There are lots of factors that go into opening a sports facility, but just one truly determines your business fate.
That factor is cash.
If you have enough on any given day to cover your expenses, you can stay open. If not, you’ll shut down.
Keeping enough cash on hand trips up a lot of new sports facilities. Some don’t have enough cash because they generally struggle to make ends meet. But others stay busy and may even have plenty of money owed to them, yet still suddenly find themselves without enough cash to pay an essential bill (like payroll or rent).
Protect your business with these best practices for cash management.
Check your “cash position” every day.
I was an accounting major, but I understand that I’m in the minority when it comes to liking to run the numbers.
You don’t have to do a deep dive into your numbers every day — just a basic check of how much cash you have in your bank account, how much you’re owed, and the expenses that will be due soon. You should be able to work out a basic forecast for the next 12 months or so and just continually do quick check-ins to keep it up-to-date.
Checking your cash position each day guarantees that a cash shortage won’t sneak up on you.
If you’ve started out with a big loan or lots of cash that’s supposed to last through a potentially slow period, your cash position might seem fine at a glance. But you still need to keep a close eye on the rate you’re using it. Your accountant can help you with those details.
Require upfront payments.
One of the biggest obstacles to good cash flow is too many “accounts receivable” — that’s the technical term for money you’re owed.
For most sports facilities, this tends to become a problem when owners bill members AFTER they’ve already used services like classes, lessons, or memberships.
We all tend to trust our clients to pay on time. But as every seasoned business owner knows, it doesn’t always happen. And sometimes they don’t pay at all.
Maybe you know where I’m going with this. The best way to turn accounts receivable into cash is to require payments upfront. For more on this topic, read the full post on stopping no-shows and late cancellations.
Focus on selling memberships.
Revenue projections and cash management get much easier when you collect recurring revenue.
Recurring revenue means that your clients’ credit cards are billed automatically at regular intervals — usually each month. These scheduled payments give you more peace of mind that cash will come in as expected.
At my sports facility, there were two numbers that my staff and I always had on our minds: the number of active memberships, and the dates that those memberships were up for renewal.
If we hit those numbers, we knew we had our operating costs covered. Every other service we offered was there to supplement membership revenue and diversify the business.
Set aside cash for the slow season.
Most sports academies have busy seasons and slow seasons.
You may think you’re doing fine with profitability and cash flow, then run into problems when you hit a much-slower-than-expected slow season.
That’s why you should keep cash from the busy season in an interest-yielding account so you can have it ready to pay the bills once the cash stops coming in.
The bigger the seasonal changes in your business, the more important this is.
For big purchases, shop around and get financing.
If you’re considering buying something big, such as pitching machine or office equipment, you’d better do your homework.
These big purchases can drain away cash that could be your lifeblood later in the year.
If you don’t shop around and make sure you’re getting the best deal, you’re leaving a lot of money on the table. Take quotes to competitors and look for the best financing.
A lower monthly rate that costs a bit more overall can be infinitely more valuable to your business if that extra cash keeps your doors open during a rough patch.
Did I miss any best practices for cash management? Leave a comment or contact me and let me know.