Episode #556: Mastering Fitness Studio Growth-KPIs, Cashflow, and Expansion With Lauren Schoenfeld

0:00 I am super excited to announce that we now have a formal partnership with the Prospect Wizard. And when I say wizard, I mean wizard. Obviously you have a website. This allows you to convert your website traffic visitors directly into leads. It's not just another chatbot and it's not AI, but it allows a visitor to call, text or leave a voicemail immediately. Goes to you, your sales team or anyone else in the club instantly. MIT shows a study that if you contact the lead within 10 minutes, chance of them converting goes up nine times that of the average. We got the Atlanta clubs on it. Vita Fitness, Gold's Gym, Mountainside City Fitness, Philly, College Park. Become one of the next Halo companies to deploy the Wizard.

0:48 It's easy to use. Go to the prospectwizard.com get a free 30 day trial. Talk to my boy Dave Gallen. He will get you all set up and let the leads flow based on the Wizard. Go get him. This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing your new fractional cfo. That will be your Halo most important position. Hire Lauren from Active Core Consulting, hailing out of San Diego with roots in New York City. And she is music to my ears because we're going to talk finance, we're going to talk ebitda, which people know I love, and we're going to talk about how you make sure you can manage and measure and eventually sell your business.

1:33 So Lauren, welcome to your first Halo Talks. Thank you so much. I'm so excited to be here. Yeah, so look, in our business, a lot of people have bookkeepers, they've got accountants and we get on and we help them, trust me, try and sell their business. And it sometimes takes upwards of six months to actually decipher what their cash flow is, what their KPIs are, how you can articulate what the business model is actually through financial drivers. So talk about your background, why you've dedicated yourself to be a fractional CFO and people you've helped and some of the takeaways you've learned.

2:14 Yeah, of course. My background is heavily in finance and strategy. I started my career at PwC, did a lot of public company financial audits. I was an early employee at WeWork before they tried to go public the first time. And then I got into the fitness space at Equinox where I spent the lion's share of my corporate career. I was an athlete growing up and then got into the accounting finance world out of college. And so coming to Equinox and, and back into the fitness space felt like the best marriage of my athleticism and my finance brain coming into one. During the pandemic, I lived in New York City. I was stuck in my apartment.

2:55 I was bored because I didn't have anything to do in terms of work was slow. Fitness industry was kind of slowing down. So rather than finding a creative outlet through arts and crafts for bread making, I was like, let me start a company. And so I reached out to the cycling studio owner of the studio I was a coach at and asked her how she was pairing through the pandemic. Obviously, no one was doing great. And so I helped her restructure her business, helped her open the first outdoor cycling studio in Brooklyn since you're in New York. Bikeland was my first client. And so she was like, this is amazing. And she was an MBA grad from Wharton. So I was like, wow, if this amazing, smart studio owner needs my help, I imagine most people are in the same position. So it really started out as a labor of love during COVID just wanting to help out the industry and kind of get my feet wet into what a consulting business agency would look like. And about five years later, we have fully grown. I have eight other people on my team. We're also growing into not just fractional cfo, but also sales and operations coaching.

4:13 So the ideal flow is you come in on the finance side. We have bookkeeping services, we have finance services. So our fractional CFO offer is a really holistic offering where we clean up your P and L, we make sure you're giving reporting that actually speaks to what your business is doing so we can make smart operational decisions rooted in your numbers. We build you out a three year business plan with monthly goals. So when you're doing your weekly and monthly KPI metrics, you actually have something to base your metrics against. So we can really keep a tackle on your business and what you're doing, what you're not doing. And then our sales and operations coaches will really come in and help you nail down your sales process, your communication process, your team building, your community building, your retail strategy, and just everything that comes along with running the four walls of our studio.

5:10 Our sales and operations coaches have also come from the boutique fitness world, from Barry's bootcamp, Orange Theory Fitness, a lot of thick equinox generators and helping out big names that we've all taken our skill sets to help the smaller entrepreneur crew. So before we get into the business, what was your athletic prowess? And we have to get you a copy of our book, which is called Time to Win again. We where it's 52 takeaways from team sports to run a successful business. So it's a caricature picture book. Kind of like Where's Waldo? Beats good to great. But we love what you're doing. You know, we're focused, as most people know, on the mergers and acquisition side. And a big piece of our business is making sure that we have a bulletproof historical and projection model and be able to tell the story of what's a special sauce of a club chain or studio concept or franchisor. And it's really difficult to do that unless somebody has a handle on how they're driving the business, what levers they're able to focus on and actually. Put. Rocket fuel on or not. And as you reference, you have to have a handle on those monthly in order to prove to an investor that, that you're not just running a four wall business.

6:34 But you know how that four word business model and revenue model works. So first off, what's your sport of choice? I was a big soccer and volleyball player growing up. Okay, live and breathe sports. Every weekend up and down the state of California. My poor parents were just driving my brother and I to all of our competitions and tournaments. And I was a goalie. I just retired a year ago. I was a goalie at 52. No way. Awesome. Yeah. All right, there you go. All right. So we're fast friends. You know, my mom used to tell me like, oh, you know, there's 10 other people that it got passed, you know, so it's okay that it got past you. I'm like, no mom allowed to use my hands. So, you know, make me feel, you know, comforting. But yeah, I say, well, you'll see in the book, you know, like the CEO of the company is really the goalie. And, you know, I'm responsible for people not losing, which, you know, in your current, you know, profession, you're basically, you know, like the defense, you know, for these businesses. So, Dave, make sure we get a copy of the book to Lauren as soon as possible. And it's always good to have another goalie, you know, on board here. You know, from a standpoint of when you got involved with your first couple of clients here, you know, they've, they're either on ABC, they're on MyBody, you know, who, who, what role were you either replacing or what role were you shocked that wasn't there?

8:00 It was more so just transparently shocked that wasn't there. I think a lot of studio owners who were successful pre pandemic didn't have to keep as tight of a pulse on their cash flow and how impactful certain operational decisions are going to have on their profitability and their cash flow. But once Covid hit, obviously revenue just plummeted. So each decision was so much more valuable and so much more important. So. So in the early, early days of the business, my goal was really just to keep people from not going bankrupt and not losing all of their cash. So really helping them understand cash flow analysis. If we make this change, what is the downstream effect on your profitability and helping them manage cash flow and make sure they can pay all of their people? And then as Covid started to recover and our industry started to recover, and then it was really about helping studio owners, how do we regain the revenue that we lost during COVID What operational changes do we need to make given this new landscape?

9:04 And then that's where I really brought in a lot of the sales and operations coaches that we have now to help them redo a lot of their communications, their sales, their marketing tactics. How do we operate a schedule? How do we manage a team? We really have partners that do everything under the sun that you need for boutique fitness, just depending on what you need, who is dependent on who on the team that you'll work with. And now that we're, you know, Covid is in the backseat, Thankfully, a lot of our studio owners are opening up new studios, growing their portfolio, figuring out how are we going to gain funding for a third, fourth and fifth location. And so my role with them is really outward expansion, growth planning, what metrics do we need to hit in order to be attractive to an investor and helping them build out the bigger vision, but also on a smaller scale. They still work with our finance coaches to make sure we are always understanding what are the cash flow needs of the business, what is our cash flow run rate?

10:03 Every single month, we give our clients a P and L review. And what that means is we take the budget and the projections that we have set, we marry that up against the actuals that happen in your business and through the story of your P and L. And then working with me, since I know the operations of your business, we merged the two together. So you can see, okay, we made this operational change in the business and we expected revenue to grow 5% and only grew 3%. What happened? So we'll dive into that. Conversely, if it beat budget, then we really want to understand why it beat budget so we can continue doing the good and leave what's not working. So we do that for every P and L category that we have. And it's really important for me for our CEOs to understand their numbers, what's coming in and out of their business so they can make better decisions.

10:55 This is Pete Moore. I want to let you in on a little secret. There's this company called Promotion Vault. And what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away T shirts. What you want to do is build a rewards program that lasts, that people value and that doesn't discount your own products and services. So here's the deal. There's something called Rewards Vault. The Rewards Vault is going to allow a member to set up their own profile. They are going to answer questions, you are going to get those answers. You're going to be able to target those members and you're going to reward them inside your club, inside your spa, and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions. A lot of companies are cutting back on rewards. You shouldn't be.

11:51 Promotion Vault, your answer, Trust me, this is real. From a standpoint of a lot of studios. I mean, most of them historically have been on my body. When you go into a company and diagnose, you know, okay, we can help you, do you want them to be on a certain software or would you rather have that remain nameless or do you find that certain software is better deployed and able to give you the reports that you need? Yeah, that's a good question. Ironically, we don't have any clients on mindbody. When we came in with a lot of the post pandemic newer studios, they were all going into Mariana Tech, which I think is a.

12:39 I don't think there's a perfect system. I think every system has their pros and cons and we could probably have a whole podcast riffing on what are the pros and cons of each platform. I like Mariana Tech for reporting. I think they have opportunity to better integrate their marketing brand bot with the system. So it's a bit more seamless. A newer system that we've become partners with is Walla, because everything is under one operation. They're the only system that has an actual CR and lead flow, which is really important for our sales and ops team and how they coach our studio owners and managers on how to follow the journey and the sales Process. Another system our clients use a lot is moments. So I would say like, those are probably my top three systems that we've seen the best results with.

13:28 Gotcha. And then when you look at these systems and you look at what the operator has been using prior to getting involved, do they have like a management dashboard? Is there like a KPI? You know, I use the word term crystal reports from back in the day. Yeah, but, but you kind of building those out for people and also like providing almost like an educational roadmap on not only am I your cfo, I'm actually like teaching you how to manage this business and actually understand you can sleep at night or you can't or, you know, here's like three or four things. You can just cut marketing and assume that you know the business is going to be the same. You can't have less programs on the calendar because you got revenue per hour, you know, that we're looking at here. So, so what are some of the things where you're one, you go from like shocked into like execution mode and saying like, look, you kind of, if you hire me, you have to run the business the way I'm telling you to run the business because I know how your business works. I know you might have certain things that you look at. But let me just tell you how successful studios work. And I've got enough data and I got enough clients to tell you how to do that.

14:38 And kind of trust me, I'm sure if there's a question. I think there was a question there somewhere. Yeah, it was. We definitely have a specific framework that we use on both the finance side and the sales and operations side. And so what I teach in our program is our signature framework. Right now we're taking people through an eight week group program to get your financial foundations. It's called, called Finance and Flow. Depending on when you're listening to this, we have eight week program that kicked off this week, the end of January and we do another one in the summer. And it's eight weeks to take you through. Like what exactly do you need to have in your business to feel financially confident? Everybody wants financial freedom, but before we have freedom, I believe we have to have confidence in our numbers and confidence in what we actually need to do in our business to hit the goals that we can so we can feel financially free. So, so throughout this program, we take them through the journey. KPI metrics is the number one thing that I teach. We have to do this on a weekly basis and then we do it on A monthly basis to recap the month. Once we have your business plan, you have specific goals that you need to hit each week. For first timers leads, Intro offers, new membership sales class packs. And so those goals are funneled into your weekly KPI tracker. So your studio manager can pair up how you're doing each week against the goal that we have and you can make operations operational changes in week over week depending on what you need more. Do we need more leads? Do we need more Intro offers so we can hit that membership goal? It's all just a big math game, right? It's

16:11 all conversion percentages. So once we have the history of your business, we know how you've been performing and then we can help you project out what the next six months to a year will look like. And then if we add in our sales and marketing coaching, we have the data to be like to say, okay, on average your conversion rate will go up 15 to 20% depending on where you started if you work with our team. So that's just a really powerful visual for owners to see where they're at versus where they can be with the right coaching. Obviously you have to do the work and follow the framework, but we're laying it all out for you. So as long as the owners do the work, we see really good success. Yeah, we, during COVID we started off something called Halo Academy and it's basically an executive boot camp where we go through the business models on Planet Fitness, CrossFit, Soul Cycle, Cycle for Survival and, and Peloton. The next one starts on a week from now if we'll send you a comp on that if you want anybody to sit in because they're basically trying to explain to them, you know, if you're going to operate in this market, you got to understand how your competitors make money and how you can either combat that or how you can maybe take some of those learnings. Obviously studios don't have annual maintenance fees, which sometimes equates to 50% of the total cash flow of a Planet Fitness as an example.

17:33 So we love what you're doing on, on the education side and kind of having people understand like this is how the, the revenue model works and is what you have to provide on your end. Do you see, do you find that, you know, in some companies that you go into, they come to you as like a last resort and, and it's like, hey, can you kind of fix this? You know, we don't have any money left to put into the business and it's almost like A rescue, you know, CFO situation. And maybe you say, look, I, like, I can't help you because this is not something where, you know, you should have called me like six months ago, which sometimes I feel like I want to help everybody but I can't.

18:14 Or what do you go through to kind of diagnose? And also it's kind of like dovetails into like, who's your ideal client as a, as a studio operator? Like, you know, there's certain things I can and can't do or who I want to target. Yeah. Luckily, since our business is growing and the agency is getting more involved with other coaches, we do have an offering for almost every level of business as long as they're able to support the investment level needed to pay for us. So we kind of, we put two, we put ideal clients into two categories. We have studio rescue. And that's kind of under what you were just describing. You're probably not cash flow positive.

18:57 You have some success and you feel like you have a good vision and you can see the road to it. There's just something that's not sinking correctly. And for our Studio rescue clients, we actually have them skip the fractional CFO which is normally our first step, and just go right into sales and operations coaching. Because something is wrong, or I shouldn't say wrong, needs to be adjusted in your operating process so we can get more leads in so you can have the money to invest. Really think through of what a bigger three year strategy will be like for your business and get that financial support and help to walk you through the steps. But sometimes we just need to stop the bleeding and get the top line revenue up so you have capacity to start paying yourself so you can stop living in scarcity mode and then make other investments in your business to continue that growth. And then, you know, not necessarily to pin an actual dollar amount, but you know, what's, what's an entry point for a studio on a monthly basis to be able to bring, you know, your team on or some component of your team. So you just know that this is, you know, cost effective and probably the best return on investment they're going to get in any, you know, outsourced, you know, advisor or provider. Yeah, it's a good question.

20:16 And sometimes isn't necessarily a revenue goal that they need to hit. It's more like, do you have the money to invest with us? So ideally, if you're within the 10 to $25,000 a month revenue range, it's probably too low to invest with us. But if everything that you own is tied into this business and you have to make it work and you can find the money to invest in our coaches, they will help you increase your revenue to what you need. However, our true ideal client is bringing in at least 50k a month in revenue to really go through the full journey with us. We want you to be on the road to seven figures having one or two studios and you want to open and grow your portfolio. That's the ideal client for me on the fractional CFO side.

21:07 But there is a bit more flexibility with that studio rescue type offer with our sales and operations coaches to help you to stop the bleeding. Just get some more. And what would be I like to use the term invest because I talk about marketing is an investment in your revenue. It's not an expense. So when you talk about your fractional CFO role, can you give us a range of what that minimum would be? Yeah. To join our group program and that's where everybody starts now is so you can get the eight week fractional roadmap or finance roadmap for your business to just do the group program. It's a $2,000 investment.

21:49 If you want to have the one on one time with me and the team to help you go through the worksheets and get your business plan together, that's a $3,500 investment. And what we've seen is like the people who do the VIP upgrades are the ones that were actually implement implement the strategies. You could obviously do it on your own. It's just the, you know, more one on one support is always beneficial. This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called higher dose higherdose.com they are the leader in workout recovery products, infrared technology, LED light masks, neck enhancers and other products such as PEMF mats and sauna blankets. If you have not gotten on the workout recovery train yet, your time and your stop is now. You got to get these products in there before these workout recovery and spas end up saturating your market.

22:50 Having your members walk out of the club and going into one of their locations for 200 bucks per month where they're paying 39 to you. Let's become an expert in workout recovery. If we are already an authority in workouts. Higher dose, check it out. There's a wholesale code and we look forward to helping you augment your products and services to meet the demands of your members. And hey, let's get people happy, healthy and Sweating and the recovery should be just as good as the workout. So there are a lot of franchisors out there that sell people a franchise or award them. Usually the ones that are sold maybe don't have something called Item 19 in their financial franchise disclosure document because the unit economics, you know, just aren't proven or aren't good. So they don't put it in there. I've always used a benchmark for the last 10, 15 years of you have to really be doing $60,000 a month or 2,000 a day regardless of really what your rent is, to not be paying more to the landlord than you are in cash flow to yourself.

24:01 Do you have any kind of benchmarks or, you know, hacks, if you will, to say, like, look, I kind of, once I get your financials, I know what the problem is. Right. I got a, I got a revenue issue, I got a marketing issue. I've got, you know, I'm overpaying people. I've got too many, you know, I've got too many of your family members on, on staff or, you know, is there, is there a revenue kind of threshold where it sounds like using 50, you know, that you say, look, if you can't make X dollars per month in and paying full rent next to a hair salon that's open 16 hours a day, then you're open next to a Dunkin Donuts. So you're open up to, you know, that this, you know, European wax or lash amazing lash or what have you, where you're like, look, you just don't have enough programs on the calendar to actually generate enough revenue. What are some of the things that you see is maybe just like, you know, industry benchmarks to say like, look, we got to get you up to X for you to even be relevant and to stay alive.

25:00 Yeah. One of the first things that I'll look at with a new client is instead of just revenue targets, I like to look at expense categories as a percentage of revenue. So we'll look at studio payroll as a percentage of revenue, marketing, rent and operations, all the different categories. And actually one of the things that I would love to gift your listeners, I created a calculator for, for just the average business owner. It's more high level analysis than what we do. Where you enter in your revenue, you enter in different expense categories and it will help you show you where you're spending too much or too little, or if you have a revenue problem where we need to just generate more revenue. So that will be in the show notes with the link where you can download that calculator. And so just like some basic assumptions that I like to call out from like a marketing standpoint, I usually try and have people stay around 10% unless we're in growth mode and there's a specific strategic initiative around it where we want to punch out a bunch more ad spend. Rent, Ideally less than 10%. 7 to 8% of total revenue would be super ideal, which probably sounds crazy to some people, but it's definitely possible with the right strategy and with payroll like that, in my opinion, payroll is going to be your most expensive line item after rent. And so we try and keep our Studios payroll around 30% of total

26:30 revenue. And then there's other buckets that we have. But I think payroll, renting, utilities and marketing are the ones that I like to focus on initially. And that's what's driving that calculator template that you guys. Yeah. And then from a sales and marketing standpoint, we used to own a couple of bar businesses and one of the things that kind of shocked me is the lack of co op marketing that people could and should be doing in their local strip center. You know, if you're, if you're next to a, a hair salon and you are a, you know, Pilates or bar business, the fact that either the manager at that location doesn't have a comp membership or doesn't have, you know, get a haircut and get a free bar workout or you know, you know, at like a first watch, you know, breakfast place where they're doing like 300 or 400, you know, you know, transactions a day. Like, how are they not just putting in there? Like, you know, our friends at xbar, you know, want to welcome you to this. Show your receipt, get a, you know, and get a, get a three day pass. Or like, are you seeing a lot of people think like, oh, my SEO this, my SEO that. It's like, there are people with cars that drive in here that pass by and they have no idea what's going on inside here. Like, why don't we actually talk to them, build relationships? So are you seeing a lot of that? Like, people are like, oh, I did email marketing, I did text messaging.

27:56 It's like, why don't you talk to people? You know, I'm laughing because this happens every, almost every new client we get. It's a huge gap, which is like an easy win for us to help them with community marketing and having their studio manager or their event, whoever is in charge of this, get out in the community and Create those relationships. I also think because our world has become so digital, even having the front desk team learn how to have conversations with people that are coming into the studio is a huge area of opportunity that we help our clients with. One of our coaches, Jamie, has this amazing sales training. At the crux of it, it's basically teaching you how to have conversations, but it's teaching you how to have conversations based on different behavior attributes, that you can identify people in certain Personas and certain behaviors. And so based on their certain Persona or behavior, we know how to talk to them based on what they want.

28:57 So it really helps our studios with conversion. She did a training back in November, so it was about three or four months ago for a client. And the last two months, this client's new sales numbers have way overblown budget. Like, for example, we had, like, 50 was her goal, and I think she hit, like, 75 new sales. That's amazing. Yeah. So we're just, like, really learning how to have conversations, and taking sales out of the process and making it more conversational is a shift that we really help clients with. She actually would be very mad at me if I called it a sales training, because it's not a sales training.

29:38 We're actually, like, teaching you how to have conversations. But the word sales is what I think resonates most with people. Yeah, gotcha. In closing here, just to keep it under our cap, how bullish are you on the boutique studio space? And do you have franchisees that are under a franchisor where you're like, look, I know this is the operating model that you're supposed to do deploying, but let me pour some rocket fuel on here. And you might become the best franchisee and kind of listen to me, but you stay within the parameters of, you know, your franchise agreement. Yeah, franchise. Franchises are tough. Right. Because I think you believe that you're coming into a business and you're getting a business in a box, and the franchisor, in theory, is supposed to do all these things to set you up for success. But in actuality, there's a lot of gaps in training, a lot of gaps in specific sales processes, and you're having to pay a lot of money out to franchise fees and this fee, and you have to order things a certain way. Everything is just so scripted, which could be great for some people, but the clients that like working with me are like me. We're true entrepreneurs, and we want to do things our own way. And so something that we've been really working on as a Business is how can we give our clients a business in a box, but instead of it being somebody else's business, it's exactly the business that you want to build. And so through all of our partnerships and coaching, we hit all of those pieces that you would get from a franchisor as a business in a box. But it's even

31:10 better because it's yours and you can make whatever decisions you want or need to. And that's where the creativity of working with our team really comes into play and not having any rules and getting to do whatever you want to make money. I kind of wrote this down as a. As a joke to myself as you were talking at the beginning. That says you should have, like, little font letters that they could put on their sign that says, like, buy Active Core or like profitable by Active Core at the bottom, like the top of the sign coming in. And then, you know, in closing, do you have any. Have any good quotes or anything you live by or Laurenisms inside your company that you could share with us? Yeah, something that Jamie and I created really early on because both of us are recovering perfectionisms and just super high achievers. And as an entrepreneur, perfectionism has to be thrown out the window. So whenever we're working on something and if we feel like it's taking too long, we ask ourselves, is it right?

32:05 Like, fuck it, ship it. Sorry if we can't curse on here. No, you can curse on here. It's actually preferred. Great. Fuck it, ship it. Is it in a place where it's good enough and we can put it out to the world and at least starting to get some traction on it? Because we know 50 to 75% of us is most people's hundred percent. So, yeah, good point. Ask yourself. It, Ship it. Stop overthinking. Stop with the perfectionism. The world just needs your gifts and whatever you can. I like it. All right, From a fellow goalkeeper to another, thanks for keeping a defense tight. And, you know, you can be my sweeper, my striker, or vice versa. So I love it. I was all of those too. So we can play the game. Stopper. Stopper. Sweeper.

32:50 Sweeper or stopper. I said striker. Deal with those guys. Awesome. Thank you for having me.