Budget: Dollars and Sense
A budget is an essential business need often neglected. If you are avoiding this, you have plenty of company. I understand…we just want to have more than enough and not experience the tedium of figuring it out. As the founder of See Jake and Jane Train, a company inspired to help independent personal trainers and studio owners thrive, I am overjoyed to help.
What is a budget? Our favorite definition: ‘telling your money where to go instead of wondering where it went’ (John C. Maxwell). Instead of throwing caution to the wind, hop in that driver’s seat, open a road map (or Waze) and let’s cruise to your chosen destination. Ready? Let’s ride…
Two powerful proactive budget tips:
Look back to move forward.
The most common problem I see among my independent personal trainers and studio owners is not having a current budget. They do not have an understanding of their numbers from the last few months, let alone the last three years. Is this you? Do you know your budget in terms of projecting what you are going to realistically earn and what you are going to spend? All with room for unexpected needs?
First, let’s be clear, anyone can make a projection. As a someone that watched a fair amount of startup pitches, it is easy to say a company is going to earn a certain amount. For example, I can project that I am going to pull in millions in the next couple of years with my new real estate venture… Great, right? Nope. A true and useful revenue projection is based on historical income and realistic improvements or changes with in the business or industry. We can’t pull numbers out of thin air. It must be rooted in past performance and legitimate research.
What if you thought you pulled in $100,000 last year as an independent trainer, but, in reality, you only earned $82,000 because you forgot about the personal loan you put into the business and the series of discounted sessions sold over the summer months. Then, armed with misinformation, you set next year’s revenue goal at $110,000, which is a $28,000 increase, not a $10,000 increase in income. This is unknowingly a 34% increase in revenue goal as opposed to a 10% increase goal. Yikes.
In this example, you are unknowingly wearing a financial weight vest in basing goals off of a guesstimate of income, not actual income. We wouldn’t allow an exact weight loss goal for our clients without actually weighing them on our scale first. Let’s not do it with the numbers in our budgets. Projections need to be based on facts, be realistically attainable and supported by historical data. This is part of why it is so important to know our past numbers.
Next, we need to look ahead. What expenses are we anticipating? Think of it this way. You have a smartphone. You can choose to back it up regularly or face the music when it breaks down without a backup. Lost data, lost photos, limited communication, potential scheduling problems and a giant headache. We have all been there. It’s a mess, yes? The moral of the crashed device story is proactively preparing for the future. Projected expenses work the same way. What are you going to need? Are changes are about to happen? Could something make the future easier for you as a practitioner and for your business? Anticipate upcoming expenses like these…
- Vacations / time off
- New equipment
- New devices
- Studio lease
- Investments in marketing
- Continuing education for our teams and ourselves
- Savings for the unexpected
Are you prepared to cover these expenses? I encourage everyone to look at their budget. Seek help in the process. Make your starting point as simple as possible. And no matter what, just start. We have some great tools at See Jake and Jane Train. Materials in the Nine Week Turnaround and 21 Days to Independence help you through it. Even if you don’t like math or looking at the numbers (so common), the courses have simplified everything for even the most reluctant practitioner and provide a step by step blueprint for financial success.
Empower yourself and your business. Move forward with knowledge of your past numbers and a realistic projection of your future earnings and expenses.
Easy concrete action steps…
- Track all deposits from every client from the previous year and get a sense of your true gross revenue.
- Review your total transactions on your work credit card (or messy pile of receipts or email folder) to get the big picture of expenses from the last year.
These are both rewarding, effective first steps and so much better than having only a suspicion of your income and spending.
Avoid spending what you have not yet earned.
“An investment in knowledge pays the best interest.” (Benjamin Franklin)
Learning new things can be unnerving. It’s understandable that so many people do not learn how to budget. When you really see how much you spend compared to what you actually earned, it’s not a great moment. Take some deep breaths and remember that sometimes it has to sting a bit before it can get better. I am going to argue that ultimately it is a really great moment. (Stay with me.) You then come from a place of powerful knowledge and have eliminated false perceptions. Once we look at our historical data, we avoid overspending and prevent perpetuating a problem. But, what if we haven’t created that road map yet? You might reach your destination eventually, but it will include unnecessary wrong turns and stress. Why not get in the driver’s seat and forge a better path?
Need more convincing? Here is a very common example of overspending in our field. And, it’s an important lesson to learn from…
When we sell, specifically when we are selling a large package (which is not something I recommend, but I understand it’s still going on), it takes time for clients to burn through and use all of those sessions. You know the drill…you are selling a 40-session pack in January receiving a big chunk of revenue all at once. That 40-session client may not burn through those 40 sessions for 4 or 5 months. (Especially, if you have not set up an intense training schedule for them.)
As a studio owner, your payroll obligation must still be met. Or, if you are an independent trainer, resisting the urge to spend all of that money right away is daunting.That client is still consuming time in your schedule but will not pay again for months. Neglecting a traffic helicopter view (i.e. budget), becomes a significant pain point for our business finances. I have seen many trainers endure this moment, and even some studio owners. The impression of financial success due to a temporary boost in revenue spurs emotional decision making. But, with a budget, they could see the upcoming drop in revenue as a result of large packages sold.
I find people that do budget and have moved through finance fear experience significantly greater success. Ultimately, (hold onto your seat here) they actually become excited about budgets. (I know!) We can relate as trainers though, can’t we? If a client does not drink water, and you encourage them with a baby step option to improve their water consumption, sometimes, in six months they are water evangelists! They now love water! Gradually drinking water consistently allowed them to feel the difference. You don’t have to encourage them anymore because the feeling of being hydrated and their new habit is the motivator. The same can happen to you with your numbers! When we feel the power of being informed and reduce our stress with proactivity, the habit and work are minimized by feeling the benefits.
Wrapping up. Here are our takeaways…
- Know your numbers and forecast your future. Be proactive and look at the history of your revenue and expenses by writing them down. Create a roadmap for your future. When we are proactive, we eliminate the need for a fire drill, reactive response. It’s having that metaphorical spare tire in your trunk. You don’t know exactly what is going to come up, but you are as prepared as possible.
- Do not spend what you do not have. It might hurt a little bit at first. We are not adverse to pain though, we’re trainers. You will avoid misspending that temporary boost in revenue because you have thought through the future expenses that draw from that boost. Ultimately, you will be empowered. Your renewed personal training business will responsibly grow into a lucrative, sustainable entity with financial shock absorbers that can handle the inevitable bumps in the road.
What is your greatest budget lesson?
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