Gyms and fitness studios are starting to re-open and take a deep look into their finances. These are tough times and no doubt difficult decisions will need to be taken. Right now, many business owners have so many questions. Should you take out a new line of credit? Which is the best government scheme for my business? How do I speak to my landlord about rent? The list goes on.
The important thing to know is that you are not alone. Over the next few months, you will need to make several difficult decisions that will affect your employees and your business. As you start to think about re-opening your business and invite members back, you will need to spend time evaluating your options and thinking carefully about your next steps.
Recently we spoke about these issues on The Fitness Founders Podcast with Eric Killian, a Certified Public Accountant and the owner of The Fitness CPA, an accounting firm for fitness business owners. The following article is based on the in-depth knowledge he shared with us on the podcast. You can listen to this interview here:
In this article, we explore the financial support available from the U.S government and the tough decisions you may need to make.
Skip ahead to:
- Government and Financial Support for the Fitness Industry
- 5 Difficult Decisions Gyms Need to Make
- 3 Ways to Make Better Financial Decisions During Tough Times
Government and Financial Support for the Fitness Industry
Whether its credit card loans or government schemes, a lot of business owners are asking questions about financial support. Although the spotlight is on free government loans, it’s important to consider all your options and decide what method works for you and your business. Here is a summary of the type of financial support you have available.
Before we get into government loans and schemes, let’s touch on credit. There are a lot of places that you can turn to for capital. It’s important to consider all your options. Depending on your needs, business position, and what you have access to, the best option may look different for everyone.
Perhaps you have a personal line of credit or through your business. Maybe you have the potential to go through the home equity line. If you have virtual membership options and have maintained a good chunk of your paying members, you may not need a big lump sum to take you through the pandemic. However, if you find yourself with your business closed and your income has stopped practically overnight, your needs are very different.
There are normal business loans that you can get right now through the SBA. You can access the SBA Express Loan or SBA 7A Loan. These SBA loans provide small businesses with financial support.
The maximum loan amount of the SBA 7A Loan is $5 million. While the SBA Express Loan has a lower bowering limit of $350,000. However, the benefit of the SBA Express Loan is that the turnaround time is much faster. The SBA aims to get back to you within 36 hours. For those of you on a tight deadline for rent payments or other financial issues, the SBA Express Loan may be a good option. For more information on the types of SBA loans available to businesses, visit their website.
The Paycheck Protection Program
The PPP or Paycheck Protection Program has a lot of buzz around it. Although the scheme isn’t perfect and some people have struggled to access support, it’s still worth looking into the PPP. The program is designed to keep employees on the payroll. The scheme is helping the workforce to stay employed during the COVID-19 crisis. It’s an incentive to keep employees working.
If you were thinking not to bother with the program as it hasn’t worked for some people, it’s still worth looking at. Check if the funds are available and make an application if you can. The deadline for a Paycheck Protection Program Loan is approaching so it’s definitely worth checking to see if you can access extra support. With government schemes, often you need to persevere to get the result you want. So, keep refreshing the page and properly understand the type of support you have access to.
The Economic Injury Disaster Loan
The Economic Injury Disaster Loan or EIDL is run by the SBA. So, you have to access the loan through the SBA website. The loan provides up to $10,000 of financial relief for businesses that are temporarily affected by difficulties. In this case, businesses affected by the pandemic. Originally, the scheme was overwhelmed and stopped taking applications.
As of June 15th, the SBA is now taking applications for the EIDL. Small business owners are currently eligible to apply for a low-interest loan. Although the interest is low, one thing to note is that your money will not arrive fast. So, you will need to take steps between now and when the money arrives. Previously submitted applications are still being processed so hold tight and wait to hear.
5 Difficult Decisions Gyms Need to Make
Whether you’re running your gym at a limited capacity or are still at the planning stages of your grand re-opening, you will be faced with difficult decisions. Looking at your current situation and making the right decision for your business is hard. You have financial and operational decisions ahead of you. Here are five difficult decisions you will need to make right now.
Financing, Loans, and Credit Cards
When it comes to difficult decisions, often you think about your finances. With loans, financing, and credit card debt, it’s tough to know what you should do. Do you apply for a government loan? Should you use your business credit card? Or should I apply for an SBA loan? The questions are endless.
The bottom line is that you want to reduce your expenses. You want to look at your cash flow projection and see light at the end of the tunnel. If you haven’t been able to shift your business and continue to generate income, the road may look too long with a massive financial requirement to continue. Maybe you don’t think you will have enough members when you do reopen. Well, now may not be the best time to take on a big debt.
However, if you have some money coming in and know that $30,000 will cover your expenses and give you the boost you need to survive this time. Before you panic or make a rash decision, take a look at your finances and figure out what your cash flow looks like for the future. You may find that you’re in a much better position than you originally thought.
Existing Trainers and Staff
Although your finances will always bring stressful decisions, it’s hard when you have to make cuts to your staff. The difficult decisions you face are often tied to your finances. You need to think about who you can bring back and who you can afford. You’re in a tough situation. As a business owner, you have to make choices that will affect your staff.
No business wants to lay off its staff. Up until now, the difficult decision was taken out of your hands. If your staff couldn’t work because the business was shut, they were furloughed. But, now as businesses re-open, you have to make hard choices on your staffing. If you find yourself extremely tight on cash, there might be a role you can take on. For example, if you had a general manager but you work in the business too and can manage day-to-day tasks, you could save money by doing the work yourself.
If employees are worried about their health and perhaps don’t want to come back to work, that’s a conversation you need to have. It’s your job to decide what to do next. But, remember that your gym will need to follow strict health and safety protocols. Make sure you have the staff available. If you’re running very thin with trainers and staff, you might not have the staff to do the job properly. Whatever situation you will be, you will need to look at your staff on a case by case basis. There will be no one answer solution to all your issues.
New Staff Recruitment
If some members of staff don’t want to come back or you’ve expanded into virtual training and streaming, you might need to go on a recruitment drive. With a major focus on digital fitness, many fitness businesses are running both physical and digital services. If employees are not prepared to come back to work or perhaps they live with a vulnerable person, you may need to think about your recruitment.
Despite already having your staff before lockdown, you might have to start recruiting outside of your initial team. When you know you have a spot to fill, start looking for potential talent. If you’re looking to perfect your hiring process, we break down what you need to think about before hiring new employees.
Landlord and Rent
Should you stop paying rent? Should you renegotiate your terms? This is a difficult spot to be in. You’re paying rent yet your business is closed or maybe you’re running at 50% capacity but 100% rent. The large majority of people are in a tight position where they don’t have money coming in to pay the rent.
If you can, don’t default on your payments. This means you just stop paying without coming to any agreement with your landlord. When your lease comes up in however many years in the future and you didn’t stick to your contract, they might kick you out and get someone new in. If possible, you need to communicate and negotiate with your landlord.
Rent is often a business owner’s biggest expense. But, if you’re ready to take action, you can come out of this period on top. This guide on rent abatement and how to speak to your landlord about the issue is a great starting point.
Marketing and Acquisition
Another thing you need to think about is your marketing and acquisition. When should you start reinvesting in your marketing? At what point should you think about growing your customer base again? It’s possible that if you market to new members they might not sign up if you’re not fully open or running at a reduced capacity. So, consider marketing to your existing membership base. Offer additional services to your current members. Maybe they would appreciate personal training sessions and one to one time with one of your fitness experts. Think about where you can get the most value from.
It’s important to note that you shouldn’t stop marketing altogether, if at all possible. You don’t need to spend your usual marketing budget on this but keep maintaining brand awareness. It all comes down to your budgeting and what cash you have available to spend on marketing.
3 Ways to Make Better Financial Decisions During Tough Times
When making financial and operational decisions in your business, there are some things you can do to help you make better decisions. With the right information, you can make well-informed choices that move your business forward.
Talk to Someone
Whether it’s a loved one, a friend, or an accountant; talk to someone. No business was truly prepared for a pandemic and many people are going through the same thing. By talking to someone, you can find a person to lean on.
Start off by speaking to a spouse or loved on to help lift some of the emotional stress. You can then reach out to fellow business owners or accountants. Try speaking to fellow fitness business owners. Find one that is where you would like your business to be in five years’ time as well as someone at a similar level.
Model Your Finances
Sometimes the word budget can sound scary. But, looking at your budget can give you the power to make the right decisions for your business. With financial modeling, you can find out your cash flow burn rate and see if you’re in positive or negative cash flow. The more information you have on your finances, the better the decisions you will make. For more information on financial planning for the future, we talk you through what you need to know and how to make it a success.
A lot of people and business owners go to the webinars and listen to the advice. They know that modeling their finances and making a budget is a good idea. But then they do nothing. They don’t take action. Nothing will change unless you make it happen and take action. You probably know that you should track your cash flow. If you’re not doing it, you’re not helping your business.
No doubt, the next few months will be tough for many business owners. Gyms will need to make some difficult decisions that will affect their employees and finances. If you enjoyed this article and want to find out more, listen to the full podcast on making difficult decisions with Certified Public Accountant and the founder of The Fitness CPA, Eric Killian.