This article is the last in a five-part series on opening your own personal training facility. The previous column examined different methods for marketing your new facility. This column covers business accounting practices; guidelines for determining the ownership structure that best suits your new business; staff hiring; and ideas for future expansion.
Hiring an accountant is imperative when starting up your new business. A good accountant can save you thousands of dollars in tax write-offs related to some of the huge expenses you will incur. Ask other fitness professionals for recommendations and take the time to interview prospective candidates thoroughly.
Although your accountant will explain the tax deductions you can make and help you prepare end-of-year records, you must have a good understanding of basic accounting. This knowledge will enable you to track your income and expenses, thereby improving your chances of making a profit. You will also need to collect the financial information necessary for filing your various tax returns.
Collecting Financial Information
The actual process of keeping your books is easy to understand when you break it down into three steps.
Keep Receipts. Make sure you have a receipt or another acceptable record of every payment to and every expenditure by your business. Your records must show the amount and date of each transaction, plus any other relevant information. You’ll use these records to create summaries of your transactions.
Create Income and Expenditure Summaries. It’s important to summarize both your income and your expenditure on a daily, weekly or monthly basis. You can create summaries by setting up ledgers (records in which accounts are recorded) and posting information to them. A completed ledger is really nothing more than a summary of revenues, expenditures and whatever else you’re keeping track of (entered from your receipts according to category and date). At any given time you can use these summaries to answer specific financial questions about your business, such as whether you’re making a profit and, if so, how much.
You can purchase an accounting software program that will generate its own ledgers as you enter your information (and then automatically generate the necessary financial reports from the same information). Some good accounting packages are Quicken and QuickBooks.
Use Summaries to Create Financial Reports. These reports will tell you specific information about your business, such as how much monthly profit you’re making or how much your business is worth at a specific point in time. Financial reports combine data from your ledgers to show you the big picture of your business. Following are the key reports you need to create regularly:
- a cash flow analysis, showing the anticipated movement of cash into or out of your business
- a profit and loss forecast, showing the financial performance of your business over a given period and
- a balance sheet, a financial statement showing the assets, liabilities and owner’s equity of the business at a particular date
Types of Ownership Structures
It is also key to select the best kind of ownership structure for your business. Before choosing one, weigh the pros and cons of each type.
Sole Proprietorships, and Partnerships. A sole proprietorship is a one-person business that is not registered with the state as a limited liability company (LLC) or a corporation. You don’t have to file any papers to set up a sole proprietorship; you create one just by going into business for yourself. Legally, a sole proprietorship is inseparable from its owner. This means that the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business-related obligations, such as debts or court judgments.
Similarly, a partnership is simply a business owned by two or more people that hasn’t filed papers to become a corporation or an LLC.
Sole proprietorships and partnerships make sense in a business where personal liability isn’t a big worry. However, owing to the nature of our industry, you may decide to take steps to reduce your personal liability to protect yourself from a lawsuit.
Limited Partnerships. Limited partnerships are costly and complicated to set up and run, so they are not recommended for the average small-business owner. Limited partnerships are usually created by one person or company, the “general partner,” who solicits investments from others who will be the limited partners. Consult a limited partnership expert if you’re interested in creating this type of business.
Corporations and Limited Liability Companies. It is more complicated and costly to form and operate an LLC or a corporation than it is to start up and run a sole proprietorship, but the extra effort is well worth the trouble for some small businesses. The main benefit of an LLC or a corporation is that these structures limit the owners’ personal liability for business debts and court judgments against the business.
Corporations and LLCs make sense for business owners who run the risk of being sued by customers or clients, are likely to pile up a lot of business debts or have a good deal of personal assets they want to protect from business creditors.
Once you have set up your business structure, you should think about how many staff you’ll hire. Before hiring them, you’ll need to consider a whole host of federal and state laws that govern many aspects of the employer-employee relationship, including minimum wage, withholding taxes, worker’s compensation and more. If you violate the law, you could find yourself facing steep penalties that could jeopardize your business. In some cases, employing the services of
independent contractors rather than
hiring employees makes sense. However, certain laws regulate who can and cannot be treated as an independent contractor. A lawyer can help you make the best decisions for your business.
Whether you ultimately decide to use employees or independent contractors, bad hiring decisions will come back to haunt you. That’s why rushing through the hiring process is always a big mistake, no matter how eager you may be to get someone on board to start earning money for you. Good hiring takes time and planning. (See “The Hiring Process” on page 15 for more information.)
Having the proper insurance is another crucial key to the success of a new business. Be sure to research the right types of insurance for your company. You will need commercial property, liability, loss of business income, disability (in case something happens to you and you can’t pay your expenses), life (just in case, to cover the expenses you would leave behind), medical and dental. These expenses add up, but the coverage will protect you and your business in case of any unforeseen circumstances.
After you open your business and it grows, look for ways to expand it to increase profits and keep up-to-date with your customers’ needs. For example, as The BioMechanics has grown, I have added a new dimension. I have partnered with a full-time wellness coach who helps people with the mental aspects of stress, health and wellness. In addition, we are currently interviewing nutritionists and will add one as a part-time independent contractor in the next few months. We are also working with San Diego State University to start an intern program within our facility to help with our consulting work. By summer 2005 we will add educational seminars to our services along with the possibility of in-home services and online video assessments.
Your Business Success
Opening a new facility is an incredible experience. You will learn more about things you never even knew you wanted to know, from choosing the right lighting fixtures to setting up multiline phone systems. The key to success is turning the stumbling blocks you will encounter along the way into stepping stones. Learn from your
experiences and strive to create an
environment where you know your clients will succeed. Then your business will be both a personal and a
financial success. n
Prepare a Detailed Job Description. Include the duties and responsibilities of the position, the minimum qualifications required of candidates and any special skills needed.
List the Qualifications and Traits of the “Ideal Candidate.” Include desired job experience, skills, and character and personality traits.
Thoroughly Review Each Candidate’s Resumé. Watch out for potential red flags, such as demotions in former positions, inconsistencies or conflicting dates in the resumé, or a lot of job changes in a short period of time.
Interview the Best Candidates. Interviews are too important to be rushed, so set aside enough time to gather and assess all the facts about each candidate. In the interview, apply these guidelines:
Check References. Once you have narrowed the list of potential candidates by reviewing resumés and conducting interviews, call to check the references of the finalists.
Running your own business is very exciting, but you will find it hard not to spend every waking hour thinking about ways to improve it. For the first 6 months of business, I was in the office 14 hours a day. I loved it, but it started to become
too much. I sat down and assessed the situation to ensure that I could maintain longevity in my career and also have fun with the business. Here are some ideas
to help you survive—and thrive.
Set Opening Hours. Define specific opening and closing times and stick to them. Do not make yourself available at any hour.
Schedule “Me Time.” Mark in your calendar at least 1 hour per day for you.
Work out, go for a walk, have a leisurely lunch, read a book or do whatever fuels you.
Make Networking a Fun Experience. Get out of the office and visit potential referral sources. The change of scene will help you feel revitalized when you return.
Set Specific Time Goals for Tasks. Don’t try to do everything in the first 6 months. Plan your ideas and stick to your plan so that you don’t become overwhelmed.
Subscribe to our Newsletter
Stay up tp date with our latest news and products.