Devi Fitness
Prepared For: Comm 447
Meagan Knash
Devi Fitness Comm 447
Table of Contents
Page
Executive Summary
5
1.0 Introduction
6
1.1Mission Statement
6
1.2 Goals and Objectives
6
1.3 Industry Overview
6
2.0 Operations Plan
7
2.1 Site Plan
7
2.2 Floor Plan
8
2.3 Average Day Operations
9
2.4 Service Providers
11
2.5 Capital Budget
11
2.6 Operating Expenses
12
3.0 Human Resources Plan
13
3.1 Organizational Structure
13
3.2 Job Descriptions
14
3.2.1 Manager
14
3.2.2 Supervisor/Pole Supervisor
15
3.2.3 Pole/Fitness Instructors
15
3.2.4 Personal Trainers
16
3.3 Human Resources Strategy
16
4.0 Marketing Plan
17
4.1 Marketing Mix
17
4.1.1 Place
17
4.1.2 Services
17
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4.1.3 Pricing
22
4.1.4 Promotion
23
4.2 Competitive Analysis
25
4.3 Marketing Expenses
26
5.0 Financial Plan
27
5.1 Income Statement
27
5.2 Balance Sheet
28
5.3 Capital Budget
28
5.4 Capital Cost Allowances
28
5.5 Debt Amortization Schedule
29
5.6 Corporate Income Taxes
29
5.7 Dividend Policy
30
5.8 Financial Analysis
30
5.8.1 Net Present Value
30
5.8.2 Internal Rate of Return
31
5.8.3 Break Even Analysis
31
5.8.4 Critical Variables
32
6.0 Summary
32
Figures
Figure 2.1 Site Location
8
Figure 2.2 Floor Plan
9
Figure 3.1 Organizational Structure
14
Figure 4.1 Zumba
18
Figure 4.2 Barre Class
19
Figure 4.3 Jazz
19
Figure 4.4 Hip-Hop
20
Figure 4.5 Yoga
20
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Figure 4.6 Group Power
21
Figure 4.7 Group Step
21
Figure 4.8 Pole Dancing
22
Figure 5.1 Break Even Analysis
31
Tables
Table 2.1 Capital Costs
11
Table 2.2 Operating Expenses
13
Table 4.1 Pricing
23
Table 4.2 Competitive Analysis
25
Table 4.3 Marketing Expenses
26
Table 5.1 Net Income Summary
27
Table 5.2 Balance Sheet Summary
28
Table 5.3 Capital Requirements
28
Table 5.4 Capital Cost Allowances
29
Table 5.5 Debt Amortization Schedule
29
Table 5.6 Income Taxes
30
Table 5.7 Dividends
30
Table 5.8 Sensitivity Analysis
32
Appendices
34
Appendix A- Equipment
34
Appendix B- Flaman Fitness Quote
35
Appendix C- Financial Model
37
References
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Executive Summary
The need to live a healthy and active lifestyle has become a growing concern for
Canadians. Women are under constant pressure to be fit and look like the models
portrayed in magazines. However, many feel intimidated and uncomfortable when they
walk into large fitness facilities. Reasons for this include the amount of in shape men,
the amount of equipment, the lack of knowledge about the equipment, not knowing
how to workout for their body type, etc.
The following is a business plan for Devi Fitness, a ladies only fitness facility in
Saskatoon, Saskatchewan. The plan goes into detail about the operations, human
resources, marketing, and financial aspects of the proposed business.
Devi Fitness will be a 7,500 square foot facility that offers individual cardio and weight
training, personal training, group classes, and pole dancing classes. Group classes
include, but are not limited to, yoga, Zumba, Barre, dance, Group Power, Core, Step,
Kick, etc. Devi would be the only large women’s only fitness facility in Saskatoon, giving
it a competitive advantage.
A manager, two supervisors, and several fitness instructors and personal trainers will
run Devi. Personal trainers will ensure that all members know how to use the
equipment and how to workout for her body type. This will help reduce injuries and
increase results. Devi encourages goal setting, and will reward achieving these goals, no
matter how big or small.
With an IRR exceeding the required rate of return and a steady flow of profits, Devi
Fitness would be feasible and a great opportunity for investors. Devi will be financed
with 47% bank debt and 53$ equity, requiring $1,400,000 as an initial capital
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investment. Through strategic marketing and a passion for fitness, Devi is surely to be a
huge success for the city of Saskatoon.
1.0 Introduction
Devi Fitness is a ladies only fitness facility that offers personal training, individual
training, and group classes. Devi Fitness will help clients set and reach attainable fitness
goals, and inspire women in Saskatoon to live a healthy, active lifestyle.
1.1 Mission Statement
Devi Fitness provides a comfortable space for women of all ages to get into the best
shape of their life.
1.2 Goals and Objectives
The goals and objectives for Devi Fitness will include the following:
 Help all clients achieve their various fitness goals through accountability,
personalization, and unique opportunities.
 Obtain 250 members, along with 150 people taking pole dancing classes in the first
year.
 Achieve a 16% return on investment.
1.3 Industry Overview
Statistics Canada states that the amount of physically active Canadians is on the rise, as
shown in the Canadian Community Health Survey (2005). However, it also found that
men and young people are more active than women. From my own conversations with
several women in the Saskatoon area, reasons for this inactivity have been found.
Women are often very intimidated by the weights, equipment, and men in gyms. They
are unaware of what types of workouts to do for their body type, or how to use the
equipment properly. Also, men are capable of running faster, lifting more, and have 15%
less body fat than women (Barreira et al, 2012). This causes women to be self-conscious,
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and makes them less likely to even go to the gym in the first place. There has been a
trend in offering ‘women’s only’ sections in fitness facilities, however, these sections
after often over crowded and lacking equipment. Also, this still doesn’t solve the
problem of women not knowing how to use the equipment even if it is there.
Some trends that have been emerging in the fitness world include smaller groups, dance
specific workouts, and demographic-specific programs (Patel, 2011). Smaller workout
spaces and groups mean more engagement and motivation from participants. This is
usually due to increased attention from personal trainers or fitness professionals. If the
customers are known by the employees working in the gym, and are being held
accountable they are more likely to keep coming back and be motivated. Workouts like
Zumba, Barre classes, and pole dancing classes have been an emerging trend, especially
with women. They are able to get in a really good workout while having fun and not
feeling like they are actually working out. Smaller group classes often increase
motivation and competition with participants. The final trend, demographic-specific
programs, is an important one. People have different needs based on their age and sex,
and more fitness professionals are catering to these needs. It is easier to tailor programs
to these needs if you are only focusing on a certain group. For example, an 18-year-old
male does not have the same fitness goals as a 45-year-old female. Having a fitness
facility that caters to everyone is difficult to do. Devi Fitness will help to address some of
these issues and trends.
2.0 Operations Plan
2.1 Site Plan
Devi Fitness will be located in Saskatoon, Saskatchewan, where a ladies only fitness
facility is not available. The exact location will be in the newer Rosewood area of
Saskatoon. This section of Saskatoon was chosen because there are currently no larger
fitness facilities in this area. Also, it is one of the wealthier neighborhoods in Saskatoon.
Rosewood and surrounding areas, such as Lakeview and Briarwood, all have average
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household incomes over $100,000 (www.saskatoon.ca). Figure 2.1 shows the map view
of which neighborhood Devi Fitness will be located.
Figure 2.1 Site Location
Since this is such a new area of Saskatoon, there is plenty of space for development, and
will provide the amount of space that is needed for Devi Fitness.
2.2 Floor and Building Plan
Figure 2.2 shows the floor plan for Devi Fitness, and how the business will be laid out.
We will be building a 7500 square foot building all across one level. The building will
consist of one large open area for individual and personal training including treadmills,
ellipticals, bikes, weights, etc. There will be two equally large rooms, one for group
classes and one for pole dancing classes. The pole dancing room will feature fifteen
poles spaced five feet apart. In the back corner will be a change room/washroom
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including lockers and showers. The other side of the gym will include a smaller room for
an office and another room for personal training assessments.
Figure 2.2 Floor Plan
2.3 Average Day Operations
Devi Fitness will be open 5:00am – Midnight Monday to Thursday, 5:00am-10:00pm
Friday, 7:00am-10:00pm Saturday and Sunday, and 8:00am-8:00pm Statutory Holidays.
This is done to allow for plenty of time for working professionals and fitness to fit in a
workout. This is also so Devi Fitness can match Motion Fitness’s hours, since they are
currently the biggest competitors. A personal trainer and I will open Devi Fitness for
business in the morning. Most personal trainers will come in only when they have
appointments with clients, but at least one will always be at the gym assisting members
and helping daily business activities. Daily business activities include answering phones
and emails, signing people up for memberships, showing people around the gym, and
tidying around the gym. Also completing daily business activities will be the full time
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employee that is in. Two full time employees will be working at the gym. One will take
over for me in the early afternoon, and the other will close the gym down in the
evening. Fitness class instructors will also come in only as they are needed, with classes
starting as early as 5:30am, and ending as late as 10:00pm. Pole dancing classes will run
from 6:00pm-10:00pm Monday to Friday, and 11:00am-3:00pm Saturday and Sunday.
However, times of classes vary depending on member feedback, availability of
instructors, and member demand. Devi Fitness will only be closed on Christmas Day and
New Years Day in order to accommodate strict fitness requirements. Hours of operation
and class availability will be reduced on statutory holidays.
All first time members will have at least one personal training session in order to help
them set goals, create a personalized workout plan, and learn how to use all of the
equipment in the gym. This is to ensure all members are confident when coming to the
gym, and they have a workout regime that is right for their body. This will also help to
reduce injuries related to improper use of equipment. With a workout plan in place and
specific goals set, Devi Fitness can recognize and reward members when goals are
achieved, encouraging them to come back.
Customers do not have to be members in order to take pole dancing classes. These
classes are separate from memberships fees, but members do get a discounted rate.
Pole dancing classes can run up to seven stages, each stage being six weeks long with a
weekly one hour class. Approximately 3-4 pole dancing instructors will be needed, as
each instructor can teach several stages. Group classes will run throughout the day as
needed and demanded. These classes include Barre, yoga, dance (hip-hop, jazz, salsa,
etc.), Zumba, Kick, Power, Core, Step, etc.
Each night a contracted cleaning company will come in to tidy the gym and sanitize
equipment, bathrooms, and change rooms. This will ensure that my gym is always clean
and ready to use the next morning. Employees working during the day will help to keep
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the gym tidy while the gym is open. Various electrical, plumbing, and maintenance staff
will be called as various repairs arise. At the year-end, an accounting firm will be hired to
complete the necessary financial statements and income taxes.
2.4 Service Providers
Occasionally, Devi Fitness will experience machine breakdowns or will need some
maintenance with equipment. My gym’s equipment will be coming from Flaman Fitness
in Saskatoon, and this equipment comes with a certain amount of warranty. After this
warranty has run out, they will continue to complete the necessary repairs at a cost.
Otherwise, other maintenance will be called as needed. If one machine is out of order,
waiting a couple of days for it to get fixed is not going to make or break my business.
Therefore, various maintenance staff is not needed immediately. Scrub Masters
Commercial Cleaning in Saskatoon will come in each night and clean the entire gym. An
accountant will not be on staff, but will be contracted at the end of the year to complete
the necessary statements. Also, a company called Zu in Saskatoon will be hired to
complete the necessary website design and maintenance.
2.5 Capital Budget
As was mentioned earlier, Devi Fitness will be building their space and not leasing.
Because of this, a large amount of capital is needed to get this business up and running.
This includes land, building, and equipment. Table 2.1 shows the amount of capital
needed for Devi Fitness.
Table 2.1 Capital Costs
Building
1,125,000
Land
100,000
Equipment
60,804
Total
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For a more detailed breakdown of equipment, please see Appendix A.
The cost of the building was based on 7,500 square feet multiplied by $150 per square
foot. This number was received as an estimate from PCL Construction in Saskatoon. The
cost of land was approximated through Colliers International, a commercial real estate
company. A personalized quote for the equipment was received from Flaman Fitness, in
Saskatoon. This quote can be seen in Appendix B. Equipment will be replaced only as
needed and as breakdowns occur. Equipment, such as treadmills, will probably
experience more use and need to be replaced sooner.
Working Capital for this type of business will be extremely small. There will be no
accounts receivable, as customers will pay for services before they are even used.
Memberships will be collected bi-weekly, whether they use the gym or not. Accounts
payable will be little to none as well, since bills will be paid online as they are due. Also,
since members pay for services before they are even used, this money will be used to
pay the necessary bills. There will be no inventory at my gym, as there is no need for
any. All of the equipment will be on the floor, ready for use. Finally, very little cash will
be needed monthly, as was stated many times, money for the memberships are
received before the services can be used.
2.6 Operating Expenses
The operating expenses for Devi Fitness are quite high in the first year. The highest of
these expenses is wages for the various employees needed. The breakdown of the
operating expenses for the first year can be seen in Table 2.2 below.
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Table 2.2 Operating Expenses
Expense
Source
Property Taxes
26,500
City of Saskatoon
Utilities
10,800
SaskPower, SaskEnergy
Wages
167,400
Employee Benefits
25,579
Custodial Services
2,500
Marketing
10,074
Accounting & Legal
2,000
Insurance
3,000
Repair and Maintenance
2,000
Capital Cost Allowance
28,500
Debt Interest
46,060
Total operating Expenses
$324,493
Scrub Master Cleaning
Cherry Insurance
Detailed 5-year estimates for the various expenses and capital costs can be found in
Appendix C.
3.0 Human Resources Plan
3.1 Organizational Structure
Devi Fitness will require a manager, two supervisors, and several instructors/trainers.
The amount of trainers and instructors needed will vary by demand for them.
Supervisors will be full-time, and doing most of the daily administration tasks. All of the
instructors and trainers will be part-time, and come in when they are needed to teach
classes or meet with clients. Figure 3.1 shows the organizational chart for Devi.
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Figure 3.1
Manager
Pole
Supervisor
Supervisor
Personal
Trainer
Personal
Trainer
Personal
Trainer
Pole
Instructor
Pole
Instructor
Pole
Instructor
Pole
Instructor
Fitness
Instructor
Fitness
Instructor
Fitness
Instructor
Fitness
Instructor
3.2 Job Descriptions
3.2.1 Manager
The manager will be responsible for overseeing and running the business activities. They
will be responsible for recruitment and hiring of all employees at Devi. The manager will
be the first one at the gym in the morning, making sure that everything is ready for the
day. The manager works full-time hours at the gym performing various tasks. These
tasks include paying bills, ordering supplies, assisting supervisors with answering phones
and emails, recruiting new trainers, attending fitness conferences, etc. The manager is
expected to stay on top of fitness trends happening in the world so Devi can be the first
ones offering new classes. This will require them to attend various training courses to
constantly stay up to date. The manager makes sure that everything is in order at the
gym, and helps wherever it is needed. They require excellent people and leadership
skills in order to make and keep positive connections with employees, members, and
leading fitness professionals.
The manager for Devi Fitness will be Meagan Knash. She will be completing her
B. Comm in April of 2012, majoring in Management. Meagan has several years of
experience working in retail, and being a leader for her team at lululemon athletica. Her
experience at lululemon has caused Meagan to create many connections in the fitness
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world that will be beneficial in starting this business. She has very close connections
with several fitness instructors and personal trainers throughout the city. As a fitness
enthusiast herself, Meagan is aware of the latest trends in fitness and how a women’s
experience is at the gym. These reasons and many more make Meagan a perfect
candidate to manage Devi Fitness.
3.2.2 Supervisor/Pole Supervisor
The supervisors will be responsible for the various instructors in their section and will
report to the manager. For example, the pole supervisor is responsible for making sure
pole instructors are on time, and doing an excellent job. The supervisors will be full-time
staff, and will also be responsible for administration duties. This includes, answering
phones and emails, completing memberships, giving new members tours around the
gym, setting up appointments, tidying, etc. The main supervisor will take over the
manager in the early afternoon, and the pole supervisor will close the gym in the
evening. Instructors or trainers with any questions will first go to the supervisors and
any further problems will be directed to the manager. Supervisors must have great
leadership skills, as well as excellent communication and people skills. They will be
dealing with members a significant amount of time and must always make everyone feel
welcome and comfortable. They must have experience in leading or managing, and
some experience in the fitness world.
3.2.3 Pole/Fitness Instructors
Instructors will report to the supervisor or manager on duty at the time. If possible, they
will direct problems to the supervisors first, and then to the manager. Instructors must
have completed all the required training, and have significant experience in their field.
They must have a high amount of energy and be very outgoing. They are responsible for
motivating and encouraging participants in their classes, and they must do this every
class. Feedback on these instructors will be collected, and if they are not performing
their job up to standards, they will be notified. The fitness instructors will not require
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any training from the manager, as they will have completed all of the necessary
requirements already. However, the pole instructors will go through a certification
course to ensure they know exactly how to instruct the various moves. Since there is
more risk for injury in these classes if not taught properly, they will require some
training. The training will show them how to teach the moves, how to communicate the
moves, how to demonstrate the moves, and how to prevent injuries. Once they have
shown they are capable of this, they may move on to instructing.
3.2.4 Personal Trainers
Personal trainers will report to the supervisor or manager on duty at the time. If
possible, they will direct questions or problems to the supervisor first, and then to the
manager. Personal trainers must have completed their Bachelor of Science in
Kinesiology. Strictly courses in personal training will be not accepted as enough. This is
to ensure that trainers are very qualified, and that Devi has the best trainers. They will
have a well-rounded knowledge of how to prepare programs for various individuals, and
how to instruct them to prevent injuries. All trainers must be very friendly, outgoing,
motivating, and encouraging. Trainers must challenge individuals and help them reach
their goals. They must have past experience training and strong references.
A breakdown of wages for these employees can be seen in Appendix C.
3.3 Human Resources Strategy
At Devi Fitness, each woman should walk out feeling like a goddess. It is really important
that every woman feels extremely comfortable and can’t wait to come back. This feeling
will mostly come from the staff at Devi. Each member of the team must be very
encouraging, welcoming, and uplifting. The manager, supervisors, and instructors will be
encouraged to track member’s goals through their personal programs. Also, getting to
know the members of the gym is very important. Once the staff gets to know the
members, they will feel more comfortable at the gym and they will be held accountable.
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If staff knows the members, they will feel guilty if they don’t show up for their workout
because the staff member will ask them the next day. It is important for the manager to
attract and retain individuals who are passionate about what they do, and love sharing it
with the world. Since the manager feels this way about fitness, attracting similar people
should be easy.
4.0 Marketing Plan
4.1 The Marketing Mix
4.1.1 Place
Devi Fitness will be located in the Rosewood area of Saskatoon. This is a newer area of
Saskatoon, and is surrounded by many other newer areas. As a newer, more expensive
area to buy housing, the residents must have a higher income. The Rosewood and
surrounding areas all have average annual incomes greater than $100,000. Also, middle
aged women with families dominate these areas. Since I am targeting women ages 1865, with a focus on women aged 25-45, this area is suitable. Also, no other larger fitness
facility is in this area yet, which would give me a competitive advantage. Residents living
in Rosewood and surround areas currently need to drive 15-20 minutes to get to a
larger gym. For a busy, working mother, this isn’t ideal and a closer gym would be much
more suitable.
4.1.2 Services
Devi Fitness offers a wide variety of services to members and non-members. Customers
can choose to purchase a yearly membership, which gives them full access to individual
training, group classes, and the ability to purchase pole dancing classes and personal
training sessions at a discounted rate. Customers can also choose to drop in at the gym
without purchasing a membership at any time. Finally, customers can choose to just
partake in the pole dancing classes without a membership, at full price.
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Personal training sessions are offered for a more personalized workout plan and one-onone motivation. Clients can choose to meet with trainers as many or as little times as
they would like, typically for one-hour sessions.
Group classes are offered daily at various times in the gym to motivate in a group
setting. Classes that will be offered at the gym will range based on demand and trends
in the fitness world. They may include Zumba, Barre, dance (hip-hop, jazz, salsa), yoga,
Core, Power, Kick, Step, Groove, Centergy, etc.
Zumba is a new way to work out while dancing and having fun. It combines Latin dance
music with a choreographed routine, designed to get your heart rate up and tone your
body. An example of Zumba can be seen in Figure 4.1.
Figure 4.1 Zumba
Barre classes are a new trend in the fitness world. It is a combination of ballet, pilates,
and strength training that uses a ballet barre. It involves up-tempo music to help tone
and sculpt women’s bodies. There are many classes within Barre that includes, Booty
Barre, Barre Boot camp, Barre Flow, Cardio Barre, Classic Barre, Power Barre, and
Prenatal Barre. An example of Barre classes can be seen in Figure 4.2.
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Figure 4.2 Barre Class
Adult dance classes are a great way to get in shape, while learning a new skill.
Participants will spend an hour learning certain dance moves and then combining them
into a short routine. Participants will work on flexibility, while toning their bodies.
Classes will include, but are not limited to, jazz, ballet, hip-hop, salsa, and ballroom.
Routines would be different every week, with options to make certain moves harder or
easier. An example of some dance classes can be seen in Figures 4.3 and 4.4.
Figure 4.3 Jazz
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Figure 4.4 Hip-Hop
Yoga classes are a great way for participants to work on their flexibility and relax after a
long hard day. There are many variations of yoga classes including yin, flow, and
moksha. Yoga classes offered will be based on demand and popularity. Participants will
be required to bring their own mat, and an instructor will lead them through one hour
to an hour and a half sessions. An example of yoga can be seen in Figure 4.5
Figure 4.5 Yoga
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Group Core, Power, Kick, Centergy, Step, and Groove are all programs from Body
Training Systems (BTS). Group Power involves the use of barbells to strengthen muscles,
and improve movements such as squats, lunges, and curls. Group Kick combines boxing
and martial arts movements for an exciting cardio workout. Group Centergy combines
yoga and pilates movements in order to stretch out sore muscles and work on flexibility.
Group Step uses steps and weights to strengthen and shape the lower body. Some
examples of these programs can be seen in Figures 4.6-4.7.
Figure 4.6 Group Power
Figure 4.7 Group Step
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Pole dancing classes will also be offered at Devi, as a separate fee. They range from
Stage 1 to Stage 7, each stage being six weeks long. Participants will attend a one-hour
session, once a week for six weeks. Each stage will teach them various moves and skills
using a dancing pole. Some stages may be repeated due to difficulty, as some of the
stages require a great amount of skill to master. An example of pole dancing can be
seen in Figure 4.8.
Figure 4.8 Pole Dancing
4.1.3 Pricing
Most of the pricing done at Devi Fitness will match existing competitors. Devi’s biggest
competitor is Motion Fitness in Saskatoon. They have three gyms in the city, and are the
largest gyms in the city. Since Motion Fitness has hundreds of members, Devi will be
matching their prices for memberships. Through my own research and conversations
with women in Saskatoon, they said if Devi was like Motion Fitness and was ladies only
they would absolutely pay the same price to go there. For pole dancing classes,
ClubMynx in Saskatoon is the biggest competitor. Therefore, prices for pole dancing
classes will be matched to them as well. A breakdown of the various prices, and
competitors pricing can be found in Table 4.1.
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Table 4.1 Pricing
Regular
Student
Pole Dancing
Drop-In Rate
Membership/bi- Membership/bi- Classes/Stage
weekly
weekly
Devi Fitness
$24.99
$22.99
$99.00
$10.00
Motion Fitness
$24.99
$22.99
-
$10.00
ClubMynx
-
-
$99.00
-
Fitness
4.1.4 Promotion
Devi Fitness will use a variety of unique ways to promote the gym, and make it known in
the city. The two weeks prior to the grand opening, flash mobs will take over the city of
Saskatoon wearing Devi Fitness shirts and educating about the gym. The flash mobs will
consist of the staff hired to work at Devi Fitness, as well as their friends and family. The
more people that can join in on the flash mobs the better. The mobs will be taking over
very busy places, during very busy times over the course of two weeks. The mobs will be
video taped and put on YouTube by Devi Fitness. They will be doing yoga, Zumba,
dancing, etc to draw attention and get bystanders excited and interested. Some places
that will be visited will be Midtown Plaza, Lawson Heights, and Center Mall during noon
or in the evening, Place Riel in between class changes, etc. When people see flash mobs,
they often remember exactly what it was for and tell several people about it. They will
get people talking, and citizens of Saskatoon will start to watch for them throughout the
city. After the mobs, the participants will hand out cards advertising the grand opening
and some information on Devi.
A Facebook page will be created a few months before the grand opening to increase
awareness about the gym beforehand. This Facebook page will be used to post the
YouTube videos of the flash mobs on, and to give clues as to where the next one will be.
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A very well designed website will also be created beforehand to promote the business
and provide information to prospective members. It will include videos, pictures,
business hours, what classes are offered, what makes Devi different, etc.
Billboards will be placed around the city in areas where many professional women will
see them. Two billboards will be placed on Circle Drive, heading towards busy centres.
Another billboard will be placed on 25th Street, heading towards downtown as many
professionals drive down this street every morning. The billboards will be black and
pink, the colors of Devi Fitness, and feature women in various dance poses. It will also
feature the website, and the grand opening date.
Finally, a strategic partnership with lululemon athletica will be in place. Often, lululemon
offers large discounts to groups of athletica individuals in order to promote their
products throughout the city. Devi Fitness could offer a team sale to anyone that signs
up for a membership during the grand opening weekend. Lululemon is a very popular
athletic clothing brand in the city, and many women would be encouraged to sign up
right away to get this discount. It is a great way to promote lululemon and have
lululemon promote Devi. Also, during the 2nd Avenue Sidewalk Sale, lululemon uses the
space in front of their store to offer fitness classes throughout the weekend. Devi could
offer classes throughout the weekend and promote their gym during a very busy time
downtown. Lululemon is always looking to partner with fitness communities in the city
and an affiliation with them would be very beneficial.
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4.2 Competitive Analysis
Table 4.2 Competitive Analysis
Name
Motion Fitness
Description
Three very large gyms,
male dominated, ladies
only section-very small,
updated equipment, wide
variety of classes and
equipment
Physical Activity
Complex
Mostly university students, College Drive,
filled with athletes-mostly Saskatoon
male, no ladies only
section
GoodLife Fitness
Attached to centre mall,
medium sized, not a wide
variety of equipment and
classes
Located downtown, very
small only one room, only
studio in Saskatoon that
offers pole dancing, ladies
only facility, offers similar
group classes
ClubMynx Fitness
Location
Price
Blairmore, Nelson $50/month
Road,
Stonebridge,
Saskatoon
8th Street,
Saskatoon
23rd Street,
Saskatoon
Included in
Tuition for
students
$50/months
regular
$45/month
$99/stage
The above table lists a few on Devi’s main competitors in Saskatoon. There are many
fitness facilities in the city, but these ones are similar in size and offerings.
Although ClubMynx is a ladies only fitness facility, they are a very small space with only
one room. It is not a regular gym, but only offers classes such as pole dancing, Zumba,
yoga, etc. Women are not able to go there to go for a run or lift weights on their own
time.
Motion Fitness is the leading fitness facility in Saskatoon, with three locations. They are
very large gyms with new equipment and a lot of variety. The ladies section is very small
and overcrowded. It is often difficult to find a space to work out in them, especially
during busy times. Also, in the main section of the gym it is difficult to find space to
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workout with how many men are always there. Women often feel very uncomfortable
working out in front of these men, as they are usually very fit. Also, many women do not
know how to use the equipment or weights so they are embarrassed to do it in front of
men who do know how.
The Physical Activity Complex faces the same problem. The university is home to
hundreds of athletes who work out at the PAC, and it is often very crowded. Women
feel intimidated to work out in front of very fit athletes and become discouraged that
they are not as fit. However, it is beneficial for students on a budget, as the membership
is already included in tuition. These reasons provide a very good opportunity for Devi
Fitness, as many women would feel comfortable working out.
4.3 Marketing Expenses
In order to attract and retain the desired amount of members, Devi Fitness’ marketing
plan is very important. The marketing plan will ensure that the citizens of Saskatoon are
aware of Devi and why they should go there. The promotional campaign for Devi Fitness
will include billboards, a website, business cards, and newspaper ads. This is to go along
with the guerilla marketing prior to the opening, and the social media pages that will be
used extensively. Social media pages are free to use, but will require employee
maintenance while at work. The flash mobs will be strictly voluntary, but should not be a
problem as people enjoy being a part of them. The remaining marketing expenses for
the first year can be found in Table 4.3.
Table 4.3 Marketing Expenses
Billboards
3,300
Website
5,819
Business Cards
550
Newspaper Ads
405
Total
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$10,074
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Five-year projections for the marketing expenses and revenues can be found in
Appendix C.
5.0 Financial Plan
5.1 Income Statement
Through strategic marketing, Devi Fitness plans to have about 230 members and 140
people taking pole dancing classes in the first year. In year two, this is expected to grow
25%, 15% in year three, 7% in year four, and 5% in year five. The projected revenue,
expenses and net income (subtracting income taxes found in Table 5.6) can be found in
Table 5.1.
Table 5.1 Net Income Summary
2013
2014
2015
2016
2017
Revenue
310,800
398,213
469,393
514,807
554,061
Expenses
324,493
350,045
350,400
351,283
352,598
Net Income
$(13,693)
$43,686
$103,524
$142,266
$175,273
Devi Fitness incurs a loss in the first year, because of high marketing expenses to make
the business known. However, break even occurs early in year two and profits rise
steadily from there. A more detailed income statement, including retained earnings can
be found in Appendix C,
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5.2 Balance Sheet
Table 5.2 Balance Sheet Summary
Current Assets
Non-Current
Assets
Total Assets
Liabilities
Equity
Total L & E
2013
104,319
1,257,224
2014
120,748
1,202,179
2015
174,673
1,151,087
2016
207,873
1,103,440
2017
235,609
1,058,819
$1,361,543
633,236
728,307
$1,361,543
$1,322,927
605,254
717,673
$1,322,927
$1,325,760
575,311
750,449
$1,325,760
$1,311,312
543,271
768,041
$1,311,312
$1,294,428
508,986
785,442
$1,058,819
A more detailed breakdown of the balance sheet can be found in Appendix C.
5.3 Capital Budget
Devi Fitness requires a total capital investment of $1,285,804. This includes the land,
building, and equipment. This capital will be raised through approximately 47% bank
debt and 53% equity. The capital projections can be found below.
Table 5.3 Capital Requirements
Bank Debt (47%)
658,000
Equity –Common Shares (53%)
742,000
Total
$1,400,000
These are the requirements for the first year of business. After the fifth year, expansion
to a larger space will be analyzed. This will depend on whether or not the business is still
thriving, and if it has met the appropriate amount of memberships. Since a building,
land, and equipment can be used as collateral, acquiring the bank loan should not be a
problem. The remaining equity will come from outside investors, including my parents.
5.4 Capital Cost Allowances
There are two types of assets that need to be depreciated based on the Capital Cost
Allowance (CCA) rates. The building falls under Class 1, and will be depreciated based on
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the CCA rate of 4%. The equipment falls under Class 8, and will be depreciated based on
the CCA rate of 20%. The CCA breakdown can be found in Table 5.4.
Table 5.4 Capital Cost Allowances
Building
(4%)
Equipment
(8%)
Total CCA
Expense
2013
22,500
2014
44,100
2015
42,336
2016
40,643
2017
39,017
6,080
10,945
8,756
7,005
5,604
$28,580
$55,045
$51,092
$47,647
$44,621
5.5 Debt Amortization Schedule
It is estimated that the average debt interest rate for Devi Fitness is 7%, paying the loan
off in 15 years. A breakdown of the debt amortization can be seen in Table 5.5 below.
This is based on an initial bank loan of $658,000.
Table 5.5 Debt Amortization Schedule
Payment
Interest
Principal
Reduction
End Balance
2013
72,245
46,060
26,185
2014
72,245
44,227
28,018
2015
72,245
42,266
29,979
2016
72,245
40,167
32,078
2017
72,245
37,922
34,323
$631,815
$603,797
$573,818
$541,741
$507,418
A more detailed breakdown of the debt amortization schedule can be found in Appendix
C.
5.6 Corporate Income Taxes
As a corporation, Devi Fitness is required to pay corporate income taxes at a rate of
approximately 13%, after year two. Because Devi incurs a loss in year one, taxes are not
paid and the loss is carried forward, therefore the rate is lower. A breakdown of the
income taxes being paid over the five years can be seen in Table 5.6.
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Table 5.6 Income Taxes
2013
2014
2015
2016
2017
-
34,474
118,993
163,524
201,463
Total Taxes
-
4,482
15,469
21,258
26,190
Rate
-
9.3%
13%
13%
13%
Taxable
Income
5.7 Dividend Policy
Devi Fitness will pay dividends to equity investors if the cash balance is greater than
$50,000. If the cash balance is not greater than $50,000, no dividends will be paid.
Dividends paid will be equal to the amount of cash minus $50,000. The projected
amount of dividends being paid and the total cash flow to investors can be seen in Table
5.7.
Table 5.7 Dividends
Net Cash
Flow
Dividends
Terminal
Value
Total to
Equity
Investors
2013
104,319
2014
16,429
2015
53,925
2016
33,200
2017
27,736
-
54,319
70,748
124,673
157,873
742,435
$104,319
$70,748
$124,673
$157,873
$928,043
5.8 Financial Analysis
5.8.1 Net Present Value
The Net Present Value for Devi Fitness has been calculated and it would be positive.
However, it is not an extremely large number. The NPV for Devi Fitness is $35, 849. The
fact that cash flows, net income, and NPV are positive show that the business would
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Devi Fitness Comm 447
definitely survive. However, whether or not this number would be enough for investors
is uncertain.
5.8.2 Internal Rate of Return
The Internal Rate of Return for this investment would be 16.4%, for an investment of
$742,000 compounded annually. It is above the required rate of 15%, however,
investors may not find this enough. It is also important to keep in mind that the
expected number of members does not take into account the number of drop-ins and
personal training fees. These two factors would raise the revenues, the NPV, and the
IRR.
5.8.3 Break Even Analysis
Although Devi incurs a loss in year one, break even is achieved early in year two. This
break even analysis can be seen in Figure 5.1.
Figure 5.1 Break Even Analysis
700
600
500
400
300
200
100
0
1
2
3
4
5
The break even is based on number of customers/month and was achieved by setting
net income to zero. The amount of customers needed to set that net income to zero is
the break even case. The blue line shows the base case amount of customers a day and
what Devi can expect in the first five years. In the first year, break even number of
customers per month is 380, and Devi is expecting about 370 customers per month.
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5.8.4 Critical Variables
The main critical variable for Devi is the amount of customers per month. The projected
revenues and IRR are very sensitive to the amount of customers. Dropping the amount
of customers per month a slight amount greatly decreases the IRR, and increasing the
amount of customers slightly greatly increases the IRR. The effect number of customers
per month has on IRR, NPV, and annual revenues will be shown in Table 5.8.
Table 5.8 Sensitivity Analysis
Customers/month
IRR
NPV
Best Case
440
30.4%
$456,042
Average Annual
Revenue
$534,487
Base Case
370
16.4%
$35,849
$449,455
Worst Case
300
-2.8%
$(386,230)
$364,423
6.0 Summary
Devi Fitness will offer women in Saskatoon a comfortable atmosphere where they can
work on their fitness goals and love their body. Currently, a lot of women are
intimidated and uneducated about the proper ways to workout for your body type. Devi
plans to stop this by showing each and every woman how to create a customized
workout plan that will be effective for her body.
Fitness facilities in Saskatoon do recognize that women prefer to workout in their own
section, however these sections are small, crowded, and unequipped. Providing an
entire gym for women to complete an entire workout in will surely help them get into
the best shape of their lives. Women of all ages, but especially women 25-45, will
undoubtedly be able to find something that is right for them. This includes individual
cardio and weight training, personal training, assorted group classes, and pole dancing
classes.
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Currently, the only ladies only fitness facility in Saskatoon is ClubMynx Fitness. However,
they are very limited to their one room, and they do not have any equipment, such as
treadmills. Since they only have one room, they are limited to the amount of people
they can bring in. Devi would have a competitive advantage over ClubMynx, with a very
large facility.
The main critical variable is the number of customers per month. The IRR and NPV are
very sensitive to this number, and little changes make big differences. With strategic
marketing, however, Devi should be able to bring in the desired amount of customers
per month. If the initial number of customers per month is 370 or above, then Devi
Fitness would be feasible. This business has great potential in the city of Saskatoon and
could be a huge success with the women in the community.
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Appendices
Appendix A- Equipment
Poles
Barres
Yoga Mats
Treadmills
Ellipticals
Upright Bikes
Cable Cross
Dumbbells
Olympic Bar w/ plates
Benches
TRX
Miscellaneous Gym
Office Equipment
Total:
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3,600
360
400
26,392
11,250
5,697
4,299
1,320
708
558
720
1,500
4,000
$60,804
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Appendix B- Flaman Fitness Quote
September 26, 2012
Meagan Knash Quote
TREADMILLS
FreeMotion 11.4 Treadmill
Recommended Use: 5+ hours a day, 5 days a week
Retail Price: $7399.00 Your Price: $4200.00
Warranty: 3 year parts, 1 year labour
FreeMotion 5.8 Treadmill
Recommended Usage: 3-5 hours a day, 5 days a week
Retail Price: $3899.00 Your Price: $3299.00
Warranty: 2 years parts, 1 year labour
LifeSpan 4000i
Recommended Use: 1-3 hours a day, 5 days a week
Retail Price: $2499.00 Your Price: $1999.00
Warranty: 1 year parts and labour
BIKES
FreeMotion Commercial Bike EX3256P
Recommended Use: 5+ hours a day, 5 days a week
Retail Price: $2899.00 Your Price: $2400.00
Warranty: 3 year parts, 1 year labour
FreeMotion 11.9 Spin Bike
Recommended Use: 3-5 hours a day, 5 days a week
Retail Price: $2999.00 Your Price: $1899.00
Warranty: 3 years parts, 1 year labour
Progression Club 24 Spin Bike
Recommended Use: 3-5 hours a day, 5 days a week
Retail Price: $1599.00 Your Price: $999.00
Warranty: 1 year parts and labour
ELLIPTICALS
FreeMotion 4255P Elliptical
Recommended Use: 5+ hours a day, 5 days a week
Retail Price: $4799.00 Your Price: $3899.00
Warranty: 2 year parts, 1 year labour
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Devi Fitness Comm 447
Progression Club 24 Elliptical
Recommended Use: 3-5 hours a day, 5 days a week
Retail Price: $2999.00 Your Price: $2250.00
Warranty: 3 years parts, 1 year labour
FreeMotion 570 Elliptical
Recommended Use: 1-3 hours a day, 5 days a week
Retail Price: $2699.00 Your Price: $1799.00
Warranty: 1 years parts, 1 year labour
GYMS
FreeMotion Commercial Cable Cross
Recommended Use: 5+ hours a day, 5 days a week
Retail Price: $6299.00 Your Price: $4299.00
Warranty: 2 years parts, 1 year labour
ACCESSORIES
2 Progression US07 Incline Decline Bench $279.00 $558.00
2 IR 5004 Olympic Curl Bar $28.00 $56.00
2 IR 4039 Olympic 7' Bar $99.00 $198.00
1 Progression 8lbs. Med Ball $31.99 $31.99
1 Progression 12lbs. Med Ball $38.49 $38.49
1 Progression 15lbs. Med Ball $42.00 $42.00
1 Progression 20lbs. Med Ball $55.00 $55.00
2 Set of Rubber Hex Dumbells (5-55lbs.) $660.00 $1,320.00
2 Set of Cast Steel Olympic Plates (300 lbs.) $255.00 $510.00
2 65 cm Exercise Ball $25.89 $51.78
1 75 cm Exercise Ball $27.99 $27.99
Service and Maintenance
Assessment = $39.99
Labour Rate = $65/hr.
Mileage Charges = $1.00/km.
Mike Henschel
Fitness Equipment Consultant
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Appendix C- Financial Model
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References
Barreira, T. V., PhD., Staiano, A. E., PhD., Harrington, D. M., PhD., Heymsfield, S. B., M.D.,
Smith, S. R., M.D., Bouchard, C., & Katzmarzyk, P. T., PhD. (2012).
Anthropometric correlates of total body fat, abdominal adiposity, and
cardiovascular disease risk factors in a biracial sample of men and women. Mayo
Clinic Proceedings, 87(5), 452-60. Retrieved from
http://search.proquest.com/docview/1012115920?accountid=14739
Neighborhood Profiles. City of Saskatoon. www.saskatoon.ca
Patel, A. (2011). Fitness Trends: The Top Fitness Trends For 2012. The Huffington Post
Canada. http://www.huffingtonpost.ca/2011/12/19/fitness-trends2012_n_1155395.html
Physically Active Canadians: Findings. (2005). Statistics Canada.
http://www.statcan.gc.ca/pub/82-003-x/2006008/article/phys/10307eng.htm#a10
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