Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for

One of the major challenges that many studios face is dealing with finances. This doesn’t necessarily mean just paying the bills, but knowing exactly how much money you made each month. Not just that you have money in the bank, but knowing what your expenses were and how much profit you made.

Perhaps you do this already, using QuickBooks (or something like it), and every transaction is entered, categorized and reconciled. At the end of the month you generate a profit and loss statement and examine your expenses and revenue to determine where you made money and where you lost money.

If you don’t do this, you might wonder, “Why should I care, as long as I’m making money?” Good question.

The goal is to determine where you really make money, and where you don’t. Then, do more of whatever you do that makes money, as well as change or eliminate the things that don’t make money.

For example, do you know exactly how much you made from classes this month as opposed to last month? Maybe you’ve done some advertising – these numbers will tell you if it was worth it or not.

For example, suppose you find that for the past 6 months, you average of $5,000 from selling memberships per month, after paying instructors. Then, one month you spend $1,000 to do some radio advertising. At the end of this month, you again look at your profit and loss statement and see that you made $7,500. You made an extra $2,500, but the advertising cost $1,000, so in reality, your increase in profit from radio advertising was only $1,500. This tells you that it is worthwhile to use radio ads.

On the other hand, lets say you only made $5,800 on memberships that month. On the surface it appears you made and extra $800, but after taking into account that you spent an extra $1,000 on the radio ad, you really made $200 less than you had previously averaged.

Your conclusion would be that this type of radio advertising was not a good way to make more money. Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for

and examine your expenses and revenue to determine where you made money and where you lost money.

If you don’t do this, you might wonder, “Why should I care, as long as I’m making money?” Good question.

The goal is to determine where you really make money, and where you don’t. Then, do more of whatever you do that makes money, as well as change or eliminate the things that don’t make money.

For example, do you know exactly how much you made from classes this month as opposed to last month? Maybe you’ve done some advertising – these numbers will tell you if it was worth it or not.

For example, suppose you find that for the past 6 months, you average of $5,000 from selling memberships per month, after paying instructors. Then, one month you spend $1,000 to do some radio advertising. At the end of this month, you again look at your profit and loss statement and see that you made $7,500. You made an extra $2,500, but the advertising cost $1,000, so in reality, your increase in profit from radio advertising was only $1,500. This tells you that it is worthwhile to use radio ads.

On the other hand, lets say you only made $5,800 on memberships that month. On the surface it appears you made and extra $800, but after taking into account that you spent an extra $1,000 on the radio ad, you really made $200 less than you had previously averaged.

Your conclusion would be that this type of radio advertising was not a good way to make more money. Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for

to last month? Maybe you’ve done some advertising – these numbers will tell you if it was worth it or not.

For example, suppose you find that for the past 6 months, you average of $5,000 from selling memberships per month, after paying instructors. Then, one month you spend $1,000 to do some radio advertising. At the end of this month, you again look at your profit and loss statement and see that you made $7,500. You made an extra $2,500, but the advertising cost $1,000, so in reality, your increase in profit from radio advertising was only $1,500. This tells you that it is worthwhile to use radio ads.

On the other hand, lets say you only made $5,800 on memberships that month. On the surface it appears you made and extra $800, but after taking into account that you spent an extra $1,000 on the radio ad, you really made $200 less than you had previously averaged.

Your conclusion would be that this type of radio advertising was not a good way to make more money. Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for

your increase in profit from radio advertising was only $1,500. This tells you that it is worthwhile to use radio ads.

On the other hand, lets say you only made $5,800 on memberships that month. On the surface it appears you made and extra $800, but after taking into account that you spent an extra $1,000 on the radio ad, you really made $200 less than you had previously averaged.

Your conclusion would be that this type of radio advertising was not a good way to make more money. Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for

Yes, you did get more students from the radio ad, but not enough to offset the cost of the ad.

Think of it like a runner timing herself each time she practices the 100-yard dash. The stopwatch will tell her exactly how she did today compared to yesterday or last week. Maybe she’s trying to decide if eating before running makes her faster, slower or has no effect. Without the stopwatch, she could feel like she was faster or slower, but not really know for sure.

The same is true for business. When we don’t accurately measure profits and expenses, we end up like the runner who says “Boy, I felt fast today!” Sure, you probably have a good intuitive sense of how the studio is doing. And knowing the exact numbers will allow you to take your studio to a new level.

Doing this kind of analysis of profits can help you earn more and stress less. So often a studio will try the “Advertising strategy of the month,” randomly trying things to bring in more business, but never really knowing if they earned more money from it.

As you get more experienced with doing this (it’s actually not hard once you get used to it), you’ll be able to focus on those things that make money, and change or eliminate those that don’t. And remember, as the one who is in charge of running the studio, no one cares more about the bottom line than you do.

I work with many people on this very idea: How to figure out where you are making money and losing money so that you can make your studio more profitable. If you have a questions you would like me to address about this, please email me at coach@CenteredBusiness.com, and I will try to address it in a future newsletter.