Launching a new fitness business is about more than passion and expertise in the field. Bringing your business to scale new heights requires smart financial planning. It takes time to think through your fitness business budgeting. When you start your fitness business, you must be well-versed in making accurate financial projections. This way, it’s easier to manage budgets and ensure the long-term success of your fitness venture.
Financing Your Fitness Business
Here’s how you can ensure your business takes flight:
Learn financial terms
Finance can be complex. While you’re not required to become a financial expert, it’s best to know critical financial terms to make an informed decision. For example, knowing what revenue, costs, and profits mean helps you make decisions that can positively impact your bottom line.
Having financial knowledge is also critical for strategic planning. Literacy in financial terms helps you communicate more effectively with stakeholders like investors, accountants, and even your employees. If you’re seeking external funding, a good grasp of financial terminology will make you more persuasive and credible to investors.
In essence, the language of business is heavily rooted in financial terminology. Being fluent in this language is crucial for successfully navigating the business world.
Know start-up costs
The equipment can cost between $10,000 and $50,000, depending on the size and type of gym. Don’t forget to budget for technology like software for member management and furnishings like seating or lockers.
When you open an LLC, you’ll need a business license, which could cost around $100 to $500, along with various permits. Certifications for trainers can also cost up to $500 each.
You also have to factor in initial marketing efforts. This can include digital advertising, which can run up a bill of around $10,000 to $40,000.
List ongoing operating costs
Understanding your ongoing operating costs is a crucial aspect of fitness business budgeting. Fixed costs are expenses that are consistent and unavoidable. For example, rent can range from $15 to $30 per square foot for a 2,000-square-foot space. This equates to $30,000 to $60,000 annually.
Salaries are another significant fixed cost. For instance, having four trainers, two administrative staff, and a manager could result in annual salary expenditures of over $200,000. Note that the cost will depend on your location.
Utilities such as electricity, water, and gas could cost between $1,500 to $2,500 per month. Additional fixed costs include insurance, software subscriptions, and internet and phone services.
Variable costs, on the other hand, fluctuate based on a variety of factors. Seasonal promotions and special events are good examples. Depending on its scope, you might spend $500 to $2,000 per promotional campaign.
Equipment maintenance is another expense, accounting for about three to five percent of yearly equipment costs. For instance, if you have $50,000 worth of gym equipment, maintenance could run you between $1,500 to $2,500 annually.
Other variable prices to keep in mind include cleaning supplies or fluctuating inventory costs for a snack bar. You must also factor in periodic training and development courses for your staff.
Work on a budget
One way to manage your finances is to set a budget. Divide your budget into categories like marketing, operations, staff, and maintenance. Tools like QuickBooks can help you keep track.
While doing so, work on your cash flow management. Remember that gyms have peak and non-peak seasons. Ensure you have strategies during slow seasons, such as offering early-bird discounts for upfront payments.
Understand revenue projections
Aside from listing possible expenses, project how much you can gain in revenue. Know the different income-generating strategies you can put in place. These may include:
- Membership fees: You could offer various pricing models: monthly ($50-$200), yearly, or class-based. Run different scenarios based on sign-up rates to estimate revenue. Subscriptions are often a great way to generate predictable revenue.
- Ancillary revenue streams: Additional services like personal training or selling merchandise can also add to your earnings. For example, personal training can contribute about 20-30 percent to your overall revenue.
On top of revenue projections, you should also have a short-term and long-term financial outlook. Your first-year projections should be your focus. KPIs to monitor include membership retention rate and average revenue per user (ARPU). But it doesn’t mean you won’t have a view of your business in the long term.
A three to five-year outlook will help in securing loans or investors. Scenario analysis can help plan for both growth and setbacks.
Monitor and adjust
All financial and budgeting strategies must undergo timely monitoring and adjustment. Set a KPI and do a regular analysis of what works and which needs improvement. Consider software like Excel or more specialized tools like Tableau for financial analysis. Key financial ratios to monitor include liquidity ratios and profit margins.
If the metrics aren’t favorable, it may be time to adjust your plans. This can mean scaling up your marketing or reducing costs by negotiating with vendors. These are key aspects of fitness business budgeting.
Maintain a Solid Fitness Business
Financial planning is crucial for the long-term success of your new fitness business. Pay attention to your start-up costs, revenue streams, and ongoing expenses. Use modern tools to create budgets and projections.
Staying on top of your financial health is as important as ensuring your clients stay on top of their physical health. By taking financial planning seriously from day one, you set your fitness business on the path to sustainable growth and success. So, open that spreadsheet and get started!