Key Issues

whether or not it is a good idea to open a new training facility in downtown London

whether or not is a venture that will prove to be financially sustainable.

Situation Analysis

The goals of partners Martin Menard and Mirella Craciun are well defined in the presented case. In point form, the four main goals are:

Earn a profit of $10 000 in the first year to be reinvested into the business.

Register four to eight new clients every month (beginning in year 2).

Establish Elite Personal training as the premium training facility in London.

Provide high-quality customer service and long-lasting results.

Environmental factors are not as evident in the case as other factors are, however there are a few main points to take out.

The city of London, Ontario is Canada’s 10th largest city with a population of 356 000

Since 1998, there have been 2000 more people moving into the downtown district due to a commitment by the city to revitalize its downtown core.

these new downtown residents are young professionals. The business sector in London has also grown substantially

with 74 new stores opening and two major construction projects being completed

The average annual income of people living in London is $27 100. This gives an idea of the economic situation in the area.

The target market outlined by the partners consists of the following four groups:

Business professionals Sports professionals Women University of Western Ontario students.

The following is a brief size up of the main competitors in the London area:

Goodlife 11 London locations (one location five

minutes away) Average of 2000 members per gym 5 of these locations are women only Personal training sessions range from

$43 to $60, dependant on several factors

Not all trainers certified

The Athletic Club 2 London locations Women only sections included Approximately 8000 at each gym (150

taking advantage of personal training) Personal training sessions range from

$43 to $60, dependant on several factors

YMCA 5 London locations Several personal training packages available,

$40 per session, then several packages TrueStar Health for Women 2 London locations Approximately 1000 members One-on-one specialists, $38 to $67 per

month, dependant on program

Herbal Magic 800 customers Focus on supplements, and nutrition,

not personal training Curves 6 London locations 500 women at each location No personal training programs

Personal trainers 3 personal training facilities, and 20-25

personal trainers working out of their home

$50- $85 per sessionCompetition is very high in the London area for fitness facilities and personal trainers. All options offer different services and price ranges.

Financial projections The financial projections for Elite Personal Training are

focused around the fee for each personal training session. The hope is that each client will purchase 48 sessions, and that a certain retention rate would apply.

They acknowledge that there would be a certain number not return after they complete so many sessions and accounted for this.

The partners are willing to be flexible based on the needs of the client. The decision on pricing is based on competitions pricing, and the needed revenue to cover costs and create a profit.

The financing for the business in the initial stages include $14 000 equity and $24 000 loan from the bank.

The bank is hesitant to give more money until there is any cash generated from operations.

This may not be enough as there are high start up and monthly costs of operating a fitness facility.

Additional personal may be needed and this would increase costs even more, but may increase revenue

The marketing will also prove to be expensive, as promotion is so important in the success of a new business. Low cost strategies to bring in cliental will have to be explored.

The business strength and weaknesses Strengths Highly qualified trainers that are consistently

updating certification Loyal client base already established Previous management experience Downtown location Diverse skill set between partners Experience training a wide demographic of

people (ages, sexes, etc.) Solid knowledge of the business

Weaknesses One partner has no prior funds All financial liability on one partner’s shoulders Unsure of the target market Low cost and low quality equipment in the

beginning Service could prove to be unaffordable No price set yet on personal training services High start up costs

Alternatives

The decision criteria will be based on profitability, the attractiveness to the target market, the demand for the service, the intensity of competition, and the overall chance of success.

Opening in a larger market, such as Toronto, would give access to a larger number of people and wealthy businessmen. The downside if this is the personal cost incurred and the inconvenience of moving. Further market research would also be necessary.

Rethinking the entire business plan is a solid alternative. This would require looking at the target market again, and redefining the short and long term goals. Group rates and different promotional strategies may be in their best interest.

Seeking further financing would help their chances of success as well. Not having enough start up money can really handcuff a business early and cause the business to cease operations before ever really starting. This would ensure a bigger pool of money to go towards properly equipping the gym and promoting the business the proper way.

Obtaining additional finance would require further work and may raise monthly costs due to increases interest payments.