In today’s missive, I shall cover a common question for gym owners AND a model for thinking about the answer.
“Should I share financial numbers with my team?”
The super short answer is “Yep!” But you have to provide some context.
Here are points that need to be considered:
Help them understand WHY the numbers matter
Help them understand what the numbers mean
Dealing with special scenarios (losing money and/or massive profits)
TEACHING THEM WHY THE NUMBERS MATTER
The first thing to appreciate is your team doesn’t care all that much about business math. With the exception of your Sous Chef, there will be some limitations as to what you can rightfully expect of your team.
The issue will NOT be that they’re getting all up in your financial business and scouring your P&L for sensitive data. The issue will be they’re not sure what it means for them..
Part of your job is to teach them. Broadly, there are two reasons it should matter to your team:
1) For your business to achieve its mission and impact the lives of your members, it has to be financially healthy.
2) For you to continue to provide more opportunities and increased pay and benefits to your team, the business has to be able to pay its bills and have enough left over to reinvest.
But you’ve got to connect those dots. Otherwise it just looks like a bunch of meaningless numbers.
TEACHING THEM WHAT THE NUMBERS MEAN
The second nuance: you have to give them the right amount of numbers and the appropriate context, so they know what it all means in light of the two points above.
Sharing your P&L won’t be helpful. It’s too detailed. It will look like gobbledygook. Furthermore, remember, the P&L is a tax treatment. Cash flow also matters. This isn’t always captured by the P&L, so it probably won’t tell the whole story.
Help your team understand what’s happening by sharing a monthly breakdown of:
Revenue – money that comes in; possibly broken down by the main services you offer
Expenses – money required to run the business; possibly split between People (including owner pay for working in the business) and Operations (all non-people related costs)
Profit – what’s left over
This is high level, but that’s all that’s really required. Based on the complexity of your business, you could get more granular. But less is more here. Remember, they don’t care that much beyond 1) how does this impact our mission and 2) how does this impact my continued employment/ possible future opportunities.
It’s also important to contextualize what “profit” means. Some gym owners are afraid to talk about finances if the business is healthy. They’re afraid the team won’t understand that the owner doesn’t keep all the profit.
But this is easy enough to solve. Explain to them what it means in your business.
For instance, at MFF, our team knows profit is NOT going directly to the Fisher-Keeler slush fund and we’re explicit about it.
It’s used for:
Savings to pay quarterly and/or year-end taxes
Targeted reinvestment opportunities like marketing, education for the team, facility upgrades, etc.
Possible profit distributions to the owners and the team
Breathing room for any month-to-month variations where expenses may be up and revenues may be down
NOTE: In most cases, going down the rabbit hole and explaining Profit First and allocations is beyond their interest and need. Again, we keep it pretty high level.
It’s also useful to explain your profit margin targets on a monthly and yearly basis.
This target will vary based on your business and goals. But your team will understand that if margins get too low, the business isn’t “safe.” This means you’re risking the ability to keep serving your mission AND you’re not in a position to increase anyone’s pay.
Finally, let’s talk about two situations that could require further nuance:
1) Your profit margins are horrible and the business is losing money.
This one is a toughie. If you’re truly losing money, you may be sending a message that’s scary for your team. If this is the case, you may want to right the ship before starting regular financial messaging with your team. Usually this requires some combo of growing revenues AND cutting expenses. (If you need help, I know some peeps.)
Having said that, I still lean towards transparency. Half of leadership is real talk about the facts on the ground. Just remember the other half is presenting a clear plan to win AND having the confidence you can execute.
2) Your profit margins are massive.
This is usually because you’re underpaying yourself owner pay and relying on profit distributions to make your living. Leaving aside the tax implications for your accountant, you may adjust the numbers you share with your team to remove your pay from the profit margin you show and simply add it to the expenses.
But let’s say you’re mega-crushing it. Perhaps your training gym is doing $30k per month and you’re only paying out $10k total expenses, with $20k profit even after your pay and regular distributions. This is where you must explain what profit does –– and does not –– mean.
If you’re paying out fair market value to your team, this shouldn’t present a big deal. Sure, most people would be happy to make more money. But it’s not the main driver for most employees in a training gym. And presumably that money means you’ll be able to invest in the business and create more opportunities for the team.
If you’re NOT paying fair market value to your team, however, this gets stickier.
But I have good news!
If you’re really paying under market while squeezing every dollar out of your business, the odds of keeping a high-performing team around for long isn’t good.
Because you’ll likely have turnover which will eat into your margins over time anyway. 🙂 So in practice, this won’t be an issue indefinitely.
As always, the model above requires adjustment for your situation. But hopefully it gets you thinking about if and how to share data with your team.
Because ultimately, here’s why it’s valuable to YOU for the team to know the broad strokes:
Given the right context, financial data can actually drive team behavior and performance.
Money is not the only thing to care about. But it IS one proxy for how you’re impacting your clients. And if shared with the right context, it can gamify your mission to impact your community and incentivize your team to act in their own rational self-interest.
You can’t measure everything that matters, but that doesn’t mean you shouldn’t measure anything,
PS: Here are three ways to get more BFU in your life:
- Learn more about our coaching group The Unicorn Society HERE.
- Subscribe to our Business for Unicorns podcast HERE.
- Subscribe to Mark’s new YouTube channel HERE.
PPS Speaking of, have you checked out my YouTube channel lately?