Fitness professionals usually make one of two mistakes when it comes to spending money. In one scenario, they spend money on whatever feels good in the moment rather than basing it on a system or comprehensive strategy. This is a recipe for disaster, and entrepreneurs who do this oftentimes don’t make it, due to breaking the #1 rule in business: “Don’t run out of cash!”
On the other extreme is the fitness professional who makes the opposite, but equally pernicious, mistake. They are so nervous about spending, so they don’t. This can lead to missed opportunities for their business to thrive.
At the root of both of these problems is a lack of awareness around the finances. Having a good picture of the accounting, including an accurate income statement and knowledge of cash flow is paramount to making financial decisions. Even if you have a basic understanding of the numbers, hiring some outside help (bookkeeping, accounting, etc.) could be one of the best investments you can make.
It’s crucial to have structure in all areas of business, and finances are no different. Unfortunately, most fitness professionals simply don’t have the structure to keep themselves where their growth takes them.
Now that we’ve established a common root problem for poor financial decisions, let’s look at some common areas where overspending occurs.
- Personal Expenses: One of the first areas to look at is your personal spending habits. Fitness businesses, whether a one-person-show or larger operation can struggle when the owner needs to pull too much money out for personal use. Mixing business and personal expenses needs to be avoided. This makes it difficult to invest more in the business or save for the future. For example, paying for an expensive car or elaborate meals out can bleed the business of cash. To combat this, establish a “reasonable” salary and decide to live on a budget. You can always pay yourself more as the operation becomes more profitable. Once the “personal house” is in order, it’s time to look at the business.
- Equipment and Supplies: Regardless of how much you want something, it needs to fit into the overall plan. When purchasing equipment, ask yourself if you really need it. Will it bring in new clients or enhance the experience of current members, leading to better retention? If it checks the boxes and fits into the overall plan, then by all means, go for it!
- Marketing and Advertising: At some point, investing in marketing is necessary. With that said, it doesn’t need to “break the bank.” Tracking your return on investment (ROI) will let you know if your plan is working. If the ad in the local newspaper isn’t bringing in anyone new, it’s time to adjust.
- Renting or Leasing Space: While this is a bigger topic, it’s important to note the impact of this fixed expense. Too much space or a high-end area can dramatically increase overhead and quickly eat into profits. One of the keys in this area is to be prepared. For example, don’t wait until the last minute to re-negotiate your lease!
- Technology and Software: The right software can add efficiency and enhance the client experience. With that said, make sure it’s in your budget and fits within the values of your business. If you’re starting out and don’t have any clients, you probably don’t need an elaborate software system to onboard clients.
- Subscriptions: Subscriptions (even low-cost ones) can quickly add up. Make sure the subscriptions you have are being used and adding value to you and your business.
Other than these categories, keep an eye on things as a whole. It’s easy to overspend in areas you’re not paying attention to. For example, check and make sure that you’re not paying too much in liability or workers compensation insurance.
Once your overspending is dialed in, it’s useful to look at areas were you may be underspending.
- Continued Education: I may be “preaching to the choir” since you’re reading content from Personal Fitness Professional, but it’s crucial to stay up to date on the latest fitness trends and research as well as honing your business skills.
- Marketing and Advertising: This one made both lists. This is why it’s so important to know what’s working for your unique business goals and make decisions accordingly.
- Employee Compensation: While frugality can be an asset in business, this can easily be taken too far. We are going to need help along the way and it’s important to compensate fairly to help attract and keep the right talent. Compensation might also include additional perks like training and development, retirement plans, etc.
- Legal and Financial Support: This category is one of the most important for success, driving fitness professionals to pay close attention. Having relationships with good lawyers and CPAs can have a dramatic impact on your business. Legal issues, tax problems and financial mismanagement are only going to be costly in the long-term.
Carefully analyzing your budget and maximizing spending in these areas will help ensure long-term success and sustainability in your career. Additionally, this will help you to better serve your clients. Skimming on essential areas will only come back to cause more problems in your business and your relationships with your clients.
Billy Hofacker has been a personal trainer for over 25 years and is now passionate about helping Fitness Professionals become financially fit. Billy now lives 1,000 miles from his facility. He is the the host of the leading financial podcast for Fit Pros, Your Fitness Money Coach Podcast. You can learn more by listening to the podcast or by visiting www.yourfitnessmoneycoach.com.