Introduction

In the recent decades, the world has experienced the drastic change of lifestyle, which has led to less physical activity of people. Modern technological and social trends have prompted the online lifestyle (Fals 2013). Engagement in the social media has led to less physical activity (Fals 2013). Consequently, today, approximately one out of three children in the USA is overweight (Dawes 2014). Child obesity is causing numerous health problems, which were previously associated with adults only. They include type 2 diabetes, increased blood cholesterol levels, and high blood pressure. In addition, obese children suffer from psychological problems, such as, negative body image, depression, and low self-esteem (American Heart Association 2014). Therefore, it has become important for the entire family to engage in various physical activities (Constantini & Hackney 2013). Since most adults do exercises at home, at work or visit a gym, in their neighborhood, they find it important to make their children visit kids gym as well. This demand has prompted the establishment of the Pearl Fitness Center for children. This paper presents a business plan for a kids gym based in the Oakland County, which will offer various services and fitness programs including gymnastics and total body conditioning classes.

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Description of Business

The Pearl Fitness Center is a privately owned company with limited liability. The principal officers hold equal shares of the business. It is going to be established in Bouncetown, Michigan. It will provide the community with a friendly and comfortable environment where their children will be able to practice gymnastics and engage in other fitness activities. The fitness center will focus on gymnastics due to its increased popularity among the Olympic sports. Most clients will come from the Oakland County and the neighboring Wayne and Macomb Counties. The fitness and gymnastics center will attract children aged from one to eighteen years regardless of their abilities and backgrounds.

The companys key to success is the maintenance of unsullied reputation and competitive prices for its services. The services will be offered under flexible hours; the clients will get the security in the vicinity, including the parking area. Both the management and members of staff will be highly qualified and will develop personalized relationships with the customers. The company will strive to minimize different risk factors by implementing various measures. It will ensure that there is low overhead by employing specialists with valuable skills and ensuring continuous training. The initial capital will sustain the company for an entire year. The center will develop a strong customer base through implementing the aggressive marketing. The business will eliminate the collection costs by ensuring that the facility accepts cash, as well as debit and credit cards.

The companys mission is to offer children from the suburbs a place where individuals can learn gymnastics, exercises, interact, have fun, and relax. The company will offer varied strength, conditioning, and gymnastics programs at affordable prices. However, there will be extra emphasis on training in groups; nevertheless, the individual needs will be also considered. In order to offer the latest techniques, the instructors will get regular training. The diversity and will be upheld; the company will also demand a drug-free environment. In order to ensure that the venture is sustainable, the business will strive to attain various objectives.

Before the first year ends, the center should:

have more than three hundred participants:

provide strength, conditioning, and gymnastic trainings, at basic and advanced levels:

ensure that the center operates at more than sixty percent of its capacity by the end of the first year of operation.

increase its membership by twenty percent by the end of the second operational year.

strive to provide constant training, support incentives, and provide benefits for the staff to motivate their commitment.

The Pearl Fitness Center will offer fitness and gym services for the children in the Detroit Metropolitan Area. The main goal of the center is improving the overall health status, focus, and discipline of the children. It is a privately owned fitness center, which will focus on gymnastics trainings. However, it will also offer total body conditioning and dance classes. It will engage both boys and girls in training on the Olympic gymnastics equipment. The children will start with the core elements of gymnastics. Afterwards, they will do total body conditioning. The fitness center will employ creativity while communicating with children. This feature will give the center a significant competitive advantage over the other market players. The kids programs will incorporate repetition and variation. One of the Pearl Fitness Centers principles entails ensuring that every child enjoys and has fun while doing the physical activities. Moreover, the fitness center will employ trainers qualified in childrens psychology and communication. Employees will also study the modern training techniques to help children receive brilliant physical and mental outcomes.

The company start-up costs are going to be spent on the procurement of the padded floor and modern equipment. The center aims at buying equipment worth $40,000, which will be the companys long-term assets. Another equipment worth $30,000 will require replacement every three to four years. In order to gather the start-up costs, each of the owners will contribute $25,000. Moreover, the initial capital will include a seven-year loan of $36,600.

Services

The Pearl Fitness Center will offer gymnastics trainings and other classes for children in the Oakland County. It will offer gymnastic classes on the individual and group basis for social and competitive purposes. There will be a variety of training programs, which will satisfy the needs and financial limitations of every client. The services to be offered at the fitness center include:

Private Lessons

It will offer the clients the training of the highest quality at the best value. In private lessons, a child will work individually with an instructor. Each kid will receive personalized instructions, supervision, and instant corrections. This program will help the customer develop required skills and do exercises with pleasure. The instructor will design the private lessons for each child using an individual approach. The prices will depend on the expertise of the instructor and the childs needs.

Preschool Lessons

It will focus on the youngsters aged three years and kindergarten-going children. The class will last for one hour and will include various activities including the exercises with a low bar and floor beam, tumbling, and developing motor skills. In the class for the three-year-olds, there will be one instructor and six children. In the class for the four-year-olds, one instructor will train eight children. Each child will be required to pay $100 for a ten-week session. Moreover, the advanced preschool lessons will cost $128 per a ten-week session. Prior to acceptance, the instructor will have to approve each child.

Parent and Child Sessions

This service will offer a 45-minute session, which is designed to enhance the listening, social, and motor skills of a child in the gymnastic activities. The session will involve the participation of a parent or an adult exercising together with the child. The program is designed for the children aged from fifteen months to three years. For a ten-week session, the fee per child is $75.

Tumbling Program

It will be a 75-minute session for both boys and girls, during which, they will develop basic and advanced tumbling skills and bounce on the trampoline. The skills include the cartwheel, handstand, back handspring, round-off, and back away, among others. Each instructor will have eight children aged from six years and above. For a ten-week session, each participant will pay a fee of $115.

Cheer Squads Program

It will be a 60-minute tumbling class for cheer squads of eight or more individuals. It will emphasize the back handsprings. The program will target the existing cheer squads from the neighborhoods. Every interested coach will have to contact the company so as to set the time for their session. The number of individuals in the squad will determine the price for the service.

Cheering Program

It will be a 60-minute session for individuals who are interested in learning basic, intermediate, and advanced techniques of cheering. It will include the training in jumps, stunts, and flexibility. It will be offered to children of various ages, and the charges will be $100 per a ten-week session.

Program for Boys

It is a 90-minute session aimed at developing the basic to advanced gymnastics skills. The activities include exercises on the parallel bars, plummeting, rings, single bar, trampoline, and vault. It will be offered for the boys of six years and above. Under this program, one instructor will have eight students. A ten-week session will cost $128.

Program for Girls

Similarly, it will be a 90-minute session. The activities include exercises with the bars, vaulting buck, beam, and trampoline, as well as dancing and tumbling. Every instructor will have eight girls aged up to twelve years. Each client will pay $128 per a ten-week session.

Gymnastics for Adults

Although the fitness center is mainly aimed at kids, it will also offer a 75-minute class for adults. They will learn basic and intermediate tumbling skills. Every instructor will have eight people. Adults will be an additional motivation and role model for the kids. For a ten-week session, each client will pay $115.

Field Trips

The service aims at introducing the basic skills in gymnastics to a group. It will last for one hour, and the fee will depend on the size of the group.

Birthday Parties

One of the most important days in every childs life is a birthday. The company will offer children to celebrate their birthday in a creative and healthy way. The parties will be organized for a group of maximum twenty children, and the charge will be $150 for the session. The first hour will involve games and some gymnastic activities for the children. Afterwards, there will be another session of between thirty minutes to one hour for food, refreshments, and gifts from the family and friends. The company will provide the party venue, adornments, entertainment, and tidying up.

Market Analysis

The Pearl Fitness Center is a business with a crucial task in the modern world. Nowadays, people are extremely busy and rarely take care of their health. Consequently, the health problems associated with lack of physical activity are on the increase. It becomes increasingly necessary to establish a facility that will help in dealing with the health problems. In addition, modern children spend most of the time indoors watching television or playing video games on a wide variety of consoles including Xbox, PlayStation, and personal computer. As a rule, they rarely go outside and play physical games such as soccer, baseball, or basketball. Therefore, there is a demand for a fitness center offering gymnastics services for the children.

The target market includes children aged from one to eighteen years in the Oakland County. While the Oakland County is expected to give more than 70% of all clients, some customers are also expected to come from the Wayne and Macomb Counties.

The area lacks modern private fitness centers; the only gym is situated on the opposite side of the Oakland County. Pearl Fitness Center, in turn, will offer a full set of services for children. The industry offers opportunities for setting up the public or private gyms. City recreation centers like the YWCA and YMCA are the public gyms, and they do not offer specialized programs similar to the ones offered at Pearl Fitness Center. Their services feature basic programs, which are similar, to what are offered in preschools; moreover, they lack individualized training services.

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Nevertheless, some level of competition is expected from the public facilities as their services are considerably cheaper, although their equipment is of low quality. In addition, they offer basic programs only; hence, children who need advanced skills have to visit the private gym. The private gym will also offer the better trained and skilled instructors, who will be able to develop trust-based relationships with the clients. Therefore, the Pearl Fitness Center will offer advanced skills programs for children in addition to individualized trainings of high quality. The company will also cater for the social development of the clients and offer specialized training for children with special needs, including kids with physical disabilities.

The centers competitive advantage will be gained by offering the trainings in the first-level competitive gymnastics. It will also focus on the programs in basic and advanced gymnastics. Exercising in the fitness center that specializes in gymnastics, the children will be able to advance their skills with ease. The company will differ from most high-competitive private gyms, which target the children with advanced skills or those with Olympic potential. The Pearl Fitness Center will target all children, as its aim is to engage them in physical activity for their health benefits. The center will also aim at developing strong relationships with clients with the aim of retaining them.

The marketing strategy will start with the designing and construction of the building, keeping in mind it should look appealing to the public. The strategic aim is to build a wide and diverse customer base within the Oakland County, and beyond. The company will employ a multi-dimensional marketing and promotional strategy, involving both online and offline media. It will utilize the business-to-consumer channels including press releases, company website, brochures, exhibitions, cold calls, business cards, and marketing on the social media, among others.

Sales and Revenue

The company will accrue significant revenue due to the top-notch services and care of children. Even though it will charge less than other private gyms, the word-of-mouth advertising will assist the company in generating high profits within the first year of operations. The business also expects that the clientele will double every six months, for the first year and a half. The sales projection is based on the number of sales in the other private gyms. The cost of sales includes the hourly wages of the owners, instructors, and other personnel. Table 1 shows the companys sales forecasts for the next five years.

Financials

Pro-forma Income Statement

As indicated in the income statement table, the company projects steady growth in profitability over the next five years.

Year 1 ($)

Year 2 ($)

Year 3 ($)

Year 4 ($)

Year 5 ($)

Sales

209,500

302,000

388,885

487,320

597,700

Direct Cost of Sales

64,100

91,700

132,750

177,600

217,250

Other Costs of Sales

3,500

4,040

4,800

5,700

6,300

Total Cost of Sales

67,600

95,740

137,550

183,300

223,550

Gross Margin

141,900

206,260

251,335

304,020

374,150

Gross Margin %

67.73%

68.30%

64.63%

62.39%

62.60%

Expenses

Payroll

41,280

68,000

81,120

98000

116000

Marketing/Promotion

5,500

5,500

5,500

5,500

5,500

Depreciation

4,500

4,500

4,500

4,500

4,500

Rent

25,000

25,000

25,000

25,000

25,000

Utilities

3,400

3,500

3,600

3700

3800

Insurance

19,999

20,999

21,999

22999

23999

Payroll Taxes

0

0

0

0

0

Other

1,600

2,000

2,500

2900

3300

Total Operating Expenses

101,279

129,499

144,219

162,599

182,099

Profit Before Interest and Taxes

40,621

76,761

107,116

141,421

192,051

EBITDA

45,121

81,261

111,616

145,921

196,551

Interest Expense

3,366

2,772

2,330

2011

1984

Taxes Incurred

12,000

21,521

32,574

41254

44523

Net Profit

25,255

52,468

72,212

98,156

145,544

Net Profit/Sales

12.05%

17.37%

18.57%

20.14%

24.35%

Projected Balance Sheet

Below is the projected balance sheet for the Pearl Fitness Center for the next five years. It is expected that the retained earnings, cash, and net worth will have a steady increase.

Year 1 ($)

Year 2 ($)

Year 3 ($)

Year 4 ($)

Year 5 ($)

Assets

Current Assets

Cash

37,500

85,000

158,000

225,365

312,500

Accounts Receivable

9,882

15,227

19,123

21,251

25,412

Other Current Assets

2,100

2,100

2,100

2,100

2,100

Total Current Assets

49,482

102,327

179,223

248,716

340,012

Long-term Assets

Long-term Assets

40,000

40,000

40,000

40,000

40,000

Accumulated Depreciation

4,500

9,000

13,500

18,000

22,500

Total Long-term Assets

35,500

31,000

26,500

22,000

17,500

Total Assets

84,982

133,327

205,723

270,716

357,512

Liabilities and Capital

Current Liabilities

Accounts Payable

12,460

14,800

19,000

21,460

24,120

Current Borrowing

0

0

0

0

0

Other Current Liabilities

0

0

0

0

0

Subtotal Current Liabilities

12,460

14,800

19,000

21,460

24,120

Long-term Liabilities

31,280

26,100

20,120

15,120

11,640

Total Liabilities

43,740

40,900

39,120

36,580

35,760

Paid-in Capital

50,000

50,000

50,000

50,000

50,000

Retained Earnings

(36,600)

(11,345)

41,123

113,335

211,491

Earnings

27,842

53,772

75,480

70,801

71,901

Total Capital

41,242

92,427

166,603

234,136

333,392

Total Liabilities and Capital

84,982

133,327

205,723

270,716

369,512

Net Worth

41,242

92,427

166,603

234,136

333,392

Organization

Management

The company has two owners, Justin Ralph and Michelle Jenny. They have a huge experience and impeccable reputation in the industry, and they will benefit the company in two main ways. First, they will solicit clients from their previous employers. Since they have been in the industry for a long time, they have developed their client base, with whom they have created strong relationships. They will bring these clients into a new center. Second, each of the two principals has experience, which will attract new clients, and will assist in the effective running of the business. They both have experience in different fields including sales, marketing, management, administration, and finance. This experience will be vital in running a business. They will also offer their services as instructors at the Pearl Fitness Center.

Personnel Plan

Justin Ralph will not only instruct on a full-time basis but also perform the managerial duties. On the other hand, Michelle Jenny will have five to six classes weekly and will some perform managerial duties. She will also conduct administrative and accounting duties. A receptionist will also be an administrative assistant. During the first year, both principals will receive reduced salaries. The table on the sales forecasts highlights almost all personnel costs. The instructors will receive their remuneration on an hourly basis depending on the number of children that they will train. The company is expected to increase the number of its instructors, as the number of children increases. Table 2 presents the personnel remuneration plan.

Exit Plan

Regardless of the business success or performance in the industry, there comes a time when the management cannot continue with the operation (Nemethy 2011). It may be caused by a personal perspective, or it may be a situation forced by changes in the economic conditions (Finch 2013). When there is such a situation, it becomes necessary to employ the most efficient strategy for winding up. A process entails selling a company to another owner or entity, or cessation of its operations (Pinson 2005). The exit strategy relies on the circumstances that necessitate the exit. If the business is struggling in its operations, it will most probably choose the liquidation of all the assets. A common approach during liquidation is the going out of business sale (Mariotti & Glackin 2012). The approach entails the business marking decreasing the prices of its assets and selling them quickly. A second approach entails selling the business with the aim of retiring or starting a new venture (Finch 2013). For a private company, the owner may opt to sell its shares to the public through an initial public offer (IPO) (Finch 2013).

In the case of the Pearl Fitness Center, there will be two main exit strategies. In the case of poor business performance, it will undergo liquidation. The proceeds will be used in settling of debts with the rest shared between the two owners. On the other hand, the business may be sold to another entity or investor. The proceeds may be ventured into another venture by the two owners separately or together.

Appendix

Five-year Sales Forecast

Year 1

Year 2

Year 3

Year 4

Year 5

Sales

Parent and Tot

$6,000

$8,500

$11,100

$16,000

$21,000

Preschool

$64,000

$89,000

$113,300

$137,000

$163,000

Girls

$58,000

$80,000

$101,365

$123,500

$147,000

Boys

$11,500

$15,500

$21,120

$30,120

$37,000

Tumbling and Adult Gymnastics

$26,000

$37,000

$47,500

$59,000

$77,000

Birthday Parties and Field Trips

$8,000

$11,000

$14,000

$19,500

$27,000

Cheerleading

$15,000

$21,000

$26,500

$32,800

$41,200

Advanced Girls

$21,000

$40,000

$54,000

$69,400

$84,500

Total Sales

$209,500

$302,000

$388,885

$487,320

$597,700

Direct Cost of Sales

Preschool gymnastics instructors

$21,000

$28,000

$50,000

$75,000

$88,000

Plummeting instructors

$28,500

$39,700

$49,750

$58,500

$77,250

Advanced girls instructors

$14,600

$24,000

$33,000

$44,100

$52,000

Subtotal Direct Cost of Sales

$64,100

$91,700

$132,750

$177,600

$217,250

Table 1: Five-year sales forecast

Personnel Remuneration

Year 1 ($)

Year 2 ($)

Year 3 ($)

Year 4 ($)

Year 5 ($)

Receptionist

17,280

20,000

$21,120

32,000

47,000

Justin Ralph

12,000

24,000

$30,000

33,000

34,500

Michelle Jenny

12,000

24,000

$30,000

33,000

34,500

Total People

8

9

9

11

11

Total Payroll

41,280

68,000

81,120

98,000

116,000

Table 2: Personnel remuneration

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