Leslie Nolen leads The Radial Group, which provides sales, marketing and business planning know-how for health and wellness businesses. Join thousands of health and wellness leaders who get free weekly business tips at http://www.radialgroup.com.
DO: Base your budget on specific business improvement plans.
DON’T: Create a budget without specific ideas for improving results.
Plans should precede budgets. Too often management teams create budgets as if financial improvements will happen by magic and without specific plans, and then they wonder why they can’t make their numbers.
Decide what you’re going to do to improve the business. For example, if you plan to win more customers with a new weight-loss program, estimate the resulting changes in revenues and costs you expect. Doing this allows your budget to reflect your business plan.
DO: Base your business on its strengths.
DON’T: Ignore the weaknesses of your business.
Knowing the strengths of your business also means acknowledging its weaknesses. Say your plan for this year is to win more customers. If you have high staff member turnover—and the truth is that they rarely know anyone’s name—don’t develop a marketing plan that emphasizes great service.
Perhaps your business is stronger in other areas such as offering the latest equipment, the greatest variety or a great price without sales pressure. Or maybe your strength is having caring personal trainers or super-supportive weight-loss programs. Whatever it is, know it.
DO: Check key assumptions against reality.
DON’T: Rely exclusively on published price lists, last year’s budget and other hypothetical data.
A common budgeting mistake is to use your published prices. However, many businesses consistently discount or negotiate lower rates in practice. If your “rack rate” for a health club membership is $49, but you always discount it to $39, use $39 in your budget. Apply the same approach to personal training and other hourly rates.
DO: Look at the track record of your business.
DON’T: Assume that everything will go according to plan.
Most improvement plans cost more and take longer than originally expected. Look at your budgets, plans and actual results for the last two or three years. How do your results compare to your plans? If your business always falls short, dig into why.
DO: Know which types of customers are most profitable and why.
DON’T: Think all customers are the same.
Focus your plan on winning and keeping the kinds of customers who will turn into your most profitable, long-lived relationships.
A common mistake is spending big money to win customers who will inevitably decide in a few months that the grass is greener at another facility. It’s far cheaper to keep a customer than to win a new one. A single loyal customer will generally buy far more from your business over three years than three new customers who each stick around for only one year.
DO: Get outside perspectives from trusted colleagues and advisors.
DON’T: Rely exclusively on internal opinions.
Every business plan and budget benefits from an outside perspective. Ask trusted advisors to take a look. Run your plan past your accountants and attorneys. Look for people with experience in running other kinds of businesses.
Seek out skeptics. When people poke holes in your plan, ask them for their ideas about how to fix it. They may have good ideas that you hadn’t thought of, especially if they’re experienced in other industries.
DO: Make your business plan actionable.
DON’T: Make it a laundry list of possibilities.
To be useful, a business plan must ultimately turn into a to-do list: Who’s going to do what, when and how, and what results are they aiming for?
Too many business plans and budgets skip the details. They make high-falutin’ statements about all of the millions of obese, sedentary people. Then they list all the services that they might offer, all the ways that they might promote and market their products.
Plans must be specific. Instead of listing a dozen marketing possibilities for your sports-specific fitness programs, develop a detailed plan for one way you’re absolutely certain you can market your program.
DO: Write a plan that reflects what matters most to you and your team.
DON’T: Worry about whether it sounds impressive to others.
If your vision for your business is to make a decent living for the owners and the staff by showing up bright and early, unlocking the doors and keeping the lights on and the area tidy while customers come and go throughout the day, that’s perfectly OK. On the other hand, if what keeps you going is a deeply altruistic vision of making your community healthier, that’s OK, too.
Honor what’s true for you and your team, no matter what it is. Don’t invent a mission that doesn’t reflect what really drives your business.