Is Your Studio Recession Resistant?
We’ve been hearing talk of a potential recession for over a year now.
Is one coming or not? Deep recession or moderate slowdown? No one seems to know, and that is OK, as long as you are prepared, regardless.
Truth: You should ALWAYS be preparing for recession in your studio.
I know, that doesn't sound fun, but it doesn’t have to be hard. I live in the South, and every summer we know that there is a very real possibilty that we will see a hurricane impact our families, our homes and our businesses. Because we have a process, we don’t spend a ton of time preparing…we check our supplies, review and update our evacuation plans, and top off anything we need to have on hand. We know what we will do, and what we need, so the review really only take a few minutes and we are good to go, ready for the unexpected. But if we waited until the storm was bearing down on us to go get our supplies, we’d be out of luck.
What does that have to do with making our studios recession resistant? When we build into our businesses the pricing, employee costs, and strategies that allow our studios to thrive in good times, we are better prepared to face and withstand the inevitable slowdowns that will occur in our businesses.
And what you do TODAY in your business will be reflected in your results 6 months from now. That means if you shore up your systems today, you will be well positioned for a slowdown if it happens, or the new year’s rush. And if you wait to see if there is a recession in your area to start looking for solutions....you are going to be too late.
We were all caught by surprise with COVID, and the damage the closures and capacity limits did to our businesses. But if it happens to you again...that's a choice.
And while we cannot make our studios recession proof, we can make them recession resistant.
The good news for boutique studio owners is that unlike COVID which impacted us all, not everyone will be impacted by a recession, and certainly not all the same. For many, it may be merely an inconvenience.
Most memberships at boutique fitness studios run upwards of $100. I’m not saying that people who buy those memberships are not going to be impacted by a slowdown in the economy, but truthfully they are less likely to be impacted as much as others. And your people are not going to cut back on things that make them feel better.
People quit using commodities. They don't quit community.
Here are my top three tips to make your studio recession resistant, and my top tip of what NOT to do.
1. Focus on your high-value clients. We’ve all heard the 80/20 rule, right? You’ve got a group of members in your community who are very loyal, very active, and very engaged. You know who they are, and I’d bet you can tell me their names. They likely are also the same folks who like to participate in your workshops, they grab the first new branded T-shirts when they show up in your studio, and they are eager to support your charitable causes. I want you to really focus on these folks they are the people who are going to stick with you even if you head into a slow down.
Think about what you can offer that is high value that will appeal to your top clients. Some examples include teacher trainings, retreats, exclusive or limited workshop series. One of my top clients signed up for a 300-hour teacher training during covid, and she made it clear that she was signing up because she wanted to support us. :)
2. Bank additional cash flow now. I hear you, this is easier said than done. I always recommend to studio owners to have at least one full month of studio expenses in the bank, and today I would recommend working your way towards at least two maybe even three or four months of cash. We don’t know how long a slowdown may last and you don't want to be one broken window or an unexpected A/C repair away from desperation.
So how do you make this happen? When you bring in some additional revenue by offering high-value services to your top clients, keep a little bit more of that money set aside. If you offer Paid In Full memberships, bank the cash and roll it into your operations on a monthly basis instead of all at once. If you use a profit first model, scoot your profit percentage up a bit and save up a little bit more each month so that you can grow your savings.
Does this sound like too much math or accounting mumbo-jumbo to you? No worries, hop on a call with me and I will help you out.
3. Pay attention to retention. I want you to look closely at your sales journey and understand what your retention percentage is from your intro offer to membership. Look for places where you can add a couple more touch points, keeping them as personal as possible. It’s very likely that fewer people will show up to take advantage of an intro offer during a slow down, so it is imperative that a higher percentage of those folks stick around for a membership. Now is a great time to tighten up those systems.
And here's the truth...you likely already have all of the tools that you need to build a robust sales journey. You don't need to invest any more money....you just need to invest your time. If you don’t have a sales journey system at all, reach out to me.
Seriously, just keeping two or three more clients each month can make a HUGE difference in the cash you have on hand.
And for my promised tip on what not to do, here it is. Please, please, please DO NOT REDUCE YOUR PRICES. I have no idea why this is the go-to answer for so many studio owners facing a cash crisis, as it makes zero sense. If a reduced price helps you bring in more members, then why didn't it work before? Why don't you have a lower price in good times? And when we are facing higher costs for all of our business needs, how could bringing in less revenue possibly help?
As I mentioned before, not everyone is going to be impacted by a recession. Those who are, are not going to stick around just because you dropped their price by $10. And those who are not impacted don't need the $10 break...but they will for sure take it if you offer it. Resist - don't do it.
What can you do today to prepare for the next slow down, whenever it happens? When you focus on your high value clients, shore up your savings, and create systems that help you to increase retention, you will be better positioned to weather the storm.