Gyms find streamlining expenses and negotiating with parents key to success in a tough economy.
By Jacqueline Durett - Photos and Article courtesy of CBN June/July 2009
The rule of any business—including a cheerleading business—is to have more revenue coming in than going out. But in this economic climate, that's far easier said than done. And this fact has forced many cheer gym owners to reevaluate their businesses.
Estee Martin, who has owned Majestic All-Star Cheer Gym in Watsonville, CA, for almost five years, says that she's definitely feeling the pressure of the economy. "We have a lot of parents who are struggling out there," Martin says, adding that parents' challenges then become her challenges as a business owner. With a gym located in one of the states hit hardest by the recession, Martin is on the front lines of the cost-cutting war. However, she says the gym is her passion, and money is just a necessary evil to keep it going. "If I went into this for the money," she says, "I'd need to get out."
In fact, Martin says she would rather take a part-time job to keep Majestic going than take a harder line with parents. "I'd rather take the pay cut myself." Martin says that as long as she's able to meet her monthly rent, she'll be as flexible as possible with parents. In fact, Martin says she's only raised rates when her landlord has raised her rent, and she recently renegotiated with him. "He lowered it $400 a month to help me," she says, explaining that she goes the extra mile to keep the building maintained and has a good relationship with her landlord. "Good returns good. It's just the way it is."
While Martin has only herself to rely on, Sarah Schneider has the backing of a larger company, Premier Athletics, to reduce the stress of expenses. "Everything we do, we try to do company-wide," says Schneider, general manager of Premier's Cincinnati and Northern Kentucky business.
That doesn't mean her business is immune to the challenges of the economy, however. "We're really struggling to make it affordable," she says, adding that she hopes not to have to raise prices next year. "We don't want to see our numbers decrease."
Keeping Costs Down
So how can gym owners try to keep costs down for themselves and for their students? Linda Roscoe, owner of Suncoast Allstar Cheerleading in Oldsmar, FL, has a couple of ideas. She says she knows the value of a dollar—and she's used that knowledge to keep money coming in to her gym. "I'm a penny pincher to begin with," Roscoe says.
That thrifty mentality means Roscoe doesn't purchase equipment and materials for Suncoast until she has the cash to pay for it. "You should never buy something that you have to borrow money for," she says, adding that since the gym is not her sole source of income (her husband's income takes care of personal expenses), it does lessen the stress of making ends meet. "I've been very fortunate," she says.
Roscoe says using volunteer coaches is one way she keeps expenses down. "I don't have a large staff," she says. That cost savings is something she tries to pass on to parents, adding that with age—she's been a coach for 30 years—comes serenity. "I try to stay relaxed," she says, adding that she doesn't mandate where cheerleaders get their shoes from and doesn't require them to get to a competition the night before, adding on the expense of an extra hotel night. "Until someone screws me, [then] I might change my mind [about those things]," she says.
Whereas Roscoe has relied on her good sense, Rey Lozano focuses on having little overhead and a diverse range of services. As owner of the Long Beach, CA-based U.S. Spiritleaders, which offers cheer and dance camps and choreography services, Lozano says he's been able to quickly adapt to changing patterns in the cheer world. "While all-stars have slowed down, other teams have increased," he says, explaining his school teams and dance teams have grown—so much so that his summer camp has sold out.
Lozano says that he knew he was going to have to meet changing demands in order to run his business—a lesson he learned by simply paying attention. "I watch the news," he says. "We've been very smart. We saw what was happening, and we haven't had to lower our prices at all."
Though Lozano doesn't run a typical gym, he says gym owners would be smart to follow his model. "Embrace training [your other] students," he says of those who aren't in all-star programs, adding that the demand is now in those segments.
For gym owners who can't cut costs but are struggling to pay the bills, he also suggests using the gym for non-cheer purposes in the mornings and during off hours. Some of his suggestions include "Mommy and Me" and martial arts programs.
In addition, Lozano has no fear of putting price above a relationship with a venue, if it means a better outcome for program participants. In fact, he said he recently went to two of the arenas he normally works with an asked them to lower their prices. They didn't—and he walked.
Getting Creative
For most gym owners, keeping their cheerleaders in the program is paramount. But in order to do that, some have to find creative ways to work with parents who are struggling to pay.
Unfortunately, when a parent—or both parents—faces a layoff, children's activities such as cheerleading are on the list when considering cutbacks. But Martin, who has seen parents at her gym deal with tough economic situations, says that she's more than willing to work with parents who can't meet the monthly costs. In fact, some families pay her just $10 a month (instead of $95 to $300) to keep their child in the program. "I don't care if you have to pay me $2.50 a week. I don't allow any kid to walk out because of finances," she says.
For Schneider, having a corporate setup doesn't mean she isn't sensitive to parents' finances. In fact, in one case, a father was able to keep his daughters in the program because the gym agreed to use his printing services. "He said, 'If you give me all your [printing] jobs, I can keep my daughters in,'" she says. "I had no idea that he owned his own printing company." As it turns out, Schneider says, the father's company was handling jobs from the large office supply companies—so in effect, the gym was also cutting out the middleman, a benefit for the facility as well. "So in fact, it [was] cheaper to go to him," Schneider says.
Schneider's gym also has one family who cleans the downstairs gym in exchange for coaching services. "That has been such a blessing," she says of the cost savings for her business.
Another Approach
For those gym owners who are seeing a lot of red on their balance sheets, it might be time to start calling their competitors—not to sell, but to merge. Combining gyms is something that, depending on the proximity of other gyms, can be an option. That's what Pacific Coast Cheer in Murrieta, CA, did with Magic All Stars in Laguna Hills, CA, in mid-March. The move, says Sean Evans, head coach of PCC's Level 5 team, was a proactive approach that benefited both gyms in terms of finances and competitiveness. "Neither gym was struggling financially," Evans says, but retention was starting to become an issue, so merging seemed like the right idea. "We've seen a lot of programs in the area shut down," he says. "We decided to do something about [our retention]. We want the kids to stay here." Now both gyms, which are located about an hour apart, will combine their Level 5 teams, making for a more formidable competitor at events.
PCC and Magic All Stars, Evans says, always had a good relationship, and parents and cheerleaders took news of the merger well. "Overall, they've been excited," he says, adding that only the Level 5 teams will be required to travel between the gyms. Evans says both gyms will work hard to keep costs in check and work with parents as needed. "If parents are willing to make an effort, we try to do the same," he says.
Making Businesses Make Dollars—and Sense
Running a small business is no small undertaking. And in the current economic climate, it's more challenging now than it has been in recent history. Nader Nemati, a volunteer with SCORE in Orange County, CA, has outlined some warning signs that your business is heading in the wrong direction:
- You can't pay the monthly bills.
- There are no profits at the end of the month.
- Inventory (your time as a coach doing non-coaching activities) is increasing.
- Customers' financial patterns are changing.
If you're experiencing any of these signs, "you've got to stop the bleeding," Nemati says. That can come in the form of borrowing or bringing in investors. For those who choose the former, President Obama's recent stimulus program has provided for $730 million to go toward small business loans, Nemati says. Microloans are another possibility—business owners can get up to $35,000 pretty quickly. "But it still has to be a viable business," he says, adding this can pose somewhat of a Catch-22. Loans are best for helping a short-term problem, he says, not a sinking ship. And having two years of successful financial history is a good sign for lenders.
Credit cards, meanwhile, are good for short-term cash-flow issues only. "If it's a matter of using the credit card to pay the cable bill [every month]," says Nemati, that's a bad sign.
So does an owner address his or her creditors or customers first? "I don't think [business owners] have the luxury of [choosing] one or the other," Nemati says. As such, he has plenty of ideas for addressing both.
Creditors
- When you can, pay your bills early and reap the rewards. "If you're going to pay early, make sure you get a discount," he says.
- Be proactive. Letting creditors know that you're having financial problems gives them time to work with you.
- Negotiate. Nemati points out that landlords and lenders know that many lessees and mortgage-holders are struggling.
- Consider loans, microloans or short-term credit card usage.
Customers
- Negotiate, but don't work for free. "Don't continue to do the service if you're not getting paid," Nemati says.
- Keep the customers you have, and see who you can get back. Nemati says to ask yourself, "What can I try to do [to get] repeat business?"
- Evaluate your services. "Terminate [offerings that aren't doing well] if others are doing better," he says.
And if a short-term cash-flow problem becomes a long-term one? Consider selling the business. "It's unfortunate, but it's a reality," he says. But that's not the optimal solution, he cautions, and emphasizes that SCORE volunteers are located all over the country and are happy to help small-business owners with their concerns and questions. "We don't want to discourage small businesses," Nemati says. In fact, this is the time to succeed while competitors are struggling. "It's a perfect time to gain new customers."
For information about SCORE, visit score.org.
