You need an emergency financial plan for your business.
If you don’t have one, you’ll:
- Lose a lot more sleep than you should.
- Lose investment income because you’re holding too much cash in your business.
- Panic when you have small revenue dips.
- Inadvertently grow small dips into major problems.
- Take the wrong actions at a desperate time.
- Risk going under completely.
None of that is good, and a simple plan will put you in a much better position.
Two-Brain mentor and gym owner Kenny Markwardt presented “When the S*$& Hits the Fan” to our Tinker group of upper-level gym owners in Ohio in late September, and I dug into his emergency plan on “Run a Profitable Gym.”
I’ll give you the early steps here to put you on the right track.
First, Kenny breaks down financial downturns into revenue drops of 10, 20, 30 and 40 percent. A 10 percent drop is concerning but not cause for panic if you’re prepared to take corrective steps beyond “hope it gets better.”
Drops of 20-30 percent are dangerous and require swift action. A 40 percent drop is a full-on emergency—the kind of wound that will kill a business fast (think, “pandemic”).
Our Tinker clients got a complete Income Stress Test calculator so they could crunch numbers on a spreadsheet.
The goal: Help gym owners balance cash flow (including alternative sources of revenue) and cash reserves against costs.
On “Run a Profitable Gym,” Kenny and I batted about various sound strategies for dealing with downturns once you know how much you’ve lost and how much you need to get back above water. They range from running a specialty program and starting Goal Review Sessions with clients all the way to laying off staff and talking to a landlord about lease payment adjustments.
The point here: You have options in every situation (and a mentor can help you choose the one that will bring the greatest return on the shortest timeline).
Your First Step
Kenny’s exercise is fantastic—it’s like getting a financial AED and bolting it to the wall of your business just in case something bad happens.
So where should you start today?
You don’t have to jump in at the deep end and create a detailed plan for a 40 percent revenue drop. That would be overwhelming if you’re on your own.
Here’s your starting point: Start by tracking your finances carefully this month, then keep doing so.
You’ll need to create or obtain a profit-and-loss statement and learn how to read it. Figure out your where your money is going and what return you’re getting on your expenses. How much cash is coming in—and when? What’s your profit margin?
That’s Point A. Without that info, you can’t make any plans. Once you run your numbers, you’ll have the data you need to prepare for downturns—or to increase revenue and profit.
If you aren’t tracking these numbers, spend an hour doing so today—or spend the hour connecting with a bookkeeper or accountant who can provide what you need. It will be time well invested, and it’s a step toward joining the ranks of upper-level gym owners who are laying detailed plans for tough times.
If this first step seems overwhelming, or if you run your numbers but don’t know what to do next, here’s your plan: Book a call to talk to a mentor who can teach you how to track your metrics and do exactly what’s needed to improve them.
