Going for Broke: Top 5 Money Mistakes
While teaching a profitability seminar at the 2012 Worlds, ACX owner Randy Dickey made a startling discovery. “Out of 160 gym owners, not one raised their hand when I asked this question: how many of you know your hourly expenses for running your company?” remembers Dickey, who also leads the All-Star Gym Association. “Many of them were just charging the same as the gym down the street—they didn’t realize that they were losing profit because they weren’t charging enough.”
Lack of financial clarity is just one of many common mistakes made by business owners. We asked Dickey for his take on common financial pitfalls and the precautions cheer gym owners can take to steer clear of making them:
1. Launching too much, too fast: Though the exciting nature of starting an all-star gym can make it tempting to go all in, starting small is often more conducive to longevity. Dickey first opened ACX in 1996 with “very minimal equipment and very small debt,” renting space out of a local gymnastics facility on a percentage basis. “As we made money and grew our clientele, we then used the profits to buy more,” he explains. His gradual investment approach ended up having an unintended benefit: “We were always surprising our existing clients by constantly adding new elements such as a new floor and extra space. When you give everything away at first, people don’t appreciate it as much.”
2. Not taking all expenses into account when budgeting: When figuring out your monthly “break-even” budget, Dickey says it’s essential to factor in everything from property taxes to estimated tax payments to payroll to website hosting. “Take all of your bills and divide the total by how many hours you’re open—if you’re not making that much per hour, you’re in trouble,” says Dickey. To better plan ahead, Dickey keeps a monthly log of not only expenses, but also key milestones or financial factors of note (i.e. payroll being tight, enrollment fluctuations); he then refers to it the following year as a barometer of what to expect each month.
3. Not planning for setbacks or disasters: Even the most efficient entrepreneurs can’t control the unexpected—from storm damage to vandalism to our volatile economy. Although there’s no way to avoid these hardships, you can prepare for these events by having adequate insurance, backup money (cash and lines of credit), and more than one contingency plan in place. “We have every type of insurance you could imagine,” shares Dickey. “It’s also important to know the difference between replacement cost value and actual cash value.” (Replacement cost insurance is preferable, as it typically will replace the damaged item whereas actual cash value insurance takes depreciation into account.)
4. Letting competition distract you from the bottom line: “There are two types of gym owners: those who want to make money and those who want to win,” says Dickey. “9 out of 10 times, you can’t do both.” Dickey cautions against giving too many scholarships or making financial exceptions for top athletes, as that can backfire in a number of ways (such as resentment amongst other teams in the program and/or resulting loss of business).
5. Mixing business and personal money: When it comes to spending, the famed “KISS” adage applies: “Keep it separate, silly!” Having dedicated bank accounts and a business credit card is a must, not only for tax purposes but also to establish legitimacy; personal finances should be a completely separate entity from that of your cheer gym. Another enticing reason? Racking up rewards points on your business credit card can help you save on significant expenses. Dickey uses his American Express points to pay for coaches’ flights and hotel rooms when traveling to competition.
Shares Dickey, “It saves a lot of money over time.”