-home programs or nutritional handouts or providing free samples of your retail items (green tea, protein bars, drinks, etc.) at your facility, this goes a long way in capturing an emotion for your client and enhances their experience with your business.
As a personal trainer, entrepreneur and/or business owner, it is important to know your finances. You want to generate as much revenue as possible, but you also need to be aware of your expenses. Keep your eye on the balance between what you bring in and what you spend every month. There is nothing wrong with being a "rain-maker", as long as you are not spending more than you're bringing into the bottom line. A successful, wise and experienced entrepreneur will focus both on maximizing revenue opportunities and minimizing risks and expenses.
Todd Durkin, MA, CSCS, NCTMB, is the founder of Fitness Quest 10, a leading-edge facility that provides personal training, strength and conditioning, therapeutic massage and bodywork, Pilates, yoga and nutrition programs. For more information, visitwww.fitnessquest10.com or www.todddurkin.com, or email Todd at durkin@fitnessquest10.com.
Oct. 10 2007
