For the next few months, your cash flow is your top priority.
You can survive a recession—and you might actually grow. As I shared in the first post in this series, some businesses actually grow during periods of economic volatility.
During COVID lockdowns, many gyms trimmed non-essential expenses, focused on their highest-value clients and doubled down on service delivery. When they emerged from lockdown, they were leaner and tighter, and they grew quickly as a result.
Here’s your plan to manage your cash flow in the short term.
Focus on building your one-on-one and higher-ticket services. High-income clients are less affected by recessions. Don’t turn off your group option, but expect a bit more churn in your lower-priced coaching options.
Increase the number of touchpoints each client gets. Don’t leave them alone to wonder about your value or their budget. Many gyms are getting really good at “lead nurture” but then stop the calls and texts when the client signs up. You must sell your client on the value of your service every day; don’t assume they always see it.
Set up three-month plans for each client. Book their Goal Review Sessions, measure their progress, and then show them their optimal path for the next three months. People cancel recurring subscriptions, but they’re reluctant to give up on a plan halfway through. You don’t need to sell them a three-month contract; just review their goal, make a prescription, and show them how they’ll reach the goal.
When coaching workouts, tell every client how the workout is relevant to him or her or how to tweak it for his or her goals.
Publish tips on maximizing their grocery budget or how to trim other expenses instead of their fitness. (Two-Brain gym owners: We have a sample letter for you to use. Ask your mentor for the template!)
The bottom line: You’re running a coaching business. While access-only gyms are going to suffer (again), your clientele will be less affected. Just help them make smart decisions in advance.
Perform an expense audit. Print out a list of monthly expenses from highest to lowest. (Two-Brain gyms, you can use the form in the Toolkit to perform this exercise quickly and painlessly.)
Start by eliminating expenses that don’t give you a positive ROI. Look at each expense and ask, “Do I make money from that investment each month?”
If you don’t, look first for a way to make money from it. Ask your bookkeeper, “How can I leverage your service better right now?” I’m sure he or she will have an answer; I’m also sure few people ask.
Ask your mentor, “What’s the best thing I can do to get the best value from your service this month?” He or she will tell you. (I wish everyone asked me this question.)
I listed mentorship and financial advice first because whenever a crisis hits, the first people I call are my mentor and my CFO. When times are tough, I need them more than ever.
Continuing down the list:
Examine your staff. Where are you getting a great ROI? Do you have a management layer that doesn’t produce revenue? Remember: Your staff should generate a return of 2.25x their cost. They do that by serving your clients so that you can spend time growing the business. Are you spending time growing the business every day? If you’re not sure how to grow your gym, ask your mentor.
Ask your part-time coaches, “Do you want to coach right now or do you want to take more shifts at your other job?” Give more work to your full-time coaches (just don’t exceed the 44 percent salary cap).
Finally, write a “cut” plan. You added expenses as your revenue grew; you must shed them if your revenue shrinks. What will you cut if your revenue drops 10, 15, 20, 25 or 30 percent? Plot those cuts out in advance–you’ll sleep better.
Of course, if your revenue really does drop 30 percent because of unseen market forces, you have a very fragile business. Deal with that fast.
Watch John Briggs talk about cash-flow management here.
This Above All
Remember your priorities:
Your gym exists to serve your family. They come first.
Your clients come second: They support the gym.
Your staff members come third: They support the clients.
You can’t cut your way to success. But right now you might have to take a few small steps backward to stay in the game long term.
Gym owners who focus on delivering value—and charging what they’re worth–don’t have to cut staff. But, unfortunately, gym owners who don’t protect their cash flow will have to take some very hard actions in the next year.
Things are going to get weird in the next few months. But the only way out is through. My job as a mentor is to make the journey as painless as possible—and even help you gain from disorder.