Many businesses start with the best intentions, but ultimately fail because they don’t consider all the potential costs involved. A basic financial plan will help you understand your costs to operate for 6-months to a year, and include costs-considerations like legal fees, insurance, loan payments and interest, competition and staff travel, and paid promotional marketing.
REALITY CHECK TIME!
This is a big one, and the market research you’ve done so far will help you build out a budget and decide on a time-frame to execute your plan.
Decide on a Business Structure
- The majority of cheerleading gyms are LLCs, but some operate as S-Corps (with investment partners) or as non-profit as it better serves the needs of their community demographics. Once you determine the purpose of your gym based on the market research you did earlier, you need to check your state laws (check for a .gov web address) for running a business and what is needed to meet state requirements.
- Register your business directly through the relevant state departments.
Management, Personnel, and Safety
- A common mistake new gym owners make is taking on roles that don’t make sense for their cost per hour. As an owner, you should eliminate anything that you could pay someone else between $20/hour to $40/hour or less to do for you. Don’t try to be the accountant, bookkeeper, janitor, maintenance and choreographer or coach.
- Decide your genius zone and try to stay in that space as much as possible. If you’re great at relationship building, focus on sales and business development. If you’re great at training, focus on that and hire people to run operations. Know your strengths and fill in gaps with dedicated personnel where you’re lacking.
- Identify the positions you need to staff and outline the duties and responsibilities of each role.
- Decide on a pay structure, how many hours you anticipate they will work, whether you will subsidize their training, credentials and background checks—or if that is their personal responsibility.
- Protect yourself with business insurance and liability insurance that extends to any employees’ for whom you may be responsible.
Build a P&L Projection for 6 months
- Research Profit and Loss templates for similar businesses. You may want to download a few different ones and merge them into one to cover all areas of your business. For example, equipment purchases may not be included in some templates, or certain types of marketing and promotional expenses.
- When building your own P&L, include revenue based on your target numbers for athlete fees and dues, and include all expenses. It’s okay if you’re losing money in the beginning but you must know when your break even point is and have enough money to sustain you to that point. Whatever amount you think it is, plan to double it and set it aside or know you have access to it if you need.
- Don’t forget key items like business software, marketing budget to boost posts and visibility, and a website domain (including hosting and email). How you run your business is as important as how it appears; both can make a big difference in the overall impression of your gym’s quality and professionalism.
Loans and/or Investors?
- Try not to borrow for high risk plans or things that can wait until you can grow using your profit. Gyms grow in phases, an in-ground foam pit probably shouldn’t be part of phase one of opening your business.
- If you do need extra funds to start your business, read the conditions of a business loan or investment contract carefully. Consider the interest rates, and what you may be able to do without to reduce borrowing costs.
- Ask for advice from other gym owners. We can learn a lot from others’ experiences and cut down on some of the financial pain from uninformed choices.
- If you’re considering borrowing from friends and family—or bringing on a business partner—you will need a clear legal contract, understanding of ownership, and a payment plan. Protect your personal and financial relationships.
Set Up Your Business Accounts
- Choose a bank and a business credit card that can earn points you can use to funnel back into your business (eg. travel points can pay for staff flights to competitions).
- Many banks that offer small business loans also offer financial planning services at little to no cost—but always check the fine print for hidden fees.
- Decide on business management software for financial management, marketing and communication, and maintaining athlete records securely.
Next up in this series: Hiring the Right Team