Here’s the good news. You are an independent contractor and have been successfully running your own show for a few years. You don’t have a studio yet but you do have enough clients to keep you as busy as you want to be and earning enough money to meet your financial commitments. Two months ago you started putting money into a savings account and you’re thinking about opening a studio of your own soon because business is going so well. You feel like you are in a perfect position to take the next step in growing your business.
But then disaster strikes. You get into a major car accident, you become very ill or you injure your back while spotting a client in the gym. It doesn’t matter what the cause of the disaster it’s the result of the incident that’s going to bring your perfect world to a crashing halt. Suddenly you can’t train your clients anymore. You start dipping into your savings but since you only just begun putting any money aside you find you only have two months of savings to carry you through. After that, the money is gone and you have no idea where your source of income will come from.
You don’t have any insurance because you never thought about paying into a plan. You aren’t married so you don’t have the safety net of a partner to help you out. Your once viable business starts to crumble as clients look for another trainer to keep them going. You ask yourself, “What happened? How did things get so bad so fast?” That’s a good question to be asking, it’s just too bad the question came too late when the tragedy has already happened. Now you’re scrambling to figure out what you are going to do next.
Hopefully this hasn’t happened to you yet which means there’s still time to plan and prevent this disaster from occurring in the first place. While I can’t guarantee you won’t get into a car accident, suffer a major illness or get injured on the job, what I can tell you is that you should start planning for any emergency from day one of your business.
Since you only make money when you work you need to keep working to make money. As soon as something prevents you from doing so, you may find yourself in financial distress very quickly. As a business coach I see this all the time with new and veteran trainers in the personal training industry. They live very much for today and do not plan for their future or prepare for issues that could arise. It’s like gambling with house insurance. Sure your house may never burn down but what if it does? Paying the premium necessary for insurance will allow you start over without the financial hardship. So with personal training you need to create your own safety net especially when you don’t have someone else to rely on in case of an emergency. And even if you have someone to lean on, it’s unfair to allow them bear your financial burden just because you didn’t do a better job of planning in case of an emergency.
As soon as you decide you are going to be an entrepreneur and run your own personal training business you need to start thinking about how to protect yourself against hard times. Most trainers operate as a sole proprietorship and work alone. They haven’t hired other trainers to help them out so they truly have created a job for themselves and not so much a business. I think it’s this mind-set that is the beginning of the issue as to why trainers don’t fortify themselves in case of hard times. We don’t like to think about the what-ifs of getting sick or injured. We keep ourselves healthy so not being able to train doesn’t really enter our reality until it becomes reality and all too often it’s too late.
So what can you do about it and how can you protect yourself? Good questions. Here are five things you should do the minute you decide to be your own boss.
- 1. Save 10% of your revenue right away
- 2. Pay into an insurance plan
- 3. Do not overspend
- 4. Pay off any credit card debt
- 5. Cash flow is king
Let me first start by saying, if your personal finances are a mess your business finances will be too. If this is the case then get some help right away. Hire an accountant to set-up your books and create a business and personal budget. Stick to your budgets like your life depends on it because it just might. I’m not kidding this is very important.
I learned this lesson the hard way and it took me three tries to get it right and cost me a lot of money because I didn’t follow these five steps. But once I did, my business was solid and I stopped worrying about slow months or if something should happen to me.
Save 10% of your revenue right away
Whenever a client pays you, take ten percent and put it into a savings account right away. Then forget about it. When the amount in your savings account gets up to $5000 then contact an investment advisor and start investing your money. You might be tempted to dip into this savings account when a nice pair of shoes catches your eye or a much needed vacation pops up. Don’t do it. Save and forget about it. This is your future and your safety net. Think long-term otherwise you will turn into the eighty year old personal trainer who has to train instead of wants to train.
Pay into an insurance plan
There are many insurance plans available for entrepreneurs to pay into which provides medical, dental and insurance against loss of work due to illness. Look into purchasing a plan right away. The premiums you pay will be worth it should anything happen.
Do not overspend
It’s easy to overspend especially if that’s your tendency. If you have a budget you will know where every dime you earn should go. If you aren’t particularly skilled in creating a budget then hire some help to get you started. If you aren’t particularly skilled in following a budget then grow up. You’re running a business and you need to get serious about ensuring you have enough cash flow to keep you afloat. Or if you prefer to worry about money all the time then please don’t follow a budget and by all means overspend.
Pay off any credit card debt
How many credit cards do you have? How many of those cards are at or near their limit? How much interest are you paying on those cards every month? Why did you get into debt with your credit cards in the first place? I do not have a great relationship with credit cards. I love to shop and spend money. At one point I had over $15,000 in credit card debt and paid that off using my home equity. Then I ran up the card again and once again had to dip into my home equity. I guess I was a slow learner because after the third time and a serious talking by my husband I had to face the fact that I had a spending problem.
So once we paid off all the cards for a third time I cancelled all but two of the cards. One card was for business and had a $1000 limit and the other card had a $7000 limit. I called the credit card company and asked them to reduce the limit to $2500. This keeps things in control and I pay my card off as soon as I use it. If I don’t have the money then I don’t buy. It’s that simple. Well now it’s that simple but it took me a while to learn this lesson.
So now I’m passing this lesson onto you. Pay off your credit card debt. If you can’t be responsible with your credit cards then I suggest you cut them up, lower your limit and only have one. It’s no laughing matter and certainly won’t help your business.
Cash flow is king
Just recently, I attended a conference where Kevin O’Leary from the Dragons’ Den was speaking. His statement, “Cash flow is king” hit me like a ton of bricks. He said, “Without cash flow your business is dead”. DEAD! I kept thinking, “Kevin is right”. If your business does not have adequate and consistent cash flow you are dead in the water.
The best way to ensure the cash flows like an endless river is to attract, retain and service your clients like they are royalty. Your clients are your life blood and without them you have no business so do whatever you can to show your appreciation and when they do reward you with their money become a miser and save it, hoard it and protect it because it’s the life of your business.
I really want you to start thinking about what you would do if something were to happen to you and you were not able to work. How would you survive financially and for how long? What are you doing right now to put a plan into action to protect yourself? Hey, if nothing happens then that’s great. You might just be able to someday afford that studio you’ve always wanted. And guess what? You’ll have the capital to invest because you’ve taken the time to save your money.
As Kevin says, “You’re in business for one reason and one reason only and that’s to make money”. Yes as trainers we want to help people but are you doing it for free? I didn’t think so. It’s not a bad thing to make money. It’s only bad when you squander it away without thinking about the consequences if something should happen.