Developing a Sports Facility Financial Strategy
This is the fourth in a series of posts on creating a business plan for a sports facility.
Now that you’ve thought out the details of your products, staff and operations, you can use that information to estimate your business’ finances.
We’ll do that by estimating your revenue, comparing it to your expenses, and determining if you’ll make enough profit based on those numbers.
Step 1: Monthly Revenue Estimates
First, you’ll need to review the marketing plan you created, including your plans for busy seasons, major events and promotions. Then, estimate how much revenue they’ll bring in, based on your pricing.
You should be conservative in your estimates. It’s always better to exceed expectations than to come up short, especially when trying to attract investors.
Here is an example of how you might chart out your revenue estimates for your various services:
Step 2: Monthly Expense Projections
Now it’s time to get totals for all your business expenses.
- Check the marketing section of your business plan. Add up the monthly costs of all your marketing tools.
- Check the operations section of your business plan. Add up all monthly staff costs, such as the salary, apparel, unemployment and bonuses.
- Check the operations section of your business planagain and add up all the monthly costs for your building and equipment. This includes utilities, monthly payments plus interest on any equipment that you’ve financed, rent costs, and any other regular building costs.
- Add up the monthly cost of any other ongoing expenses, such as taxes, accountant’s fees, insurance, internet and phone, scheduling software, cleaning and maintenance, and security. Larger, one-time or semi-regular annual expenses, such as legal fees, should also be split up into monthly amounts and added here. Even if you paid certain expenses upfront, you should still account for them in the month they’re due, so you’ll have the money ready when the expenses come up again next year.
- Total all of your expenses to get a final monthly number. If your costs and revenues vary on a monthly basis, it’s OK to list each month’s expenses separately.
Step 3: Calculate Your Profit Margin
The profit margin is a handy figure that lets you know what percentage of your revenue is going to profit. Best practices for target profit margin depend on what kind of business you have, but it is a good idea to aim for 30% minimum.
You can find the profit margin by dividing the expected profit by the total expected revenue.
Step 4: Troubleshoot and Adjust
If your profit margin drops below 30% consistently, it’s time to make some adjustments to your financial strategy.
First, determine your least profitable piece of equipment and get rid of it. Is there a less profitable area of your building that you can eliminate? Do it. What about your staff — can you justify each staff member’s pay based on the revenue they’ll bring in? Maybe you should switch to a commission-based pay structure.
Your sports facility financial strategy is the meatiest part of your business plan and incorporates all the previous steps. If these numbers don’t look right, you NEED to fix them before you move forward.
Next, you’ll need to consider and plan your exit strategy — a particularly important aspect of your business plan if you have investors or partners. We’ll look at that next month.
The team at eSoft Planner has experience helping businesses like yours be more profitable. If you’ve run your numbers and found lower profit margins than you’d like, talk to us about scheduling, marketing, and package ideas that can improve your financial performance.