CFP Business & Financial Management Flashcards

A personal trainer setting up an independent fitness business should primarily use which business structure to limit personal liability?

Answer: Limited Liability Company (LLC)

An LLC separates personal assets from business liabilities, protecting the trainer from lawsuits arising from client injuries.

Which financial document gives a certified fitness professional the best snapshot of monthly profitability?

Answer: Income statement (Profit & Loss)

The income statement (P&L) shows revenues minus expenses over a period, directly revealing whether the business is profitable.

A CFP wants to price sessions to cover costs and achieve a 30% profit margin. If total monthly costs are $3,000 and they plan 100 sessions per month, what is the minimum price per session?

Answer: $43

Cost per session is $30; adding a 30% margin means dividing $30 by 0.70, yielding approximately $42.86 (~$43).

Which type of insurance is MOST important for a self-employed certified fitness professional to carry?

Answer: Professional liability (E&O) insurance

Professional liability insurance protects the trainer against claims of negligence or injury resulting from their professional services.

A fitness professional tracks that 20% of clients leave within the first 3 months. Which metric best describes this problem?

Answer: Client retention rate / churn rate

Churn rate (inverse of retention rate) measures the percentage of clients who discontinue services within a given period.

What is the primary purpose of a client service agreement (contract) in a personal training business?

Answer: To define the scope of services, payment terms, and liability waivers

A client service agreement legally documents expectations, payment obligations, cancellation policies, and risk acknowledgment, protecting both parties.