There’s no getting around it: starting a gym costs a lot of money upfront. Creating a detailed financial plan makes you aware of initial costs and projects revenue and return in the future. Here is what to include. 

Initial Costs

Your upfront capital spending includes: 

• Gym equipment
• Fit out
• Signage
• Setting up the reception area 
• Small consumables like towels, hand sanitiser, and wet wipes

Ensure you accurately estimate these initial costs to start your gym on a solid financial foundation. You may want to start considering financing options, including leasing and borrowing, to fund the initial purchase of equipment (more on this later).

Revenue Projections

Revenue is calculated as a function of the number of clients you expect to have, multiplied by the amount you charge. Your charges may be a recurring subscription package, a per gym visit, charges for classes, or a combination of all of the above. This will be driven by the research into your target market. A premium product may have less clients but charge a higher rate, whereas a budget product will be the opposite. You also need to consider your capacity limitations; what is the maximum number of people you can service at any point in time? Let’s look at a brief example. 

You project you will have 150 members at a membership cost of 20 dollars a week, then the monthly revenue from memberships would be 150 (number of members) x 20 (weekly price) x 4 (number of weeks in a month) = $12,000 

You will also run weekly yoga classes which are free for members but $15 per session for non-members. The classes are always full and are capped at 30 people, with a 50/50 split of non-members and members. So on top of memberships you also get 15 (dollar price per session) x 15 (number of non-members paying for the session) x 4 (number of classes per month) = $900

And finally, you offer one-off day passes to non-members at $10 a session. On average, in a month, you sell 20 one-off passes, adding an additional $200 to your monthly revenue. 

So, based on these calculations your monthly revenue from memberships, yoga classes, and day passes come to 12,000 + 900 + 200 = $23,000. 

This is of course a simplified version, but should give you some idea. 

Calculate Expenses  

Your direct expenses are those costs directly involved in running the business. For example, employing trainers to run a class is a direct cost of those classes. 

Your indirect costs (also called overheads) are the rest of the costs you will incur. The biggest of these will be rent and also includes electricity and water, administration costs, legal and accounting and don’t forget about insurance. This is especially important for a gym and to limit your risk.

So, if your direct expenses total $6,000 dollars per month, and your indirect costs come to $4,000 then your total expenses come to $10,000 per month. 

Calculating Projected Net Profit

Calculating your projected net profit is very simple, you just subtract your total expenses from your total revenue. So, subtract the $10,000 in total expenses in our example from the $23,000 in total revenue, and you’re left with $13,000 in net profit per month. This is the money you can use to pay yourself a wage and reinvest in the business. 

Always be prepared for unexpected costs; having a contingency fund is advisable. Understanding and managing your finances effectively is the backbone of any successful business. Contact JD Scott + Co to help with your financial planning today. 

Here are the basic legal and financial preparations you need to consider when starting your marketing agency. 

Chose Your Business Structure

One of the first decisions you’ll need to make on your journey to start a marketing agency is choosing the right business structure. This decision will impact various aspects, including your tax obligations, legal liabilities, and potential for growth. The common structures to consider are:

• Sole trader: Trading in your personal name. Ideal for those looking to have a simple structure that is cheap to set up but with the risk assuming all legal and financial responsibilities.
• Partnership: If you’re looking to collaborate with someone, a partnership could be advantageous. However, be prepared for shared legal and financial responsibilities.
• Company: This structure offers liability protection and a lower tax rate of 25%, , but it comes with more complex tax and legal obligations. Bear in mind that if you choose this structure, you will need a Director Identification Number. 

Find out more about establishing the right business structure.

If you want to get started easily and cheaply, then you can first set up as a sole trader and then convert to a partnership or company later. Check out our PDF guide on how to convert from a sole trader to a company, including the potential tax issues.

Tax and GST Basics

Tax obligations are an inescapable part of running any business, and when you’re figuring out how to start a marketing agency, understanding tax basics is crucial. Here’s what you need to know:

• Registering for GST: If your annual revenue is expected to exceed a certain threshold, you’ll need to register for Goods and Services Tax (GST). This involves charging your clients an additional percentage on your services and reporting it to the tax office. Find out more about registering your business. 
• Basic tax liabilities: As a business owner, you’ll be responsible for various taxes, such as income tax, corporate tax, and payroll tax for any employees you hire. Learn how to keep up with tax payments. 
• Deductions: There are numerous tax deductions available to businesses, like business-related expenses and home office costs. Make sure to take advantage of these to reduce the amount of tax you pay.

Understanding tax and GST is a complex task, and staying on top of it can help avoid any tax or financial troubles in the future.

A well-crafted business plan is your roadmap to success when starting a business. It outlines your agency’s objectives, strategies for achieving those objectives, and the resources and actions needed to make it all happen. For a recruitment agency, this is particularly important as your operations will involve managing relationships with both employers and job seekers. Not to mention, a solid business plan is essential when seeking financing or investors.

Steps to Creating a Business Plan

• Executive summary: A concise overview of your agency, summarising your mission, the market demand you aim to meet, and your business structure.
• Market analysis: A detailed look at the industry landscape, target market, and competition, backed by data.
• Service offerings: Clear definition of the services you will offer, whether permanent placements, temporary staffing, or executive search, and the industries you will serve.
• Marketing strategy: Your plan for attracting clients and candidates, including digital marketing, networking strategies, and brand development.
• Operations plan: How your agency will function day-to-day, including your staffing plans, technology needs, and processes for matching candidates with employers.
• Financial projections: A realistic forecast of your agency’s revenue and expenses, giving potential investors (and you) a clear picture of your business’s financial potential. Use our projection calculator or read our blog on how much it costs to start your own recruitment firm to find out more.
• Risk assessment: Identification of potential risks and your strategies for mitigating them.