If creating a financial plan weren’t hard enough, we are now faced with creating one in the midst of a pandemic.
Due to all the uncertainty, I’m sure many will be tempted to not do any planning. Benjamin Franklin’s famous quote, “If you fail to plan you plan to fail,” applies here. COVID-19 has affected different fitness businesses in different ways. The impact is largely based on:
- Location — For example, my facilities are in NY and were closed for six months.
- Business model — Those who were used to doing large group classes may have found it more challenging to adapt to the new guidelines (e.g. social distancing).
- Preparedness — Businesses that had little to no cash reserves were often faced with huge dilemmas as they saw revenues decline.
Regardless of circumstances, all businesses must face and plan for an uncertain 2021.
While the focus here will be on business, it’s also crucial for business owners to make sure their personal financial house is in order. Here are 3 steps you can take to develop a financial fortress during this extraordinary time.
While the focus here will be on business, it’s also crucial for business owners to make sure their personal financial house is in order. Here are 3 steps you can take to develop a financial fortress during this extraordinary time.
1. Hold onto your cash. Do what you can to keep your cash on hand right now. For example, you may be saving up to buy something such as a car, home repair or even a vacation. Depending on your situation, you may want to hold onto the money until things stabilize.
2. Keep your expenses down. Make sure you are prioritizing your basic needs. These would include food, shelter and clothing. Other than that, and especially if your income is down, turn off the faucet on other expenses that might be considered wants and not needs, until you feel like you’re in the clear.
3. Have an “Unexpected Event Fund.” This would be 1K to start and then ideally much more so that you can handle any emergencies without getting completely derailed. One of my favorite quotes is by Warren Buffet. He said, “It’s only when the tide goes out do you discover who’s been swimming naked.”
Assuming that things are squared away on the personal side, here are the key points when it comes to financial planning for an uncertain 2021.
Flexibility is key
“There is nothing permanent except change.” — Heraclitus
One benefit of all these changes is that it facilitates the ability to create something new and better.
Many fitness professionals had businesses that were limited by poor profit margins. In other words, they weren’t making enough money for their service regardless of the global economy. Now is the time to set a realistic forecast when it comes to revenue, but the focus should be on improving the profit margin on the services that are offered.
This may mean increasing rates, adjusting payroll or targeting a different type of clientele. In addition to a flexible revenue forecast, you’ll also want to analyze expenses. Here are some of the factors to consider:
- Payroll — Do you need to get rid of or shift team members who aren’t working out? Perhaps you need to hire.
- Marketing — It’s been said that the business who can spend the most on acquiring a customer wins. While there is some truth to that, it’s imperative the marketing budget is focused to produced the greatest results. Additionally, there are creative ways to get in front of prospects on a limited budget.
- Fixed expenses — These are generally those that don’t change, like rent. It’s definitely worth having a discussion with a landlord to see if there are any creative ways to move forward. An example would be rent forgiveness or at the very least rent increases being delayed.
Just do it
Like most things, financial planning begins with your mindset. Many fit pros lack the confidence bigger businesses have and neglect to do any planning.
Those that succeed learn the financial skills they need and take action.
It’s usually much more painless than they realize. “If you can’t measure it you can’t improve it.” — Peter Drucker
Action steps
- If you are still unsure how to create a plan for 2021, these steps will get you moving in the right direction.
- As mentioned at the start, keep your personal finances in order. Determine your goals and work on the next steps to achieve them.
- Pull an income statement from a normal year (e.g. 2019) and use it along with the information you currently have to begin creating a rolling plan.
- If your sales are stable or even robust, double down and finish the year strong. This will help you enter 2021 with an advantage.
- Adapt your program offerings to the current behaviors of your target market.
- Keep your risk down. In other words, don’t use credit cards to finance your business. This is a surefire way to go bankrupt!
- In relation to the point above, keep debt in check. Ideally, a debt eradication plan would be developed and at a minimum, you wouldn’t take on more.
- One final reminder, be flexible! Keep your plan in front of you and adjust each month if you need to.
“Change or stagnate. Keep moving or die.” — Mercedes Lackey
