Business plan: Smart Ladies Fitness Center and Health Club
Learning Outcomes
- Build a business plan by designing a strategic plan, conduct a feasibility analysis, understand franchising and how to buy an existing business
- Develop a marketing plan and how to use e-commerce, create a successful financial plan.
Task:
You are required to write a business plan which will provide direction and increase the probability for success of a business idea within the today contemporary and very competitive market.
Solution
Business plan: Smart Ladies Fitness Center and Health Club
Executive Summary/company overview
Smart Ladies Fitness Center and Health Club is a women’s only fitness club that creates a personalized and friendly environment that enables women to pursue their health and fitness goals. We have the best equipment, training program, weight management program and lifestyle systems that are responsible, effective, in confidence and unbeatable. Our focus is the urban professional women who is very active but with little time to spend on fitness as well as young mothers that are interested in a fitness environment that meets their unique needs.
Located at the Burnwood area near Melbourne city, the vision of this start up is to be the preferred fitness and health club in the region. To achieve its vision, the business intends to a) create a woman-focused fitness environment that promotes confidence in our clients’ b) promote and advance the success of our clients in their bid to meet their health and fitness goals and c) celebrate their success while encouraging them to set new and more ambitious fitness goals.
Description of Business, Product and market dynamics
The health and fitness sector, just like any other business is affected by environmental factors. Political factors affecting this sector include policies related to minimum wage, and tax rates such as VAT and corporation tax rates (Jacksack, Susan, 1998). Economic factors affecting this business include inflation, interest rates on loans, income levels and disposable income. It’s important to note that this fitness center will be located in an up market area with a upper middle class population, who are mobile, health and fitness conscious. Social factors to consider in setting up this enterprise include age and trends (Gupta, 2013). This area is characterized by a young to mid age population, that is trendy, sensitive and conscious about their lifestyles, health and fitness status. This will form the bulk of our target clients and they inform the types of services offered at the health facility. Technological factors that affect this type of business include the use of advanced equipment and programs that assist in workouts and weight management. Others include client interface and payment methods that make it easy for clients to register and pay for the services in the facility.
A market survey carried out on the demand for an all ladies health and fitness revealed a significant gap in the fitness market (Rule, Roger, 2004). Amongst the 500 respondents that were interviewed, at least 80% felt that they needed to join a health and fitness center; however, they felt that they did not have either enough time, resources or the motivation to join a fitness center. Most of these even requested more information on the service. Others felt that the existing fitness centers were either too far or too expensive and did not cater for the specific needs of women. Consensus on what was a fair charge for a fitness facility was not clear, with 42% saying that they would spend $90 per month, 21% answered that they would be willing to spend up to $150 per month while 6% would be comfortable with $200 per month. Almost 80% of the respondents felt that work out time should be between 45-60 minutes. On what was considered in a trainer, 45% felt that the bond between a client and the trainer was the most important consideration while 15% would be more interested in a trainer’s qualifications and experience. At least 60% identified the trainer’s physical ability, commitment and motivation to be key factors in their choice of a trainer. On the choice of training periods, there was divided response, with some favoring the morning hours (5-6 am) (40%), lunch break (12.30-1.30)(10%) and evening (5.30-6.30pm)(50%).
Services
For most people, having personal trainers is not an option, given the high costs involved ($50 per session). Smart Ladies Fitness Center and Health Club will significantly bring down this cost, by creating a model club where trainers can access the best fitness services at the most affordable cost. In partnership with leading health, fitness and wellness professionals, we intend to provide services such as
a) initial consultation and screening
b) both private and group training sessions
c) private and customized workout plans for each client
d) advise on life, fitness and lifestyle management
The objectives of the business are
e) to exceed 60% capacity in the first year of operation
f) b) to acquire at least 200 members by the end of first year and
g) c) to increase membership by at least 20% at the end of the second year.
h) d) To break even after the first year of operation
Strengths
Superior location- This fitness center will be located in a very busy location, with a youthful population of about 75000. The close proximity to a market center, a shopping mall and institutions of higher learning is expected to boost subscription as it taps clients from the neighborhood.
The unique business model as described above where the facility offers women only tailor made services to a unique set of clients is a key strength for this venture. The women only facility is expected to be an attractive feature in this facility. The hands-on approach and personal engagement with the clients is expected to build a personalized relationship which will eventually create loyal customers.
The managerial expertise and networks in the health and fitness industry is also a key strength for this business as the owners will seek to leverage their extensive experience and expertise in this area to ensure customer satisfaction (Novicevic, Harvey, Autry, Bond, 2004).
Weaknesses
The business will have some challenges with initial capital, which it hopes to borrow from financial institutions. Being a new business, it’s hoped that some challenges may be experienced in accessing capital to start off.
As a startup, there is not much information on what services and or products would be best received by the market, leaving the owners with the risk of making an investment in some equipment that may not entirely be necessary and may not have best returns on investment in the short run.
Opportunities
There are just a few fitness centered in the area, with none specializing on women fitness and health, which leaves this business with a huge opportunity to explore the untapped potential.
Modern time emphasis on health and fitness in the wake of increasing prevalence to lifestyle diseases such as diabetes, obesity and hypertension, as well as the need to look and feel good is expected to drive demand for health and fitness services
Threats
According to Osita, et al (2014), there is the ever existing threat of competition from the available conventional physical fitness centers. Since health and fitness is a rather personalized service, there is likelihood that some competitor existing clients may not be willing to join us.
Health and fitness activities such as physical exercise carry a very high risk of personal injury. While the company is covered for liability, litigation could still prove to be an expensive affair.
Part III: Market and marketing plan
Market Analysis Summary
Burnwood town can be regarded as a city on the move. Figures from the national census bureau indicate that the population has been on an upward trend, averaging 10% each year for the last 3 years with a current population of 500,000. This growth is fuelled by the increased employment in the city service industry and technology companies. This has attracted a particular type of professionals that form our target market. These are upwardly mobile women who are interested in healthy lifestyles and personalized fitness regimes and are therefore the total focus of the marketing team at Smart Ladies Fitness Center and Health Club. Young mothers, who are interested in a fitness club that fits all their mothering needs, keeping their children close, form part of our target as well. The facility will be designed I such as way that it caters for babies and their nannies, and its anticipated that this will be viewed as a welcome addition that will bring in new clients.
Market Segmentation
Smart Ladies Fitness Center and Health Club will focus on two market segments
• Young urban professional women;
• Young mothers with children (ages new born to three years of age).
Competitive analysis
Smart Ladies Fitness Center and Health Club competitive advantage would be derived from three key areas. First, being the only ladies only fitness and health club in the area puts it at a vantage competitive position. Women would feel more comfortable and relaxed in a program that focuses solely on their needs and therefore it’s expected that we shall attain a large market share for this segment in a short period of time. Second, the great environment and ambience is expected to play a great role in attracting and retaining customers, who would feel quite comfortable in a friendly environment. Lastly, the unique child center, that allows mothering women to bring with them their toddlers and have them play as they wait for their mothers to complete their work outs is a one of its kind innovation that would effectively lock in this client segment.
Marketing plan
Services
Smart Ladies Fitness Center and Health Club will offer services such as
a) initial consultation and screening
b) both private and group training sessions
c) private and customized workout plans for each client
d) advise on life, fitness and lifestyle and weight management programs
These services will be provided by trained, certified and accredited professional trainers who are equipped with first aid and CPR skills. Besides, the health and fitness club will offer a wide selection of sophisticated and biomedically designed equipment that suits the female body.
Promotional strategies
In order to succeed, Smart Ladies Fitness Center and Health Club will need to keep costs as low as possible. It will therefore do its best to maintain a reputation of being the best and unique fitness center in the region. It will be marketed both physically and online through our website, sponsored ads and social media platforms such as Facebook, Twitter and Instagram. Initially, in order to create awareness, the club will market aggressively on social media, flyers and to the various institutions that are adjacent to the facility. Trainers will also put on branded training shirts, which would help create curiosity amongst health and fitness enthusiasts. Lastly, the company will run a ‘five free sessions’ promotion, where customers will be able to access all the services for free for the first five sessions, after which they will be expected to have made a decision on whether to join. These free sessions are aimed at encouraging clients to sample the clubs facilities and services and note the difference with the competitors in the hope that most of them would join the club. These inexpensive methods will go a long way in creating exposure for the new business while keeping operating costs at the minimum.
Pricing
Monthly charges will be $150 while daily charges will be $25 for a personalized training and consultation session
Sales Forecast
Despite the above marketing and promotional efforts, sales are anticipated to be slow for the first quarter, occasioned by the ‘first five free sessions’ promotion after which they will be expected to increase as new members join and pay their subscription fees. The sales forecasts for the next three years are shown below
Part IV
Operations strategy
Management and organizational structure
Maxwell Smith and Sanford Cliff are the owners, each contributing equal capital towards the formation of the company. Maxwell will be in charge of operations and a lead trainer at the club. He has been a permanent fixture at the area fitness community for the last ten years and has been a manager at some of the leading athletic and fitness clubs for a long period. Her reputation as an effective leader and motivator is excellent and already has a great rapport with most of the fitness enthusiasts in the town. At his previous work stations, membership went up by 12% per year under his leadership. He will be tasked with the responsibility of ensuring the smooth running of the club regarding quality and availability of trainers, management of assets and equipment, contracts with trainers etc.
Cliff is a certified public accounted with over 15 years in financial management, cost management, strategy formulation and execution with one of the leading manufacturing concerns in the area. His primary role will be to manage the financial issues of the company including debtors and creditors, designing a financial system and other operational systems, company strategy and cost management and marketing (a role that would be co-shared with Maxwell).
For the past one year, the company will operate with only these two directors and an administrative staff, who will be in charge of running errands, monitoring social media platforms, receiving new clients and ensuring that they get all the necessary information that they may need etc. After words, when the company expands, employment of other administrative and technical staff will be considered.
Organizational structure
Work flow
The initial tasks would be to build the infrastructure such as partitions, carpeting, children’s area, signboard and buying equipment such as Stepmills, Steppers, Upright and recumbent bikes, Treadmills, Elliptical trainers, Bodytrek, Cross aerobic trainers. Stairmaster, Gravitron A floating form floor that is suitable for various aerobic, muscle conditioning, step and yoga classes. This will be followed by laying out the marketing plan, which includes hiring a web designed to build a website which will be used as a marketing platform, information and bookings. The website will also feature all services as well as profiles for each of the personal trainers to enable interested clients to choose those trainers that they feel are right for them. Clients will also be able to use the website to set appointments with specific trainers. The website will be included in all the company’s promotional materials. Trainers will be recruited through the careers section of the website, as well as personal referrals from friend and interviews will be contacted by a sports and fitness recruitment agency based on their qualifications, experience, athleticism, and general suitability for this job. At the end of each session of training and work out, each client will fill a confidential satisfaction survey to enable the company to evaluate the performance of the trainers.
Personnel and mode of engagement
Smart Ladies Fitness Center and Health Club will start by hiring three trainers, for the various sessions which will be slated for the morning hours (5.00 am-6.00 am) lunch hour session (12pm-1.00 pm) or evening session (5.30 pm-6.30 pm).The directors, who are also experienced gym instructors will be in charge during the other times of the day, receiving clients and training some of them during the day.
Personal trainers will be independent contractors and not direct employees of the company. The important implication for this arrangement is that the company will not be responsible for withholding federal, medicate tax, social security, income tax or any other responsibilities with the tax department (Cross, Wilbur, Richey, Alice, 1998).
The challenge with this kind of arrangement is that the company will not be able to control how most of the work is done, although the company intends to run a program that will harmonize training programs for all instructors and trainers. Additionally, all instructors will be held to a basic contract ensuring that all their actions reflect the company’s best interest
Part V: Capital, financing and financial projections
Initial capital will be raised from director’s personal savings and borrowings from banking institutions in the ratio of 62.5% to 37.5% respectively. The loans will be secured on the director’s personal guarantee. The business financial requirements and projections are detailed below
START-UP CAPITAL REQUIREMENTS
Start-up working capital requirements 94,200.00
Start-up investments 65,800.00
TOTAL AMOUNT REQUIRED 160,000.00
ASSETS –
Initial cash requirements 65,800.00
Additional cash requirements –
Total cash requirements 65,800.00
TOTAL ASSETS 65,800.00
LONG TERM LIABILITIES
Current loan portfolio –
Long-term Liabilities 6 0,000.00
Creditors –
Other liabilities –
TOTAL LIABILITIES 60,000.00
CAPITAL CONTRIBUTION
Directors capital contribution
Maxwell 30,000.00
Cliff 70,000.00
Additional Investment Requirement –
Total capital contribution 100,000.00
START-UP EXPENSES
Insurance 500.00
Website 200.00
Printing and stationery 1,000.00
legal and professional fees 500.00
Rent and rates 2,000.00
Children’s center set up 10,000.00
Equipment lease charges 80,000.00
TOTAL START-UP EXPENSES 94,200.00
Start-up Assets
Cash Required 65,800.00
Other Current Assets –
Long-term Assets –
TOTAL ASSETS 65,800.00
Total financial Requirements 160,000.00
Projected profit and loss
YEAR 1 YEAR 2 YEAR 3
Revenues 236,000 294,000 376,000
TOTAL COST OF SALES – – –
Gross profit 236,000 294,000 376,000
Gross profit margin 100% 100% 100%
Expenses
Salaries and wages 180,000 190,000 213,000
Marketing and promotion 5,500 7,500 9,800
Electricity and water 4,500 4,500 4,500
Insurance 2,200 2,200 2,200
Rent and rates 23,000 23,000 23,000
Income taxes 27,018 29,280 31,902
Other – – –
Total operating expenses 242,218 268,280 287,300
EBIT (6,218) 25,720 88,700
EBITDA (6,218) 25,720 88,700
Interest Expense 5,560 4,820 4,019
Tax charge – 7,716 26,610
Net earnings (11,778) 20,900 84,681
Net profit margin -5% 7% 23%
PRO FORMA BALANCE SHEET
YEAR 1 YEAR 2 YEAR 3
Assets
Current Assets
Cash and cash equivalents $55,200 $68,150 $123,224
Other Current Assets $0 $0 $0
Total current assets $55,200 $68,150 $123,224
Noncurrent assets
Total noncurrent assets $0 $0 $0
TOTAL ASSETS $55,200 $68,150 $123,224
Capital and liabilities Year 1 Year 2 Year 3
Current
Creditors $5,814 $6,730 $8,513
Other Current liabilities $0 $0 $0
SUBTOTAL CURRENT LIABILITIES $5,814 $6,730 $8,513
Non current liabilities $52,000 $44,200 $36,300
TOTAL LIABILITIES $57,814 $50,930 $44,813
Paid-in Capital $100,000 $100,000 $100,000
Retained Earnings ($93,250) ($101,000) ($82,530)
Profit and loss account ($11,778) $20,900 $84,681
TOTAL CAPITAL ($5,028) $19,900 $102,151
TOTAL LIABILITIES AND CAPITAL $52,786 $70,830 $146,964
PRO FORMA CASH FLOW
YEAR 1 YEAR 2 YEAR 3
Cash from Operations
Cash Sales $236,000 $294,000 $376,000
SUBTOTAL CASH FROM OPERATIONS $236,000 $294,000 $376,000
Expenditures from Operations
Cash Spending $180,250 $198,500 $213,200
Bill Payments $63,250 $80,950 $101,825
SUBTOTAL SPENT ON OPERATIONS $243,500 $279,450 $315,025
Cash flow from financing activities
Long-term Liabilities Principal Repayment $7,600 $7,600 $7,600
Dividends $0 $0 $0
SUBTOTAL CASH SPENT $251,100 $287,050 $322,625
Cash Balance $55,200 $68,150 $123,224
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