The main emphasis of this article is to provide the perspective entrepreneur with a better grasp on the various costs involved in opening and operating a profitable personal training studio. The tasks have been separated into six (6) main groups and are listed in a chronological order considered ideal for planning your new venture. This list has been prepared recognizing that, in many cases, these tasks will be completed by one individual who will own and manage the new studio.
1. Set-up your corporation
- Determine the best form of incorporation (Limited Liability Corporate (LLC), S-Corp, etc.). It is best to consult your attorney and accountant to make this decision.
- Establish your team: your accountant and attorney are key advisors to avoid costly errors.
- Select the bank of your choice and open a business account. Opt if possible to use community banks and credit unions as they rarely charge monthly fees.
- File for a health club license with the appropriate state agency, if it is required in your state
2. Write your business and financial plan
- Free business plan and cash flow templates are available at http://www.score.org/resources/business-planning-financial-statements-template-gallery.
- Write your business plan and include your bio which focuses on your industry and education expertise in fitness.
- Include a synopsis of your competition with 5 miles.
- Project your source and use of funds to start-up your business. Based upon your cash position and personal credit, determine if you should purchase or lease your fitness equipment and non-fitness equipment such as signage, computer hardware and software.
- Your operating budget should include all expenses including inventory, supplies, utilities, property and liability insurance, employee benefits, income tax allowance and sales tax. The end product is a 3-year cash flow projection showing profitability by the end of year one. There is no one place to source this information; use industry experts for fitness insurance plans and inventory. State agencies can provide sales tax information and your accountant should be able to provide income tax estimates based upon your financial projections.
3. Find your location
- Most commercial realtors can provide a demographic study and a traffic count for each location.
- Negotiate a build-out allowance with your landlord as a source of funds to reduce the initial capital you will require. Use your realtor and attorney to reinforce your requirement for the landlord to prepare your space for use so that you do not have to use your working capital for build-out expense. In the worst case, quantify the build-out expense and request that same amount as rent credit for your initial monthly rent.
- Once you receive a lease document, make certain your attorney reviews the document and you negotiate any needed changes before signing any lease.
- Revise your cash flow projections to adjust for your rent, legal costs, lease deposit, build-out expenses and ongoing common area maintenance (CAM) charges, if any.
4. Create your annual marketing plan
- Set your marketing budget initially at 10% of your projected sales to attract new business. As you center becomes profitable, slowly reduce the percentage over time to no less than 4% to replace your attrition. For example, year one = 10%, year two = 7%, etc.
- Include a referral campaign to encourage your clients to bring in family members and friends by offering an incentive.
- Create community relations and offer corporate discounts by joining the local Chamber of Commerce.
- Plan your grand opening events for your new members and host a Chamber of Commerce event.
5. Product delivery
- Identify your Cost of Goods Sold (COGS) which are all direct costs associated with delivering your product and service. For example, you determine how you employ and pay your personal trainers for each training session and package sold.
- Plan long-term to include other certifications and continuing education to improve your business.
- Plan to set-up a maintenance program with supplies and inventory to offer a clean, well-maintained facility to your clients.
6. Administration and finance
- Select front desk club management software and hardware for monthly billing. Plan your operating budget for a one-month delay to receive cash from monthly dues revenue from the billing company.
- Select accounting software to keep current and accurate financial records.
- Apply to become a vendor for MasterCard, VISA, American Express and Discover to increase your sales. Remember to account for merchant account fees in your operating budget typically ranging from 2% up to 4% for credit card sales.
- Preprint contracts and new member packets in advance for your grand opening and daily use.
Since I have spent the majority of my career as a self-employed entrepreneur, I believe it is important to share that this journey is not for the faint of heart since there will invariably be many ups and downs. Your customers will become your bosses so you will not escape the challenges of pleasing someone who is paying your salaryâ€¦there will be just more of them! The good news is that self- employment will allow freedom for you to choose how to spend your time and what opportunities to pursue. Most likely it will also lead you in directions that you will never be able to anticipate, so being flexible and passionate are a few of the many keys to your future success.