According to the U.S. National Bureau of Economic Research (the official arbiter of U.S. recessions) the last recession began in December 2007 and ended in June 2009, and thus extended over eighteen months. The average recession lasts about one year and the normal range is 6 to 18 months. Expansions last longer than recessions, almost six years on average, but the length of an expansion has varied widely from one to ten years.
Although data shows that expansions and recessions do not occur at regular intervals, there are many who believe that we are overdue for a recession. It has been 10 years. In an attempt to boost growth, President Trump passed massive tax cuts, scaled back regulations and boosted government spending in his first 2 years in office. The result is a large-scale stimulus that appears to be causing growth to rise but at a cost: It has also triggered an unprecedented expansion of the federal deficit. Recent trade wars and threats of trade wars has not helped consumer confidence.
The IMF predicts U.S. growth will hit 2.7 percent in 2019, a level of growth that hasn’t been achieved since 2006. But the IMF also predicts the United States will be the only advanced economy in the world to have its debt-to-GDP ratio get worse in the next five years as the government budgets become even more unbalanced, adding to the debt.
The current expansion of the economy, which hasn’t necessarily felt record-breaking for many gym owners, has been a long but slow recovery from the Great Recession and financial crisis that struck a decade ago. Growth has averaged about 2 percent a year, far slower than the 3.6 percent annual average during the 1990s expansion, and wages have grown well below the usual pace in good economic times.
The consensus among the world’s top economic forecasters is that the United States is in for good times through 2019 and possibly into 2020, but that will probably be followed by an economic hangover of sorts. Not only is growth expected to slow, but it could end up being weaker than it would have been without all the stimulus because the U.S. government will have a harder time spending any more money to try to aid the economy, and the large debt that already exists will cause investors to buy U.S. Treasurys instead of investing in the private sector where it would be more likely to boost growth.
While many economists agree w that the short-term picture looks promising, they don’t believe it will last beyond a few years. CBO anticipates growth slipping back to 1.8 percent by 2020, while the Federal Reserve forecasts 2 percent by 2020.
How can you recession-proof your gymnastics business?
As an industry based on a children’s activity- we are sometimes the last ones to feel the pinch. Parents will stop other things before they let it affect their children day to day activities. Maybe one less vacation a year. BUT when they do stop- they are hard to get back into the gym.
There are steps you can take to ensure your gyms survival and some may help you even thrive during economic tough times.
1. Protect Cash Flow
Cash flow is the lifeblood of your business; to keep your gym healthy, cash needs to continue flowing through. Now no matter how tough times get, having cash flow out of your business will never be a problem. You need to have some cash on hand as well. When things are going great you can always count on next months tuition to cover the some unexpected expense. But during tough times you need a plan.
Most small businesses have some form of a line of credit: an agreement between a financial institution—generally a bank—and a borrower to provide a certain amount of loans on demand. Many banks today have more money than borrowers and report that only about 40% of the existing lines are drawn. Many businesses do go out of business during a recession and it is for one fact: they run out of capital.
If you can increase your line of credit NOW and establish new credit facilities even if you don’t need them now. You may later.
As long as your gym exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing in. Protect your business by implementing strategies to keep the cash flow moving.
2. Review your equipment needs NOW and Management Practices
See what can be done to get equipment (with out financing it) now. BE SMART- do you really need this or is it a luxury item? Most gym owners don’t watch new costs too carefully during good times. Why bother, if you are flush with cash? The problem is that new expenses can add up quickly. And by the time a recession hits, it may be too late to make changes. Here is the golden rule:
Don’t buy something unless your gym really needs it.
That doesn’t mean you can’t splurge here and there. You can, as long as you do it in moderation and carefully.
Just because you’ve always ordered something from a particular supplier or done things in a particular way doesn’t mean you have to keep doing them that way – especially when those other ways may save you money.
Trim existing costs
Look at your existing costs and eliminate unnecessary expenses. Leave no stone unturned. If possible, outsource non-essential functions. In many cases, this strategy saves you time and money. And when recessions hit, outsourced resources are the easiest to trim.
What is outsourced will vary by gym. Just keep whatever functions make your business special and competitive.
3. Focus on Core Competencies
I have seen many articles on diversification as a strategy for small business success. But too often gym owners simplify the concept of “diversification” to “different”.
Just adding other programs or services to your offerings is not diversification. At best, it’s a waste of time and money if it is not bringing in NEW or different clients. Worse, it can damage your core business by taking your time and money away from what you do best and/or damaging your brand and reputation.
Drop the extras and focus on what you do best that is most profitable to recession-proof your business.
4. Develop and Implement Strategies to Win the Competition’s Customers
If your gym is going to prosper in tough times, you need to continue to expand your customer/client base – and that means drawing in customers from the competition. I DO NOT TREAT THE OTHER GYM IS TOWN AS COMPETITION. Your real competition is all the other activities kids can do.
How can you do this? By offering something more or something different than the competition does. I am preaching to the choir when I say that gymnastics is a base for nearly every sport. Can you SELL that in your area.
I had a parent signing up their daughter for class while their son stood there. I asked if their son was going to be taking classes. “no” she said, “he is playing soccer”. I went on to explain all the benefits of a one day a week boys class. How that was going to help him.
Research your competition and see what you can offer to entice their customers into becoming your customers.
(Providing better customer service is often touted as one of the easiest ways to outdistance the competition.)
5. Make the Most of Current Customers and Clients
We’ve all heard the old adage that a bird in the hand is worth two in the bush. The bird in the hand is your customer or client and he or she is an opportunity to make more sales without incurring the costs of finding a new customer.
Even better, he or she might be a loyal customer, giving you many more sales opportunities. If you want to recession-proof your gym, you can’t afford to ignore the potential profits of shifting your sales focus to include established customers.
6. Don’t Cut Back on Marketing
In lean times, many gyms make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your gym most needs marketing. PLUS- traditional media is also hurting and may be able to offer you a good deal.
Consumers are restless and looking to make changes in their buying decisions. You need to help them find your gym and choose YOU rather than others by getting your name out there. So don’t quit marketing. In fact, if possible, step up your marketing efforts.
7. Keep Personal Credit in Good Shape
Hard times make it harder to borrow and small business loans are often among the first to disappear. With good personal credit, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to.
To recession-proof your business, keep tabs on your personal credit rating as well as your business one and do what’s necessary to keep your credit ratings in good shape.
There’s absolutely nothing that will make your gym one hundred percent recession-proof. But implementing the practices above to recession-proof your business will help ensure your business survives tough times and might even be able to profit from them.