Make Sure Your Business Is As Fit As You

Challenge

This small business came to us for some help with practical growth and higher-level leadership. When we first engaged, the business was looking to better manage tax planning and the cash flows surrounding those taxes. They had cash flow issues and were troubled with their debt paydown while looking to refinance. As a fitness studio, their costs were rather fixed and the constraint became maximizing space utilization while anticipating future cash impacts - aka taxes,  payroll, etc.

Solution

While setting annual goals was important to the management team for the purpose of continuing the long-term vision and keeping alignment, the more important issue became tracking against those goals. Were these goals being met on a monthly basis? Was the full team moving in the same direction? At the end of the day, some of the goals were being met, and others weren’t. 

You will often hear us preach one of our four principles - knowing where you make and lose money. For this husband & wife team, they only knew that they were making money, and used our guidance to better understand where they are losing money on the flipside. We dove into the underlying financial data to better understand utilization ratios, cash flow from classes, retreats, and workshops, as well as some of the retail good sales in their studio. 

While diving into this historical data, we also began the coordination of refinancing and consolidation of their existing debt, along with coming up with a plan for debt paydown that tied back to their forward looking budget. 

Further down the road, we dove into people planning - one of the most important pieces of their business. It’s easy to throw bodies at problems as you’re growing, but is much more effective, albeit difficult, in the long-run to re-jig the entire organizational structure to maximize your profitability and customer experience. GrowthLab, along with their management team, began asking questions such as what is the most desired customer experience and who is needed to support operational overhead? Do we have those people? Who can we move around to make this work?

Finally, we worked with their CPA and bankers to better understand their liabilities and options for refinancing and payment plans. The goal here was not just to minimize interest expense, but to also make sure that these payments fit into our cash flow projections.   

Results

After getting the fundamentals and foundation taken care of, this company is now on track to pay down debt in the next 18 months, down from the original 3 year projections. They are consistently hitting revenue targets and the business is producing excess free cash flow - allowing the founders to continuously invest in themselves and their business. This company is growing quickly, and is planning to open additional franchise locations, and even an online video platform for their members!

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.