Case study: from losses and a cash gap to RUB 750K+ monthly operating profit, with revenue up from RUB 1.5M to RUB 3M+, at a chain of boxing studios
The original of this case study is in Russian: victorwr1ght.ru/p/case-box/. This translation was made with AI and has not been proofread.
I'll show how the owner of the Good Balance studio network and I took the business step by step from losses and a cash gap to profit.
The investment in our work together paid for itself 8 times over in the very first month.
Contents:
2. Strategic development track: what stages take us to multifold growth?
3. Tactical development track: what are we doing right now? (already done)
3.7. Launching a sales sprint (result: RUB 2.65M in revenue, RUB 500K+ in operating profit)
3.8. Continuing to grow revenue and profit through systematic business development (result: RUB 3M+ in revenue, RUB 750K+ in operating profit)
Testimonial
Video testimonial after the development plan was drawn up and inefficient costs were optimised: https://t.me/businesslikesport/204
Video testimonial after the investment was raised: https://t.me/businesslikesport/234
1. Background and problem
What we had
Good Balance, a network of boxing studios, operating since 2018.
What Good Balance boxing studios look like inside
Owner: Dmitry Mogilev
- Two black belts: in kudo and in taekwondo
- Trained 10 Ural Federal District champions and 2 Russian national champions in kudo
- Coached a contender for the world professional boxing title
- Led a boxer to victory in a professional bout in America
With his experience and deep understanding of the product, Dmitry is a model owner of martial arts studios
At the audit stage, we identified
- a high-quality product (NPS = 87%)
- no financial management
- losses of about RUB 0.5M per month, a cash gap of RUB 1M+, and a need for financial resources to relaunch marketing, then rebuild the business model and scale
- team issues: lack of alignment and communication, a need to fill out the team, a feeling of “I'm fighting for the business goals on my own”
- the owner's low energy amid a shortage of resources and no plan for reaching the goals
- no corporate culture, and a need to refresh the ideas the business is built on: mission, values, long-term goals
and analysed hypotheses about the mistakes that had led to the losses.
2. Strategic development track
The first task in any project is to determine its current stage of development on the strategic track and its target stage. That way we understand where we are coming from and where we are heading over the next few months, and can choose the right tools for it.
Losses alone don't tell us anything definitive. Each stage can have its own causes.
Here are the questions worth asking when a business is losing money:
Does the business model fit the market, or do we need to “close / relaunch” the project?
Is the need we meet still relevant in the market?
We look at the market:
1. Have there been significant changes in the market in the last 1-2 years? Have breakthrough technologies or competitors entered this market that could have destroyed our business model?
2. How are competitors doing in this and adjacent niches, serving this need?
Our answers:
1. There were no significant changes in the market
2. Competitors are still operating
OK, the need and the model for meeting it are both relevant.
Given the project's long history, including its past profitability, and the mistakes already identified, to our fundamental question
Does the business model fit the market and the other inputs? Can it generate the profit we need to move to the next stage of development?
our answer is:
Yes, the model very likely fits and can generate the target profit for moving to the next stage. Mistakes were made that led to the losses.
At the strategic level, we decided to work in 3 stages:
- Return the current model to normal profitability.
- Rebuild the business model to increase efficiency.
- Scale the updated business model.
3. Tactical development track
The first stage, “Return the current model to normal profitability”, included 7 tasks, which we completed successfully in 4 months:
3.1. Optimising inefficient costs
3.2. Getting the finances in order
3.3. Analysing mistakes, drawing up a development plan and raising investment
3.4. Refreshing the ideas behind the project's long-term development
3.5. Filling out the team and restructuring how we work with it
3.6. Relaunching marketing
3.7. Launching a sales sprint
3.1. Optimising inefficient costs
What looks to an entrepreneur like “just another expense” — to me, with
- experience in executive roles (managing cost efficiency on RUB 10M+ payroll budgets for my team and RUB 100M budgets for other cost lines, and many cost optimisations)
- experience of a cash gap in my own project in 2019
... some expenses look like
well, aren't we big spenders, paying that much for this 🙂
What exactly did we optimise?
1. To be efficient, a team member's payroll cost should pay back ~8-10 times in revenue. A small business should outsource some roles and cannot afford to hire for them full-time. These are usually service functions such as HR, finance and the like.
2. Product margin. Analysis showed that some group sessions were in fact being run with 1-2 clients. At group prices. On top of that, the coaches' pay formula made it impossible to reach target profitability.
3. Sales staff incentives were not aligned with the interests of the business. We fixed that.
In total, over a couple of weeks of analysis and implementing changes, we optimised more than RUB 400K of monthly costs.
3.2. Getting the finances in order
The owner was not closely involved in the finances.
We cut the finance officer role (it was not effective for the business) and introduced a simple accounting form that gave us a transparent view of
- income by product
- costs by line item
and set up a regular process between the accountant and the managers for entering data and reviewing results monthly with the owner, making decisions to improve efficiency.
3.3. Working on mistakes, drawing up a development plan and raising investment
Important: we do not raise investment to cover cash gaps. That is a road to nowhere: if all we want is to plug a hole with money, a new one will appear.
To raise investment, we need to:
- analyse the mistakes and be confident that we will quickly return to profitability
- outline a preliminary plan for further growth/scaling of the project
After that, we put together two documents:
1. An investor presentation
2. A financial model of the project for the next 3 years
Within a month of starting the preparation, we had the funds in our account.
Spoiler: in August 2024 we beat the profit plans we had presented to the investor!
3.4. Refreshing the ideas behind the project's long-term development
If you yourself don't understand why we're doing all this, the team doesn't understand it either. When there's no sense of purpose, the energy is at the level of “we just work and try to make money”. Once we refreshed our sense of purpose, the energy came back and the team got involved too. That purpose became the foundation of our corporate culture: how we communicate and build relationships within the team, how we communicate with clients. Decisions are made based on values. (c) Dmitry Mogilev
It matters that purpose is more than nice words. Culture is created through actions that match the chosen mission and values. You have to be ready to make key decisions based on them. It is an exploratory, creative process.
We refreshed the mission
Mission of the Good Balance boxing studio network
We refreshed the values
Values of the Good Balance boxing studio network
Pictures are all very well, but the key result is the owner's energy level and his readiness to convey this purpose to the team with energy and move the business forward. Speaking of the team...
3.5. Filling out the team and restructuring how it works
Here is how the owner describes the situation before we started working together
I was distant from the team. It was important to restore the connection.
There was no working atmosphere
It was important to show how we communicate with clients and what matters to me in the team.
I was fighting for profit alone
The key focus on my side: openness with the team and working at the level of purpose. We show the problems and move towards results together.
We also audited how the team worked and adjusted based on the findings.
How the owner describes the teamwork now
Team members understood their value, got more deeply involved and began to understand the essence of the business. They realised that sales matter for what we do. They started asking on their own how much we need to earn to make a profit; they became more careful with money and try to earn first before paying for anything extra.
3.6. Relaunching marketing
The funds raised were reinvested in
- redesigning the sales website
- setting up Yandex Direct
- replacing the contractors for VK targeted ads and SMM, and improving content quality
We also started
- working with bloggers
- running partner promotions with other projects that share a similar target audience
As a result, we
- became ambassadors of the global boxing apparel and equipment brand BOXRAW
- grew from 20 to 140 leads in the first month after the marketing relaunch, at the standard cost per lead
3.7. Launching a sales sprint
In the end, money comes from sales)
What was done?
1. Customer segments for sales were defined.
2. Offers and scripts were developed (including objection handling, follow-up on clients who don't respond, and communication scenarios)
3. An upbeat atmosphere was created in the team, fully focused on sales: a daily kick-off, game mechanics, the atmosphere in the chats with the salespeople.
Clients like being sold to well :)
So in the last 5 days of August, sales came to RUB 1.456M, and the network reached its target profit.
As a result, operating profit = RUB 500K+ for the month. The plans from the investor presentation were exceeded.
A clear understanding of where to grow next, lots of energy🔥
3.8. Continuing to grow revenue and profit through systematic business development
Over another 3 months (September–November 2024) we grew
from RUB 2.65M in revenue and RUB 500K in operating profit
to RUB 3M+ in revenue and RUB 750K+ in operating profit
through systematic management and daily effort on developing marketing.
Revenue growth chart
