Yoga Entrepreneur Searches for Calm in Business Plan
Practicing yoga might be soothing for the soul, but running a yoga studio can be downright stressful. Christine Iannone is learning that lesson firsthand, four months after she acquired Brentwood Yoga.
“I’ve always been a risk taker so I’m jazzed to do this, but it’s not easy,” said Iannone, 34, who previously taught yoga privately and ran a much smaller yoga studio in West Los Angeles. “There’s a lot to think about.”
As a private teacher, Iannone could focus strictly on the physical and mental exercises and meditation practices that make up the yoga routine. As an entrepreneur, Iannone faces a whole new set of demands. Pressing concerns range from finding the capital to get her business rolling, to creating a strategy to attract more students and put a staff in place.
“Some yoga studios are opened by teachers who already have a very large following. I don’t have that yet,” Iannone conceded.
The issues confronting Iannone are typical of many new businesses, said Paul Ratoff, principal of Placentia-based Ratoff Consulting. “Sales are barely at the break-even point and cash flow is very tight,” he said. “But if she focuses, I think she has an excellent chance to reach her goals. There’s some risk, but that’s what being an entrepreneur is all about.”
After meeting with Iannone, Ratoff made some initial recommendations. She should jettison her smaller location to focus completely on Brentwood Yoga, which is much larger, better located and has greater potential for growth. Iannone had contemplated trying to run the two locations simultaneously.
“All your resources should be focused on your Brentwood location,” Ratoff told her. “This is where your future is.”
He also encouraged Iannone to secure a $10,000 line of credit to add to the $10,000 in personal savings she’s using as start-up money. Iannone acquired the business by agreeing to take over the studio’s lease payments and giving the previous owner a small percentage.
That arrangement allowed her to avoid a large initial capital outlay. But she still needs the funds to pay the eight independent contractors who teach classes, to spruce up the facility and to cover rent, advertising and other costs.
After making those initial recommendations--which Iannone followed--Ratoff encouraged her to take a look at the bigger picture surrounding her businesses. Rather than simply making a handful of suggestions, Ratoff plunged into a two-month business-planning process with Iannone.
Using a system known as “Chart Your Own Course,” Ratoff encouraged Iannone to examine her opportunities and challenges. By completing a series of written exercises and coaching sessions, Ratoff and Iannone aimed to map out Brentwood Yoga’s future.
The planning began with a phase requiring Iannone to strategize. Ratoff directed Iannone to identify and evaluate a series of strategic choices that would lead to a vision of the studio’s direction within three years. This phase pinpointed a series of Brentwood Yoga’s strengths, such as a good location, friendly customer service and a calming environment.
Against those attributes, Iannone also considered challenges, such as the likelihood of increased competition from other yoga studios as well as gyms, health clubs and even hospitals that offer yoga. With that information in mind, Ratoff directed Iannone to itemize ways that she could differentiate herself from the competition and develop a vision for her business.
Ideas that emerged ranged from broad themes--such as making her studio a “one-stop growth and fulfillment resource” by organizing nutrition workshops and special classes for groups such as skiers or entrepreneurs--to more specific marketing ideas. These included offering an initial complementary class to attract new students.
Next up was a “focus” phase, which required Iannone to develop a mission statement based on the vision her earlier brainstorming had produced. Iannone’s mission statement included goals to offer a broad range of courses using expert instructors in an inspiring and healing environment.
Armed with a mission, Iannone moved on to a goal-setting phase. Ratoff urged her to list a series of ambitious but realistic objectives she would like to achieve within three years.
The result was a series of goals that included growing sales to $700,000 annually--she is on a $75,000 annual pace--and generating a pretax profit margin of 25%. Currently, the business is barely breaking even.
In addition to the financial goals, Iannone listed ambitions such as increasing the expertise of her instructors, broadening her schedule of courses and designing a marketing plan that both attracts new students and helps retain existing ones.
With the three-year targets in place, Ratoff and Iannone moved on to the final stage of the planning process--setting goals the business should reach within the next year. Ratoff referred to these as SMART objectives, an acronym for specific, measurable, agreed-upon results that come with a tracking system. In other words, these are the bridges that will allow the company to reach its longer-term ambitions.
These goals included the following:
Set financial targets. For the next year, the revenue goal should be $200,000 and student enrollment should be 525, up from 150 now. “I need to raise awareness about this studio,” she said.
Ideas for achieving that include direct-mail advertising and making special offers through local gyms that don’t offer yoga programs.
She also intends to raise her studio’s profile by working with community groups by hosting fund-raisers. She has already used her facility for an event to support a breast cancer group and an organization that helps needy children. “Those are things I believe in and they fit in with the concept of trying to use the studio to build a community feeling here,” Iannone said.
Create a budget. Previously, Iannone had done little financial planning. Ratoff suggested she set some fiscal outlines so she will know whether she is on target. In addition to the $200,000 revenue goal, Ratoff suggested some more specific parameters. Teaching costs, for example, should not exceed 50% of the revenue each class generates. He also encouraged Iannone to limit her other operational expenses, including rent, utilities and other expenses, to $60,000.
The idea, Ratoff said, is to aim for a predetermined profit level rather than make the mistake of figuring that the profit will be whatever happens to be left over.
Track customer opinion. Student retention is a huge issue for Brentwood Yoga and will ultimately determine whether the facility succeeds or fails. Previously, Iannone had relied on informal or anecdotal feedback from students. Ratoff suggested a much more comprehensive approach.
“You need to do research and analysis in your business if you want to be able to make decisions with confidence,” Ratoff said.
With that in mind, Iannone is creating a survey she will send to each student who attends a complementary first class. She will gather student feedback about her instructors, her facility and other factors.
Broaden the course offerings. Ratoff urged Iannone to increase the number of weekly classes from about 30 to 40 in an effort to accommodate a wider range of student schedules.
He also urged her to organize a special class or workshop at least once per week. These could range from special classes to tie in with holidays, such as a New Year’s Eve yoga event, to one catering to a special audience, such as new entrepreneurs.
Finally, Ratoff urged Iannone to avoid the trap of working so hard on details such as dealing with paperwork, answering phones and scheduling classes that she leaves herself with little time for broader issues. “I guess it’s the difference between working in the business versus working on the business,” she said.
The planning process should be an ongoing exercise, Ratoff said. “Businesses need to consistently be setting goals, putting action plans in place and measuring their success,” he said. “This forces a structure that allows people to pursue their visions.”
Iannone said the planning process was extremely useful. “All the coaching and feedback was really valuable,” she said. “I know I have a big challenge here, but I’m optimistic. I think I can succeed if I put my mind to it.”
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This Week’s Company Make-Over
Name: Brentwood Yoga
Headquarters: Brentwood
Type of business: Yoga studio
Status: Limited liability company
Owner: Christine Iannone
Purchased: August
Financing: $20,000 from savings and line of credit
2000 sales: $75,000
Employees: Eight independent contractors as instructors
Students: 150
Main Business Problem
Looking for ways to increase the number of students.
Recommendations
Concentrate on a single location.
Borrow money to even out cash flow.
Develop a comprehensive vision and game plan for the studio.
Collaborate with local businesses to attract students.
Create a survey to track customer satisfaction.
Meet the Consultant
Paul Ratoff is a certified management consultant and the founder of Placentia-based Ratoff Consulting. Ratoff has 25 years’ experience as a business consultant and specializes in comprehensive business planning.
