Once you have an idea of what you’ll pay upfront for your new sports facility’s site and equipment, the last piece of the puzzle to finding your total upfront investment is your “operating cash.” That’s the money you need for the day-to-day expenses that keep your doors open and your business running smoothly.
Calculating your operating cash isn’t as exciting as planning your dream facility, picking out your logo, or choosing your new state-of-the-art equipment. But even though it sounds boring, it’s your lifeblood. Operating cash shortages are the primary reason new sports facilities shut down.
So, let’s get it right.
Multiplying Monthly Expenses
In the financial section of your business plan, you added up your estimated monthly expenses and adjusted them if they were high compared to your projected income.
Now, take that monthly expenses total (including the costs for marketing, staff, equipment, infrastructure and more) and multiply it by 9. That’s how much operating cash you need to get started.
That’s a lot of money, right? Maybe more than you were expecting. You’re probably wondering if you really need the cash for 9 full months upfront. Let me try to convince you.
Riding Out the Peaks and Valleys
In the sports world, you know that your business opportunities will change a lot with each season. Sure, you want to market hard to keep your revenue as steady as possible throughout the year, but you’ll naturally have some busier and slower times.
For example, my sports center focuses on speed and agility training, is located in Ohio, and is popular with baseball players. My busy season is in the winter (because no one wants to train outside), and my slow season is in the fall (because most of the athletes are busy in-season). If your business is like mine, you should have enough cash to get you completely through the slow season to your next busy season. Most new businesses have a slow first year.
If you expect your peak seasons come more often in the year, or if you’re in a warmer climate and expect a steadier flow of business, you may need less than 9 months of operating cash to get you through to your next peak season … but I wouldn’t suggest anything less than 6 months.
Be Ready for the First Year
You’re making a big commitment to this business. After all the energy it will take to secure a space, equipment, a staff, and the million other details that go into opening a sports facility, you’d be crazy to hurt its chances of success by skimping on your operating cash.
With nine full months of cash available, you can be more confident and persistent. You’ll be more likely to overcome the obstacles you’re sure to face that first year.
So, have you calculated your operating costs? Have you figured out how much you need to start your new facility and how you’re going to pay for it? Leave a comment below or email me and let me know.