Elite Personal Training
Elite Personal Training Case Study Key Issues The key issue presented in the case study regarding Elite Personal Training is whether or not it is a good idea to open a new training facility in downtown London. Another key issue is whether or not is a venture that will prove to be financially sustainable. These issues are explored more deeply in our case study. Based on the information provided and the proceeding discussions within our group, we will make recommendations on what course of action will be in the best interest of the partners. Situation Analysis
In our situation analysis, we will be exploring several factors that will enable us to make a credible decision regarding the potential business success for Elite Personal Training. These factors include the company’s goals, environmental factors, a market assessment, a financial size up, a competition analysis, and the strengths and weaknesses of the potential plan. Further analysis of these factors will provide much needed insight to the viability of the proposed business venture. 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. They have four well defined goals clearly outlined to go along with other goals that are implied in the text. These goals include providing the people of London with very personal, one-on-one training sessions where the client has private use of the facility (along with one other client).
This can be considered sub-goals of the last two goals presented in their main four. 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. Many of 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 market assessment gets a little more complicated. The partners are still unsure if they are comfortable with their proposed target market. The target market outlined by the partners consists of the following four groups: * Business professionals * Sports professionals * Women * University of Western Ontario students. These four groups are outside of preexisting clients from their former training facility.
The business community in downtown London consists of 9700 employees with an average salary higher than the London average. One of the major institutions in London, London Life, already owns a fitness facility with a low cost to employees ($10 per month). Serious athletes involved with professional or semi-professional teams train quite often. Some train six times a week. However, there is a major question of the number of sports professionals in the area and if there is enough to fill Elite’s capacity. The London Knights hockey team and the London Silverbacks football teams are potential clients. Women offer a huge demographic.
Many fitness facilities now offer “women only” training. The main criteria for women when working out are losing weight and enjoying the social aspects of training. However, many feel intimidated in co-ed establishments while training. The area instantly increases by 38 000 people in September, due to students arriving to attend Western University. Many students live on a fixed income, so the partners are already questioning whether or not they should be targeting this group. Competitor analysis is an important evaluation tool for this business. There are many similar services and facilities in the area.
The competition is high and carefully studying the potential competitors is key in making an accurate assessment of the business potential. The main points covered in the size up are location, membership size, female training, and personal training fees. 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 session Competition is very high in the London area for fitness facilities and personal trainers. All options offer different services and price ranges. 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 are clearly exhibited in the case. There seem to be more apparent weaknesses from a financial standpoint at this point then strengths. 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. Upon reviewing these criteria, it has been decided that the following alternatives are the best options.
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. Seeing where they can cut initial costs would help them not lose as much money as initially forecasted.
This would be a time consuming project and would make it difficult to open on the projected date. 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. Recommended Course of Action
Our recommended course of action at is to establish a more detailed business plan in order to be profitable without losing sight of the business goals. It was felt that the partners were still unsure of their exact course of action. Their potential costs were outweighing their initial capital, so redefining the business plan may help them decide a better course of action. In doing this, they can become more confident in their financial projections and exactly who they want to target. In completing a better and more specific business plan, it may be possible to obtain more financial assistance.
This will inspire confidence in potential investors. In gaining additional finances, a better promotional strategy can be implemented. New businesses fail often because the initial funds did not allow proper advertisement. In an industry that is so high in competition, gaining that edge is mandatory for success. If Elite Personal Training can find that proper differentiation strategy, they can expect long term success through attracting new customers and retaining them as well. A more specific business plan will help define that strategy.