Top 3 Financial Difficulties for Gyms, Health Studios, and Wellness-Based Services
While getting yourself to a gym in the morning may be your daily hill to climb, running the gym facility could be a financial mountain for the owner. From identifying lurking financial risks to implementing growth strategy, LJ Suzuki, the founder of CFOShare has the advice needed for fitness, health and nutrition business owners for navigating all things finance.
Let’s face it – running a health studio is hard work. Even tougher than the cross-fit workout, pilates routine, or bikram yoga.We’re talking staffing, scheduling, marketing, paperwork, cash flow management, long days and sleepless nights. Amidst all this chaos, your advisors and mentors are probably telling you to be doing some budgeting and financial planning, but who really has time?
Building a strong business is no different from building a strong body. Do you remember your first time going to the gym? Maybe you were a meek teenager nervously trying machines with teammates, or an out-of-shape adult trying to get healthy. In either case, day 1 in the gym is usually intimidating and confusing. Planning business financials is the same. Where do you start? You want to spend less time worrying about cash, so maybe you open up google sheets and try forecasting. What do you do first? How much revenue will you get next month? How do you model payroll?
Maybe you take a class or watch a Youtube video, and quickly get lost in the terminology – margins, opex, working capital… I remember the first time I did yoga and felt like a fool as the instructor commanded various positions who’s names I had never heard. I frantically flubbed around on my mat imitating people around me and being embarrassed. Now, like me, you may be flubbing around on Google sheets trying desperately to mimic what you see on small business blogs.
It’s ok. That’s how everyone starts.
Fast forward six months – that meek teenager has a routine in the weight room, I have my sun-salutation down, and you have a weekly or monthly forecasting process. That’s how muscles, workouts, and good financial planning build up from nothing! With enough time and repetition, your friends will soon be complimenting your new tight body and growing business.
After that you have a choice: you can rest on your laurels and maintain, or you can challenge yourself to step up your game. That’s when an athlete would hire a coach. That’s when an entrepreneur should hire a finance professional.
I have on boarded dozens of clients at this stage and, like a coach correcting bad form, spend a lot of time rebuilding financial fundamentals to help the business shape up and grow. Here’s a list of the top 3 financial difficulties at this stage, and what kind of “workouts” you can do to strengthen and grow.
Not Using Pricing to Your Advantage
Pricing is like the diet/nutrition that compliments your workout. If you eat a healthy diet while starting a new exercise regiment, your body will have the tools to rebuild and improve itself; likewise, if you have a good business with good pricing, you’ll generate enough revenue and profits to reinvest in growth. But, if you have bad pricing, just like if you eat unhealthy food, you’re undermining your own hard work.
The most common mistake is under-pricing your service or product. Under-pricing tends to happen to new gyms or studios who are eager to get clients. They think, the lower the price, the more people will join. What you really end up doing is telling consumers your gym is cheap and low-quality before they even step foot inside. The most profitable studios usually offer a new service, unique ambiance, or specialized equipment, any of which demands a higher price than your competition. The higher price convinces the consumer you are superior to the existing competition and attracts them to your studio.
Not Taking Advantage of Seasonality
Health and wellness is a highly seasonal business in North America, with peak demand immediately following New Years’. During this time consumers are committed to permanent lifestyle changes to improve themselves, so you should offer a membership to fulfill this commitment. I recommend a full-year subscription, with a discount if you pay in advance. It’s a great way to help good clients fulfill their wishes and advance some cash.
In low seasons like June, July, and August you have two opportunities. First, encourage your staff to take summer vacations. This is a benefit to them that you can burn during low demand. Second, experiment with new products or services. Your thinner audience of devotes will be more tolerant of experiments, and iterative failures will go less noticed.
Not Performing Labour Planning
For gyms and studios, your #1 cost is employees. That means you can’t afford to not do both long-term and short-term labor planning. Failure to do so results in full classes (and thus missed sales) or empty classes. Labour planning doesn’t have to be complicated, but it does involve forecasting attendance. So keep good records, learn how to use a bit of excel or google sheets, and make a habit of doing labor planning every week.
Remember, business health, like personal health, requires sweat, perseverance, and a bit of pain. But if you get in good habits and have a good coach, it’s immensely rewarding in the end.