Tuesday, November 21, 2006

Thanksgiving Lecture

I just want to mention something very quickly that Pat, Alwyn and I were just talking about and I think is worth bringing up.

Don’t dispute a credit card charge with someone who offers a 100% money back guarantee. Please. That’s ridiculous. I’ve had a couple of people who over the course of time have disputed their charge for an info product of ours, and I’m nothing short of amazed. We offer a 100% money back guarantee, which we honor and never ask any question other than to constructively improve our products. If we have a guarantee, it’s for a reason, and we honor it. What’s more, those individuals who have entered a dispute won’t return emails sent to resolve the issue. The reason we would prefer resolving through a refund is because chargebacks reflect poorly on our business. (And for the individuals who do this, it reflects poorly on your credit as well. Whoever issued your credit card is going to snatch it back out of your little hand if you keep abusing.) Alwyn said he even has someone who received a physical product and disputed, without contacting him, kept the product, and won’t return correspondence. I think that warrants posting a blacklist. Ridiculous.

Rather than diminish my post by only fussing about a couple of less than classy individuals, I want to make a positive point. For every one person like that, we’ve had probably 1000 good experiences with good people, and we appreciate them. We enjoy what we do, and the people we get to work with, and we hope that it shows in what we provide. We also appreciate everyone in the fitness industry who has helped us over the course of time. So rather than me just venting about a couple of bad customers, it is Thanksgiving, and I want to thank all of the rest of you who make our industry so much fun. Keep up the great work. And we can just make a joke out of the jackasses that think they are ‘beating the system’.

Be safe and have a great Thanksgiving.

Nick Berry

The Wal-Mart Articles

I’m going to change up from my usual topics a little, let’s expand our horizons. I’ve got a couple of links to articles that I think everyone should read. The first one, the Fast Company article, is pretty long, but an interesting article. The second is shorter, but still interesting. They are both a little old, but that doesn’t diminish their meaning.

The articles are written about Wal-Mart and the pressures that they put on suppliers and the economy. This is not any attempt to persuade, influence, or even give my opinion on Wal-Mart and their business practices. As an entrepreneur and a business coach, I feel it is important that we think outside the box – seeing things for what they are, rather than just from a single perspective. I, probably like most, used to look at Wal-Mart from a consumer’s angle…………low prices, everybody wins. Now I try to educate myself on both sides of every coin. For every nickel saved here, there’s a potential nickel lost there. We see those types of examples every day, the proverbial ‘swinging of the pendulum’.

I guess my intrigue with Wal-Mart in particular stems from a growing understanding of our economy, and the potential effects a company the size of Wal-Mart could have.

Again, I’m neither lobbying for or against Wal-Mart. Form your own opinion with whatever information is available. My intention is that we learn to look past the glow of the smiley faces and flashing signs we are bombarded with daily, and start to understand the economics behind it all.


http://www.fastcompany.com/magazine/77/walmart.html

http://www.commondreams.org/scriptfiles/views03/1208-08.htm

Nick Berry

Thursday, November 16, 2006

More Resources

Typically, but not always, Fitness Professionals are compensated by 1099, contract labor. Which means they are NOT employees and are responsible for their own taxes. This will obviously reduce the business expense of withholding taxes, and will change your legal liability, so make sure you have consulted with your legal and tax professionals regarding each. You should also inquire about being ‘at-will’ employees and what that may imply in your state. ‘At-will’ directly relates to your liability for the individual as well as your obligation to them.

You will probably at some point have an employee on payroll, even if it is just a small salary for an assistant. In this instance, you are going to have to withhold taxes and pay in at certain intervals.

As an employer you’re required to withhold chunks from employee paychecks, plus you must pay other employer taxes -- and provide timely and proper reports to the IRS and various other federal and state agencies. It is imperative that you understand exactly what is required.

Employer tax responsibilities are so complex and handling them right is so critical that you want your accountant’s input on how you go about this. My recommendation is that you have their office to help you set up your employer tax system, whether it will be handled in-house by you, coordinated with an outside payroll service provider, or your accountant. Outside sources will handle the ongoing detailed paperwork for you correctly, cheaper and quicker than you could do it yourself. They are also extremely beneficial if there is a change in policy, which happens often, and you don’t have to bother with the headache.

Here are a couple of resources for you to check out (which will reinforce any information I have given as to why you want someone else to do your bookwork).

www.irs.gov

http://www.irs.gov/pub/irs-pdf/p15.pdf - The Employers Tax Guide. This you should probably have on hand for reference.

IRS FAQ – Questions answered regarding reporting tips, mailing W-2s, providing benefits, day care, tuition reimbursement and topics of that nature.

http://www.statelocalgov.net/ – This site is a directory of state, county, and city agency websites.

Also check with your local Small Business Administration. One of their main goals of this Small Business Administration (SBA) program is to help small companies create more jobs. They may offer classes and other help for employers. You can find more info about your local SBA by clicking here.

If you are going to hire employees, you will have to withhold taxes, and you will need an Employee Identification Number (EIN). An EIN is an Employer Identification Number that is the equivalent of your social security number, except for your business. The EIN serves the purpose of identifying a company, and is issued by the IRS.

After you have talked with your tax or legal professional you will have determined which form of business entity you will start with -- sole proprietorship, LLC (Limited Liability Company), or corporation. Based on that you will then know if need an EIN or not. You are required to obtain an EIN if you are:

  • Business entities that are separate from you as an individual, such as corporations and LLCs.
  • Any business that will have employees

You are not required, but may want an EIN if you are:

  • A sole proprietor who wants to separate the business from his or her individual social security number.
  • A proprietor who wants to establish business credit that is separate from personal. A good idea, especially if your personal credit score is less than great and would hold back the business’ opportunity to make purchases and borrow to expand.
This page will give you more information about the EIN and point you to the application:
IRS.gov Employer ID Numbers (EINs).

I won't write about this again for a while, I promise. Again, I'm trying to provide the info and guidance that I wish someone would have given me early on, rather than having to learn the hard way.

Nick Berry

Tuesday, November 14, 2006

Quick Accounting Tips

During just about every coaching call I take at some point bookkeeping or accounting gets brought up. Which, I suppose is good, because if there is a mistake to learn from, I’ve probably made it. In most if not all instances, the client either doesn’t have a bookkeeper/accountant working on their books, or if they do, they aren’t communicating with that person well enough to know exactly what to expect out of them. So, I’ve jotted down some quick notes to ask your CPA when you meet them. You may have decided already on your legal entity or your chart of accounts, but it won’t hurt to ask, so you get his or her perspective.

1. What form of business entity should you establish?

Ask your CPA what form of business he or she thinks you should start with -- sole proprietorship, Limited Liability Company (LLC), Partnership, C Corporation or S Corporation. They will ask you a few questions, then recommend which form seems right for your startup. There are both tax and liability issues involves, so if the form you choose requires legal help, they can probably recommend an attorney.
CPAs and attorneys in the same general location typically know which of their fellow professionals have experience in what types of work for which industries. If they refer another professional to you, their referral is based on working experiences, which are much more helpful than yellow page ads.

2. If and when do you need to start paying estimated taxes?

Being self employed means you have to keep track of (and pay) your own taxes rather than have someone else withholding it from your check. As miserable as that sounds, there is also the benefit of the ‘write-off’ that you will be able to take advantage of.
Depending on your situation, you may or may not have to pay estimated taxes to begin with. The CPA will be able to advise you, and if you’ll need to pay, give you or direct you to the proper forms to use.
Be responsible and have your taxes done properly. It can become a tremendous hassle if you don’t, and could be the one mistake that will run you out of business.

3. Which accounting software do they recommend?

You may or may not plan on doing any data entry or bookkeeping yourself, but you need to understand what to look for if you need accounting software, as well as how you use it and what your options are.
When you meet with your accountant, discuss which accounting software program, if any, you’re considering for your small business and see what they think. You don’t want to go with something that’s going to cause problems down the line. And you certainly don’t want to change programs, converting from one program to another is a hassle you want to avoid if you possibly can.

4. What chart of accounts should you set up in the software?

Every accounting setup has a chart of accounts, it’s the accounting framework which organizes all of a company’s transactions. But it’s not a ‘chart’ – it’s more of a list, and they aren’t bank accounts like we are accustomed to. The best description of the accounts is they are like buckets which can accept numbers that represent amounts of money. Some buckets are grouped together. Maybe that wasn’t a great analogy – that’s why I have an accountant do all of our work.
Many of accountants prefer to provide you with their own list to set up from scratch instead of using the software’s default. Make sure you give them every bit of the information regarding your business so they can design the chart of accounts with that information in mind. They are trying to save you money – do what they say.

5. Can they help you get organized to handle employer taxes?

Having employees requires whole new levels of paperwork and money management. Make sure you inform them of your current and planned employee status, as employee and payroll issues – when handled improperly – will snowball in a hurry.
I will make my next post with some information regarding employee withholding and all of that garbage.
I am quite familiar with how boring and irritating this kind of stuff is. But I would have loved for someone to have given me this information when I started out – so I’m passing it on. It will save you a lot of money. USE IT.

Nick Berry

Wednesday, November 08, 2006

The Importance of the Autorenewal

I have been working with a couple of clients who are trying to get their client base set up on autorenewal contractual agreements. This is one of the most important decisions that they have ever made regarding the Lifetime Customer Value. There are a couple of very simple reasons that this is a must: 1) Security. I’ve only addressed this in at least half of my blog posts. Having a projectable receivables base will let you forecast for income and expenses. 2) Longevity. Directly related to Lifetime Customer Value. Obviously, the longer a client remains a client, the more opportunity they have to spend money.

There are essentially two types of agreements in our business – Term and Open Ended. Term agreements are for a specific length of time, and when that term is expired, the agreement is null. In order to remain a client/member, the individual must resign another agreement. Open-ended agreements are agreements that typically have an initial term, but after that term ends you are able to extend the agreement by renewing terms or a month to month basis. In these instances, there is no action required in order to remain a current client/member. I do love simplicity.

Through our experiences with both types of agreements, we have found that in a true ‘service’ business, you are better served by opting for the autorenewal agreements.

**Be forewarned: Certain states do not allow for autorenewal agreements, you can write term agreements only. You can find out what your state allows by checking with the Attorney General’s Office.

First, the autorenewal agreement can be identical to the term agreement during the initial term. When designing your packages, you can decide if you are better served with a 12 month initial term, like we do with Fitsystems, or maybe something shorter, say 4 months. That decision should be based upon the variable specific to your business, ie your niche, sports seasons, specific client goals, etc.

Where the autorenewal agreement benefits you is at the end of the term, and why it does is very simple. Which is easier, for someone to take the time to resign, fill out another agreement, write another check, and go through the entire process again – or is it easier to do nothing except keep scheduling your next session and working out? Simple answer to that one.

Let’s not lie to ourselves here – people want what’s easiest and most convenient. It’s hard enough getting them to make every session and follow the program you have designed for them. Not to mention, when they are up for renewal, they are going to have to be sold again to some degree on the idea of a long term commitment, and spending more money. Then they remember last year when they signed up and their husband wasn’t exactly excited about it. Or now Christmas is around the corner, maybe they should wait until January and get started again (fabulous idea there!!). You do not want to have to go through the process of re-selling them if you don’t have to. If they are on an autorenewing agreement, all you have to do is KEEP PROVIDING GREAT SERVICE.

Best example I can give you:
Here’s a client, a late 30’s gentleman, absolutely made of money, so there’s no issue there. He signs a 12 month agreement with us in December, and it expires after November of the following year. He is die hard faithful. Active and following his program for 10 straight months – getting great results. Then he has an issue with his job, nothing major, just taking a little bit extra of his time – and adds a second child to his family. Now at the end of November, it’s been two months since he’s been in, and it’s going to be like starting over for him. Plus the new baby, and Christmas, and he’s wondering how he ever had time in the first place!

Look at this – the guy loves to work out, he’s fit, money is no issue, he’s been successful with the program before – he’s an ideal candidate for a renewal.

But will he? Maybe, maybe not, but he’s going to have to be sold on the idea if it’s going to happen. So now you or one of your trainers is going to have to put some time into re-motivating him to get back in here. I’m not saying this is bad but which would sound better if you were him,

“Nick, you need to get your butt back in here and pick back up on your program.”

Or,

“Nick, you need to get your butt back in here and pick back up on your program, but we need to re-sign your agreement first (which in their mind means spend money).”??

It’s a potential barrier to RE-entry, that we can avoid by using autorenewing agreements.

I’ll touch on this more in the next month or so, as we are working on something that will simplify and automate most of this process for you.

If you are thinking that might alleviate some of your headaches – you’re right.

Nick Berry

Wednesday, November 01, 2006

Creating a Culture Within Your Business

When Pat and I decided we wanted to take our businesses to the next level, one of the most important decisions we made was to define and create a culture within our PT Company. Creating a culture has an indirect and intangible effect on your growth and business worth, but do not underestimate its importance. We identified that we wanted our business to be more profitable and less dependant upon ourselves. Essentially we wanted a dynamic, self-sustaining business that we could count on while we focused on other areas.

Creating a culture does not have a crystal clear definition. It involves your businesses identity, values, beliefs, products, services, and everything else you offer – and it brings out yours, your employee’s, and your customer’s passion and enjoyment of what it is you do. Your business culture will begin (or end) with you, and you’ll find that it will spread infectiously throughout your team if you have selected the right teammates. After that, you’ll find your customers picking up on it and responding to it. The kind of loyalty it can bring about can lead to referrals, repeat business, and positive word of mouth, and we know what that can do.

Looking back at how we effectively created a culture within our business which we are happy with, there were 3 basic benchmarks which we started with.

1. Define and Display Big Picture
2. Have Team Take Ownership
3. Identify and Apply Completion Plans

Define and Display Your Big Picture

You’ve probably heard me use the phrase ‘Big Picture’ repeateadly. Well, rest assured it’s that important. That’s the snapshot of what you want the finished product of your business to look like. When your team sees the vision of and buys into your Big Picture, it takes your business to a whole new level. You’ll begin to see their Big Picture become even bigger and run concurrent with yours in many cases. I’ve written about it time and time again, but I’ll reinforce the importance of setting specific goals for specific timeframes. Weekly, monthly, quarterly and annual goals for the short-term, and your Big Picture goals to which everything else relates.

You should also identify goals for each individual who has a role within your business. Identify and explain them, so each person understands not only what they’re personally responsible for accomplishing, but also how their goals relate and contribute to the overall goals of the business.

The Big Picture and goals should be kept in the forefront, so don’t be scared to post them for everyone to see daily. We all need those reminders on occasion.

Have Team Take Ownership

If you have the right people on your ‘team’, then expect them to embrace this new culture. In order to do so, you will need to establish a sense of ownership within them. Your people should know that there’s a “win” for them, not just for you, the owner, upon achieving individual or team goals. You need them to buy into the TEAM mentality, and not look at the business as a ‘punch-in, punch-out’ type workplace. Find out what makes them flourish and put them in a position to succeed. Give them the opportunity to do what they are good at and enjoy, and you will see more of a fire in their performance.

If your employees feel like pivotal contributors and that they can influence the process of reaching the company goals, you are creating a positive culture. If they do not, your culture will become one of cynicism, laziness and mediocrity.

Identify and Apply Completion Plans

One of the most important steps we took was developing our completion plans – which we included in our Business Action Plan - http://www.fitnessconsultinggroup.com/businessactionplan.html. Completion plans are step by step plans for every possible task every individual can do within our organizations. But we didn’t just write out step by step plans, we identified the steps which we feel will give us the highest probability of achieving our desired result (heard that before?). Having procedural steps in place allows us to identify, then, where an individual or a procedure went wrong if we don’t achieve our desired result. So if our sales are down, we’re not left scratching our head. It also allows easily quantified results if we are attempting to test any new methods or steps in any procedure.

Where this falls into creating a culture is giving your team accountability for every task and action they perform. Their tasks are identified and outlined, so they know exactly what is expected of them. Also, there is significantly less time spent aimlessly wondering, ‘What do I do with this now?’ (It’s simplifies tasks to where some of them are almost mindless – I love it.) So now the guy who hates paperwork but loves to train clients, spends less time fumbling with getting a client folder organized - it's step by step - and has more time to do what he loves. We all win.

Of course there is more to creating a positive, productive, profitable culture than just three steps. This is where you need to start. And no matter what type of culture you feel as if you have now, know that it can be changed starting right now. And it probably won’t be as difficult of a transition as you think, but I will guarantee that it will make as dramatic a difference in your business life.

Nick Berry