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Seasonal Cash Flow Issue #2 That Membership-Based Businesses Experience (and What To Do About It)
Post Series: Seasonal Cash Flow Issues

In case you’ve missed it, last week, we outlined #1 of the 5 most common, seasonal cash flow issues that membership-based businesses–such as gyms and yoga studios–experience, and why establishing a cash flow forecast is vital to business growth. You can read it here. 

This week, we’re delving into cash flow issue #2 that relates to your cash flow forecast, and whether or not you’re profitably pricing your memberships.

Cash Flow Issue #2: Being Overly Optimistic About Your Projections and Pricing

Without a cash flow forecast, you run the risk of mistaking your revenue for profits. This makes you prone to making optimistic business decisions based on the money you think you have, only to find yourself running short when it comes to time to pay bills and make payroll. This is one of the most common occurrences that drives small business owners to reach out for short term business loans. 

Maintaining a cash flow forecast will also help you profitably price your products and services. Membership-based businesses are prone to pricing their offerings based on what the other guys are charging, not taking into account their operating overhead, membership capacity and the profit margin they need to make to be successful. 

What To Do About It:

Be realistic about your projections!

Don’t be overly optimistic about your revenue projects. If you’ve been in business for a year or more, use historical data to base your cost and revenue projections on. If you’re a start-up business, see what you can find out about how other similarly-sized businesses in your industry are doing. When it comes to forecasting, it’s better to be a little pessimistic about potential costs and revenue than overly optimistic and woefully unprepared. 

Set your goals high and your expectations low

Use your data and projections to price memberships accordingly:

What are you basing your drop-in and membership prices on? Does your pricing account for all the fixed and variable costs of delivering the service? Does it leave enough of a profit margin? Are you still charging the same rates you did 5 years ago? 

Cash flow forecasts and recording give you valuable insight into the true costs of doing business, which you can then reflect in your pricing. You want your pricing to be competitive while also covering costs and generating profit. 

Businesses that rely on extremely thin profit margins must rely on volume to make a profit. So, it’s important that you also consider your membership capacity when developing your pricing. Patriot accounting software offers a free guide on pricing services, and Zen planner offers an excellent walk-through on the 5 steps to effective pricing in your fitness business.

Buffer up!

Once you get started on your cash flow forecast, don’t forget to include buffers. We already mentioned the importance of forecasting-as-best-as-humanly-possible your recurring variable expenses, but the very nature of variables is that they’re not always possible to accurately predict: a pipe in the gym washroom springs a leak, a piece of equipment breaks, or you need to hire extra staff in order to stay open later. It doesn’t hurt to include anywhere from a 10-30% buffer or “emergency slush fund” to your forecast if you’re able. 

If your business can’t afford a buffer:

This is where knowing where to go for immediate cash flow relief comes in, and many small businesses end up periodically relying on one or more types of business loans

Ready For the Next Step?

Visit our blog next week for Cash Flow Issue #3: Not Competitively Capturing Seasonal Market Share.

Need Cash Flow Help Now? 

Is your business feeling stuck in a situation that only an immediate influx of money can resolve? 

The problem with bank loans and lines of credit:

Applying for a business loan from the bank can take weeks, and many small business requests aren’t ever approved. Banks are typically only interested in substantial and long-term loan requests by business owners who have sufficient liquidable assets for securing the debt.

Considering that many small business owners are busy wearing several hats in their business, they don’t have the time to go through meetings with banks and potential lenders. When a financial emergency arises, time is of the essence and they need help, fast! 

And considering that many small business owners, already invested their own personal assets and savings in launching their business, they need a lender that considers their situation and offers loan amounts and repayment terms that are tailored to their unique requirements. 

Company Capital Can Help

While your business may be counting on increased sales this quarter, keep in mind that the holiday rush is also a time when businesses experience cash flow issues due to poor prior forecasting or lack of operating capital. Small business owners come to us for this very reason, seeking immediate financial support through one of our short term business loans. 

100% Canadian owned, Company Capital offers small business loan options that are based on your business’s historical sales performance. 

At Company Capital, you can speak with real humans at our office who will listen to your situation, and guide you through a fast and simple application process. 

Borrowing from Company Capital is a heck of a lot faster and more convenient than the process involved when borrowing from banks

It takes as little as 3 minutes to apply for a loan from us online, via phone or email. Over 90% of applicants are approved for our Term Loans, receiving funds within 1-2 days. 

Actual Clients, Actual Results

Take a look at what other local small business owners have to say about us and how we’ve helped them.

Choose The Right Business Loan For Your Situation

Find out which loan option is right for you, take a look at how easy it is to apply, or give us a call at 1 (877) 595 2346 to learn more. We’re proud to support small local businesses and serve as trusted advisors in helping you grow your business.

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