YNAB BLOG

Your Gym’s Finances Rx’d (5 Critical Cash Flow Mistakes of CrossFit Gym Owners, and How to Fix Them)

About two years ago I hit a personal best on my 1RM back squat. The next day I went hiking with some scouts and was sucking wind within the first 10 minutes of the hike.

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By day I run a budgeting software company. Really early in the morning, I CrossFit.

Realizing I was strong (relative), but had no cardio to speak of, I stumbled upon CrossFit. I rolled my own at my home gym for a while, and then joined an actual CrossFit gym a little while later. Julie (my wife) joined right along with me.

I’m pleased to report that my 1RM back squat has increased, and my cardio has gone through the (it’s all relative people!) roof. In other words, I’m stronger, faster, more flexible, and more coordinated than I’ve ever been.

Four or five days a week I walk into the gym and let our trainers teach me how to be more fit. You guys can coach someone to an explosive snatch, a lightning-fast Fran time (mine is 3:27, I need to learn that buttefly pullup), and a perfectly-executed muscle up.

Now, I want to turn the tables a bit, and teach you CrossFit owners how to be financially fit. Let me highlight a few mistakes I see being made regarding your cash flow management. I want to leave you financially stronger, faster, and more flexible.

The overarching principle, is to recognize that your finances are vital to your business! I reached out to Ben Bergeron of CrossFit New England (I’m a big fan), who had the following to say:

“Having your books in order is a top priority for small business owners…[outsourcing allows you] to focus on the true factors that determine our success; customers, employees, and growth opportunities.” – Ben Bergeron, CrossFit New England

Ben is a big advocate of outsourcing those things in your business that keep you from focusing on the business. I couldn’t agree more. However, if you can’t (yet) outsource your bookkeeping, you can certainly make them a top priority, and avoid the following five mistakes while doing so.

Mistake One: You Intermingle Your Business and Personal Finances

Keep separate bank accounts for your personal and business use. Don’t intermingle the two. It makes tax time horribly, horribly inefficient and probably pretty inaccurate. If you mingle business and personal expenses, and end up being audited, you will hate your life.

Another reason to keep your business and personal finances separate is so you can know how the business is even doing! Are you having to heavily subsidize its operation with personal money? Are partners having to toss in a few hundred dollars each month to cover “this or that” on a regular basis? Are you profitable? If you don’t separate your finances, answering those critical questions is next to impossible.

Solution: Separate your business and personal finances immediately. Separate bank accounts, and separate tracking.

Mistake Two: You Make Spending Decisions Based on What’s in the Checking Account

I know how this goes because I made the mistake of running my software business the same way. You look at that big checking account and you think, “Yeah…we can buy another rower.” Or maybe it’s, “No way can we buy another rower! Or paper towels for the bathroom!”

Do you need to hire another coach? Can you afford it?

Are you wanting to build out a complex membership management/billing/training system? Can you afford that?

The sound system is broken. Can it be replaced?

Looking at that big (it’s all relative) pile of money in your checking account and asking yourself if you can afford something…you’re asking an impossible question, because you don’t have proper insights into what expenses have already “spoken for” that money.

In other words, you may have $9,800 sitting in your checking account and you think, “Well, yeah, let’s get a new rower.” Before you realize that um, taxes are due. Not only can you not afford that rower, you suddenly can’t afford those paper towels.

Solution: We teach our small business clients this simple question: “That money sitting in my account, what does it need to do before more money comes in?” Answer that question every time you’re “doing the books” (see Mistake Three) and you’ll find clarity only found at the end of a 20-rep squatting session.

Mistake Three: You Don’t Track What You Spend

You have no idea if that member management system is actually worth it, because you aren’t tracking what you’ve spent on it, and how that’s translated into more revenue.

You don’t know what you spend on equipment maintenance, because you haven’t bothered to record when you spend money on fixing the old stuff, or buying something new.

Those t-shirts you bought. Were they worth it? That bowling event you planned for your members, how much did it actually cost, all-in?

You write down your workouts, right? And you have your members record their workouts, right? Recording your spending is just as important. Just like a recorded WOD, recorded spending gives you a historical record that provides information for you down the road as you begin to proactively plan what to do with your money.

Solution: Track what you spend. But don’t fall prey to Mistake Four in your pursuit.

Mistake Four: You Use Quickbooks to Manage Your Books

The beauty of a CrossFit gym, is that it’s simple. Oh so simple. I love everything about it. You’re a cash-based business, you carry limited (if any) inventory, your monthly revenue is predictable over the short term, and you don’t have to worry about invoices or purchase orders.

In other words, as a CrossFit affiliate, you very likely don’t need Quickbooks. It’s overkill and will only confuse and de-motivate you.

Solution: Use YNAB (pronounced why-nab), of course ;)

Mistake Five: You’re Reactive to Cash Crises, Instead of Proactively Deciding What’s Important for You and Your Gym

The rower breaks, so you pay for the repairs on a card (probably your personal card, see Mistake One). You decide you want to throw some kind of “End of the Open” event for your members, so you buy some food, maybe rent some tables and chairs, and have a great time. But you didn’t really have the cash to float that, so you put it on the card.

Your equipment is in such disrepair that prospective members are a bit turned off by the first impression you’re giving them. But you can’t buy new equipment because hey, it’s expensive. You grit your teeth and grab the duct tape (I made up the part about the duct tape).

Instead of waiting for these things to inevitably happen, I want you to look at that big pile of money in your checking account, and answering that question of “What should this money do for me?” I would encourage you to look AHEAD and be proactive about these expenses.

For example, let’s say you want to throw an annual member appreciation barbecue. You’ll need tables, chairs, and food. Maybe the whole thing will cost around $600. You’d like to do the event every April – which means you have a year before the next event. If you set aside $50 per month for the next year, you’ll have the money ready when it’s time to buy the burgers. No crisis, no credit card – no worries!

Solution: Look Ahead for those Larger, Less-Frequent (but Significant) Expenses and break them into manageable, smaller monthly amounts to save for. A few examples: taxes, annual membership events, CrossFit Open extras, equipment repairs (just guess on this, and be a pessimist about how long the gear will last), extra holiday spending, and perhaps the summer drought, where people freeze or cancel their memberships.

Small businesses fail because they manage cash poorly. You don’t want a financial DNF for your gym – so take care of your cash!

What Next?

While I wrote this article specifically for CrossFit gym owners, these principles are universally applicable to any business owner. I’d encourage you to take our free 9-Day Small Business Cash Flow course. You’ll be able to ensure your business finances stay fit for the long haul.

10 Responses to “Your Gym’s Finances Rx’d (5 Critical Cash Flow Mistakes of CrossFit Gym Owners, and How to Fix Them)”

  1. lettersfromheartscontent

    But, but…Quickbooks is much better than YNAB at reports at tax time. It would be a nightmare to prepare for taxtime without it. Our bookkeeper will not touch YNAB for the business, I am afraid. I love it for personal budgeting.

    Reply
    • mark

      I don’t know…I ran a small business for four years with nothing but YNAB and I never had any complaints from my tax preparer.

      Reply
    • jesse

      Three years running with YNAB and I just send my accountant a spreadsheet with all of our transactions for the year, he makes a pivot table and does our taxes. It’d be a shame to not get the benefits of YNAB for an entire year because of an accountant’s desire to maximize their 8-hours-per-year workflow!

      Reply
      • lettersfromheartscontent

        Actually, it is the bookkeeper we have to keep happy. She takes home our files and works with our entries. Okay, I should say my husband does not enter his own numbers into QB; she takes home his checkbook every quarter. She prepares our business numbers for the accountant in QB.

        What is a pivot table?

        Reply
        • Lyz K.

          A pivot table is a way to manipulate Excel sheets to get the information you want. Extremely helpful, but also complicated if it’s not something you’re used to doing.

          As a bookkeeper, small business owner, and (ex)tax preparer, I also cringe when I see so many YNAB posts and comments pushing for people to jump their financial software ship. Maybe in the perfect world, YNAB’s business shortfalls would be limited to an accountant grumbling because they couldn’t “maximize their 8-hours-per-year workflow.” But I’ve been on the tax prep side, and I promise you that business owners with nothing but YNAB records will pay much more for their tax returns, provided their accountant agrees to do them at all. I promise that I’m much younger, more tech-savvy, and open to non-QuickBooks alternatives than 90% of your accountants out there, and I’ve already excused myself from the tax prep world.

          YNAB is hands down the best for personal money management, and I’ll continue to recommend it as such. But I wish Jesse and the team would lighten up a little on the QuickBooks bashing/YNAB pushing, as I think it will cost business owners a lot more time and money down the road.

          Reply
          • jesse

            Hi Lyz,

            Thanks for your comment. Quickbooks is perfectly appropriate for some small businesses, where the business necessitates the extra complexity of QB. However, for many, many small businesses, they look to QB because it is the default, and end up being far more confused and demoralized than they otherwise would be, and that’s too bad.

            The primary purpose in bookkeeping should NOT be for tax compliance. The primary purpose is for you to execute your business priorities better, be able to plan ahead, and basically follow YNAB’s method for your business. In my own (limited, and anecdotal) experience of moving YNAB from QB to YNAB, my cash flow management improved tremendously, and I was able to be much more aggressive in our growth over the past three years.

            YNAB can export a P&L report (it’s your Income v. Expense report) that any accountant would happily take and from which they could very easily file a return. I sent our tax adviser those reports and he can see the beginning balance of our accounts, the totals ins and outs, and that they now match the ending balance of our accounts. Every penny is accounted for in the same way that every penny is accounted for in QB.

            If you wouldn’t mind, I’d love for you to cite specific concerns as to where using YNAB would “cost business owners a lot more time and money down the road.” Maybe it’s something I need to be aware of when instructing small business owners. I’ll happily correct any bad information. I have no intention of giving anything but good advice, and take corrections sincerely and gratefully.

            Reply
            • Joyce Cass

              In one word – inventory. (I’m replying to your comment regarding why YNAB would not work better for businesses). With QB, when I enter an invoice I know instantly if I have a item for sale, what I need to do to that item and if I have to order it. QB serves as inventory control, purchase orders, billing information and production schedules. YNAB, as wonderful as it is, will not fulfill what I need in a program. I am currently testing YBAB, but how would you make invoices, call lists, etc.

              So far YNAB is only good for the in and out of money and the 4 rules. I believe the business would have to be very simple to use it. I’m open to hear how this could be changed, :-)

              Reply
              • jesse

                Joyce, I agree. If you have complex inventory needs, and you’re looking for a one-size-fits-all solution, then YNAB wouldn’t be what you’re looking for.

                Reply
    • xhenxhe

      I thought the same thing. I purchased QB just to make taxes easier on my accountant. I QB is useless when it comes to budgeting and I got tired of maintaining two systems. The year I turned in a CSV file instead of a QB file my accountant did my taxes faster and since he charges by the hour I saved more money!

      Reply
  2. Joyce Cass

    I LOVE YNAB for personal budgeting! I am doing both YNAB and Quickbooks trial at work. I have an embroidery service company, I do invoices, purchase orders, customer histories, inventory; basically need to continue with QB for the business as it encompasses everything I need and use in one package. But for me? at home? You saved me!!!!

    Reply

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