Larry Conner shares eight financial tips in case of a recession and that are best practices even if one doesn’t occur.
Financials and the economy are top of mind for many right now in light of rapid inflation and questions regarding if the U.S. is on the heels of a recession.
With this in mind, how are operators in fitness feeling about the industry’s financial future? Larry Conner, the chief financial officer of Regymen Fitness and The Covery, recently returned from the IHRSA trade show and recapped his conversations with those in attendance.
The verdict? Despite economic uncertainty, the fitness industry is feeling optimistic.
“Everybody is just feeling real positively — even with the way the economy’s going and everything else,” said Conner.
Conner attributed this positive mindset to a couple of reasons. For one, he feels U.S. consumers no longer view fitness as a luxury but a necessity, and gym memberships should remain a priority if people start to cut back on expenses.
In addition, many operators who survived the pandemic feel as if they can weather most anything after the challenges of the past two years.
“The exercises we went through during COVID-19 have prepared everybody in case of a recession,” said Conner.
However, despite the optimism, you should still prepare for an economic downturn, just in case. With this in mind, Conner shared in his own words eight financial tips in case of a recession.
1. Start Saving
“I always tell people to watch your cash flow, and this is a great time to really start socking away a little bit of money if you haven’t already. If you put 2% to 3% of your revenue away each and every month, within a year you’ll have a large chunk saved. Build that up.”
2. Consider Raising Dues
“Don’t be afraid of a dues increase — restaurants do it all the time. If chicken doubles in price, you’re not going to pay the same for that chicken sandwich the next time you visit that restaurant. As an industry we need to adjust quicker. With all the pressures we’re getting on labor, all the pressures we’re getting in the other areas, your price can’t be the same if you’re dealing with the same numbers.”
3. Invest in Things With an ROI
“Don’t invest in stuff that’s not going to have a return. Yes, we want to build up the value of the membership. But you’ve got to use a little caution. If you’re going to invest, see how you can monetize it. That doesn’t mean you always charge for it, but it has to draw interest from outside your membership — it has to have a reason to bring people in. We have to make sure we can have a return on our investments that is appropriate.”
4. Don’t Undersell a Profit Center’s Value
“Take recovery for example — once you make it free, you’ll never be able to charge for it because you just discounted it. It then doesn’t build value in the consumer’s eyes. You need to build value in whatever you do.”
5. Do a Bottom-Up Analysis
“This is the absolute best time to do a bottom-up analysis on your balance sheets and your income statements. Have your department heads look at every transaction. There’s so many times we have something on there we’re paying for, and it could have been dropped off months ago. In addition, strongly focus on the expenses at this time, because $1 saved on expenses is $1 to the bottom line.”
6. Consider Ways to Conserve
“For example, utilities have gone up 20% for some businesses. At a big club that can be $3,000 to $5,000 a month. Start looking at how you can conserve better. There are adjustments you can make, such as limiting access to who can control the thermostat or converting to LED lights.”
7. Apply for the Employee Retention Credit
“If you haven’t already, apply for the Employee Retention Credit. It’s not too late — you can still do it for 2020 and 2021. Go back and get it done. It’s not going to help you right now — it will take six to eight months to get it — but that money is solid. And it is your money. It is a tax refund you’re due.”
8. Be Aware of Your Cash Flow
“The cash flow statement is where it is at. Know what drives the cash on the income side. Start thinking about those things and know what would trigger cash really quickly if you need it.”
Do you have more financial tips to add to this list? Email them to email@example.com.