Sponsored by Fit for Profit
By Shannon Simmons, Special FBA Contributor
The number most business owners focus on when determining their success (or lack thereof) is revenue. And while increasing revenue is a good goal, it’s not always the one where you should focus.
Why not? Well, revenue isn’t a great determinant of the health of a business. You could be bringing in $250k in revenue but have an overhead of $245k, leaving just a sliver of your revenue for profit. And taxes? You haven’t even thought about the implications of taxes yet. That’s not a very healthy business.
A healthy business has a profit month after month, pays its CEO a living wage, and has money set aside for taxes each quarter. And keeps its expenses low.
Sound too good to be true? It’s not. When you use Profit First in your bookkeeping and focus on increasing profits regularly, you’ll have that healthy business too.
Review Your Regular Expenses
If you’re following Profit First, you’re already adjusting your distribution percentages each quarter. Add reviewing expenses to this quarterly money date with yourself.
Print off your bank statements or look them up online, then review every transaction. As you look at the transactions, ask yourself:
- Am I still using this service or can I let it go?
- Am I using the whole service or can I use a lower tier?
- When was the last time I asked this company to reduce my rate?
- Can I switch to another provider for a lower rate?
Sometimes we forget about regular recurring expenses because they’re on auto-pay, or we don’t think to look for another option. But going through this exercise regularly can save you hundreds or thousands of dollars each year--and this is a necessity if you’re going to make my other recommendations work.
Adjust Your Prices
Inflation in the U.S. was 5% for the 12 months ending May 2021. Did you raise your prices? I’m guessing that you didn’t, for fear you’d lose clients. But if you’re not adjusting your prices for inflation, you’ll see your profits start to slide.
If it’s been a while since you raised your prices, do some research on market rates for your services. You’ll also want to review any expenses you incur in delivering your services to ensure that you’re earning a profit on deliverables.
Then talk to your clients to let them know you’re raising rates, by how much, and when. Don’t surprise them with new rates; give them time to prepare.
Increase Client Sales
Finding and closing new clients can be challenging, but if you’re meeting your current clients’ needs you may be able to move current clients into additional packages or programs.
Let’s say a client joins your practice needing one-off sessions every other week. But over time, you notice that this client might benefit from an additional service or a different cadence of sessions. Let them know what you have to offer and open the door for them to add that service on. This will bring additional revenue with minimal effort on your part.
Create an Online Presence
I think 2020 showed us all that it is possible to run a health and fitness business online. (And sometimes, it’s a necessity.)
If you moved some of your services online during the pandemic, you may have realized that overhead is much lower online than it is in a studio or gym. And low overhead means more profit! Don’t let go of those online services just because you can work in-person again. Instead, identify ways you can grow your online presence. Market the online-only arm of your business and encourage your clients there to share their experiences. With online services, you’re no longer bound by geography!
Profits are the key to a healthy business, not your bottom-line revenue. And yes, many of my recommendations above will also increase revenue, but they’ll also turn out more profit for you if done right.
Shannon Simmons is a Certified Profit First Professional and Certified QuickBooks Pro Advisor, specializing in working with fitness and wellness businesses. Her practice, Fit For Profit, helps small business owners grow financially healthy and personally fulfilling businesses.