Lift The Bar

As we approach the end of the year and start looking at how we want next year to look, it may help to think about your finance goals more holistically.  Here are 5 tips to help you get the most financially from your business.

1. Set a range rather than a specific number as your financial goal

Whatever business you are in you expect fluctuations.  From a personal training perspective (in UK) we expect things to be busier at the beginning of the year, another uptick when the weather changes (Easter-ish), a quieter summer, an increase as schools go back and a dip as we approach Christmas.

Yet, when it comes to looking at income, so many trainers focus solely on a single level of income, the top of whatever is possible.  This is what causes the stress when we go through a quieter period as well as leading to potentially bad business decisions when everything is based around best case scenario.

What works better is to have a  range of expected income.  A bottom level which may be break even (including your salary) as well as the top level “This is what I get when everything is sunshine and roses”.   Anything in this range is ok and expected.  Of course, it would be nice if it was always at the top, but we know that’s not realistic so by having an acceptable range, we can use that to sense check our emotional reactions to a drop and to ensure we are making good decisions throughout the year.  

Identify the top and, more importantly, bottom of your expected income range.  Everything within this range is ok.  If a client leaves, then that’s ok, it’s still within range.   This doesn’t mean we ignore everything until it becomes an issue, but it gives us more breathing space and a more realistic view of business.  

2. Decision Making

Don’t make investment decisions based on top end income estimates.  If you are thinking of adding any expense to your business be realistic about your income expectation; assume there will be fluctuations and allow for reductions in income as well as the hoped-for increases. Make sure you are going to be able to pay the additional costs in the quieter months as well as the good ones.

3. Make Sure You Don’t Need to Be At Full Capacity In Order To Make The Money You Need

Sense-check your business model and expectations are realistic and you don’t need to be operating at full capacity to make the money you need.  If your model requires this, then you are setting yourself up for a lot of stress and worry.  You should expect to have times where you aren’t at capacity, you know that clients are going to leave, and you will need time to replace them.  By having a buffer in your client numbers, it allows you to operate at a higher than necessary level. The “extra” money when you are full is a nice to have not a necessity to pay for a roof over your head.  It’s going to depend on your business model but aim to be in a position where you are earning what you need at 80% capacity or less.

4. Pay yourself a set monthly amount

One of the things that is often mentioned as a benefit to employment is paid holiday and sickness but it’s easy to create this for yourself in your self-employed business by putting money aside in busier months to cover the “quieter” ones.  If you know what you are paying yourself on a monthly basis and put any extra to one side, you can ensure a regular wage that isn’t directly impacted by you taking holidays or having time off sick.  This is a much nicer way to live than spending everything when you have a good month then wondering how you are going to manage with less money in a later month.  It also allows you to get a better handle on your personal finances.

5. Treat your business as a business and separate it from your personal finances

I’ve written this before but it’s worth repeating. Treat your business like a business.  Calculate your personal wage on a monthly basis not as and when you get payments from clients.  Calculate your monthly income and expenses for your business, be aware of financial commitments that are coming up (tax is a big one but annual insurance payments and other expenses are good to keep track of too), and separate your personal expenses from your business ones.  Have a separate personal budget with your personal income, expenses, and savings.

For more on finance check out the Accountancy For PTs Webinar.

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