Tracking Your Business Expenses

Effectively tracking your business income and expenses is a vital component of your business success.  While income can be easy to figure out, deciding what qualifies as a business-related expense is not always as cut and dry.  The IRS guidelines aren’t too helpful either in that they define a business expense as “ordinary and necessary” to your trade or profession.

The definition is very vague and sometimes it’s difficult for most people to determine what truly is a business related expense.  However, most expenses associated with starting up, organizing and operating your business are potentially tax deductible.  In fact, did you know that you can even write off up to $5,000 in startup and another $5,000 in organizational expenses in the year you start your business? (These deductions are reduced if you have more than $50,000 of either type of expense.)

Many sole proprietors are often confused as to what is and is not a business expense.  The best thing you can do if unsure, is to err on the side of caution.  Track all your expenses, even those in doubt, and then let your accountant or tax professional figure it out for you at the end of the year.

There are several great software programs that can assist you such as Quickbooks, Peachtree, Microsoft Accounting, Quicken and Microsoft Money.  Depending on your business needs, any of these feature-loaded softwares could get the job done for you.  Another option would be to keep a monthly Excel spreadsheet of your expenses.  Whichever method you use, consider setting up your expense categories to match those on the Schedule C (Profit or Loss from Business Form) of your tax return.  This will save you or your accountant time at the end of the year trying to figure out which expense goes where.

The IRS is strict about not mixing personal and professional write-offs on your taxes.  In other words, be careful if you are claiming expenses that are a mixture of both personal and professional expenses.  For example, you plan to attend a conference in Florida.  While there, you are going to drop in and visit Aunt Mary and Uncle Bob.  It’s okay to combine business and pleasure, but be careful when you claim those business expenses.

The conference must be geared to your business.  Furthermore, the conference also needs to last at least six hours a day, and you must attend a minimum of two-thirds of it in order for you to be able to consider it a business expense.  Also, be sure to extract any expenses related particularly to visiting Aunt Mary and Uncle Bob. 

Finally, hang on to your receipts and records.  The general recommendation is to retain that information for seven years.  The IRS has three years from your filing date to audit your return if it suspects good faith errors and has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more.   And, if you failed to file, or filed a fraudulent return, there is no time limit. 

Pitfalls of Sales Forecasting

Creating a sales forecast can prove challenging, particularly if your focus is on trying to just meet your current sales numbers.  However, accurate sales forecasting is important to the overall health of your business.  Accurate forecasting allows us to avoid unforeseen cash flow problems and to manage our operation, staff and finances more effectively.

Sales forecasting can be time intensive in terms of gathering past sales information and preparing projections based on a set of sales assumptions, but it is necessary.  When preparing your sales forecasts, be sure to avoid these common pitfalls.

Wishful Thinking. A positive and optimistic outlook for business is always good, but you have to remain realistic, particularly when working with your projections.  Ask yourself if you and your sales force can realistic meet those sales figures?  Do you have adequate staff and trainers to handle that level of projected volume?  Also, do not make the mistake of writing in the figure of what it takes to keep your business up and running.  For example, if it takes $25,000 a month to keep your doors open, don’t arbitrarily write in $25,000 as your sales goal.  You aren’t doing yourself any favors.

Ignoring Assumptions.  Sales assumptions are an essential part of your projections.  Each year, your assumptions are probably going to change.  However, they remain a pivotal part of understanding what will impact your business and sales for the upcoming year.  Do not ignore your assumptions.  For example, if you believe that you may loose market share because two new fitness facilities are opening up within a five mile radius, do not disregard and project an increase in sales.  Your assumptions need to tie in and support your sales projections. 

Moving Target.  Once you have reviewed your final numbers, agreed upon them with all relevant parties, and created a timeframe for accomplishing, leave it alone.  Fight the urge to spend time going back and refining and “tweaking” the projections every chance you get.  This only distracts you from meeting the target.

Lack of Consultation.  Most likely, you will not single-handedly be meeting your sales projections.  Chances are you have staff and/or sales associates who will assist you.  One of the biggest mistakes you can make is not consulting your staff and getting their opinions and buy-in.  Talk with and listen to your staff.  If they raise legitimate issues, they need to be addressed.  Unrealistic sales goals only place unnecessary pressure on people and create a stressful working environment.

No Feedback.  When you’ve completed the projections, take them to someone who has the knowledge and know-how to review them and offer feedback.  This may be your accountant, a senior manager or colleague.  Having a fresh set of eyes brings a new perspective and potential insights that could prove useful.

Some argue that sales projections are an act of faith, and to an extent that’s true.  However, your leap of faith may not have to be as far if you avoid these common pitfalls, use solid past sales figures, market research, and industry reports, and keep things in perspective. When you do these things, you may be pleasantly surprised at the results.

Analyzing Your Business

In order to run a successful business, you need to have a reliable method in assessing your business, its resources and the environment in which it functions.  You need to be able to accurately identify its strengths, weaknesses, opportunities and threats.  The formal term for this process is called a SWOT (strengths, weaknesses, opportunities and threats) analysis and it’s a useful tool in gaining a better understanding of your business and its position in the marketplace.

The main objectives of a SWOT analysis are to:

¨  Identify what you do well;

¨  Recognize areas which need improvement

¨  Determine whether you are making the most of opportunities around you, and

¨  Analyze possible threats to your business

The best way to complete a SWOT analysis is to create a blank grid of four columns.  Across each column, write a heading for strengths, weaknesses, opportunities and weaknesses.  Then, list all relevant factors that fall in each category.  Do not be concerned if some factors appear in more than one box.  It is not uncommon to see a factor that appears as a threat could also be viewed as a potential opportunity.  For example, several new health clubs may open in your area.  Yes, this could be a major threat to your business, but it may also prove to be an opportunity as more competitors often boost the number of clients who would come to the area.  Some of those clients may see your business and decide to try it as well.

It is important that you be completely honest and realistic when performing your SWOT.  What’s the point of investing the time in doing the analysis if you plan on creating some vivid tale of the imagination?  You may not like to hear or admit to the things you discover, but ultimately you may find this exercise to be extremely helpful to the survival of your business.

Be sure to look at all factors, not just the big stuff.  Consider all issues impacting your business carefully no matter how initially insignificant they may seem to you.  You are also encouraged to take advantage of other people’s perspectives.  They can prove to be extremely insightful, particularly if they are not close to your business and can view things objectively.

After you have finished your analysis, be proactive and develop a game plan to build on your strengths using them to their fullest potential.  Additionally, determine how you can reduce your weaknesses; understand where your opportunities lie and how you can capitalize on each one presented to you. 

SWOT is an important part of developing an overall strategy that can analyze your business, its potential and put you on a path to prosperity.  While it is not a major decision making tool and shouldn’t be used as such, it is a useful guide for looking  at the internal and external forces that impact your business at that particular time.  Since a SWOT is not static in the sense that it will change as your business environment changes, using it as part of your ongoing business analysis can prove beneficial. 

What Fitness Business Owners Should Know About Non-Compete and Non-Solicitation Agreements

The use of non-compete and non-solicitation agreements are becoming a staple in just about every business.  The fitness industry is no exception.  In fact more and more small fitness businesses are using non-compete agreements when hiring trainers regardless if the trainer is an independent contractor or an employee. 

Now I am by no means a legal expert and would strongly recommend speaking to a lawyer if you have specific questions regarding a non-compete and/or non-solicitation agreement.  So, don’t substitute what I am about to say as legal advice.

Although the two terms non-compete and non-solicitation are often used together they have two distinct meanings.  A non-compete agreement is a contract between employer and employee/IC whereby the employee agrees not to enter into competition with the employer after employment has ended.  The non-complete typically takes effect after employment has ended and will last for a pre-determined time set forth by the employer. The non-solicitation agreement restricts the employee from soliciting (a) employees or (b) customers of the business after departure.

The intent of using the non-complete and non-solicitation is to provide reasonable protection for the business.  When a fitness business owner hires a trainer there is an assumed risk that the business owner takes.  The primary risk is the effort and resources the business has provided the trainer to develop a client base.  If the trainer was to just up a leave and take the clients with them: this could lead to a devastating impact to the business because of the loss of income.  The use of agreements is permitted by the courts in an effort to protect the intellectual rights and any proprietary information the company has provided the trainer.

The use of non-compete and non-solicitation agreements vary by state.  In fact in California the use of non-compete agreements are deemed unenforceable.  However, most courts favor non-solicitation agreements.  Check with your local state laws for additional information.

Also important to note is that the terms of the agreements must be deemed reasonable.  Unfortunately, reasonable is a very loose term and if you end up in court it will be up to the judge to determine what is or isn’t reasonable.  Here is what you need to keep in mind.  The purpose of the agreement(s) is not to prevent the employee from working in their choosing career field and to limit their ability to earn a living.  So although the intent of the agreements are to provide reasonable protection for the business regarding their customers and confidential information, they also provide protection to the employee for his/or right to earn a living.

There is one last point I would like to make; the non-compete and non-solicitation agreements are generally in place for the position and time at which they were signed.  This means if you hire a trainer, and have them sign the agreement(s) and then later promote them to a management position the previous signed agreement(s) may no longer be in effect.  So, error on the side of caution and make sure to have trainers/staff sign a new set of agreements whenever there is a change is positions or status.

 

Business Coaching

What exactly is a business coach? And more importantly what can a business coach do for you and your business?  These are two important questions.  First let us start with a brief understanding of a coach.  When the term coach first comes up for most of us this can bring back an instant memory of a youth sports coach, drama coach or even a music coach.  The job of the coach was to provide direction, guidance and a game plan to help us maximize our talents.  There is not much variation when it comes to the defining a business coach.  The job of a business coach is to provide direction, guidance and a game plan to help you maximize your talents.  In addition a business coach will provide resources and assets to expedite the learning curve.

Let us briefly review the topics of direction, guidance, game plan, resources and assets.

Direction is an area that we all need from time to time and as a business owner it is imperative that one has a sense of direction.  With all the obstacles and challenges that lie in front of each business owner, having a sense of direction will help you steer clear of any number of obstacles.  For these obstacles that one can not steer clear of a business coach is there to help you develop strategies to tackle the obstacles.  Direction is developed between the business coach and owner based on a clear understanding of what the business owner intends to accomplish.

Guidance is an extension of direction.  Once the business coach has a solid understanding of what the business owner intends to accomplish the business coach will tap into his/her experience to provide the business owner a readily available resource to help guide them through the easy and tough decision that lie ahead. Touching upon a few of the decisions, ‘When do I hire?’, “How do I expand?’. ‘Am I ready to expand?’, ‘How do I set up a compensation plan’ and ‘How do I handle a trouble employee/IC?’ are all questions every business owner will face.  These are but a sample of situations that a business coach can help you overcome.

A business coach will take the information obtained from the business owner and help them create a game plan to achieve success.  This is where things can get a bit tricky, it is not the goal of the business coach to create your business plan or directly give you the information to complete you business plan.  In fact it is not the business coach’s duty to give you all the answers.  There are some instances where the coach should give you the answers, but for the most part giving the answers doesn’t help the business owner in developing the confidence to make sound decisions and to grow their business.  If you are always given the answers one never learns.  Part of the growth of the business comes through the process or journey of exploring and challenging what the business owner already knows (or thinks they know) and provided direction, guidance, resources and assets to fill in the blanks. It is for this very reason that every business owner is different.  Each owner comes to the table with a different knowledge base and skill set.

Resources and assets are an important part of the arsenal for every business coach.  The information available in arsenal has been developed based on the experiences of the business coach.  The experiences both gained through personal experiences and coaching experiences.  It is through these experiences that business coach can deliver information that is both valid and applicable.  The resources and assets available through the business coach are geared specifically to maximize the time investment of each business owner.  Inefficient use of time is a wasted resource and something business owners can’t afford.

Getting back to the questions asking in the beginning; ‘What is a business coach?’ and ‘What can a business coach do for you?’  A business coach is a coach.  A person that will help you develop and solidify a sense of direction, to provide guidance through the good and bad times, to help you develop a game plan to achieve your goals and to provide resources and assets to help you maximize your time.  A business coach can move your business light years ahead of where you are right now.  A business coach prepares you to play game.

Client Development

6 keys to client development

1. You must get in front of prospective clientele
2. Be understanding and empathic to wants and needs of your target market
3. Speak to your prospective and current clientele in benefit-orientated language.
4. Present yourself and/or your business as the answer to the wants/needs of yours clientele.
5. Be adaptable
6. Follow Up

You must get in front of prospective clientele

The business of personal training is ‘Personal,’ and to that extent it means becoming more personal.  The best known way to get personal with someone is to physically get in front of them.  Please don’t misunderstand: all the ways to market your business are important, but the bottom line is that all that internet marketing and social networking is designed to get the prospective client to have direct contact with you. 

There are many ways to get in front of prospective clientele: one-on-one, in a group setting, through word of mouth referrals, and by replicating yourself.  Just get off your butt and meet your target market!!!

Be understanding of and empathic toward the wants and needs of your target market.

Being able to grasp the struggles and concerns of your target market will allow you to communicate directly to the prospect, either through your marketing materials or in any personal situation.  Knowing the emotional buttons to push to help lead your prospect where they want to go is vital to the success of your business.  This is by NO means a harsh sales tactic. The truth is, if the prospect is willing to read and/or listen to the information you present, they are viewing you or your business as a means to an end. 

Speak to your prospective and current clientele in benefit-orientated language.

Don’t waste your time going through all your credentials and latest and greatest exercises.  Those are just features.  Talk to them in terms of what you can do for them.  Talk to them about the results they can expect if they take action with you.  Keep the conversation focused on their wants and needs.

Present yourself and/or your business as the answer to the wants/needs of your clientele.

Once you have established an understanding of the needs and wants of your prospect and have spoken to them in benefit-orientated language, you can begin to present yourself, your business or your program as a means to an end.  Show them how they will achieve the results they most desire by adhering to your guidance and direction.

Be adaptable.

Be able to match the services and programs you offer to the needs and wants of your clientele.   Not all clients’ goals are 100% the same – there is always a little variation.  So be able to adapt to those situations.

Follow Up.

Follow up is huge.  This is how you keep your client accountable to their commitment to you and how you keep accountable to your client.  This also follows under the realm of ‘Say what you’re going to do, and do what you said you would.’  This applies to current clients, prospective clients and life.   This is the critical step that allows you to solidify your position as a professional.

Hiring Bad Trainers

Hiring trainers is one of the quickest ways to bring monies into your business. In fact not many business owners realize that hiring trainers is a revenue stream. In fact it is often looked at as one of the business headaches. Here are some quick pointers to identify if you are in fact ‘Hiring Bad Trainers’. Do your trainers:

 

• Consistently making excuses for low or no sales?
• Procrastinate on performing sales or marketing-related activities?
• Ignoring directions and only doing what they feel comfortable doing?
• Measuring success not by the number of sales closed, but by how much time or effort is put into something?
• Creating conflict with others in order to deflect attention from their own non-existent or low production/performance?
• Sabotaging co-workers or stealing prospects and sales leads?

Do your trainers work the training room floor, speak with prospects and go the extra distance. Are the:

 

• Trainers sitting at their desk or on the internet?
• Studio floor is cluttered with weight or weights not be racked?
• Fitness equipment is dusty or not working properly?
• Engaging the members on a first name basis?

 

Mind you this is certainly a short check list. But the point here is that there if far more to being a successful trainer. As the owner or department head that hires trainers expectations need to be clearly stated. The end goal would be to have the trainers develop a clients list and earn a good living. This would make both the trainer and owner happy. But often time what gets lost is what the expected of the trainer that will lead them down the road to ultimate goal and that is obtaining clients.

Take a moment and evaluate your current trainers to see if they are meeting the minimum requirements list above. Tune in next time for some tips on how to set up the expectations for your training staff.

 

Funding a Fitness Business

Starting your own fitness business can definitely be an exciting proposition. However, finding funding for it may not be so. In fact, it can be a very stressful task.

Starting a fitness business, whether opening a gym or a complete fitness center, requires a huge outlay of funds. So, before you start looking for funding, the first thing you need to do is prepare a business plan. The business plan must include all the details of your fitness business, from the type of fitness equipment you intend to have to the place you plan to open or rent your fitness center.

Doing this will give you a clear idea about the kind of funding you will require. However, starting a fitness business is not the only time you require funding. You will also need it if you plan to expand your existing business.

There are many different types of fitness businesses in existence these days such as full-fledged business centers, one on one personal training, cardio, boxing, yoga, aerobics and various others. The kind of funding you require will depend on the type of fitness business you wish to start.

When you think of starting your own fitness business, you should be ready to spend your own money. If you can't put up your own money, try to convince friends and family to invest in your fitness business venture. If you are unable to do that also, don't worry. Today, there are various options available to those who need funding for their fitness business ventures:

1. Banks: Banks usually approve large business loans. Simple loans are an excellent source of funding if you have the appropriate security to borrow against. Normally, banks look for a good business plan, great credit rating score and security. Once the risk of your venture is assessed, the terms and conditions are laid down. With the current popularity of fitness and health centers, it should not be difficult to procure a loan through a bank for a fitness business.
2. Mortgage: You can also raise funds for your fitness business through your mortgage. The advantage of obtaining funding through a mortgage is that they offer flexible repayment options as per your business needs.
3. Minority Business Grants: You can obtain as much as $50,000 for your fitness business using minority business grants. The main advantage of funding your fitness business venture using these grants is that they don't need to be paid back like conventional loans. Grants are provided by certain government agencies as tax-free cash awards. However, you must have a foolproof business plan to get approved for these grants. To increase your chance of receiving the grant, get them written professionally.
4. Administrations: There are various administrations and agencies that either work under the federal government or privately. They are dedicated to providing loans to people who are interested in starting their own fitness business.
5. Private lenders: If everything else fails, you can approach private moneylender to fund your fitness business.

Wellness and fitness industries have the fastest growing markets today. Thus, funding a fitness business start up should not be difficult.