You want your boutique fitness studio or gym to be the best. You likely even have an idea of everything your studio needs to attract more clients, compete against other studios, or fulfill the dream you set out to create.
In a quest to improve your gym, losing sight of your budget is easy- if you had one, to begin with. As we head into fall- a statistically strong season for boutique fitness, studio owners should ramp up events and marketing, but not at the expense of their bottom line.
We’ve talked about increasing profits by redlining your recurring expenses, but creating a budget for your studio is just as important. We regularly work with talented gym owners whose gross profits- the amount of revenue coming in each month- are impressive, but their bottom line- the amount of money left over once expenses are paid- is in the negative.
Before you plan your studio schedule for the rest of the year, check your numbers.
As a small business owner in the fitness industry, you’re busy; you don’t have extra time for anything that isn’t strictly required. It may seem unnecessary if you don’t usually operate with a budget. However, if you’re spending without a strategy, you’re paying out money that could be directed toward owner pay, long-term profits, or anywhere other than your credit card payments.
A budget for your fitness business will help you:
Before you plan where you’d like to spend your money, you’ll need to know how much of it you can reasonably expect to earn and spend. If you’re an existing fitness studio owner, you’ll also want to know your historical spending habits to give you insight into your gym’s average profitability.
If you have a bookkeeper or use an accounting software, pull your monthly comparison Profit and Loss statements for the last three years. It should include all the cash flow for each month side-by-side for easy analysis. If you were in business pre-Covid, you might also want to pull data from what you consider a “normal” year pre-pandemic.
If you don’t yet track your finances, it’s easier than it may seem. For smaller or newer gyms, you can begin by keeping track of cash flow in a Google template and following the steps below. If numbers and spreadsheets aren’t your forte, click here to check out our preferred partners.
Let’s take the guesswork out of your ending bank balance each month. Follow these steps to build your budget.
Step One: Calculate Your Revenue
To determine how much you can spend, you first need to know how much you reliably make each month. Tally up all of your income sources, including:
If you have an existing fitness business, try to include data for each of the past twelve months so that you have a complete annual outlook by month.
Step Two: Subtract Your Expenses
Expenses are comprised of two categories; variable and fixed. First, start with your fixed expenses, which are the same every month regardless of usage. These may include:
Next, include your variable expenses, including those required to run your business (like payroll) and those that fall under discretionary spending- which is nice but not required for regular operations (like a new certification for the owner). Other potential variable costs include:
Step Three: Give Yourself a Buffer
No budget is a perfect predictor of the future. Give yourself space for planned expenses- like a new pilates reformer on the horizon or taxes, and unforeseen emergencies- such as a flood that damages studio floors. Emergency wiggle room will save you stress and is a good habit for business and personal budgets.
Step Four: Put it Together
Sum all of the data for steps one through three. If you have profit and loss statements, your job will be more straightforward because your bottom line is already calculated for you. If you’re profitable, congratulations! If not, don’t panic. Both offer opportunities to look for trends, search for cost-cutting opportunities and plan for a more profitable future.
Step Five: Look Backward to Go Forward
Now that you have your finances mapped out, it’s time to predict (forecast)what the rest of your year will look like based on your historical finances. Unfortunately, no matter how you describe it, forecasting is guesswork. The key is using your P&L to identify trends to build a budget that supports your business.
Examine the P&L that you just created. There are likely areas to cut spending that are more noticeable than others.
Step Six: Check In
For each month and each category on your P&L, create a budget total that you’d like to stick to, and then hold yourself accountable. If you hit your supply spending limit early in January, try to postpone any new non-required purchases until the budget resets the following month.
Remember to congratulate or reward yourself for the months you stay under budget. Like your clients, you’ll build a habit if you stick to this new operating method in a few months.
If you’re regularly going over your allotment, it’s either time to redline your expenses or revisit your budget. Were you overly ambitious in your quest to cut spending? Or do you truly need to cut costs in order to ensure your studio stays in the green? Analyze your budget monthly to make sure you’re on the right track.
You probably didn’t open your fitness business because you’re passionate about budgets and bottom lines. However, a budget is your best tool to ensure your studio pays you back for all your hours.
This is a guest post by Shauna Armitage. Shauna is a Fractional Marketing Director who has been running her own business for quite some time now! Shauna works closely with teams to help them develop their marketing strategies and create successful campaigns to generate new leads; she also hosts a podcast called Startup Renegades.