Many of our clients are aspiring fitness entrepreneurs, a large number of whom are venturing into this field for the first time. While being your own boss has its perks, there are also a few challenges to consider. However, the focus of this blog is primarily on accelerating through the initial stages of starting a fitness or wellness business. The goal goal of this Blog is to provide guidance on planning for profitability, maintaining a healthy cash flow, cultivating a loyal customer base, finding excellent staff or suppliers, and optimising your online and offline presence.
Before you invest a significant amount of money into a wellness or fitness business, here are some crucial steps to take:
- Plan for Success: Don’t overlook the importance of a business plan. Sometimes Clients only come to us when they need to get a lease for a new fitness studio or gym, or they need to pass their certification to set up as a PT. This is not the man reason of a Business Plan – in fact, it’s there to help you make a success of those businesses, whether they are gyms, outdoor training, PT, or wellness businesses. Especially if the owner has previous business experience, it is still essential to engage in some form of business planning, even if it’s not documented. Your business plan should include an analysis of the competitive landscape, and identifying indirect competitors (for example, personal trainers and group fitness classes).
Define your target customers based on factors such as age, income, gender, or more subtle preferences, for example, they prefer a non-intimidating environment or better facilities. Remember, the environment extends beyond similar gyms and encompasses entities that indirectly compete with you, such as Google AdWords or organic search results.
Assess your strengths and weaknesses, relative to your competitors, and identify external opportunities and threats.
Develop a marketing section and an operational plan within your business plan. Set clear objectives, milestones, and goals to guide your progress. While not necessary at this stage, considering a mission and vision statement can be beneficial if it aligns with your businesses’ ethos.
For further assistance on writing a wellness or fitness Business Plan, click here.
- Sort Out the Legalities: It’s very common for fitness entrepreneurs to focus on product development and overlook the legal structure of their business. However, it’s crucial to determine your legal structure upfront. If your fitness business encounters financial difficulties or unforeseen circumstances such as a pandemic, your liability will depend on your chosen structure. As a sole trader, you will be personally liable for any debts, and creditors can pursue your personal assets, such as your house or car. On the other hand, setting up a company separates your personal liability from that of the business. It’s also helpful if you understand the tax implications and complexities associated with each structure. An interesting example on this would be legal liability of outdoor training – it may be just you accompanying your Client for a run in Council parks, or you may want to run sessions – there are lots of licences, certifications, and registrations for all businesses, but there are ones that apply to fitness and outdoor wellness sessions that would be put and actioned in a Business Plan for you.
Don’t forget that marketing forms an integral part of any thorough fitness and wellness business plan:
- Enhance Your Visibility: Fitness and wellness is intensely competitive – this means you must stand out, you must be memorable, and you must press every button that you can to make that happen. Establish a strong brand identity that accurately represents your unique features and benefits to your target fitness market. Ensure that your messages, imagery, logo, and colours align with your customers’ preferences. Surprisingly, many entrepreneurs create a logo without fully understanding their consumers and competitors. Conduct thorough research on your target audience, including their colour preferences, shapes, fonts, and imagery. Analyse your competitors’ logos to differentiate yourself effectively. Consulting a professional graphic designer can provide valuable insights into contemporary design elements.
- Develop a Marketing Plan: A lot of fitness entrepreneurs who ask for their Business Plan to get a lease or pass a qualification misunderstand that within a Business Plan is a solid high-level marketing strategy – it will help you get clients, especially in the first 90 days. Consider this section as a more focused subsection of your overall business plan. When time permits, create a comprehensive standalone document specifically outlining your marketing strategies. Your marketing plan should include a target market definition, a thorough analysis of competitors, goal setting with actionable steps, strategies to achieve those goals, and a monthly measurement and evaluation process. This allows you to track your progress, attract customers to your business, website, e-store, app, and handle inquiries effectively.
- Leverage Online Opportunities: Embrace online strategies to enhance your fitness businesses’ visibility. Establish a professional website, optimise it for search engines, and utilise content marketing to demonstrate your expertise and the value of your products and/or services. Understand the role of various platforms like YouTube, Facebook, Instagram, Google My Business, Pinterest, LinkedIn, and Twitter in your customers’ decision-making process. Tailor your content to their preferences and behaviour on each platform. Search engine optimisation is crucial for products or services that require consumer education, online purchases, or preliminary research before contacting you. Incorporate electronic direct mail into your marketing mix, as it remains an effective communication tool. Consider using both AdWords/Facebook advertising and targeted email campaigns, as they can be highly cost-effective.
- Your Unbeatable Products and/or Services: Ensure that your offerings match or surpass your competitors’ quality. Conduct market research and seek unbiased opinions to validate your product’s superiority. If you run a gym, for example, emphasise the qualifications and experience of your staff or highlight unique features that appeal to your target audience (e.g. downloading workout histories or recently refurbished showers). If it is a one-on-one personal training studio, you may want to emphasise the opening hours – as that’s quite a high-up decision-making process for your potential customers. You may even want to emphasise times where the Business is less busy for first-time clients who prefer a quiet atmosphere. Determine your pricing strategy based on your environmental scan. Should you be highly competitive or differentiate based on superior quality? Avoid charging more than 7% above market prices, as research indicates this threshold may deter potential customers.
- Go beyond digital: Don’t overlook the importance of offline marketing strategies. While advertising is essential, consider the need to be visible in other physical locations as well. For instance, if your gym is situated near some office buildings, advertise to reach a portion of corporate workers through Facebook ads. To expand your reach, however, visit the offices with invitations to try your gym for free, and leave behind special offer flyers or QR codes to access your website. By combining physical presence with advertising, you can potentially reach a more significant percentage of the building’s clientele. Repeat these activities on different days or times to maximise exposure.
Now it’s time to dial down more deeply into your fitness or wellness businesses’ operations and services:
- Hiring Employees that stay: In fitness, and in any service, it’s all about staff and you. Therefore, it’s important to follow a structured process to hiring people, and also to analysing your own strengths and weaknesses. Always start by creating a job description and a person description. Many business owners expect to find the perfect fit for their fitness business, but it’s essential to be proactive in attracting the right candidates. If your staff members interact with clients or represent your business through communication channels like email, it’s crucial to define their values, approach, and style. This alignment between their personal qualities and the job description will ensure consistency in delivering your services.
- Responsibilities as an Employer: As an employer, you have certain obligations towards your employees. These include ensuring fair pay, providing superannuation, complying with payroll tax requirements, prioritising safety measures, and offering appropriate employment agreements. Most industries are currently experiencing skills shortages in Australia and there’s no reason to think fitness is any different. Therefore, it’s essential to position yourself as an employer of choice by treating your employees well, paying them fairly, and creating a positive work environment. Your employees directly impact the quality of your products or services and play a crucial role in building customer loyalty.
Don’t make the mistake of putting your fitness businesses’ finances to the side or not taking money matters seriously:
- Bookkeeping and Accounts: Setting up a cloud accounting system is highly recommended overusing Excel or other outdated methods. Programs like Xero, MYOB, or Quicken provide preloaded formulas, up-to-date tax rates, and charting capabilities that simplify financial management. It’s important to establish a system to track bills, receipts, invoices, and petty cash. Additionally, consider obtaining a company credit or debit card to separate your personal and business finances effectively. Fitness industry clients do need careful management as many of them are on subscription – and this is fraught with difficulties in managing and keeping yourself, and them, and clients up to date.
- Starting Your Books Immediately: Many fitness and wellness businesses overlook the potential tax deductions they could claim. Even if your business is not yet generating revenue, expenses incurred during the startup phase can still be deducted. By starting your bookkeeping early, you’ll be able to track your expenses accurately and take advantage of potential deductions. Additionally, setting up systems with fewer transactions makes it easier to manage and understand your financial records.
- Startup Costs and Expenses: When creating a startup budget, ensure that you allocate enough funds for both business expenses and personal living expenses. Make a comprehensive list of everything you need to purchase before opening your doors. Conduct research, ask for recommendations, and gather all necessary items within your budget and time constraints. Consider different financing options such as business loans, credit cards, equipment leasing, or bringing in equity investors. Choose the right lender based on terms and interest rates, and if needed, seek assistance from a finance broker. Typically, a fitness industry from a gym or small studio will have around 22 expenses, three costs, and around eight revenue streams. If you would like a simple template to start thinking about these, click here and scroll down to “Free Financial Templates”. Start with the Profit and Loss Statement.
- Understanding the Big Three (Profit and Loss, Balance Sheet, and Cash Flow): It’s crucial to grasp the concepts of profit and loss reports, balance sheets, and cash flow statements. Understanding how these financial reports work will help you forecast sales, track costs and expenses, and assess your fitness business’s financial health. Distinguish between costs, which fluctuate based on sales volume, and expenses, which are incurred regardless. Calculate your gross profit by deducting costs from revenue, and then determine your net profit or EBIT by subtracting expenses. To benchmark your performance, the Australian Taxation Office provides small business benchmarks on their website.
- Calculating Profit Margin: Profit margin is a key metric to assess the financial performance of your fitness or wellness business. After paying costs, you’re left with gross profit, and after deducting expenses, you arrive at net profit or EBIT. To ensure a good margin, it’s important to manage costs effectively. To calculate your break-even point, use the formula: Fixed Costs / (Average Sales Price – Variable Costs). This formula helps determine the number of units or products you need to sell per month to cover your expenses. Monitoring your margin and break-even point is vital for financial sustainability.
- Compliance with the Australian Taxation Office (ATO): Registering for the Goods and Services Tax (GST) is essential if your business turnover exceeds $75,000. Timely registration and compliance are crucial to avoid penalties. Establish a robust bookkeeping system to maximise tax deductions by maintaining accurate records. Differentiate between personal and business expenses, and ensure you’re claiming deductions correctly. Prepare to pay quarterly or monthly Business Activity Statements (BAS) and payroll tax to avoid financial strain when the payment is due.
Before we finish, here are some important watch-outs for wellness and fitness business owners:
- Staff Quality and Culture: In the fitness industry, having a distinct personal style or a team that embodies your approach can set your business apart. While equipment and facility size are important, differentiating your gym through staff quality, advice, and service can be even more valuable. Strive for excellence in customer service and ensure that your staff members align with your business values. Building a strong service-oriented culture will help you compete effectively in the market.
If you want to start a fitness and wellness business and need some help getting your business plan sorted, get in touch with us on 1300 644 853 or at info@smallbusinessplans.com.au (24/7 website chat and enquiry available).