You are working as an assistant in a small business advisory service who wants to start: Business Decision Making  Assignment, OU, UK

Scenario:

You are working as an assistant in a small business advisory service. Esah, who wants to start her own fitness business, has asked for advice on two possible options for the future. Esah has provided you with some information about her business, the market and the two different options that she is considering. The business Esah has been working at a local fitness studio since studying health and fitness at college. She is qualified to provide exercise instruction and now wants to set up her own business that offers personal training to support health and wellbeing and help people to achieve their fitness goals. 

The aims and objectives of the new micro business are: • to make a profit • to grow the business. Market trends In 2023 the global health and fitness club market was valued at USD 70.3 billion and is estimated to grow at a rate of 7.67% annually between 2023 and 2030. By 2030, this industry is estimated to be worth approximately USD 169.7 billion worldwide. This growth in the industry shows that today’s consumers are prepared to continue spending on health and fitness. An increase in health awareness has led to more fitness club memberships around the world.

There has been a steady rise in the number of fitness studios that offer personal training using the latest fitness equipment, often in exchange for a membership fee. There has been an increase in the types of equipment and spaces in these businesses, such as hot yoga studios, high altitude training rooms, metabolic testing equipment, medical exercise areas, and day spas, all of which are gaining popularity among consumers and so helping market growth. Increased spending on marketing and advertising are also helping these businesses generate more revenue. 

People are spending more time at their fitness studios as they are not only concerned with burning calories and working out, but also enjoying the experiences on offer. Classes on offer vary from spin to powerlifting, from high impact Zumba to low impact Pilates and yoga. Consumers not only enjoy these classes but also like doing them with other people. In addition, by 2045 one in every five people is expected to be aged 60 or older. 

The fitness industry is embracing this concept of ‘active ageing’ by adapting and focusing on equipment and services that can help older people optimise the opportunities offered by increased life expectancy. There has also been a huge increase in the purchase of home gym equipment and the demand for online fitness courses and mobile apps. There has been a growth in the number of online exercise businesses using indoor exercise bikes and home gym equipment that allow members to join in and work out using live stream classes or on-demand classes at their own convenience.

5 Turn over W77914A Option 1 – Provide mobile fitness services at the client’s home Esah has seen a gap in the market for providing individualised fitness services at clients’ own homes. Esah will lease a large, air-conditioned vehicle fully equipped to use as a mobile fitness studio. Clients will book a personal individual fitness session and Esah would drive and park the mobile studio outside the client’s home. Clients will pay by the hour for each appointment made. 

As well as personalised fitness instruction and advice, Esah will supply a free protein bar and a bottle of water as part of the service. Esah plans to own and run this business alone. Yearly costs Lease for vehicle and equipment $18 000 Insurances $8 000 Fuel and other bills $5 000 Vehicle and equipment maintenance and repairs $1 000 Cost of goods sold 4% of sales revenue Other financial information Predicted weekly sales volumes 25 hourly sessions Price each hourly session $30 Average variable costs each hourly session $15 Weekly fixed costs $300 Current assets and liabilities Trade payables $995 Inventory (protein bars, bottled water, cleaning materials) $600 Cash in bank $1 000 6 W77914A Option 2 – Open a new fitness studio on an industrial estate The local council has a commercial property available to rent on a busy industrial estate.

Esah thinks it would be ideal for conversion into a fitness studio. It has a small kitchen and enough space for Esah and one employee to work. Ordering the equipment and installing it at the property would take one month. Customers will pay a monthly membership fee to use the studio, and Esah will supply free drinks as part of the membership fee. Yearly costs Rent of property $4 500 Lease of fitness equipment $6 000 Staff wages $13 000 Insurances $5 000 Utility and other bills $2 000 Property maintenance and repairs $1 200 Cost of goods sold 2% of sales revenue Other financial information Predicted sales revenue for the year $37 440 Price of monthly membership $40 Variable costs of yearly membership $8 Monthly fixed costs $2 650 Current assets and liabilities Trade payables $350 Inventory (drinks and cleaning materials) $200 Cash in bank $800.