Ryan Vaughn explains how gym owners should manage cash during emergencies like natural disasters or pandemics. Using Profit First, allocate half your quarterly profit to an emergency fund. If that runs out, tap equipment savings, then your tax account. Cut non-essential expenses and communicate with your landlord early.
So I wanted to make this quick video on what do you do when there are emergencies. At the time I'm filming this, there was a big tornado in Nashville. There's this pandemic of the coronavirus. Emergencies can happen, can and will happen. But what do you do from a cash flow standpoint? How do you prepare for it? And what do you do when it actually happens? From a Profit First standpoint, I would first say this. You only distribute half of your profit account once a quarter because the idea of the other half is to be used as an emergency fund. Well, that's the first place you're going to go for cash if you're forced to shut down your gym, if your revenue decreases, even if you don't have to force down. Even if you don't have to close down your gym and you still have members who are asking to put payments on hold and things like that, the profit account is going to be the first place you go for extra cash. The second place you're going to want to go is your equipment bucket. If people aren't coming into the gym, there's not wear and tear on it. And that is a— the equipment account by itself is a proactive way to plan for for your equipment needs. But look, when emergencies happen, we got to dial things back. And so this would be the second bucket you want to go to if you're short on cash during a sort of emergency. And then the third place you're going to want to go to is your tax account. Look, in the case of emergency, especially some of the gyms that have to close down, they have losses now. And When there's losses, that means there's no taxable income. So if you have money set aside for taxes, go ahead and pull from that, from the third spot. Now, what happens if you weren't using the Profit First system and you find this emergency upon you? What do you do? From a cash flow scenario, you are going to want to really dial back everything that is not Absolutely critical to keeping the gym open. So if you think about the absolutely critical expenses you're going to have, you're going to have to pay your landlord for the space. And even that, in this type of emergency, maybe they're going to be, you know, um, considerate of the situation and give you some wiggle room. But you're going to want to have that conversation. But ideally— You probably are going to have that rent expense. You're going to have to probably have some minimal utility expense, but not a lot, because if your gym is closed, no one's in there running up electricity. If your gym's closed and you pay coaches per class, then you don't actually have any coach expense. Now, that's not to say you're probably going to want to look at how can you, to the best of your ability, take care of your coaches. Absolutely, you need to look at that. I'm just saying, every, you know, in an emergency situation, I don't think the full burden of financial stuff needs to be on your shoulders, um, especially in this scenario where I'm talking about where you didn't have time or didn't plan for a type of emergency where your gym would be forced to close for a month or however long. Other than that, I mean, really, all the other expenses you have, you probably want to put those on hold or cancel them. I guess you're gonna have your membership software because you don't really want to lose that data. But again, you, you want to go through and look at things and only keep the things that are absolutely critical. All the other stuff, you got to dial it back and, and ride out the emergency. I hope those quick tips can be of value to you. I know that a lot of times we don't actually think emergencies are going to happen to us. I can tell you as I'm recording this, it is a bit of a shock on how fast this coronavirus has ramped up. Prepare now. If you're watching this after the fact and this type of emergency has blown over, just know that it could happen. That's why a system like Profit First is really important to have in place. Because you have extra buckets of cash that you can pull to in an emergency without affecting your take-home pay and your life. Plan ahead. Take these tips to heart for emergency planning. Here's to being financially resilient.
