Many fitness business owners we’ve spoken with recently have been experiencing slower revenue in the last couple months than their average revenue per month over a twelve-month period. It can be attributed to many things: nicer weather leads people outside for fitness rather than the gym, vacations take people out of town, etc. The reasons don’t matter; we want to minimize its effect on profitability.
One way to do this is PLANNING. If there are slower months, then there must also be faster growth months. When the revenue is higher than normal, put away the “extra” to help get through the slower periods. This is a perfect example of when in doubt, open an account. That’s right, here’s another account to consider.
The second way to minimize the effect on profitability is to have INDICATORS as to when it’s happening. The income account is the perfect indicator. If Profit First has been implemented for over 12 months, there is history in the income account that can predict higher and lower revenue months. If implementation is more recent, a daily check can tell if appropriate progress is being made to revenue goals. It’s important to know what revenue is needed to ensure current allocation percentages will cover all expenses AND owner’s pay, tax and profit allocations. Once the revenue goal is determined, it’s fairly easy to review the bank balances and determine if one is on track or not and adjustments can be made.
Finally, profitability is SCALABLE. Profit First is not a switch. It is a dial. It cannot be turned on and off but it can be dialed back. We never want the profit allocation percentage to fall below 1%, but if there hasn’t been enough time to see the indicators and plan for a small, short-term downfall, we can always go back to just the minimum PROFIT and keep the ball rolling in the right direction while we weather the Summertime Blues and wait for the Back To School Rush.
As always, contact us if you’d like help determining your revenue goals and/or bank performance indicators to be watching on a more regular basis than only when allocations occur. And, if you decide to dial back your profit allocations, remember you can also revert them back up faster than the quarterly changes we recommend when first implementing Profit First.