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Zach Forrest, PushPress: Thank you for, joining another Push Press, Push Start webinar.
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Zach Forrest, PushPress: with tax season here, yeah, nobody loves taxes. Dan just made that statement. Nobody loves taxes, really. But with tax season here, a lot of gym owners, a lot of business owners are looking at their financial numbers.
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Zach Forrest, PushPress: Most of the time.
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Zach Forrest, PushPress: what we've found is they don't actually know what their profit and loss statement, otherwise known as a P&L, so we're going to say P&L throughout the webinar. P&L refers to the profit and loss statement. Most of the time, gym owners don't know
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Zach Forrest, PushPress: specifically what their P&L is telling them. And so today, I'm going to be joined by the one and only Mr. Brian Ong, PushPress's CFO, and Head of FinTech.
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Zach Forrest, PushPress: took me… I had to figure out what FinTech was, but you are the head of fintech, and we're going to break down
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Zach Forrest, PushPress: what a healthy gym P&L
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Zach Forrest, PushPress: actually looks like. And we're going to start with, one of the more important foundations, or we're going to be mentioning one of the more important foundations throughout the webinar, and that is having clean and organized chart of accounts, because that brings simplicity
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Zach Forrest, PushPress: to the P&L, and if it's simple and accurate, you're gonna be able to
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Zach Forrest, PushPress: Get more usable information from it.
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Zach Forrest, PushPress: So, with that being said, what I would like to do is figure out how to share my screen.
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Brian Aung: So, while Zach is trying to figure that out, hey everybody, I'm Brian, thanks for the intro, Zach.
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Zach Forrest, PushPress: Absolutely.
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Brian Aung: You know, we are talking today about…
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Brian Aung: Over here at Push Press, we like to think about things as two categories. It's either broccoli or chocolate.
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Brian Aung: And so we're… we're gonna be eating a lot of broccoli together today, and I appreciate, like, everybody here on the webinar. Sounds like everybody here has a very healthy diet, and we're gonna continue and dive into the P&L, taxes,
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Brian Aung: A lot of different topics, but mainly just trying to make sure that everybody has the right information so they can make the right decisions for their business throughout the year.
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Zach Forrest, PushPress: I figured it out, Brian.
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Zach Forrest, PushPress: Is it, is it, is it on your screen?
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Brian Aung: I see it. Let's go.
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Zach Forrest, PushPress: Let's… let's roll.
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Zach Forrest, PushPress: Cool. So, Brian, what is, what does the typical gym owner do when they're looking at their P&L to begin with?
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Brian Aung: I mean, I think when you describe, like, what a P&L is, you've heard, like, profit and loss.
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Brian Aung: your accountant probably asked you, like, give me your income statement. These are the things that, if you do your books on a monthly basis or a consistent cadence, like, these are all your income and all your expenses just put together in front of you and added all together so that you can kind of compare.
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Brian Aung: what's going on in your business. And so, the typical owner, I think that ranges widely.
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Brian Aung: I think most folks kind of fall into the bucket of, I have so many things that I need to do, that I really just look at my checking account.
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Brian Aung: And I look at the calendar and see when my payroll has to run.
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Brian Aung: And then, I understand, okay, I do the simple math in my head, I have…
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Brian Aung: 112 members, and I'm gonna get this much amount of money, I should be getting this much money, so that's pretty much, like, the typical, I would say, like, either day-to-day or even, like, monthly kind of synopsis of what a lot of folks do.
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Brian Aung: And, hey, we get it. Like, you're gonna be… you're underwater, there's a lot of things to do, and you're doing the best that you can.
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Brian Aung: You know, what…
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Brian Aung: What we would love to be able to help you out with is to zoom out a little bit, take a deep breath, and kind of understand
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Brian Aung: the gap that's happening, which is really… you gotta just get your books done. It's just one of those…
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Brian Aung: those things where you gotta eat the broccoli before you can get… you can get your dessert served. And so, really, the crux of this is, like, how can we provide you somewhat of, like, an easy blueprint to… to get your books done, and at least, like, look at it in a…
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Brian Aung: A little bit simplified way, and an easier way, so that it doesn't seem like it's such a hard, like, task to do.
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Brian Aung: What we consider, like, the rock star… Owner.
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Brian Aung: operator is just somebody that knows their numbers, like the back of their hand. There's going to be a lot of paths going forward, obviously, like, making sure that the lights stay on.
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Brian Aung: that could be at the end of the tunnel, understanding, like, hey, I'm gonna sell my business. All these things really come into play in understanding, like, what your numbers are, so that you can kind of dictate your journey in this, rather than have, like.
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Brian Aung: Life just dictate, like, and push and pull you along.
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Zach Forrest, PushPress: Yeah, the way you explained to me earlier, and when we were talking about this, yesterday, is the…
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Zach Forrest, PushPress: The profit and loss statement, if it's organized well, and it's simple.
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Zach Forrest, PushPress: it's not like a crystal ball. It's not going to tell you exactly what to do, but it's going to be, providing, like, guidelines. It's going to be providing,
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Zach Forrest, PushPress: Like, boundaries by which you know you need to operate in, or
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Zach Forrest, PushPress: guide operational decisions, as you put it, I think. So, that's… that's kind of cool. So, if we look at the P&L,
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Zach Forrest, PushPress: itself. What… what information is it going to be displaying, or how simplified do I want it to be? I know we were talking about the five… the minimum of five sections that we want in every P&L, right, Brian? And, they're laid out here. We got…
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Zach Forrest, PushPress: Cost of goods sold, operating expenses, non-operating expenses, payroll, and then profit. Obviously, you're gonna have revenue as the top line item,
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Zach Forrest, PushPress: But each of these categories could be broken down further, right?
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Brian Aung: Oh, yes, definitely, and I think that's where…
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Brian Aung: You know, we're gonna dive into, kind of, like, what the operating expenses are, what we consider operating expenses, we consider non-operating expenses, those are, like, the two big buckets that as long as, like, you can understand
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Brian Aung: what those add up to, you have a pretty good idea Of where the business is.
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Zach Forrest, PushPress: So, are you… I think we came to the conclusion that
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Zach Forrest, PushPress: In order to simplify the profit and loss, you should be able to collapse it or roll it up into these five categories.
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Zach Forrest, PushPress: Right? Now, there are probably gonna be…
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Zach Forrest, PushPress: exceptions to that rule. There will probably be some scenarios where you own a business that you have a transaction that fits outside of this, and I guess we could… we could address that in the Q&A, but, we're pretty confident that everything that goes on within your business, or the vast majority of it.
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Zach Forrest, PushPress: is gonna fit inside here. And this, I guess, is the breakdown of those categories, right? Can you walk us through this?
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Brian Aung: Yeah, so as we look at things, we really talk about the biggest expense of any gym
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Brian Aung: Studio type of business, which is your payroll, like, what it really costs you to help teach all the classes.
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Brian Aung: Show up at that 5AM class, like, open the door.
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Brian Aung: Just make sure that your clients and members, like, have a great experience.
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Brian Aung: That's gonna be your payroll.
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Brian Aung: Then you're gonna have what we consider your…
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Brian Aung: Operating expenses, so I'm gonna… I'm gonna jump a little bit, around. Your operating expenses are the things that you just have to make sure get paid to keep the lights on. So we're talking about rent to the landlord, or if you own the building, to the bank.
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Brian Aung: Utilities, any types of repairs, because you don't want that leaky roof. Licenses, the software that helps you keep the lights on, or at least, like, scale.
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Brian Aung: Any other, like, fees that are just related to making sure that tomorrow… Always keeps happening.
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Zach Forrest, PushPress: Then, you start talking about the non-operating expenses. These are what we consider the.
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Brian Aung: quality of life improvements. So, there's a little bit of a… you could be a little controversial here with sticking marketing in there, but we have a, kind of a reason why we're putting, like, marketing in there.
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Brian Aung: Meals that you have with, like, the staff, like, charity, any, like, one-type, one-time fees.
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Brian Aung: And then we have the owner benefits. Owner benefits are
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Brian Aung: Basically, what comes back to you as the owner-operator
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Brian Aung: And that can be distributions, your personal… wages, insurance.
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Brian Aung: Your cell phone that you use.
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Brian Aung: these are the main buckets that we kind of think about for the expenses, and I think Zach is going to dive a little bit more into, like.
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Brian Aung: How do we now think about, now that we've had all these things, like, added up.
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Brian Aung: What does that really mean?
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Zach Forrest, PushPress: So, when I look at this, I… my… as a business owner, I am immediately drawn to 3 of these categories, and it's payroll, it's what I pay my people, right? That is the heart and soul of any service business currently.
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Zach Forrest, PushPress: I don't know how AI is gonna change that, probably will at some point in the future, but it's like, payroll is such a…
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Zach Forrest, PushPress: A focal point of the financial system
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Zach Forrest, PushPress: in a gym business or a fitness business, that's gonna be major. Operating expenses, I view as just, hey, what do I need to pay out?
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Zach Forrest, PushPress: to exist.
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Zach Forrest, PushPress: Just to exist as a business, and in that space. And then non-operating is exactly what you said. Now, how do I improve the existence of the business? Through marketing, or through, any other things that you were talking about? You know.
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Zach Forrest, PushPress: Continuing education, maybe, or, maybe, like, a community event, or something like that.
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Zach Forrest, PushPress: I am curious, though, because we have way more categories here. Other income, I've always had that as, like, one-off,
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Zach Forrest, PushPress: revenue-generating events. Like, if I'm gonna go out and make an annual competition that I may not host every year, or if I did a…
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Zach Forrest, PushPress: corporate event where I trained, like, a whole bunch of people in, like, a team environment, and they paid the gym.
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Zach Forrest, PushPress: I would put that in other income. Is that… is that fair to say? Is that what that category is used for, Brian?
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Brian Aung: Yeah, if you look at your business, you, you really want to…
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Brian Aung: zoom in on the things that just happen all the time. And you really want to kind of exclude, or… not exclude, but not put as much importance or weight on the things that are just gonna happen, like, on a very, like, low occurring, like, type of basis.
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Brian Aung: Obviously, like, if you dive in, like, technically, your chart of accounts, when you're working with a bookkeeper or accountant, they're…
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Brian Aung: there's gonna be probably another 50 to 60, like, line items here. Yep, yep. But what we want to do is really just focus on the four… really, like, three, four categories, like, in front of us, the payroll, the operating, and the non-operating expenses.
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Brian Aung: And why, like, the owner benefits is there is we want you to realize what you're getting out of running this gym, at least, like, from an economic…
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Brian Aung: Perspective there.
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Zach Forrest, PushPress: I just saw Trish's question pop up. Trish, I want to hold that question to the end, because, the short answer is yes.
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Zach Forrest, PushPress: But… the reason…
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Zach Forrest, PushPress: we are narrowing down what could potentially be a list of 50 to 60 categories. The reason we're narrowing it down to these 3, 4, or 5 potential categories is because
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Zach Forrest, PushPress: in order to be successful, you really only need to focus on a few different ratios that are derived from those categories specifically. Now, you could argue that there are a whole bunch of ratios, or a whole bunch of calculations that you could, and I would probably agree with you. There is plenty of math to be done. However.
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Zach Forrest, PushPress: you will never find that you don't need to know these ratios right here. Your payroll ratio, your payroll as a percentage of total revenue generated
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Zach Forrest, PushPress: So what you would do is you would take your total payroll expense and divide that by the total monthly income, right? You're operating
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Zach Forrest, PushPress: costs as a total percentage of revenue, and then your net profit. Your net profit is usually… Brian, correct me if I'm wrong, net profit is usually that big number at the bottom. Sometimes it has parentheses or a negative symbol in front of it.
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Brian Aung: Yeah, exactly. I mean, if you… you go back to that other slide, like, to simplify it, you have your income.
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Brian Aung: And then you start netting out all your expenses.
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Brian Aung: And then at the end, at the very bottom, is what you have left. I think, Zach, you and I were talking about, like, having a pizza party.
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Zach Forrest, PushPress: Because, you know.
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Brian Aung: You gotta have pizza and broccoli, too. Freakin' love pizza. Like, as you invite more people to the pizza party, you're gonna have to keep doling out the pieces, and what do you have left? That's basically, like, your net income.
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Zach Forrest, PushPress: Yep, I like it. So, again, we're trying to simplify things. Now, the reason… We want these ratios,
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Zach Forrest, PushPress: to be highlighted. I'm gonna get into detail here in a second, but I want everybody to understand the math. Like, if you're looking at your P&L every month.
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Zach Forrest, PushPress: You can literally just take a few calculations, and it shouldn't take you more than a couple minutes to do these calculations. Find the line item, take payroll costs, divide that number by revenue. You should have your payroll percentage of revenue.
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Zach Forrest, PushPress: And if you guys have your P&L accessible right now, I highly recommend getting these numbers right now. Like, if you can look at your P&L and divide these two numbers, go for it. Then take your operating costs.
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Zach Forrest, PushPress: So what it costs you just to exist, not the meals that you took your trainers to, not, ad spend, not, you know, not… I wouldn't even put, like, the gym music if you're paying for $50 a month for Fit Radio, that's not in there, right? Get rid of all those costs. What does it cost you every month to just exist as a business? Legally, right?
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Zach Forrest, PushPress: And then divide that by your revenue. And then, obviously, you should have your net profit, margin, or that percentage of revenue, which is all costs from your revenue.
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Zach Forrest, PushPress: Now, before we get into why these are important, what they tell you, we want to have some baselines to go off of.
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Zach Forrest, PushPress: So, with those ratios, what we have found, working with plenty of gym owners over the… Brian, how long have you been doing this?
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Zach Forrest, PushPress: Years, right?
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Brian Aung: like, 12 plus years. Yeah.
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Zach Forrest, PushPress: We've worked with a ton of gym members, or excuse me, gym owners, and I looked at a lot of different books, and this is what we have found to be healthy guidelines for most group training service-based businesses.
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Zach Forrest, PushPress: Group Training Service-based businesses.
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Zach Forrest, PushPress: Payroll percentage should be 30-40%.
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Zach Forrest, PushPress: And this is also, considering that you've been open and you're a relatively mature business. If you start going past 45,
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Zach Forrest, PushPress: we have some issues that we need to flag. Operating costs should be below 30%. I've seen some decent businesses run, upwards of 35%, but if you cross that 40% threshold.
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Zach Forrest, PushPress: It's gonna get… it's gonna… it's… it's making it look…
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Zach Forrest, PushPress: Like, you're gonna have scalability issues.
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Zach Forrest, PushPress: So, we can talk about that here in a second. And, healthy net profit margin is gonna be between 15% to 25%. Brian, before I move on, is there anything that you want to note about those ranges right there?
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Brian Aung: I think, like, on the payroll side, it really depends on, like, the style and type of gym that you're running. And so, if you're heavy on more, like, PT, or small group training versus, like, group…
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Brian Aung: Like, you're gonna see those ratios, you know, move a little bit more in one way or the other.
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Zach Forrest, PushPress: Yep, that makes total sense. Yeah, so the model will dictate these ratios, especially the more a business matures, but,
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Zach Forrest, PushPress: Yeah, that's a phenomenal point that I hadn't actually really considered. The one thing before I do click forward.
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Zach Forrest, PushPress: you can be a quote-unquote successful business without a huge profit margin. 15-25% is what we see as healthy. If you're below 10% on a profit margin, it…
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Zach Forrest, PushPress: you can operate, and you can operate well. I just want to let owners know that there's very little margin for error.
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Zach Forrest, PushPress: if you are operating in a margin that small. So…
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Zach Forrest, PushPress: the 15% is what we see provides enough padding so that if you do have a slow month, or a month where, you know, a good chunk of your membership decides to leave the city, or, I don't know, something bad happens in your local market that causes a revenue drop.
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Zach Forrest, PushPress: that margin kind of protects you. So, that's why we have that 15-25%.
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Zach Forrest, PushPress: Let's look at a couple different scenarios, and I want to highlight the difference between driving a lot of revenue, or earning a lot of revenue, and being a healthy, sustainable business. So, here we have two different gyms. Gym A, we call Busy But Broke. They're generating more revenue. They have $25,000 per month.
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Zach Forrest, PushPress: Relative to Gym B, but their payroll is 52% of their overall revenue. Their operating expenses, 40%, and their net profit, like I said, is under that 10% threshold, so if something bad happens, this gym is in immediate trouble, they're unable to pay their employees, and they may miss rent.
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Zach Forrest, PushPress: But from the outside looking in, if this gym is packed and busy, everybody's going to assume, and even the owner might look around and assume, like, hey.
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Zach Forrest, PushPress: my classes are full, my staff is being paid, but why am I not taking any money home? Why am I not getting any funds to reinvest into the business to grow it past where I'm at right now? How do I get past 30K per month?
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Zach Forrest, PushPress: Or if you contrast that with Jim B, Smaller, but profitable.
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Zach Forrest, PushPress: They're taking in $22,000. We could take this number down to $20,000 per month, but they have more control over their ratios. Their payroll expense is right around 36%, operating is under the 30% margin safety net that we were talking about, and their net profit is going to vary, but it's right around that 20% area.
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Zach Forrest, PushPress: Now, in this scenario.
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Zach Forrest, PushPress: a business owner could decide, hey, I want to take this profit and spend more money on staff. I want to bump up what I pay my current staff because I'm going to have higher demands on them, I'm going to ask them to do more classes or something like that. Or, they could decide to take some of that money and put it towards marketing.
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Zach Forrest, PushPress: Right? And a lot of owners will inherently hear this and think.
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Zach Forrest, PushPress: Or hear this and inherently think.
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Zach Forrest, PushPress: sorry, I had that backwards, Brian. That, yeah, this is obvious, but the goal with these ratios is not to make the decision for you, it's to highlight where you could make other decisions. So, Brian, with these numbers.
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Zach Forrest, PushPress: what… why… Why is Jim A
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Zach Forrest, PushPress: going to grow broke. What is the future for Jim A if they keep doing what they're doing?
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Brian Aung: Yeah, I mean, I think you highlighted.
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Brian Aung: In some of, like, what you said already, it's just, you know that if your operating expenses are at a point that a majority of the revenue that you've generated just goes in and out immediately of your pocket.
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Brian Aung: Then you don't really have much breathing room in order to invest back into the business.
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Brian Aung: And a lot of these things are very much like business decisions when it comes down to…
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Brian Aung: your operating expenses, and your payroll. At a gym that…
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Brian Aung: we would consider, I guess, like.
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Brian Aung: Steady state, or at least, like…
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Brian Aung: Growing, and not… very different than if you're just starting off the gym.
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Brian Aung: Right now. But at a steady state.
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Brian Aung: knowing these numbers and looking at, like, your operating expenses and your payroll, I mean, those are the two biggest things that you can
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Brian Aung: And actually have control over.
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Zach Forrest, PushPress: Yep. Two biggest levers, like, I can't stress that enough.
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Brian Aung: And so… These are the things that we're looking for, and as much as it's common sense.
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Brian Aung: how much do you really look at these? And I can just ask the question, going back to, like, Zach saying, how many of you in the audience really know the numbers right now?
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Brian Aung: of your business.
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Brian Aung: And if you don't have that information right now.
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Brian Aung: how can you even compare and see and make these future decisions of, okay, where do I want the business to go? What are the levers? What are the other things that I can do in order to grow the business?
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Brian Aung: Or at least adjust where the business is right now.
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Zach Forrest, PushPress: Yeah, I… it's… it's interesting that most owners… it's interesting to us that most owners think they can fix everything by generating
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Zach Forrest, PushPress: more revenue.
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Zach Forrest, PushPress: And…
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Zach Forrest, PushPress: Actually, I guess I jumped the gun, because it's… we're going to talk about it here in this slide. If you just generate more revenue, but you don't address those ratios.
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Zach Forrest, PushPress: You can find yourself in a… in the same situation months down the road, or a worse situation.
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Zach Forrest, PushPress: So, when payroll starts to creep up past 45%, what that tells us is that you need… again, Brian, you spoke about this. This is for a mature gym, a gym that has settled into operations and has a membership that isn't wildly fluctuating, right?
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Zach Forrest, PushPress: A new gym is gonna look a little bit different.
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Zach Forrest, PushPress: But if you have payroll that's creeping past 45%, then you may be, undercharging relative to what you are paying your staff.
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Zach Forrest, PushPress: You also maybe overstaffing.
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Zach Forrest, PushPress: So, that is something that you should be considering. You have to look at what it says on the slide, your coach-to-client ratios, your pay structure, or your pricing. So, if your payroll… a lot of gym owners don't make that connection where it's like, oh, my payroll is up.
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Zach Forrest, PushPress: I need to look at my pricing? Yes, because your pricing needs to cover your MRR, what people pay for a monthly recurring membership, needs to be able to cover at least twice what your payroll is, at the very minimum. Like, if it doesn't cover that, then…
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Zach Forrest, PushPress: you're in major trouble as a group fitness, class-based business. The next thing would be, your facility costs, specifically your rent or your mortgage or whatever you're paying to stay in your building.
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Zach Forrest, PushPress: 25% of realistic revenue. Brian, we went back and forth on this.
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Zach Forrest, PushPress: What is realistic revenue? What do we mean when we say realistic revenue?
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Brian Aung: Well, if you… you think about…
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Brian Aung: Realistic revenue, is really, like, you look at the size of your building, and really the capabilities and the types of classes that you're gonna have.
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Brian Aung: And you know that you're not potentially going to be a $5 million business.
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Brian Aung: It's one of those things where you have to really take a quick
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Brian Aung: hard look in the mirror and say, like, hey, this is… if I was just running in an optimal kind of position.
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Brian Aung: how much revenue could I really generate?
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Brian Aung: And so, to take into account, this is why we're stressing the understanding the ratios of your operating expenses.
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Brian Aung: Sure, it's always great if you have a 10,000 square foot gym.
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Brian Aung: But…
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Brian Aung: How are you going to fill that gym, is really, like, that realistic, like, revenue type of question that we need to have answered.
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Brian Aung: as you start designing, like, what the pricing looks like, what the staffing kind of looks like, what… how you're supporting a 10,000, like, plus square foot, like, building. And so, that's what realistic, like, revenue is.
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Zach Forrest, PushPress: Yeah, essentially, the way I'm hearing it from you, Brian, is what is the most
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Zach Forrest, PushPress: what is the upper limit of your ability to hold members? Because if we talk about membership prices and membership sales, recurring revenue, being the lifeblood of any gym or any of these businesses.
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Zach Forrest, PushPress: what do I cap out at? So if you have a 5,000 square foot facility, and X amount of that, only 3,000 of it is training floor space, then you know how many people you can train in a given class.
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Zach Forrest, PushPress: And if you know how many people you can train safely in a given class, you should be able to know, hey, this is what my total membership could be at this location.
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Zach Forrest, PushPress: And if you take that total membership, and you multiply it by what you're charging.
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Zach Forrest, PushPress: Cool, you know exactly the top end of what you could possibly make from MRR. So, if you know that your building, your facility, could only service 200 people.
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Zach Forrest, PushPress: and you charge $200 a month on the low end or something like that, or that's your median, you… you can make the, let's say, safe assumption that you… your maximum potential is $40,000 in MRR per month.
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Zach Forrest, PushPress: But Brian, we're talking about realistic revenue. Is everyone operating at their maximum potential?
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Brian Aung: No, you're not, and you kind of think of it as, like, a… that's the finish line, and this is why these ratios really matter, because without knowing them, I mean, just like training a client, you have to measure, and then you assess.
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Brian Aung: And so, the realistic revenue is not just, like, the goal that you're trying to get to.
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Brian Aung: But at least it gives you a way to measure, so that you can figure out how to assess things, and you have to be realistic. You have to be… you have to look in the mirror, and you have to really say, you're not gonna hit that 100%, like, capacity.
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Zach Forrest, PushPress: Right.
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Brian Aung: But you will have to take, like, a haircut a little bit on that, and that is, like, the realistic part I think you're trying to, like, dig into.
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Zach Forrest, PushPress: So, if I know that my max potential in a given space is $40,000, and I've come to the conclusion that I think my realistic revenue, or MRR, is 30 of that $40,000, you're telling me that my facility cost should not be above 25% of that $30,000 per month.
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Brian Aung: Yep.
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Zach Forrest, PushPress: Cool. So that means I should not be spending more than roughly $7,500 to $8,000 to stay in my facility in that business model.
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Brian Aung: Yeah.
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Zach Forrest, PushPress: Was that math good? Was that good math? I did that in my head, Brian. I'm kind of impressed.
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Zach Forrest, PushPress: Right? So, okay, that's a ratio that all
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Zach Forrest, PushPress: Or, excuse me, that's a warning sign. Like, if your facility cost is already above 25% of that.
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Zach Forrest, PushPress: what does a gym owner do, or what does a business owner do? They look at this number, and they're just like, oh crap, I'm not at 25%, I'm at 33%, or I'm at 30… 35%. What…
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Zach Forrest, PushPress: how do I fix this? It's, it's my, it's my lease rate. What am I gonna do?
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Zach Forrest, PushPress: We'll talk about that later. I think that's kind of, like, a pretty complex issue. And the final thing is, I mean, this should seem obvious, but if your revenue is going up, if you're increasing the amount of money that you are pulling in per month.
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Zach Forrest, PushPress: but your profit margin, your net profit margin, is going down. That means that you have, developed a… an unscalable business structure. And…
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Zach Forrest, PushPress: I would highly recommend that… or not highly recommend, I would probably flag that it's likely due to payroll. What are your thoughts on that, Brian? If someone's revenue is going up, but their profit margin is shrinking, my head initially tells people to look at payroll.
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Brian Aung: Yes. And, you know, you go back to payroll, and you go back to, like, your operating expenses. Most of the time, like, your operating expenses
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Brian Aung: Are gonna be recurring fixed, and it's really the variable
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Brian Aung: costs are going to be your payroll, number one, and number two is, like, the non-operating pieces of the puzzle. And so.
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Brian Aung: we do get into, like, some interesting talks, like, with revenue rising, profit shrinking. Profit… having a high profit at the end of the day isn't necessarily the main goal. You're gonna have a lot of ebbs and flows when it comes down to
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Brian Aung: Number three, as you continue to grow and try to figure out how to scale. I don't think it's a… it's not a commentary that's a good or bad thing. If revenue is rising and profit is shrinking, it's still just a warning sign that, look, you're growing, that's great, maybe you… you…
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Brian Aung: Did some marketing, and now you have extra members that you have to support, and you have to hire new folks.
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Brian Aung: And you just have to get back to that steady state to understand and realize, okay.
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Brian Aung: this is where I can start to scale at a reasonable
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Brian Aung: Way, rather than just letting the train kind of get away from you.
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Zach Forrest, PushPress: Yeah, when I… when I hear about that, my mind immediately goes to payroll. However, it just popped into my head, and I should have had this in my notes. It could also be where that revenue is coming from.
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Zach Forrest, PushPress: Because we made the assumption that it's coming from membership. But if you are increasing revenue through retail products, or because you've decided to start focusing more on PT,
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Zach Forrest, PushPress: Those are typically higher margins, excuse me, lower margins to the owner.
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Zach Forrest, PushPress: So, retail margins, usually aren't really good for gym owners, unless they have, like, a t-shirt, and they sell a lot of t-shirts at a, you know, 50% plus margin. So, you have to look at where the new revenue is coming from, and if the new revenue is coming from…
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Zach Forrest, PushPress: hey, we did a sale on, or a discount on memberships. Like, what was that thing that people used to do in the back, or back in the day?
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Zach Forrest, PushPress: The 6-week challenge?
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Zach Forrest, PushPress: Was that it? Or they would do… what's… oh, Groupon! I'm thinking of Groupon.
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Zach Forrest, PushPress: Yeah, Groupon destroyed people's margins, because they would get a bunch of members, but for very little money. So if you're doing stuff like that, or you're selling more retail, or you're doing more PT, PT is a huge revenue point, but a large portion of that goes directly back to the trainer, back to payroll.
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Zach Forrest, PushPress: the… these are warning signs, and the goal is to be able to understand, like Brian said, you need to be able to understand why these things, why these shifts are occurring. So, now, with that stuff being said, I want to take a second. I want to go questions,
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Zach Forrest, PushPress: Trish, I love this question, but I'm probably gonna need a little bit more clarification. Trish goes, I feel like my payroll takes more of a hit because I want more time with my family. It's a personal choice, but am I putting myself at risk then? It's risk versus reward in some cases.
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Zach Forrest, PushPress: And, Trish, in the chat, confirm for me
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Zach Forrest, PushPress: Are you talking about when you want to take more time with your family, you now have to pay someone to do the work that you would otherwise be doing? Is that what you're asking?
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Brian Aung: Yeah, that's how I kind of read it.
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Zach Forrest, PushPress: That's how I read it. What do you say to that, Brian?
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Zach Forrest, PushPress: She responded, meaning I keep my payroll costs higher to work less.
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Brian Aung: Right. So, that is a…
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Brian Aung: business, like, decision. Like, when it comes down… I'll tell you this, I've seen businesses with, you know, higher payroll.
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Brian Aung: Lower profit margins, and it depends on
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Brian Aung: How much you value, like, the time outside of running the gym.
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Brian Aung: The community that you're building, and maybe this is much more of a… your story arc is that, which is actually typical, you have a full-time job, and this gym is not really your full-time,
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Brian Aung: responsibility. But you do this kind of as a hobby, and you're running a low profit margin, then you're okay with that.
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Brian Aung: And yes, I think the… the nuance here is, when you…
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Brian Aung: want to take time away as, like, the owner-operator, you're gonna have to put… you're gonna have to hire out somebody, like, either a general manager, or put more responsibility on your staff, and in turn, it will increase your payroll. Is that a risk?
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Brian Aung: It can be if you're just thinking about pure profit and money to keep the lights on, but so long as… and this is why it goes back to kind of the ratios and just understanding your ratios, are you putting yourself in a bad range?
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Zach Forrest, PushPress: Yeah, that's a good question.
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Zach Forrest, PushPress: Yep.
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Zach Forrest, PushPress: I wanted to go back to this one, because I think it'll help. We have this on here, but we didn't really talk about it beyond describing net owner benefits, or the owner benefits. And Trish, this might address
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Zach Forrest, PushPress: your concern, but Brian's answer is spot on. Like, the goal is not to be in the range just to be in the range. The goal is to understand why you are, or why you are not in the range. If you're in the range, and you make a decision to go outside the range because it improves your quality of life.
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Zach Forrest, PushPress: That's… that… hey, guess what? The business is serving you. It's exact… the business is doing exactly what you want it to do. So, in that case, for your specific…
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Zach Forrest, PushPress: scenario, it's completely fine. Now, here's what I want to, brian, and correct me if I'm wrong here, Brian, because I think this is important for everybody to get simply.
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Zach Forrest, PushPress: As an owner, we encourage people to separate the work that they do as an employee with the things that they like to do as owners, and if you are doing work in the business.
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Zach Forrest, PushPress: that you would otherwise have to pay someone to do if you were to step away from day-to-day operations. That should be included in payroll.
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Zach Forrest, PushPress: That work should be included in payroll, because if you're not doing it, someone else has to do it, and your payroll would go up. So, if you're including that in payroll, awesome.
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Zach Forrest, PushPress: is now… is that ratio higher? If it is, as a result, if it's in the unhealthy range, then we need to look at, hey, how is my staffing? How is my scheduling? Am I running enough classes or not enough classes? Am I charging enough?
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Brian Aung: We're definitely getting into the weeds here, and we could talk probably hours and hours on this. I know I could. I know you could, Zach. I think we have before.
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Brian Aung: I think the biggest takeaway… the biggest takeaway really is, like.
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Brian Aung: Do you know, like, what the ratios… where you stand right now? Measure and assess. The same thing we do with coaching. Like, just measure and assess right now.
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Zach Forrest, PushPress: Brian, did you have other questions that you got from, the community that we had, that we wanted to address on this recording?
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Brian Aung: I mean, I got one for you, Zach, which I've seen before. We see a lot over here at PushPress, is really, like, starting a brand new gym, and I know it doesn't apply to everybody, but how did, like… you just opened up a gym, Zach.
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Zach Forrest, PushPress: Yep, yep.
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Brian Aung: I want to ask you, like.
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Zach Forrest, PushPress: We are in week number one. Well, no, technically week number two, I guess, but yeah.
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Brian Aung: Like, how are you thinking about these ratios?
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Zach Forrest, PushPress: So I think if you're a new gym.
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Zach Forrest, PushPress: and you're looking at these ratios, I think the most important part is that you are trending towards the healthy ranges. I think you're operating… especially if you're starting with zero members, your operating expenses, if you're… hell, if you're negative, I mean, that's…
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Zach Forrest, PushPress: skewed already. Like, if you're not generating more than what you're spending, which is, you know.
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Zach Forrest, PushPress: Probable, if you're a brand new gym.
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Zach Forrest, PushPress: I think the most important part is to be trending in the correct direction as soon as possible as a new gym. What you're going to see is that your payroll is probably super low, your non-operating expenses should also be relatively low, but your operating expenses are going to be a huge portion, if not over 100%, of the revenue that you're generating. So…
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Zach Forrest, PushPress: You kind of have to accept that fact, but hopefully, as you were opening up a gym, you accounted for that.
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Zach Forrest, PushPress: Right?
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Brian Aung: Yeah, the operating expenses, that's the first mountain to climb.
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Zach Forrest, PushPress: 100%, yeah. So my first goal is I have my break-even number, amount of members that I need just to break even on operating expenses. My goal is to get there within the first 45 days of operating, and then
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Zach Forrest, PushPress: Then I start thinking, okay, how much needs to go to payroll? Cool, now how much do I need to get the non-operating expenses covered? That's the order in which I operate, or which I build the business, or spend the money, I guess. That's the fun part, Brian, is spending the money.
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Brian Aung: We…
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Zach Forrest, PushPress: Were there any other questions that we wanted to go over?
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Brian Aung: I didn't see any on the chat.
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Zach Forrest, PushPress: I had some that people asked, if… how often should I be looking at my financial reports, specifically the profit and loss?
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Brian Aung: Yeah, I mean, at a minimum, like, just every month.
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Brian Aung: It's just one of those things that every business… You have to…
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Brian Aung: it's the easiest answer to say, because once the month rolls over and ends, you're like, okay, let me just do a quick recap. What did I learn? What did I do wrong? What can I adjust and do better this next month? So, the short answer is, like, every month you should be looking at it.
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Brian Aung: And the caveat to that is it's garbage in, garbage out. If you're looking… if you really haven't put work into your books, or the bookkeeper hasn't helped you put work into the books, and you're looking at… if you're looking at garbage, then you're gonna just see garbage, and you're not gonna be able to get, like, the…
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Brian Aung: the right… You know, idea of where you're at.
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Zach Forrest, PushPress: I mean, that's a perfect segue into the final slide here.
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Zach Forrest, PushPress: we have two… two things that we're giving out here. The QR code's up on the screen right now. The one on the left-hand side… Ryan, I'm still amazed with your generosity here. You're… you're willing to give a 30-minute session to anybody that wants to book a chart of accounts review or a P&L review with you, correct?
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Brian Aung: Yeah, and I'll tag you in too, like…
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Zach Forrest, PushPress: I would love to do that, yeah, absolutely. But, I mean, so essentially, if you guys, if you're listening to this webinar, or if you want, if you're on the webinar right now, if you want to go through your specific circumstances with either one of us.
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Zach Forrest, PushPress: Use that QR to book, book a call, and we will help you simplify, organize, and derive the information that you need from your P&L in order to make better decisions. And then on the right-hand side, Trish, you asked the question earlier in the
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Zach Forrest, PushPress: in the webinar, have you guys found a bookkeeper in this space that you would recommend? Yeah, it's us. And we're not trying to pitch you or anything like that, but Brian, did we start a bookkeeping service?
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Brian Aung: Yeah, we did, and it is something that we've been thinking about, actually, for years and years and years. Like, I am such a big nerd, I have such, like, OCD when it comes down to things. I actually did the books for Push Press for many, many years.
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Brian Aung: Only… only was able to stop, like, 2 or 3 years ago.
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Brian Aung: But, I love, like, bookkeeping, because it just brings you such…
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Brian Aung: insights into how you run your business. And without that, it's the crux of a lot of things that we do here at PushPress also. Every month.
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Brian Aung: We make sure that we look at our books and understand, like, what's going on and what adjustments we can make.
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Brian Aung: But I'm gonna stress, like, take us up on the… The 30 minutes,
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Brian Aung: happy to do a bit more, too. Your success is our success over here. I want to make sure that everybody is comfortable
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Brian Aung: And I know that not everybody has, like, the resources sometimes, of who to go to, and so…
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Brian Aung: this is why we're putting on this webinar. I think one of the follow-up questions a lot of folks are gonna have is, like.
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Brian Aung: Well, what is this like? Net operating benefits? What's this? How much is my gym actually worth?
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Zach Forrest, PushPress: Oh, I'm glad that you brought that up, because I was about to talk about it, yeah.
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Zach Forrest, PushPress: And go for it.
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Zach Forrest, PushPress: Well, I was just gonna say, you and I were talking about that question that we get all the time. Okay, my books are organized, I understand my P&L, can I use this to help me understand how much my business is worth? What if I want to exit? What if I want to sell? How much should I ask for? And…
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Zach Forrest, PushPress: Now we're getting it… we can… we can talk for, like you said, hours about this stuff.
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Zach Forrest, PushPress: But you can't get to that…
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Zach Forrest, PushPress: conversation until all this stuff happens first, right? So, I think.
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Brian Aung: Yeah, eat your broccoli first.
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Zach Forrest, PushPress: Yeah, I eat your broccoli first, yeah,
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Zach Forrest, PushPress: I don't. I always go for the chocolate first, but we agreed. We're gonna do another webinar on how to use your P&L and other financial statements to figure out the value of your gym, right? We're gonna do that?
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Brian Aung: Yeah.
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Zach Forrest, PushPress: Yeah, and the goal here, guys, if you're still listening, right, the goal here is not to turn anybody into an accountant. It's just to give you guys enough clarity, to spot patterns and make better decisions using your financial statements. We started with the P&L today.
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Zach Forrest, PushPress: So, it only works on the profit and loss if your books are clean, they're organized, and you know that the data is not garbage. It's something that you guys can trust.
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Zach Forrest, PushPress: So, on the left-hand side, use that Q&R code if you want to talk with me and Brian about your specific scenario, and go over your P&L. And then on the right-hand side, you guys can join the waitlist for, the bookkeeping services that we have.
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Zach Forrest, PushPress: It's done-for-you services. Clean, categorized, ready to act on. So, hit us up and take us up on that offer, and then stay tuned. Brian, we're gonna do it probably here in the next couple months, a webinar on how much is my gym worth? Or what's my business worth?
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Brian Aung: Yeah, we're gonna be serving up a whole ton of broccoli, like…
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Zach Forrest, PushPress: Of all the brides.
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Brian Aung: In the next few months.
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Zach Forrest, PushPress: Awesome. Hey, Brian, thanks again for joining us, and thank you, everyone, for listening, another Push Start webinar. We will talk to you guys next time.
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Zach Forrest, PushPress: Take care.
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Brian Aung: everybody. Thanks, Zach.
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