Recently I was speaking to a gym owner who is looking to build a facility in the next year. She said she had met with her accountant, who had advised her to start cutting expenses in order to increase cash flow. The problem was, this gym owner was looking to cut items that have previously proven to provide a solid ROI (Return on Investment). In fact, her ROI was likely 2 ½ times her investment. (Meaning for every $1 she was investing, she was getting back $2.50.)
So why would a CPA tell her to cut it? The answer is simple. A CPA is not a business advisor or consultant. A CPA is absolutely necessary for a growing business. This person not only will help reconcile your bank statements, which provides accountability toward loss and theft, but your CPA can provide you a profit and loss statement that easily helps you see where your money is going on a monthly basis. So, you might be asking why this person isn’t the right one to help you improve your cash flow…
The reality is that your CPA doesn’t know what each of your software programs or subscriptions truly does. They’re not industry experts who know the ins and outs of running a cheer gym. So, when they tell you to decrease expenses, they may be advising you to cut services that save you time and actually make you money. Ironically, that will do the exact opposite of increasing your cash flow.
Additionally, a CPA who tells you to decrease expenses to increase cash flow is completely out of touch with the industry. In retail, you may only be able to get so many widgets of inventory to sell on a monthly basis. For example, if I can only get 100 of a particular item, then it’s impossible to increase my sales beyond that hundred. I can certainly increase pricing, but the value would have to be relative. However, even in the smallest towns, there is no shortage of children to teach tumbling or cheerleading – yes, even in the summers.
So, a CPA who tells you to decrease expenses rather than increase revenue doesn’t understand our industry. CPAs are not business advisors.
The coaches at Next Gen are, and quite frankly, we’re experts at this. Our coaches can spend one hour looking at your current business and asking a series of questions to determine if you should focus on increasing enrollment or increasing average revenue per member. Both options increase your cash flow without decreasing expenses.
As I’ve said before, decreasing your expenses to increase cash flow is a very limited option. Eventually, you’ll be left with minimal staff, rent and utilities – none of which can be decreased while attempting to grow. In my experience, bad advice like this does far more than confuse gym owners. It hurts them. It makes them focus on all the wrong things. Instead of investing money into marketing and stategic partnering, they shift their focus onto cancelling the very services that put them in the position that requires them to need the new building in the first place.
CPAs are trained in numbers. They’re trained to provide a set of metrics for owners to help you make educated decisions. They are not trained in the best methods for increasing revenue and enrollment in a cheer gym.
Imagine wanting to move into a new building so you can grow…and yet, the advice provided by your CPA actually decreases enrollments because you’ve cut your marketing budget in order to “increase cash flow”. Provided that you’re not budgeting $100 and spending $1,000 each week at Costco, you’re likely not going to see a big increase in cash flow by cutting expenses.
So, be very careful who you’re getting your business advice from. I once read that some of the most struggling businesses in America were those run by lawyers, doctors and accountants. It’s not because they’re not great at their jobs. They are. But just like a great coach doesn’t mean you have a profitable cheer gym, accounting is just one small aspect of running a business.
Be leery of people who give you advice without asking a lot of questions or proving they’re extremely successful in your industry (and those who have the same definition of success as you do.)
To learn more about the coaches at Next Gen and how they can help you “increase cash flow” by growing your revenue, visit nextgenowners.com/book-a-call and hop on a call with a member of our team. They’ll learn about your gym and see if one of our programs might be a good fit for you.
