Debt: Know Your Numbers
Debt is a common by-product of fitness entrepreneurship, but it doesn’t have to be a jail sentence. What if you walked into your facility tomorrow and everything was paid off?
What if there were
- no weight equipment or treadmill payments due;
- no payments due for a rubber floor or a state-of-the-art sound system; and
- no loan bills due—that is, no bank requesting its piece of your pie plus interest?
What if instead of paying the bills (aka “your debts”) every month, you could put all that money into a savings account and begin to build true wealth? Does this sound like a fairy tale?
Making, spending and thinking about money take up a substantial portion of our entrepreneurial lives. It’s safe to say that most people would like to have more money available to provide for their family, secure their future and enjoy their free time a little bit more.
If we don’t keep more of what we make and if we don’t have enough money because we’re swimming in debt, then we restrict our ability to enjoy the fruits of our labor and experience life to its fullest.
Swimming in Six-Figure Debt
When my wife, Cassie, and I opened Avenu Fitness & Lifestyle on January 16, 2006, we faced many sleepless nights thinking about how we were going to make enough money to pay off the $220,000 debt we had racked up. Every decision we made was based on how much money we could pull in, not on what was best for the community of clients we served. We were stuck on the debt treadmill, paying the minimum amount due just to keep the doors open, the lights on and food on our table. We could only dream about not having to make our monthly debt payments.
Just like the clients who come to us sick and tired of living unfit and unhealthy lives, we needed to lay out a plan of action. The first step to eliminating our debt was to truly understand our financial situation. In particular, we had to know where we were budget-wise.
Know Your Numbers
Before you can create a plan to get out of debt, you need to answer a few questions:
- How much money do you make each month?
- What does it cost to keep the doors open and the lights on each month?
- What should you pay yourself to begin building the life you’ve always wanted?
- How much money do you need to set aside for taxes each month?
- Do you have an organized accounting program?
I can hear the pushback: “Who has time to keep up with those details?”
I understand that you’re training clients and working 12–14 hours a day. But spending all your time training—without pulling back to get to know your numbers—could leave you closing the doors early on your dreams.
To keep your finances in line and avoid the mad dash to figure it all out at tax season, do this:
- Schedule a weekly “IN30 Financial Fitness” session (preferably on Friday), then spend that 30 minutes a week walking through items 2 and 3 below.
- Review and update your check registry. Make sure your bank online registry and your accounting program (e.g., QuickBooks™) registry match down to the penny.
- As you review your expenses, make a note next to each: Need or Want.
Need: These expenses are required for you to run your business (rent, utilities, paying yourself, payroll, taxes, liability insurance and debt payments).
Tip: Look to lower your monthly payments by calling service providers and asking, “How can I lower my bill?” Most businesses will offer you a loyalty discount or provide you with a slightly lower-end package to save you money.
Want: These expenses are not required for you to run your business (new workout toys, music and magazine subscriptions, lunches and dinners on the business dime, T-shirts, and swag gear).
Tip: Learn to say, “No for now, not forever.” That means you should cut these expenses until you’ve built up solid savings and become debt-free. The key to building true wealth is to run as lean an operation as possible, constantly trimming the fat.
After a few months of these weekly sessions, you’ll understand what an average month looks like. This sets you up for success in the second step: budgeting.
So what could you do with the additional $1,000–$3,000 you would have in cash each month if you operated without debt? Think about how much better you would sleep at night knowing you were financially secure.
You could build a team that could take on more clients and give you more room in your schedule to work on your business instead of in it. You’d be able to leave the gym at a decent hour to spend quality time with family and friends. And you could establish a brand that would create lasting impact on the community you serve while giving you the life you’ve always dreamed of.
Cassie and I finally paid off our debt, just 22 months after implementing a debt-free plan.
We created our dream schedule, team, business and life. Because we were willing to live like no other, today we can live like no other.
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