Just about everyone is a small business owner of some sorts. Whether you actually run a small gym, personal train, or just manage your own finances, you are responsible for the growth and development of your finances and goals.
The goal of all small businesses is to grow as a company and make money doing what you're passionate about in pursuit of your goals. Even if you are a non-profit, you still have the responsibility to raise money to be given away. The minute that your expenses start to outweigh your income, you are at risk. Therefore, it is important to approach your business plans and actions with some sort of strategy and plan. The proper strategy will not only help you grow as a company and increase your revenue, but it will also help provide you with some “smoother sailing” and lessen the chances of business turbulence (lessen, not eliminate).
Here are some strategies and business tactics to help you in the pursuit of your personal and business goals.
Know your profit generators and your growth destroyers.
Being able to study and understand your different financial statements is key in understanding what your business makes money doing and what it is losing money on. If you have trouble with this, it is imperative that you find a way to develop this knowledge. Buy a book (or several) or find someone to teach you how to understand your finances. Then look at your financial statements and see where your money is going and where it is coming from. Compare those areas of business with the greatest profit margins versus those with the least and work to understand how that affects your business.
For example, we'll say that you are a personal trainer who also sells some type of supplement on the side. When you look at your financial statements, you see that your training revenue is around $2,000 a month ($50/hour X 10 hours/week X 4 weeks), but your training expenses are around $1,250 a month [your gym takes 50 percent of training revenue ($1,000), you spend $100 on gas to drive to the gym, and you spend $150 on continuing education because you really want to be a great trainer]. So your training profits are $750 a month or about 38 percent of your total revenue. You picked up selling supplements to boost your income a bit. You get to keep 75 percent of all sales and you got all five of your clients to buy an average of $100 a month of supplements. In addition, you have five other non-clients who have also purchased $100 a month of supplements. So your total revenue from supplements is $1,000 and your profits are $750 or 75 percent. Looking at this example, you may identify yourself as a training business, but your profit generator is really selling supplements.
Once you understand that, you can make more intelligent decisions for business growth. Maybe your passion truly is training people, and supplements really aren’t what you want to sell forever. Taking what you learned from your financial analysis, it may be worth spending some time really building your supplement business to build up some working capital to open up your own facility. Then you can use the supplement sales as an avenue to bring in more personal training clients. Supplement sales could be your method for covering the expenses of the new facility so that you can now focus on training your clients.
You also need to be aware of what your growth destroyers are. These are anything that prevents you from growing your business. In the previous example, we'll say that a year into the business, you are now training 20 hours a week at the same $50 an hour and all your expenses are covered by your supplement sales, which have reached $2,500 a month. So you are making $4,000 a month from training, but you don’t have any time to train any more people because you spend so much time checking supplement inventory, taking and placing orders, and answering questions. Also, because supplements really aren’t your passion, you are starting to get burned out from dealing with it so much. It’s keeping you from doing what you really enjoy doing.
This is a growth destroyer. It would not be smart to ditch the supplements because they help cover the majority of your expenses. Instead, you might want to take $1,000 of your training revenue and invest it into someone to manage the supplements for you. Ideally, you should hire someone who is driven and passionate about supplements and who will grow the supplement side of the business. Meanwhile, you can focus on training and, over a period of six months, increase your training to an average of 30 hours a week.
So your initial investment of $1,000 into hiring someone resulted in you increasing your training revenue from $4,000 to $6,000. The person you hired to manage the supplements has been able to increase the supplement revenue from $2,500 to $3,250. From your initial investment of $1,000, you have increased your revenue by $2,750. By recognizing what your profit generators and growth destroyers were, you were able to make intelligent business decisions that allowed you to grow your business, make more money, and focus on what you were passionate about. These are very simplified examples, but they show what intelligent business analyses can do for you and your business.
Know who is on the bus.
The most important aspect of business is knowing who is on your “bus.” This is an analogy I got from the book Good to Great by Jim Collins. Getting the right people in the right seats on your bus (business) and getting the wrong people off your bus will accelerate your business growth faster than anything else. The greatest difference between the right people and the wrong people is that the right people are catalysts for growth, progress, and improvement. They don’t require as much management and they are self-motivated. They take ownership in the business and work hard to do a great job. On the flip side, the wrong people slow down progress because they require so much input through management and motivation. They do not take ownership and have trouble seeing past their own interests.
Finding the right people is extremely difficult. It is very important to take the necessary steps to attract the right people through fair pay, incentives, and growth opportunities. It is also important to establish a culture of excellence. Let it be known that anything less is not acceptable. Be patient when looking for the right people and try your best not to hire quickly to fill a position. It can be tough to gauge who the right person is at first, but after a while, you'll develop your skills and just know. Even if you don’t have a clear cut picture of what the person’s responsibilities will be, if you find someone who is the right person for your business, hire him and get him on the bus as soon as possible.
Don’t be afraid the to roll the dice.
Hopefully with some time and some smart business decisions underneath your belt, you will have built up enough capital so that you can invest in something. Money in your bank is great, but money sitting in your bank doesn’t do you any good. Of course, you should have some emergency funds to help you in case you need it, and you should have enough sitting in your checking account to handle monthly expenses and then some. What you don’t need is a huge checking account balance to pad your ego or soothe your worries. That is money that you could be using to grow your business.
Investing back into your business is vital for the growth of your company. Where you put that money will depend on several things. The first step, as we discussed, is to do an analysis of your business and learn what your profit generators and growth destroyers are. Also, look at who you have on your bus and where you could use someone. Whether you invest your money in assets, people, advertising or inventory is up to you and what is best for your business, but you must invest it. You should strive to win as a company, and a cowardly (or stupid) approach to finances is not a winning strategy.
I do have one rule that I go by—do not go into debt for liabilities. This goes for your business and your personal life. What exactly constitutes a liability is up to you, but for me, it is anything that doesn’t directly make me money or doesn’t have the high potential to make me money. This means credit cards are only used for points, not for credit. They are always paid off in full every month without fail. I do not take loans on anything other than assets. I don't have any student loans or car loans or loans for televisions, furniture or jewelry. This keeps my cash flow high and doesn’t drain my working capital. It also keeps me safe from bankruptcy. If the shit hit the fan and I had to, I could liquidate my assets and pay off any remaining loan balance. This approach ensures that I have money to invest and reduces the risk of those investments. It might mean that you have to drive a less than flashy car, but flashy cars aren't cool when you have to pay $500 a month to own one. I would rather take that $500 and put it into something that will turn it into $600. After time and smart decisions, that flashy car can be bought with cash and it doesn’t negatively impact your monthly income.
All these strategies and tactics have proven extremely useful to me. They aren’t anything that I came up with on my own but instead are skills that were taught to me. Now I am passing them on to you. The saddest thing in the world to me is seeing passionate, driven, and knowledgeable fitness professionals struggling to make a living. Hopefully, you can employ some of these to your benefit and turn your business into something awesome.