Tom Perkins is a fitness business coach/advisor, radio host, speaker, author and certified personal trainer/fitness nutritionist with more than 30 years in the fitness industry as a consumer, fitness professional and business coach/advisor. Read a free report where Perkins details, "The Top 5 Reasons Personal Training Departments Fail and What You Can Do About It!" on his Web site at www.megafitnessbusiness.com.
Typically, you can increase your profits in two ways. One is by increasing your sales. The other is by reducing your costs. Here are five quick tips to reduce your expenses:
1. Review your payroll and fringe benefit costs.
Payroll is a major expense for most businesses, so you should evaluate your staffing needs in relation to your customer base. If you experience busier months than others, consider hiring staff on a temporary basis. For example, January, February and March usually show spikes in health club memberships. Can you cover this temporary spike by contracting with independent fitness professionals or by hiring part-time employees on a temporary basis?
Fringe benefits can account for 20 to 25 percent of your direct payroll expenses. Review your group insurance programs on an annual basis. Consider going with a higher deductible as a way to lower your premium.
Consider opening a medical savings account (MSA) for your employees. Deposits to MSA accounts receive the same tax treatment as health insurance premiums. Therefore, these deposits would escape federal income taxes, FICA taxes, and state and local income taxes, which can mean a noticeable savings for any business owner.
2. Review your workers' compensation policy.
Make sure that your business and employees are properly classified. Misclassification is one of the most common reasons for overpaying on workers' compensation—and your insurance company won't let you know whether your employees are classified correctly or whether you are paying the correct amount.
Look for a copy of "The Scopes Manual" published by the National Council on Compensation Insurance. This manual describes the operations and rates for more than 700 classifications.
3. Review your fixed assets.
Look at your office and fitness equipment. Dispose of obsolete or excessive equipment. Think about whether it's better for you to lease or buy. To determine this, ask yourself the following questions about each piece of equipment:
- Will the technology change dramatically in the next three years?
- Will how you use the equipment change significantly in the next three years?
- Will the technology cost significantly less in three years?
- Can the equipment be upgraded easily within three years?
If you're making enough changes or experiencing significant growth within that three-year time frame, a lease will make more sense than purchasing the equipment outright.
4. Review your income tax quarterlies.
If you anticipate that your income will drop this year, do not pay your taxes based on last year's income. Work with your accountant or tax advisor to get an accurate estimate of your income. If you have overpaid, have your accountant submit a refund request to the Internal Revenue Service.
5. Review your expenses with your employees on a regular basis.
Review your budget and actual expenses monthly rather than waiting until you experience a cash crunch or a deficit. By reviewing expenses with your employees, you may find new suggestions or ideas for cutting additional expenses.