How do you know if adding a particular offering to your service menu is a good idea? How do you know if changing your pricing structure is a good idea? How many clients will you have in July of this year? December? Do you even have targets? Accounting for modest attrition, how many new people do you need beginning your program each month in order to hit those targets? What margin does your business make on each private training session that takes place in your gym? How much money is your business really making each month? How might you compensate a key manager in your business in a way that’s incentivizing the behavior you are wanting from them yet simultaneously in a way your business can continue to grow and be profitable?
95% of small business owners have NO IDEA how to answer the above questions. Most folks see they have a positive balance in their checking account and spend according to that balance. They have never been shown how to analyze different decisions to see whether or not they make sense.
I recently had a CrossFit affiliate contact me for feedback on a new pricing structure for their box. It sounded like a pretty good concept and the reasoning behind it (some pricing incentives based on how long a client was a member) seemed logical. The word doc I received to review the new model showed the yearly revenue per client to be the same as this affiliate’s current pricing structure. At first blush it seemed like a totally reasonable model. Alas the shortcomings of the simple word doc!
Truth is in the numbers, and a word doc doesn’t show everything we need to see when evaluating a significant change to one’s business model. Yearly revenue was the same for the first year only! When I projected the model out 3 years I found that the box would be profitable only during months 5-10 and would never be profitable again….in fact the model clearly showed the affiliate would be bleeding an increasing amount of money each month of operation!
I’m going to share some of the beauties of having a solid Profit and Loss spreadsheet from which to grow your business when I speak next month at the Black Box Summit on April 24-25th! If you are in the 95% of business owners that doesn’t know what’s REALLY happening month to month or if you are dreaming of one day opening your own box but have no idea how to project how much working capital you will need or how much growth might be reasonable in the first year, you will definitely benefit from my talk at the BBS! Hope to see you there!
So true, Nicki! Many affiliate owners are doing well despite not having a full understanding of their business’ financials. A P&L statement is one of the more basic aspects and every business owner should have a firm grasp on how to understand it.
Nicki, do you use Excel to track all finances? I’ve found QuickBooks to be a lifesaver! Just curious as to your method.
Hey Zach!
I used QB for 4 years, but actually now have a CPA do my books for me each month…it’s actually quite inexpensive and means I don’t have to do it
I take the expense reports from him and use many of the reports from MBO and plug that info in the PnL to project a path for the business to follow. I can also utilize it to evaluate a variety of outcomes based on changing any one variable in the spreadsheet.
I can’t wait! This sounds fantastic.
I propose attendees of the first BBS get a free recording of the excellent sounding lectures that will be at the second one! Seriously, it sounds like it will be a great BBS. Wish I could be there. Thanks for the info you put out.
Hey Jennifer!
There have been quite a few requests for recordings…I’ll check the status on that one
This is great information, thanks!
I agree with Jennifer!
Was also wondering about the excel spreadsheet you use. Will you be offering that at all, (with certain required inputs and formulas)? I would love a tool like that, but dont know where to start!
Thanks for sharing SO much great info, Nicki!
Hi Wynter!
Thanks for the kudos! At this point I’m not planning on releasing a generic template…I have been creating custom spreadsheets for some affiliates and other fitness businesses I do private consulting with. It takes some time to get it dialed for each unique business as well as teach the owner how to use it for maximum benefit in addition to holding them accountable for hitting targets…as in fitness so in business…accountability matters
I am interested in the way you do the spread sheet. My wife is the sole owner / trainer of Iron Horse Fitness (not a Crossfit Affiliate) She does predominately personal training and bootcamps. She is interested in growing and expanding her business, so I always keep an eye out for things that would help her. There is no way she can afford to go to the BBS, could you send me more information on your spreadsheet and your consulting services?
Thanks,
Jason
Jason- I will send you an email later today.