Tip #3: It Is Going To Get Tougher To Remain Open
May 16, 2020
Originally published March 16, 2020
It is going to get tougher to keep your business open during the next several weeks, but if you can, and this is my personal opinion, do not close until you are forced to by the local governments.
There are two ways to look at this problem for gym owners.
First of all, we could voluntarily close for several weeks and do everything we can do to keep the virus from spreading. This is an option many of you will feel comfortable with and I will give you some guidelines for this if this is your choice. If you are personally concerned about the virus, then do not hesitate to close.
The other option is more complicated. We should be, and can be, a beacon of calmness and a safe haven for those who need a place to go, are not willing to give up the benefits of fitness and health defending them against illness, and who need support.
If we do everything right, we mitigate the risks associated with staying open and become that one place a person can visit and feel safe while doing something good for themselves. But that is if we do everything right, which means your gym has to be the cleanest it has ever been, you need to practice commons sense on the sizes and contact points with your groups, and that you need to be part of the solution, not part of the craziness by refusing to spread rumors or become so politically lopsided you cost yourself business.
The harsh reality is that if many of you close you do not have the reserves to last for more than a month or two. I have given you a few ideas in the first two of these letters that are worth reviewing, but I am going discuss shutting down in this one.
If you have to close...
- If you are forced to close, try to limit the closure to two-week blocks but you may be forced to close indefinitely by your local or state governments.
- Immediately assess your reserve capital and go proactive. I would assume you will need two-months of reserve to get by. This includes rent, debt service, utilities and other essentials.
- Do not try to cover shortages after the damage has been done. Figure out your situation and the money you will need and start trying to put it together prior to getting in trouble.
- If you have a good bank relationship, ask now about setting up a quick line of credit, again trying to cover at least two months of reserve.
- If you have an investor, see if it is possible to borrow two months’ operational cash paid back over five years at a decent interest rate.
- Pay your staff for as long as you can. Some of you have staff that have money in their lives, but most of our staff are people who are living one check away from being seriously hurt. If you can, pay your staff for as long as you can. Yes, they could file for unemployment, but that takes weeks to get done and there will be an influx of people filing.
- If your members are on contracts, and all clients should be, then let them know that all time missed will be added to the end of their agreements reassuring them that they will not lose anytime while you are closed.
- If you close, contact the members daily with tips and stuff they can do at home. Do not lost contact with your base. If you can scramble together park workouts or other suitable situations that do not break gathering rules for your town, then try that too
- Talk to your bankers, landlord and investors about your monthly payments and what can be done if anything. For example, here is a landlord talk:
“My gym is going to have to close for two months and I will have limited income during that time period. I have cut expenses of course, but I still need to pay my staff. May I take my next two rent payments and skip them now but then amortize them spread over the remainder of my lease?”
For example, your rent is $4,000 and you have three years left on your lease. You are asking the landlord to skip two payments, or $8,000. This $8,000 would then be divided over the next three years of lease payments since you have three years left.
“My payment is $3,500 per month. May I skip two payments and add them to the end of my loan period, or may the two payments be split over the remainder of my loan. I have cut all other expenses, but I want to still pay my staff and be ready to open in two months without being so far behind I will fail.”
The banker and the landlord have an incentive to work with you since putting you out of business doesn’t help them get paid.
- “BIG.” There will be recovery loans available from the states and local governments when the situation lightens up, especially in those areas where small businesses are forced to close for a considerable amount of time. You need to be ready.
- Keep exact records of what you lose in income with documentation.
- Keep your financial statements up to date. Talk to your accountant about making sure you are financially prepared to apply for one of these loans when they become available.
- Document any deals with investors and landlords.
- If you are a team gym depending on large groups, try offering small group or 1/1 to your clients stressing you will have no contact except with a limited group or just an over- sanitized coach. If you do this, offer a limited, 90-day agreement only for this service. Do not offer packages and sessions for this unless you are already using that system.
- Promote daily that health is the best defense against disease using all social media platforms.
- Video people working out and post letting your community know you are still there.
- Post online workouts daily your clients can do at home
- Weather permitting, get your members together in a park, but honor the group limitation rules per your community
If you go proactive, you have a better chance of surviving this situation as a business owner. Wait and see what happens, or try and fix any financial messes too long after the fact, and you might get hurt.
Take leadership in this situation. The gym is a safe haven that tries to protect the people who trust us. Stay in touch with them, support them, give them ideas to help them get through this, but do not lose touch with the people who support your business.