Pilates Business Podcast: Mastering Your Studio’s Finances with Sue Ellen Brantley
Host: Seran Glanfield
Release Date: October 21, 2024

Introduction

In the episode titled "Mastering Your Studio’s Finances," Seran Glanfield dives deep into the financial intricacies that boutique Pilates studio owners face. Recognizing that understanding and managing finances is pivotal for both budding and established studios, Seran brings in expert Sue Ellen Brantley to shed light on common financial pitfalls and effective strategies for sustaining and scaling a Pilates business.

Guest Introduction

Sue Ellen Brantley is a Certified Public Accountant (CPA) and fractional Chief Financial Officer (CFO) specializing in supporting boutique fitness studios. With over 15 years of experience in corporate accounting and finance, Sue Ellen ventured into entrepreneurship by founding Healthy Balance Bookkeeping. Her mission is to empower studio owners to enhance their financial health, thereby fostering growth and community impact.

Sue Ellen Brantley (04:45): “I wanted my work to matter. I truly believe in abundance and that if we can help those business owners make more money, create more abundance in their own life and in their businesses, that means more good happening in our world.”

Common Financial Mistakes Studio Owners Make

Sue Ellen identifies several recurring financial missteps that studio owners often encounter:

1. Mixing Personal and Business Expenses
   Combining personal and business finances complicates financial analysis, tax deductions, and can lead to legal repercussions.

   Sue Ellen Brantley (10:34): “One of the first things that I see quite often is the mixing of personal and business expenses. You want to keep your business expenses separate from your personal expenses so you can truly analyze the operation of your business.”

2. Neglecting Regular Financial Reviews
   Waiting until tax season to address financials hinders timely decision-making and tax strategy implementation.

   Sue Ellen Brantley (10:34): “You don't want to wait until tax time to start looking at your numbers. You want to know what's going on in your business so you can make adjustments and changes during the year if you need to.”

3. Operating Without a Strategic Plan
   Lacking a clear financial plan can lead to unstructured growth and missed opportunities.

   Sue Ellen Brantley (10:34): “If you fail to plan, you plan to fail. You have to have a plan in place to reach your specific goals.”

Best Practices for Managing Finances

To navigate these challenges, Sue Ellen outlines essential financial management practices:

1. Establish Robust Accounting Systems
   Utilize accounting software like QuickBooks or Xero to automate financial processes and maintain organized records.

   Sue Ellen Brantley (17:01): “First and foremost, you need systems in place. Having some sort of accounting system, whether that be QuickBooks or Xero, there's other systems out there.”

2. Set Up Meaningful Financial Reports
   Customize Profit and Loss (P&L) statements to reflect revenue streams specific to Pilates studios, such as drop-in classes, memberships, teacher trainings, and merchandise sales.

   Sue Ellen Brantley (17:01): “We want to set up your books in a way that is meaningful for studios... to see what they actually sold.”

3. Conduct Monthly Financial Reviews
   Dedicate time each month to review financial statements, compare them with previous periods, and identify trends or anomalies.

   Sue Ellen Brantley (17:01): “Every month set a money date for yourself. Sit down, do your bookkeeping and look at the numbers.”

4. Perform Weekly Pulse Checks
   Regularly monitor key performance indicators (KPIs) on a weekly basis to stay informed about sales, attendance, membership changes, and other vital metrics.

   Sue Ellen Brantley (17:01): “Once a week you do just a little pulse check on what happened in the week prior.”

Key Financial Metrics to Monitor

Sue Ellen emphasizes the importance of tracking specific financial metrics to gain a comprehensive understanding of business performance:

1. Top-Line Revenue
   Identify and analyze revenue sources to understand which services or products drive the most income.

   Sue Ellen Brantley (23:35): “You need to know your top line revenue and understand what is driving that revenue.”

2. Gross and Net Profit
   Calculate gross profit by subtracting the cost of running the studio from total income, and determine net profit by accounting for all additional expenses.

   Sue Ellen Brantley (23:35): “Understand your net or your gross profit... understanding what your gross profit is.”

3. Cash Flow Management
   Monitor cash inflows and outflows to ensure the studio maintains adequate liquidity for operations and unexpected expenses.

   Sue Ellen Brantley (23:35): “Understand your cash flows because this is important to manage the future of your studio.”

Cash Flow Management and Reserves

Maintaining healthy cash flow is critical, especially in managing seasonality and unforeseen downturns.

• Reserve Funds:
  Maintain at least three months' worth of operating expenses in an accessible account to safeguard against emergencies or revenue dips.

  Sue Ellen Brantley (25:55): “I would say at a minimum, having three months on reserve is a good place to start.”

• Liquidity:
  Ensure reserve funds are easily accessible without the need to liquidate other investments, providing financial stability during challenging periods.

  Sarah Glanfield (25:07): “You have to have it accessible for that period of time.”

Approaches to Managing Profit and Cash Flow

The discussion touches upon the Profit First methodology, highlighting its benefits and challenges.

• Profit First Method:
  Requires multiple bank accounts to allocate funds for taxes, savings, and operating expenses, promoting disciplined financial management.

  Sue Ellen Brantley (26:59): “There is a lot more management that comes with Profit First... every month you have to be making sure that you're doing your transfers.”

• Benefits:
  Helps business owners stay accountable and ensures funds earmarked for taxes and savings are not inadvertently spent.

  Sue Ellen Brantley (26:59): “It's a method that helps business owners stay accountable and putting that cash aside.”

• Considerations:
  Demands organizational rigor and consistent adherence to the allocated budgeting framework.

  Sarah Glanfield (26:59): “You do have to be very organized because having those five accounts...”

Advice for Scaling and Growing Studios

For studio owners aspiring to expand their businesses, Sue Ellen offers the following guidance:

1. Ensure Financial Foundations Are Solid
   Before opening new locations, thoroughly understand and optimize the financial health of existing studios.

   Sue Ellen Brantley (29:11): “You have to have your books in order if you were trying to open a new location.”

2. Analyze and Replicate Successful Models
   Identify what works in the current studio and adapt those strategies to new locations, while being open to necessary adjustments.

   Sue Ellen Brantley (29:11): “Understand the first one before you try to implement it into another one.”

3. Strategic Planning for Growth
   Develop detailed financial plans that align with expansion goals, ensuring each new studio contributes positively to overall profitability.

   Sue Ellen Brantley (29:11): “Do you want to replicate that in the next studio? You want to make sure that you understand the first one.”

Conclusion & Resources

Seran Glanfield wraps up the episode by reinforcing the significance of financial mastery in running a successful Pilates studio. Sue Ellen Brantley encourages studio owners to seek professional financial guidance to navigate complexities and achieve sustainable growth.

For studio owners seeking to enhance their financial management:

• Sue Ellen Brantley can be reached via Instagram at HealthyBalanceBookkeeping.
• Visit healthybalancebookkeeping.com to access a free KPI tracker and schedule a consultation.

Seran Glanfield (31:05): “There is no warning, one way to do what you do, only your way. So whatever it is that you want to do, create or offer, you've got this.”

Key Takeaways:

• Separation of Finances: Keep personal and business expenses distinct to simplify financial analysis and tax preparation.
• Regular Financial Reviews: Conduct monthly and weekly financial assessments to stay proactive in business management.
• Track Critical Metrics: Monitor top-line revenue, gross/net profit, and cash flows to gauge business health.
• Maintain Cash Reserves: Set aside at least three months of operating expenses to weather financial uncertainties.
• Structured Profit Management: Consider methodologies like Profit First to ensure disciplined financial allocation.
• Strategic Scaling: Solidify financial foundations before expanding, ensuring each new location replicates successful models.

By adhering to these strategies, Pilates studio owners can achieve financial stability, foster growth, and create a thriving, impactful business.