To be successful as a fitness business owner you need to have a profitable competitive business strategy and then master 3 key business functions:
- Marketing your business effectively
- Delivering your fitness service promise consistently
- Managing your company’s money: payroll, accounts receivable, accounts, accounts payable, BAS (GST and PAYG), financial reporting and cash-flow management.
The challenge for many business owners is that they spend most of their time and energies in the one area where they are strong (delivering the fitness service) and so marketing and money-management suffer. In some instances, business owners don’t spend enough time marketing their businesses because they are weighed down by other demands of running their businesses which in most cases are not their core strengths (e.g. bookkeeping).
Although you are working hard to build up your business it never reaches its true potential. If you’re not effective in marketing, you’ll never maximise the true capacity and profit of your business. If you’re not effective in money management and bookkeeping you might suffer financial consequences like tax problems and suffering a reduced business value.
Tax problems can manifest themselves in different ways. You might be paying too much tax or you get an unexpected tax bill that threatens your liquidity.
Increasingly smart fitness business owners and investors are working in the functions where they are strong and outsourcing the functions where someone else can do things better, cheaper or faster. Some owners spend hours a week processing accounts, paying the bills and wages, and entering data where that time would be more profitably spent in marketing to increase revenue.
Consider the huge growth of franchised fitness operations. It is a classic case of outsourcing. The franchisor provides the brand, competitive strategy and the marketing for the franchisee to implement (#1 business function). Some franchisees work in their business, while some outsource, and some investors even outsource all operations to employees (#2 business function). That leaves the multiple tasks of money management and keeping good books. (#3 business function)
If you’ve ever looked at buying an existing fitness business the first thing that you’ll want to see (without delay) are clean up-to-date financial statements – preferably monthly statements that show the true trends of the business. Many business sales fall over because of the delay in getting accounts, or they are shoddy – full of personal items. The business might sell but for tens of thousands less than its potential worth.
If you’re focused on growing your business or one day selling your business, you’ll want to ensure that you have clean financial statements every month. Growing your business often relies on bank or investor finance and this requires ready access to good financial statements.
This all leaves the question about whether you should do your own bookkeeping or consider outsourcing it to a bookkeeping service to provide you with regular up-to-date reports and good financial control.
In managing the money of your fitness business there’s one task you need to do internally is reconciling your members’ direct debit payments. This is made easier with a number of billing companies that integrate with specific membership software. The other tasks (accounts payable, payroll and BAS) you can outsource to a bookkeeping service.
Many business owners also worry about having control. Of course business owners should have total control of the money, but that doesn’t mean you personally enter all the bills, compute payroll and lodge your BAS. If a business takes over $1,442 per week or $75,000 per annum it needs to be registered for GST and submit a Business Activity Statement.
To really control and drive their business, the owner/s should be able to sit down at the same time each month with last month’s profit and loss statement, balance sheet, bank statement and membership summary, to clearly consider how their business is performing compared to any targets they have set.
Reviewing your profit and loss statements, and setting financial targets (cash flow plan) are made much easier if you get your bookkeeper to provide profit and loss multi-period spreadsheet. This shows any number of months all on the one page in separate columns. This can help you identify the trends and calculate averages – especially expense averages – so that you can calculate your business’s break even.
When reviewing their accounts some owners even pay a business mentor or coach to sit in as a guest director.
To succeed, business owners should recognise where their strengths and weakness are – do the work where they are most effective and consider outsourcing where they are least effective.
This can help them maximise their business growth and value.
Author – David Hayes, Vertaccount Pty Ltd, email@example.com
David Hayes recently took the giant leap from Mobile to Bookkeeping simply because he was constantly confronted with clients who were great at marketing but lousy in financial management, and getting seriously unstuck. Saving businesses sounded like a good business idea.