Like any small business owner, the first year in business is likely (hopefully) the hardest—especially when it comes to the financial aspects.
It’s easy to spend too much money—you’ve probably been told you need to spend money to make money—as you assume you’re investing in the future of the business.
But savvy gym owners also recognize the importance of running a tight financial ship in your first year. And if you’re smart, you can come out way ahead of the game.
Here are their financial best practice tips:
1. Don’t Buy Too Much Equipment
It’s easy to overspend on equipment. Who doesn’t want a shiny new gym with a fleet of 10 new Concept2 ergometers?
However, seasoned gym owners will advise that you keep your equipment offerings lean until your membership starts to grow. Grow your equipment along with your membership, they say.
And don’t be afraid to save money by buying second-hand. Below are some great ways to get deals on second-hand equipment:
University and club rowing boathouses replace their Concept2 ergometers faster than most gyms, meaning they often sell older machines for next to nothing. Reach out to local boathouses and ask if they have any machines they’re getting rid of.
- The internet:
From various social media forums to Craigslist, shop online for second-hand deals, especially from a gym that’s closing and wants to get rid of their stuff as quickly as possible.
- Post competition sales:
Often times people host competitions and sell basically brand new equipment at the end of the weekend. Keep your eyes peeled on social media.
One last note: Not everything has to be Rogue. There are other manufacturers that offer great deals and even free shipping. Local manufacturers are especially convenient, so check your local market. And, if you’re handy, there’s nothing wrong with home-built boxes, etc…
Get more tips on equipment purchases here.
2. Read Profit First
Gym owners recommended this book over and over again. Before you open your doors, read Profit First by Mike Michalowicz. It is designed to teach you how to develop a cash management system that will allow your small business to become permanently profitable. Michalowicz explains why the traditional accounting formula (sales – expenses = profit) is actually counterintuitive to human behavior and is not what’s going to help you become profitable.
Another useful book is Managing by the Number
While these books are a great place to start, the overarching idea is to do your research and educate yourself on the financial ins and outs of running a small business. It will save you potential headaches in the future and help you manage your finances better.
3. Don’t Grandfather Your Rates
So many gyms promise new members that the rate they signed up with will be honored as long as they’re a member. Here’s the thing: That promise isn’t what’s going to get someone to sign up. People aren’t that long-term minded (we’re all a little short-sighted, in fact). So don’t shoot yourself in the foot or, before you know it, you’re eight years in and your expenses have tripled, inflation has kicked in, and 30 members are paying half the amount they should be.
Instead, build a clause into your contract that states rates are subject to change each year. Nobody will bat an eyelash.
On a similar note, successful gym owners suggest that you don’t offer discounts right away. Discounts leave much-needed money on the table, not to mention people will come to see your business as the discount gym.
Learn more about setting your prices here.
4. Make a Budget
This seems obvious, but many gym owners don’t do it because it’s hard to predict initial expenses, so they just keep spending money as situations arise.
With that in mind, be prepared for your early budgets to constantly change. You should regularly check and track your expenses, so you can make appropriate adjustments to your budget on a monthly and quarterly basis. This will help you keep track of what’s truly coming in and what’s going out.
Some gym owners also recommend doing your own accounting in the first year, as this will help you become intimately aware of everything that’s happening financially.
5. Don’t Barter
Like grandfathering rates, it can be tempting to barter or trade services with a potential member. Gyms owners say, don’t do it! It usually backfires and you probably need the cash. Instead, pay a fair rate for each other’s services.
6. Apparel Faux Pas
Though you want to spread your brand, and selling apparel is a great way to do it, don’t tie up your money on retail inventory hoping to sell it one day. Instead, offer pre-orders of apparel to existing members and restock as needed.
7. Sell High-End Services
Offer high-end services like personal training, individual programming, or lifestyle and nutrition coaching (services you can charge upwards of $75 per hour).
You’re better off charging a premium for your services rather than coaching 10 classes a day with three people in attendance. In other words, offer group classes sparingly in the first year. It’s easier to add classes later than to take them away. Read more about class offerings when you first open here.
Not only will one-on-one time with clients help you generate more revenue, it will also help you build relationships and get to know your clients’ specific wants and needs—which is the key to client retention and long-term success.
Want more tips still? Check out these 8 profit hacks for new gym owners.