Cash Flow Management for Yoga Studios: A Practical Guide to Sustainable Growth

By Dennis Bluthardt, Namaste Studios®

Every breath in yoga is essential, and your yoga studio requires the same “breath” to find balance. Can you guess what it is? Cash is the “lifeblood” of your studio. Yoga, a studio business, without cash, loses its vitality to survive. Every dollar flowing in and out represents the breath of the company, to be taken in and pushed out with clear intent. This cycle of impending payments (AKA “expiration dates”) creates a “natural” cadence and rhythm to the monthly operations and business schedule.

Cash Flow Challenge #1: Seasonal Ups & Downs (Quarterly/ Biannually)

The “off-seasons” of the summer months and the “holiday season” would result in a downturn for some studios. In more extreme cases, this would result in a shortfall or slowdown in regular cash flow. To continue growing, it requires consistently channeling more funds towards promotional activities. While retaining monthly deposits, this also becomes an opportunity to host workshops or significant annual events.

Cash Flow Challenge #2: Membership Sales Ups & Downs

Every yoga studio would face a different level of student renewal rates, with an unclear view of future inflow of cash.

Cash Flow Challenge #3: Teacher Yin-Yang

Happy teachers draw in or retain more students. They would, however, inevitably seek “equal” treatment or “better” payment.

Why Cash Flow Matters

The money that flows in and out of a yoga studio, from income to expenses, is your “Cash Flow. “It encompasses all the financial transactions of a studio for a specified period, as reflected in your profit and loss statement.”

Cash flow is not profit. You can be “profitable” according to your profit and loss statement, but be “negative” in terms of cash flow. When it comes to cash flow, it is always better to have a positive balance than a negative one. A positive cash flow occurs when there’s more cash coming in than going out. Negative cash flow occurs when your cash inflow is less than your cash outflow. Cash flow gauges the “inflow” and “outflow” of funds (money coming in and going out). Maintaining a positive cash flow requires constant management. Hence the statement above.

Cash Flow Challenges Yoga Studios Face

Companies that experience seasonal fluctuations in their earnings, known as irregular revenue cycles, face a significant challenge.

For example:

• Educational institutions or indoor gyms would experience a surge in new enrollments during specific periods of the year (like the start of a new school term or when summer starts).

• However, when it’s not peak season, your revenue can plummet from hero to zero.

When your business has uneven revenue cycles, cash flow can be a challenge. It takes thoughtful and careful planning to cover your company’s many expenses during both up and down times. 

When it comes to the company’s expenses, the operating costs of businesses of this type are sky high. Let’s examine the overhead expenses listed below.

• High rent
• High teacher or staff pay
• High software subscription cost
• High student acquisition cost for advertising and marketing

You’ve got to figure out:

• How to bring the cost of acquiring a new student down
• How can the cost of wages be lowered? Is it even legal to reduce it further?
• How to bring the cost of advertising and software license down

To boost overall company profitability, review your expenses. You’ve got to find ways to outsmart your competition! Discount pricing = low perceived value. Discounting is killing. Other challenges include obtaining insurance, as you have no cash reserves to handle unexpected pivots.

Step-by-Step Guide to Managing Yoga Studio Cash Flow

A business can be made or broken by cash flow. Accurate cash flow projections are a crucial part of determining how to create a financially sustainable business. A month-by-month inflow/outflow forecast will reveal cash surplus and shortfall. This can be used to make informed spending choices and find creative ways to generate income more quickly. Tiered membership or packages are a great way to create a sustainable income for a business. 

Offering options for different budgets and needs will tap into a larger client base. Tiered membership also prevents clients from canceling packages that are outside their budget and opens the door to a process-based upsell strategy session. These smaller planned sums of income can help everyone bridge the gap to the next client.

An online business owner can also utilize tools for automation when it comes to business finance (e.g. $5,000 in six months = 30 clients vs. an average online course selling at $150 = 34 sales per month = one sale per day). It will also protect the goddess who hates worrying about collecting payments and chasing invoices. Financial freedom is about taking steps to establish a balanced wealth system, where she sets mini long-term goals instead of succumbing to a paycheck-to-paycheck mentality. A business owner should find great beauty in chasing her dreams and exploring different avenues to reach her definition of success, rather than what worked for another person.

Savings are attractive and sexy, but purchasing unnecessary things is not. Known to many, online business owners often experience fluctuating cash flow, with money coming and going in spikes. Plan out which months she would like to allocate for paying for membership subscriptions, website theme upgrades, software, vacations, and a new car. Pay herself first. That new HD Canon camera can be bought for less during Black Friday. This new moon in this sign is a good time to save for business or invest in a new healing art or modality. Harness the power of the season to schedule these accordingly. Just imagining a life where everyone knows how to visualize dreams, find passion through darkness, learn to love themselves in more profound ways, be kind yet determined, and persevere in a healthy manner, floods the market with so many beautiful and soulful businesses. 

Best Practices & Pro Tips

It’s essential to have at least a three-month cash buffer to cover all your basic business needs. 

Everyone faces off-times in their business, and doing so will allow you to always show up without stressing out about making money. Once you hit this goal, it’ll be time to scale, build, and put a plan in place for long-term survival. This is where a lot of those lessons you might’ve heard about getting out of survival mode and shifting into being a thriving business owner are going to come into play.

For those looking to cover spots during off-peak times, you can also run promotions during downtime, as I suggested in the third example. Use this as an opportunity to get creative and do whatever you have to do (ethically) to get clients in the door to keep your business afloat. I’ve done this for years, even when I was making a great deal of money, just because it always allowed my hot streaks to get even hotter.

I went ahead and tied these two together (they’re self-explanatory), even though they work in entirely different ways, due to their direct relationship with a freedom-based, boutique fitness business. It’s always essential to monitor who comes and goes from your company. Understand your churn rate and the trends you observe in your finances and client base. And community. 

This will help you feel as though you’re growing and moving forward, and in the process, create an abandonment-free model.

Recommended Tools for Cash Flow Visibility

Software solutions like QuickBooks and Wave have created a new paradigm for financial management for small businesses, including yoga studios. Using these (typically) very user-friendly dashboards, studio owners can see in real-time their income, expenses, and general financial health. Plus, because these tools can automate many bookkeeping tasks, studio owners can spend more time on their mat or growing their community, rather than inputting receipt data.

Additionally, there are a few wellness-specific platforms, like Mindbody and Momence, that have adopted similar dashboard displays. However, rather than just reporting on financial insights, these platforms aim to be an all-in-one solution for managing studio scheduling, marketing, and finance, a “jack of all trades” for yoga studios, if you will. Overall, these platforms aim to provide a comprehensive view of your studio’s activity. You could see briefly what classes were happening that day, where you stood with membership, or track your growth, or that you needed to send Jenny a “Happy Birthday” e-card, all within five steps of logging in.

Admittedly, I don’t think most studio owners get more than an hour of “admin” time in their day, but I think it’s a nice idea. So, perhaps most users of these two platforms would be using the dashboard display as a map, a way to quickly see all the fires they need to put out before (wait—the dashboard is on fire!).

However, all in all, I must say that I appreciate a good overview dashboard. These displays soothe my business-puzzle-solving itch. And hey, if I’m going to be working late (or working at all), I think I’ve earned a little enjoyment (and the ability to write this blog off, am I right?).

Case Study Snippet or Example

In just 90 days (just in time for the barrage of holiday bills…), one small yoga studio in California went from scraping pennies to pay back bills to scaling their business, turning what was once a cash deficit into a sustainable surplus. It compelled them to reassess their approach to their business. Instead of racking up debt, they reduced their operational costs. As a result, the company streamlined its offerings, enabling it to reduce personnel expenses and increase its overall client impact.

One of their secrets? They introduced rules of behavior for their local community. The motivation was to break down barriers to purchase. It worked. One small step led to another, which led to the introduction of new students and local community-driven events. They ran promotions that effectively altered the local community’s perception. For instance, they offered free online community classes using a simple, free social media tool that received support from local businesses. From there, they provided another low-cost, low-barrier-to-entry event, which, due to a slight uptick in local community participation, gained a bit more excitement. This drives new business. Just a few new business drives into a studio over a short period, compounded over one season, will bring a profitable conversion…you are meeting new potential clients, which causes, you guessed it, gains of new students!

Knowing that, the local customer base, which was already somewhat active, showcased their community-driven classes. They found new customers through their customer programming and then used that to program their customers’ events, which they subsequently turned into their programs. They gave incentives ranging from workouts to yoga training, sales programs to help run the yoga studio business operations (as an example). It generated community interest by offering free and discounted classes, as well as community-focused collaborations with other yoga teachers within the same studio. Makes sense, right?! Promote your studio as you wish, but if you are running out of work to do, consider changing just one operation in your process. The results will save you money…which is sure to keep your student debt at an absolute minimum!

In the world of yoga studios, cash flow is king; it’s the lifeblood of sustainability and growth, as knowing exactly where all the money goes and how much should be coming in is crucial. 

Membership fees, class revenues, and all expenses, such as the cost of space, electricity for heating those hot yoga classes, and salaries, all need to be tallied up. Hence, they equip savvy owners with the information they need to spot threats and opportunities. This could be the threat of a downward trend in attendance or the marketing opportunity that a seasonal flow triggers (if you know where to look, of course!).

Once the picture of cash flow becomes reasonably clear, many owners will want to take that knowledge a step further and, gasp, create a budget. In addition to numerous forgotten-about subscription services that we’ve been guilty of (yes, we’ve been guilty of this one!), we may also find cost- and grease-filled areas of an operational process that we’ve long outgrown. Weight loss in the form of spending is so cathartic.

However, remember that even if opening some budget space becomes a reality, and someone on your team is willing to pitch in with AR, it’s not too late to book a consultation (TG for small miracles!). We genuinely don’t mind giving some free advice, because let’s face it, we’ve all been there before. Who knows… they might teach you that new balancing trick you’ve been trying to do!

Reader Exclusives

Click here to register your wellness business on the Namaste Network™ for free!

Interested in help from one of our studio consultants at Namaste Studios®

Click here to see our Studio Consulting Services

Exclusive A.I. Training Demonstration by BotBuilders – Register for Free

$500 Coupon off when you sign up for Wellness Living (Promo Code: namastestudios)