Company Outline

A start-up business born out of a passion for fitness. This small personal training and group session studio has one owner with no previous business experience. On a backbone of personal coaching clients, the introduction of group class membership subscriptions has steadily increased with an attempt to maintain viable.

Several freelance coaches are contracted to provide a small percentage of the group-based classes together with a small quantity of the personal training appointments, The main bulk of coaching, together with all sales and administration is completed by the owner, resulting in long hours at work away from their family.

Turnover: £130k
Number of staff: 3
Net profitability: 45%

Situation

Like many start-ups, getting financial set-up and stability is not top of the list. As a result, although revenue grew, the shortfall in established processes created an ever-increasing workload together with cash-flow problems.

There was no accurate product breakdown in sales, with all revenue streams merged into one. It was difficult to fully understand where the business was doing well or needed attention.

In addition, although making profit, the owner was taking a very low wage, sometimes none, while a dividend seemed just impossible. At the same time, they had no idea of how much tax they owed on the money they were taking from the business.

With a lack of any accounting, making provisions for corporation tax was non-existent. At the same time, whilst using an account to complete year-end accounts, the delay in any accurate financial situation resulted in constantly pulling money from current year revenue to pay the previous year’s tax commitments.

The business was always chasing its own tail and needed to turn things around. There was no budget for the current year and no planning for the next.

Solution

Advise on the introduction on an online membership booking and payment processing system to both reduce workload and start looking at clarifying products and revenue streams.

Working with the owner to introduce Xero online accounting software helped reduce work hours for the owner and established a method to start introducing the concept of a management information reporting system.

A basic gym management information reporting system was implemented with a range of key KPIs that helped illustrated what was happening within the business. This again released more hours for the owner, with accurate real-time information allowing an insight into what the business was doing and how to manage change to ensure growth.

The live tax commitments reporting turned around how the business operated. All tax commitments were now in advance, relieving all borrowing from the current year revenue.

As a sole owner the introduction of profit management and dividend allocation resulted in a regular quarterly dividend payment. This was also accompanied by an increase in monthly earnings for the owner. Both with accurate, real-time tax commitment reporting to ensure prompt payment.

A budgeting system was introduced to help establish a planning mindset. This not only helped understanding the potential revenue and cash-flow each month but started to build seasonal trends to help plan future budgets.

Challenges

Although working with a sole owner can be straight forward it also has challenges. Showing how releasing responsibility to others, and other systems / process they are not familiar, is both scary and can take time but has benefits.

Changing the mind-set of an owner looking at surviving each month, to one planning what growth direction they will requires access to information. Getting business owners not just familiar, but intimate, with management information system reports is vital.

A very personal approach was needed to ensure the highest level of trust in the partnership. Making each part of the set-up more involved, however, this resulted in total commitment from the owner.

Benefits

One of the biggest benefits to the owner has been the reduction in hours worked, together with the ability to spend more time at home with their young family.

A regular secure income with no tax worries for either the business or the owner has reduced financial stress, and allowed a bases upon with the business can now look at growth, year on year.

As growth in the business takes place the system will scale with it.

Products & Services Used

Management Information Reporting
Year End Accounts
Company Taxation
P11D
Company Secretarial
Fee Protection Insurance