Many small fitness and wellness businesses that fail were profitable. What killed them? Often, the culprit was poor cash flow.
They simply didn’t have enough cash when they needed it.
Here’s how you can improve your cash position:
1. Reduce inventory.
Over-ordering ties up cash. This includes everything from office and janitorial supplies to printed materials to the trinkets you hand out at health fairs. It also includes your inventory of products you resell to customers.
2. Bill promptly.
And include a specific due date like “October 4, 2015” on the invoice — not just “net 10” or “upon receipt”.
(And don’t rule out billing in advance, as we recommend in #7 below.)
3. Don’t expand if you’re not consistently cash-positive.
If you can’t figure out how to make your current business produce more cash than you spend, expansion is probably not the answer. Fix your sales and marketing problems. Make sure people actually want your services at the prices you’re charging. Figure out what’s going on with your expenses. Then you can think about expanding.
4. Consider bartering.
For example, perhaps you can offer wellness coaching in exchange for graphic design or web development services.
5. Manage your supplier payments.
You don’t have to pay every invoice as soon as it arrives. At a minimum, pay according to the terms you’ve agreed to — not sooner. Ask for early payment discounts and extended terms. Consider delaying payment if you’re really feeling a cash crunch. Some vendors are willing to wait for payment and won’t balk if you consistently pay at 45 or 50 days past-due.
6. Raise your prices.
We’ve counseled numerous clients to raise their prices. Most customers won’t notice. Even better, many often say “I wondered why you didn’t charge more!”
7. Require payment in advance
If you’re a fitness business or personal training studio that bills monthly, require the first month’s payment on Day 1, not at the end of the month.
Now, if you offer a lifestyle change or weight loss program that lasts six months, it may not be realistic to require 100% payment on Day 1. In situations like that, monthly or milestone payments often make more sense.
On big projects for business clients, it is essential that you get a substantial part of your payment up front. Corporate clients are notorious slow-payers. We also recommend timing your subsequent payments at points where the client is highly likely to feel urgency to continue the project.
8. Comparison-shop and ask for price matches and discounts.
The Internet makes it easy to comparison-shop. Find the best price and ask your preferred supplier to match it to keep the business. When buying software or subscribing to software as a service, ask for a competitive upgrade if you’re switching from one vendor to another.
Don’t be afraid to ask for discounts, including from SaaS providers like email marketing automation platforms and other backoffice software providers. Just because their websites make the pricing look cut and dried doesn’t mean they don’t have flexibility.
And if the answer is no, don’t take it personally. They’ve got a business to run and they know what makes sense for them.
9. Consider healthcare/medical financing programs & credit cards
If your program pricing typically runs to several thousand dollars, look into offering healthcare credit cards like CareCredit, Citi Health Card to speed sales and access to cash. Many health and wellness businesses offer programs and services that qualify for these consumer financing products. Common examples include dental, vision and hearing care, physical therapy, and general health which can include services as varied as weight loss, dermatology or pain management and rehab.
However: thoroughly research your options here. Don’t just jump into a relationship with CareCredit or another provider. The devil is in the details with these consumer financing programs and you want to research them thoroughly to ensure that you choose an ethical provider that will serve your clients or patients with quality.
10. Accept as many payment methods as possible
Credit cards. Debit cards. Mobile payments including Google Pay and Apple Pay. Depending on your clientele, the Venmo cash transfer app may make sense, but be aware that it’s not as secure and doesn’t have the same legal protections that these other options have.
(OK, not all payment methods. Don’t take actual cash. It’s such a bad idea for so many reasons that we’re not even going to talk about it.)
We still see a few wellness businesses that refuse to take credit cards and other electronic payments because they don’t like the fees. Look, if you only take checks, you’re majoring in the minors. Why wait for customer checks to clear the bank? Why take a chance that they’ll bounce? With credit cards, you’ll get customer funds almost immediately.
Credit card and other e-payment fees aren’t a ripoff or “money for nothing.” They’re just the price of having nearly instantaneous and secure access to customer payments, with no risk of bounced checks, no cost and time hassle to deal with the daily deposit, and no risk of theft. The value of having the cash land predictably and automatically in your account far outweighs the couple of percentage points you’ll pay in fees.
(That said, make sure your point-of-sale terminal vendor and/or e-commerce platform supports competitively-priced online payment methods. They’re definitely not all the same and some charge merchants exorbitant fees.
While we’re on the subject of fees—don’t tack on an extra “convenience fee” when customers use a credit card. It’s a cost like any other. Bake it into your prices and be done with it.
11. Charge for last-minute cancellations
Last-minute patient and client cancellations plague many health and wellness businesses. Don’t tolerate them. Charge for cancellations made with less than 24-48 hours notice. And actually do it!
Who cares if a few people get mad? Those aren’t the customers that are going to make you successful.
And keep in mind, you can always make an unofficial exception to this policy on a case-by-case basis.
12. Resolve customer payment problems fast
Deal promptly with customer NSF checks, expired credit cards, rejected charges, and credit card disputes. Some business owners avoid these discussions…but your bank balance suffers in the meantime.
13. Don’t tolerate slow pays from corporate customers
Don’t let fear make you weak. Enforce your terms.
It would be extremely unusual to lose a corporate client simply because you calmly and professionally let them know that you could not continue until the agreed payment terms were met.
If you’re a corporate wellness provider, you’ve probably experienced lengthy payment delays from at least some customers. Revise your contracts to require payment in advance, or at worst on a milestone basis. Set your terms at net 10-15 days rather than net 30. Under no circumstances agree to more than 30!
If your client routinely pays past your terms, suspend services until they’re current. They’ll learn quickly that your invoices need to get paid per their contract with you. And trust us, you won’t be the first vendor to require them to actually live up to the commitments they’ve made to you.
14. Project your incoming and outgoing cash.
Predict the cash you expect to get from customers. Predict your outgoing cash to pay employees and bills. Compare it to your actuals. You should be within 5% every month. Take seasonal differences into account. If you work with large businesses, plan on longer invoice-approval cycles if necessary. Stash cash away for the quiet months or the occasional pandemic.
15. Develop an emergency plan now.
Every business will eventually have a sudden and large need for cash. Don’t say we didn’t warn you. (And now’s a good time to look at your business insurance, as well.)
Almost every business eventually experiences a cash crunch. Start contributing to an interest-bearing emergency fund now.
Have a plan for what you’d do if revenues suddenly plummeted or you had to pay a huge and unexpected bill. Would you be able to borrow from your personal accounts or family or friends? How about customers, or key vendors?
Could you use personal or business assets as collateral for loans?
Perhaps you could delay vendor payments or payroll.
However: don’t dip into withheld payroll taxes! The consequences are severe, as your tax advisor will be happy to explain.
16. Keep your banker in the loop during good times.
Don’t wait until a crisis is well underway. Treat them like partners in your business. They have resources you may not be aware of.
17. Consider consolidating your debts.
Review rates and terms and talk to your banker to see if consolidating several debts into one might allow a longer payment schedule.
18. Get a line of credit set up.
Work with your bankers to get a line of credit established now, so that you’ll have it available if and when you need it.
19. Recognize employees and customers with gifts, not meals.
Gifts may be fully deductible. Meals and entertainment are normally only 50% deductible. Check with your tax advisor for the latest details.
20. Pay for goods with a business credit card.
This gives you payment flexibility if you need it, and gets rid of many of the administrative hassles of paying off invoices. Request the most cash-rich time of the month to be your due date. As part of your emergency plan, periodically ask for increased credit limits so that you’ll have available credit in a pinch.
