This week, Chris Cooper explained exactly how to set up a profit-and-loss statement for a gym.
You can read about that here—and even get Coop’s done-for-you spreadsheet. It’s tailored specifically to a fitness business.
If you already receive a P&L statement from a bookkeeper but aren’t sure what to do with it, I’ll provide my Top 3 questions you can ask every month to move your business forward.
Keep in mind that you can always work with an accountant or bookkeeper to adjust your P&L so you get the info you need to improve your business.
3 Questions to Ask
Question 1: “What’s in the ‘income’ or ‘revenue’ number?”
It’s possible that you just get a “final number” from your bookkeeper, who might not understand the different revenue streams in your business.
But one number doesn’t give you a lot of insight into your business. Is your nutrition program solid or sinking? Are you surviving on recurring memberships but failing to add any new members who buy on-ramps? Are your PT clients re-upping their packages? Did your special event generate any revenue?
Our sample Two-Brain P&L will help you figure out exactly where your income is coming from—and how you can boost the gross-revenue total.
Question 2: “Which labor costs are tied to revenue?”
Wages are a big expense—sometimes.
Let’s say you spend $5,000 a month on labor, but half of that is directly tied to sales of on-ramps, personal training and specialty services. In that case, half the money you spend on labor is a great investment: It’s tied to new income. If labor costs tied to program revenue increase, gross revenue and profit are increasing, too—win!
For example, in a Two-Brain gym, the owner might pay a coach a maximum of 44 percent of the revenue generated by a kids program the trainer runs. If the trainer is earning $440, the gym is grossing $1,000—the $560 held after paying the coach is more than enough to cover fixed costs and ensure the gym profits. If the trainer takes home $880, the gym’s share doubles as well.
Other wages are paid no matter what happens to revenue. For example, your coaches and social-media manager get paid even if your classes are empty. If these labor numbers get out of control, you’ll need to make adjustments fast because they eat into revenue and profit.
Our sample P&L breaks staff pay into four lines: one for a GM, one for client success managers and other admin staff, one for class coaching, and one for “other.” That last line is automatically calculated based on on-ramp sales and secondary revenue streams, and if the number here is large, a corresponding revenue number is even larger.
Question 3: “How am I paid?”
In a lot of gyms, the answer to this question is “I pay myself whatever I think I can afford at the end of the month.”
This is not a good plan—you’ll always find ways to spend the money before it gets to you.
A gym’s P&L should have a section for “net owner benefit,” and it should have several lines. Two-Brain’s sheet has slots for owner’s pay for coaching classes, salary, dividends and other expenses the gym covers (like a cell phone, for example).
An important note: The owner must be paid for service delivery. If you coach classes for free, you’re hiding expenses and don’t have a clear picture of your business. Would anyone else coach for $0 an hour? No. So if you don’t pay yourself, you can never offload the role without jacking up your business expenses.
If you pay yourself fairly, you earn money for your family and account for expenses. If you ever want to stop coaching classes, the expense is already built into the business.
Second important note: If you enter your income needs in the spreadsheet, you’ll actually get paid. You won’t miss a check because you decided to buy a ski erg. I know the money to cover your wages doesn’t magically appear, but including your required income on the sheet is a forcing function: When you know what you need to earn, you’ll work hard to find ways to generate the revenue you need (a mentor can help you do it fast).
Know Your Numbers!
I hope that helps you get more out of your monthly statement!
You can always adjust a P&L to provide greater clarity. Ask your bookkeeper or accountant for help.
Or if you want a done-for-you P&L statement tailored to a gym, head to gymownersunited.com and send Chris Cooper a message.
