You can’t put your feet up when your studio starts growing. You need to defend your growth to ensure long-term success and a successful exit.
At some point, you’re going to start thinking about your exit strategy. One of the keys to improving your strategy is business valuation.
But what makes it so significant?
To reveal the answer, let’s see how Australian businesses are valued.
The value of your studio depends on a wide array of factors. But in most cases, it’s calculated by multiplying your profit by two or three and adding add-backs.
For instance, suppose your profit is $100,000, and you’ve protected your growth for two months. Your margin stands at 30%, putting your protection at $30,000.
Since you’re already in the black, something magical happens when your business hits the bottom line. The $30,000 protection turns into $60,000 or $90,000. This allows you to keep growing your studio and attract more members.
The main reason this was possible is that you took business valuation seriously and protected your studio.
You didn’t panic and made decisions on a weekly basis.
Instead, you analysed the broader picture and considered the long term. That’s how you made the whole fiscal year worthwhile.
A lot more goes into adopting business valuations, defending your growth, and creating an exit strategy. More specifically, you should focus on retention and preventing death gaps. This article will provide three tips on how to do so.
The 3 Tips top getting a bigger exit
Tip #1. Mind Your Budget
This is crucial for any business, including F45 and FS8 studios. You need to stick to your budget to create lifetime value.
Here’s an example to understand what I mean by this.
Say your cost per member is $50, and your conversion rate is 30%. This means one of the three leads becomes a full-time member. It also means you need to spend $150 to attract a new one.
There are several possible outcomes under these circumstances, but let’s consider the worst and best-case scenarios.
In the worst-case scenario, the customer earns you $500. This gives you about 3.3 times the amount you invested to attract the member.
In the best-case scenario, the return can rise to about 13 times the invested amount. This puts you at $2,000, allowing you to dominate the market and scale your company faster.
However, earning this much is impossible unless you mind your budget.
If you can’t afford to spend more money on getting new members, don’t do it. The cost may eclipse potential earnings, putting you in the red.
The same holds if you plan on selling certain products, such as protein bars.
If one protein bar costs $1 and your daily budget is $5, you’ll buy five protein bars. However, say the market changes and the price jumps to $1.60 the next day. Your budget remains the same, but you need to adjust to the market fluctuations. That means instead of purchasing five protein bars, you should only buy two or three to stay within your budget.
Tip #2. Understand the Timing
The next ingredient for defending your growth is understanding your timing. This factor comes down to grasping your challenge campaigns and offering roll-outs.
Challenge campaigns have changed drastically in recent years. Consequently, you may have experienced less lead flow. The main reason for that is that challenging a product or service isn’t as new as before.
Experienced studio owners are more likely to encounter this situation.
Truth is, conducting challenge campaigns seven or eight years ago was absolute fire. This period was more conducive to success because most of the offerings were novelties. There was a lot of hype, increasing the effectiveness of the promotion.
But nowadays, carrying out challenge campaigns is much harder.
Virtually everyone is doing them, resulting in countless versions of these challenges. And with so much competition, the room for rolling out a new offering is minimal. This raises the cost per lead, which brings us to another key point:
Offering your roll-outs at the right time.
To illustrate the importance of this, consider how retailers roll out their products. They schedule them earlier to accommodate the unpredictable market. This is particularly evident during Black Friday sales. There’s a considerable product influx during this period, and the risk of delivery delays is sometimes too high.
To avoid this risk, owners roll out their offerings before the sales. This allows them to capture the market on time and meet customer demands without setbacks.
You may want to follow the same approach as a studio owner. Whenever you’re launching a new service, make sure to do it at the right moment.
Tip #3. Get Your Team Involved
The final part of defending your studio’s growth is getting your team involved. And I learned this the hard way when I launched my business in December a few years ago.
You see, I was taking my first steps in this industry and wasn’t well versed in F45 studios. Therefore, the initial period didn’t go as planned.
In fact, the first winter was dreadful!
I had virtually no members, but I hoped things would improve in the summer. It’s because I believed everyone would be more motivated to work out so that they could show off their body.
It didn’t happen – my studio was a ghost town!
Nobody wanted to train in my studio, so I asked myself, “What am I doing wrong?”
I realised my team wasn’t involved enough in my business. I tried to take on all the work by myself, and my team had little say in decision-making. As a result, they weren’t excited about the services, which reflected on the members.
So, I went back to the drawing board. But this time, I made sure my team pitched in. We came up with a new program, and it went great.
You should do the same in your studio. After all, you can’t run the business on your own.
Your employees need to be excited about your services for your launch to succeed. There must be many creative individuals on your team, so be sure to employ their skills.
Don’t Let Anything Stunt Your Studio’s Growth
Being a prosperous studio owner requires you to think in the long term. Once your business starts growing, you can’t sit idle. You need to defend your growth and plan your exit strategy.
The three above-mentioned strategies will be a valuable asset on your journey. .
Your business will continue to grow if you can stick to your budget, understand the roll-out timing, and involve your team. This way, the road to freedom, an enjoyable lifestyle, and a successful exit will be much smoother.