First and foremost… it’s time for a giant collective exhale. We hope that you, your family and your studio community are all healthy and safe.
The last few weeks have been non-stop as we all try to do our part to stop the spread of the Covid-19 virus AND figure out new ways of working. For most studio business owners this means that we’ve had to bring our businesses completely online in a matter of days… a process that usually takes months… or even years.
But the wellness community is strong… and resilient. And we love seeing fitness business owners creating and expanding in new and different ways. Your ingenuity, your commitment to your team, the way you leading your community and your strength and perseverance is truly unparalleled.
One topic that’s been on all studio owners’ mind is how do I continue to be profitable as we weather this storm.
When times get tough it’s common to focus on your revenues – after all it is imperative to have money still coming in so you can maintain your business operations. We trust that you have been doing just that as you've had to get creative with your service offerings.
On the flip side of that profit coin is your expenses – and this means knowing exactly where every dollar you spend is going. Typically, we recommend that you evaluate all of your expenses at least once a year or when there is a major change to your business.
Given the fact that we are all having to navigate to a completely new way of doing business we’d say this qualifies as a change to normal business.
Here are 4 expenses you should investigate and make changes as soon as possible.
If you’re paying attention to the news, it’s clear that our physical health is not the only thing at stake as the economic impact of this virus is far-reaching. Each and every day we see employers laying employees off and some predictions suggest we may surge to over a 30% or greater unemployment rate.
Since this whole crisis started we’ve been focusing on how do we maintain employment for our team AND save the health of the business.
Unfortunately, this is a complicated dance we do because sometimes what is the best decision for the business may not benefit each and every employee.
As the owner your first priority has to be the long-term viability of your business so start by taking a fine-tooth comb through your payroll expenses. Ask yourself these questions:
During the shutdown is it possible are you able to use these team members in a new and different way? For example, if your front desk staff is not “working” because you are closed what other tasks can you have them do? If you truly have no work for them or you cannot afford to keep these administrative positions then unfortunately you may have to make the hard decision to lay some people off.
Additionally, if you have team members fulfilling multiple roles, you can consider having them only serve in their revenue-generating capacity only?
In our compensation plan, we offer additional compensation for continuing education, a monthly stipend (for healthcare costs), contribution to a retirement plan, paid time off and quarterly bonuses for exceeding goals. Because our revenues are down we have decided to freeze our continuing education allowance and the monthly stipend. In the grand scheme of things these are not huge savings for us as a business, but it was one way we were able to reduce our overall payroll expense in the short term. We will certainly look to re-integrate these additional benefits as soon as can.
First and foremost, we are huge advocates of a concept we call Owner’s Profit First – meaning when you set up your business you must budget so that you too can draw a regular salary or distribution from the business. If that is not yet the case for you, then let’s chat for sure! Waiting to become profitable is not a strategy to be profitable, and as the owner you absolutely must have some predictable income from your business.
With that said, we are in very unusual times and you may need to take a pay cut to weather this storm. We know this can be hard, and we only want it to be the case as a last resort. So.. take a good hard look at your salary and see if you can trim down your draw to free up some cash in the business. If you do take a hit to your salary please make sure it is only temporary and you have a defined period of time where this will be the case.
In our situation, we are cutting our salaries as a first line defense, but this is a very temporary solution to help us weather the storm until we can hopefully re-open soon. If this way of doing business continues then we will have to make some other cuts so we can continue to earn our normal salary. We hope this is not the case, but it will be our next level response to the crisis.
The second biggest expense in our business is our rent, and we are assuming this is the case for you too. Depending on your situation you may or may not have any leeway with this expense.
However, you won’t know unless you ASK! So our big advice in regards to your rent is to ask your landlord if there is any remedy or relief available for tenants during this time of shutdown.
Here’s some sample language for you to use:
As you know our business was mandated to close on ____ and we wanted to see if the landlord is offering any remedy or relief to tenants for the month of April since we will not be able to physically operate in the studio? We know these are unprecedented times and so many business and industries are being affected (including yours). As you know we are a small entity that depends on clients coming through our doors in order to meet our business obligations.
We have been working tirelessly for the last few weeks to transition our business to an online model so we can maintain some continuity of income. However. as you might expect this comes with challenges and a dip in revenue - one that we are anticipating to have a long-term effect on the health of our business.
As of right now, we are able to meet our obligations for our next monthly rent payment (due April 1), but in all honesty we are very worried about how to weather the month of April with the doors officially closed. Please rest assured that we are working to find new and creative ways to generate income while simultaneously cutting all non-essential spending as we are dedicated to maintaining our positive tenant history at ___________. However given the magnitude of the situation we are hoping to enter into a discussion about how to weather this storm and remain a tenant for many years to come.
We welcome a phone or Zoom meeting to discuss options.
Thank you so much in advance.
The bottom line is to ASK and see what your landlord may be able to do.
As you know there are operational costs to running your business, and over time these expenses can creep up. Here’s a checklist of items to monitor as you aim to monitor your operational costs.
Now that you have had to bring your business online are you incurring new expenses that you didn’t previously have? For example, you may need additional Zoom accounts, new headsets or microphones, video editing software, etc. If so, make sure you budget for these expenses as well.
Expenses are just one side of the profit coin, so make sure you take the time to understand both your revenues and your expenses. We like to use this adage, “your numbers are facts and they tell a story about your business.” We encourage you to get comfortable with the facts and make the changes needed to weather this storm.
Here's a sample document for you to manage both your revenue and your expenses.
There you have it! We know you are getting creative out there, and we'd love to hear how you are managing expenses in your studio. Have you had a chance to sit down and make sure you are operating as lean as possible? If nothing else, doing the work above will make you feel so much more in control of your numbers and give you the confidence to make the best decisions possible.
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