Report-Case Esah

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Report

Executive Summary
This report evaluates two potential business models for Esah's new fitness venture: mobile
fitness services and a fixed fitness studio. After a thorough analysis of financials, market trends,
and strategic fit, the mobile fitness service is recommended as the more viable option due to its
lower initial costs, higher flexibility, and alignment with current consumer preferences for
personalized and convenient fitness solutions. This model promises a quicker path to profitability
and offers substantial growth potential in a competitive market.

Contents
Report............................................................................................................................................ 1
Executive Summary.......................................................................................................................2
Introduction................................................................................................................................... 4
Business Aims and Objectives.......................................................................................................4
Analysis of Business Environment................................................................................................ 4
Internal Environment................................................................................................................. 4
External Environment................................................................................................................ 5
Option Analysis............................................................................................................................. 5
Option 1: Mobile Fitness Services............................................................................................. 5
Option 2: Fitness Studio on Industrial Estate.............................................................................6
Financial Analysis and Forecasting............................................................................................... 7
Option 1: Mobile Fitness Services............................................................................................. 7
Initial Costs:........................................................................................................................... 7
Recurring Costs:..................................................................................................................... 7
Revenue Streams:................................................................................................................... 7
Financial Ratios and Break-even Analysis:............................................................................7
Option 2: Fitness Studio on Industrial Estate.............................................................................8
Initial Costs:........................................................................................................................... 8
Recurring Costs:..................................................................................................................... 8
Revenue Streams:................................................................................................................... 8
Financial Ratios and Break-even Analysis:............................................................................8
Regulatory and Legal Considerations............................................................................................9
Risk Analysis................................................................................................................................. 9
Option 1: Mobile Fitness Services............................................................................................. 9
Potential Risks:.......................................................................................................................9
Mitigation Strategies:........................................................................................................... 10
Option 2: Fitness Studio on Industrial Estate...........................................................................10
Potential Risks:.....................................................................................................................10
Mitigation Strategies:........................................................................................................... 10
Recommendation......................................................................................................................... 11
Conclusion................................................................................................................................... 11
References................................................................................................................................... 12
Introduction
In this report, we explore the business venture possibilities for Esah, a qualified fitness instructor
passionate about promoting health and well-being. Having gained significant experience working
in a local fitness studio since her academic studies in health and fitness, Esah is now keen to
establish her own business to support personal fitness goals. The fitness industry, valued at USD
70.3 billion in 2023 and expected to grow annually by 7.67% until 2030, offers a promising
landscape for new entrants. This growth is underpinned by increasing global awareness about
health and a surge in fitness club memberships, indicating a strong consumer willingness to
invest in fitness services. Additionally, trends such as high demand for specialty fitness classes
and the rise of active aging among the older population further diversify the potential offerings
and client base for Esah's new venture. The fitness market is evidently ripe with opportunities,
setting a favorable stage for Esah to launch her innovative fitness solutions.

Business Aims and Objectives


Esah's new micro business is strategically aimed at capitalizing on her expertise in fitness
instruction to foster individual health and well-being. The primary aim is to establish a profitable
venture that not only survives but thrives in the competitive fitness market. She intends to
leverage her qualifications and experience to provide unique and personalized training sessions
that directly cater to the individual fitness goals of her clients. This tailored approach is
anticipated to distinguish her services from traditional fitness centers and gyms, enhancing
customer satisfaction and retention.
In the long term, Esah's objectives extend beyond immediate financial gains to encompass
substantial business growth and expansion. She envisions broadening her service offerings to
include a variety of fitness classes and possibly integrating wellness services that complement
her fitness programs. Additionally, there is an opportunity to scale the business model to include
multiple mobile units or even a permanent studio location, depending on the market response and
financial viability. This expansion would potentially open avenues to tap into different market
segments, further solidifying her brand in the fitness industry.

Analysis of Business Environment

Internal Environment
The internal environment of Esah's proposed fitness business is shaped by the human, physical,
and financial resources available to her, alongside a streamlined management structure. As a sole
proprietor, Esah brings valuable human resources through her extensive qualifications and
experience in fitness instruction, equipping her to deliver personalized and specialized training
sessions. Physically, the options vary between a mobile fitness service and a static studio, each
requiring different types of assets and investments. For instance, the mobile service will involve
a significant outlay in a well-equipped vehicle, whereas the fitness studio would need a fully
outfitted space in an industrial estate. Financially, initial funding appears manageable within
Esah's current financial scope, with potential for revenue generation through her planned
services. Structurally, the management is initially simple, with Esah at the helm managing daily
operations and potentially one other staff member if the studio option is selected. This lean
management approach helps minimize overheads and simplifies decision-making processes,
which is critical for agility in the competitive fitness market (Pröllochs & Feuerriegel, 2020;
Partini & Witamajaya, 2023).

External Environment
Esah's fitness business venture is set against a backdrop of favorable market trends and industry
growth. The fitness industry is currently thriving, projected to reach a market value of
approximately USD 169.7 billion by 2030, driven by a 7.67% annual growth rate. This surge is
supported by increasing health awareness and a societal shift towards wellness, fostering greater
consumer spending on fitness services. Specific trends include the growing popularity of
specialized fitness studios and the demand for more personalized training experiences. As the
demographic landscape changes, with a significant portion of the population aging, there is an
emerging focus on 'active aging', which opens new market segments for Esah's services,
particularly in offering tailored fitness programs that cater to older adults (Pratama, Sutopo, &
Rochani, 2022).
However, the competitive landscape and economic factors present challenges that Esah must
navigate. The fitness industry is highly competitive, with numerous established chains and
independent studios vying for market share. New entrants like Esah need to differentiate
themselves to gain traction. Economically, factors such as fluctuating consumer spending power
and potential economic downturns could affect discretionary spending on fitness. Nevertheless,
the ongoing consumer commitment to health and fitness, even amidst economic uncertainties,
suggests a resilient market. To succeed, Esah will need to strategically position her services to
leverage current trends while mitigating the risks associated with economic volatility and
competition (Keerthi & Eswari, 2020; Winn & Martindale, 2020).
Option Analysis

Option 1: Mobile Fitness Services


Option 1 for Esah's fitness venture involves providing mobile fitness services directly at the
client’s home, offering a unique and personalized approach to fitness training. This model allows
clients to book individual sessions with Esah, who then drives a fully equipped, air-conditioned
mobile studio to the client’s location. Each session is designed to deliver tailored fitness
instruction and includes complimentary health-related perks such as protein bars and water. This
option targets customers seeking convenience and privacy in their fitness routines, potentially
differentiating Esah's services from traditional gym-based offerings (Pröllochs & Feuerriegel,
2020).
The initial investments for the mobile fitness service are significant but focused. Esah would
need to invest in a reliable vehicle that can be converted into a mobile gym, along with the
necessary fitness equipment. The annual costs include $18,000 for the vehicle lease and
equipment, $8,000 for insurance, and other expenses such as fuel and maintenance, totaling
around $5,000. The operational model also involves variable costs like the cost of goods sold,
accounting for 4% of sales revenue, which covers the consumables offered during sessions
(Pratama, Sutopo, & Rochani, 2022).
While this mobile service offers substantial growth prospects by catering to a niche market, it
also faces several challenges. The high initial and recurring costs pose a significant financial risk,
especially if client acquisition does not meet projections. Additionally, the dependence on a
single vehicle and operator limits scalability and increases vulnerability to operational
disruptions. However, if managed effectively, this business model can capitalize on the growing
trend of personalized and convenient fitness solutions, offering significant competitive advantage
in the right markets (Keerthi & Eswari, 2020).

Option 2: Fitness Studio on Industrial Estate


Option 2 for Esah's business involves opening a new fitness studio on an industrial estate,
designed to offer a range of fitness services in a fixed location. This studio would provide
customers with access to various fitness equipment and space for group classes, potentially
including high-demand offerings such as yoga, Pilates, and Zumba. The facility would also
feature a small kitchen area for clients and staff, enhancing the overall customer experience by
providing complimentary drinks as part of the membership fee. This option caters to individuals
looking for a comprehensive fitness environment and community, which could help in building a
loyal client base (Palepu et al., 2020).
The financial commitment for establishing the fitness studio includes significant upfront and
ongoing expenses. The initial setup requires leasing a property, which costs $4,500 monthly, and
outfitting it with necessary fitness equipment, estimated at $6,000 annually. Additional
operational costs include staff wages at $13,000 annually, insurances, utility bills, and property
maintenance. The cost of goods sold, primarily drinks and cleaning materials, is expected to be
around 2% of sales revenue (Winn & Martindale, 2020).
Despite the higher initial investment, the fitness studio presents significant growth prospects by
offering a stable and scalable business model. The ability to serve multiple clients
simultaneously allows for greater revenue generation per hour than the mobile option. However,
this approach also introduces challenges such as the need for effective marketing to maintain
high membership levels and manage competition from other local fitness centers. Additionally,
the fixed location limits flexibility and increases dependency on local market conditions.
Strategic location selection and robust marketing efforts will be critical to attract and retain a
substantial customer base in this competitive environment (Dolezel et al., 2023).

Financial Analysis and Forecasting

Option 1: Mobile Fitness Services

Initial Costs:
 Vehicle and equipment lease: $18,000 per year

Recurring Costs:
 Insurances: $8,000 per year
 Fuel and other bills: $5,000 per year
 Maintenance and repairs: $1,000 per year
 Cost of goods sold (4% of sales revenue)

Revenue Streams:
 Weekly sales from 25 hourly sessions at $30 each session: $750
 Annual revenue: $750 * 52 weeks = $39,000

Financial Ratios and Break-even Analysis:


Gross Profit Margin:

Net Profit Margin:


Return on Assets (ROA): Assuming assets are primarily the vehicle and initial equipment
valued at $18,000:

Current Ratio: Assuming current liabilities are mainly trade payables:

Break-even Analysis:

Option 2: Fitness Studio on Industrial Estate

Initial Costs:
 Rent of property: $4,500 per month = $54,000 per year

Recurring Costs:
 Lease of fitness equipment: $6,000 per year
 Staff wages: $13,000 per year
 Insurances: $5,000 per year
 Utility and other bills: $2,000 per year
 Property maintenance and repairs: $1,200 per year
 Cost of goods sold (2% of sales revenue)

Revenue Streams:
 Predicted sales revenue: $37,440 per year
Financial Ratios and Break-even Analysis:
Gross Profit Margin:

Net Profit Margin:

Return on Assets (ROA): Assuming initial investment in equipment and lease improvements of
$60,000:

Current Ratio:

Break-even Analysis:

Regulatory and Legal Considerations


Regulatory and legal considerations play a critical role in the setup and operation of Esah's
proposed fitness ventures. Both options—mobile fitness services and a fixed fitness studio—
require adherence to specific permits and licenses to operate legally. For the mobile fitness
service, Esah needs vehicle operation licenses, business operation licenses, and possibly special
permits for operating a business in public or residential areas. For the fitness studio, building
permits, health and safety certifications, and business licenses are essential. Additionally, both
setups must comply with health and safety regulations that govern public spaces and personal
service businesses. This includes regular safety inspections of equipment and facilities,
adherence to sanitation standards, and ensuring accessibility to accommodate clients with
disabilities (Dolezel et al., 2023). Compliance with these regulations not only ensures legal
operation but also builds trust with clients, enhancing the business's reputation and operational
stability.
Risk Analysis

Option 1: Mobile Fitness Services

Potential Risks:
1. Vehicle Dependence: The business model relies entirely on a single vehicle, which poses
risks related to mechanical failures or accidents.
2. Client Acquisition and Retention: As a new and unique service, the mobile fitness
business may struggle with attracting and retaining clients.
3. Operational Costs: Fluctuations in fuel prices and unexpected maintenance can increase
operational costs significantly.

Mitigation Strategies:
 Regular Maintenance and Insurance: Ensure regular vehicle maintenance and
comprehensive insurance to manage risks of breakdowns and accidents.
 Marketing and Customer Engagement: Implement strong marketing strategies and
maintain high service quality to attract and retain clients.
 Cost Management: Keep a reserve fund for unexpected increases in operational costs
and regularly review supplier contracts to minimize expenses.

Option 2: Fitness Studio on Industrial Estate

Potential Risks:
1. High Overhead Costs: Fixed costs such as rent and salaries are substantial, making the
business vulnerable to cash flow issues.
2. Market Competition: The fitness market is highly competitive, and a new studio may
struggle to differentiate itself.
3. Economic Sensitivity: Economic downturns can reduce discretionary consumer
spending on fitness memberships.

Mitigation Strategies:
 Diversified Revenue Streams: Offer a range of services, including personal training,
classes, and health products to diversify income sources.
 Unique Selling Proposition: Develop unique fitness programs or services that set the
studio apart from competitors.
 Flexible Membership Plans: Provide flexible pricing and membership options to attract
a broader customer base during economic fluctuations.
Risk Category Option 1: Mobile Option 2: Fitness Mitigation Strategy
Fitness Services Studio
Vehicle High dependence on N/A Regular maintenance
Dependence vehicle operability and and comprehensive
condition insurance
Client Need to build client base Need to attract Strong marketing and
Acquisition for mobile service members to high-quality service
location
Operational Fuel prices and High fixed costs Reserve funds and cost
Costs maintenance can vary like rent, wages management practices
Market Unique service but High competition Unique programs and
Competition limited exposure in local market competitive service
offerings
Economic Affected by economic High sensitivity to Flexible pricing and
Sensitivity changes affecting client economic dips diversified service
spend offerings

Recommendation
Based on the comprehensive analysis of both business options for Esah's fitness venture, the
recommendation leans towards Option 1: Mobile Fitness Services. This option presents a more
viable choice when considering financials and strategic fit within the current market landscape.
Financially, the mobile service requires lower initial capital outlay compared to the studio option
and shows a higher potential return on investment with a gross profit margin of 96% and a net
profit margin of 11.38% (Pratama, Sutopo, & Rochani, 2022). The break-even analysis also
indicates that reaching profitability is more feasible within a shorter timeframe under this model.
Strategically, the mobile fitness service capitalizes on the growing trend of personalized and
convenient health services, catering to clients who prefer privacy and flexibility, which can
distinguish Esah's business from traditional gym setups (Keerthi & Eswari, 2020).
Furthermore, the mobile fitness option offers scalability and lower fixed costs, which are crucial
advantages in the dynamic fitness market. It allows for the expansion of services and client base
without the high overhead associated with a fixed location. Although this model is dependent on
vehicle reliability and client acquisition, these risks are manageable with robust marketing
strategies and regular vehicle maintenance. The unique selling proposition of providing fitness
services at the convenience of the client's chosen location is likely to create a strong market
presence and customer loyalty, essential for sustainable business growth (Winn & Martindale,
2020). This option not only aligns with current consumer preferences for bespoke services but
also provides a flexible platform for future expansion and adaptation to market changes.
Conclusion
In conclusion, the analysis of Esah's prospective business options—mobile fitness services and a
fixed fitness studio—reveals distinct advantages and challenges associated with each model. The
mobile fitness service emerges as the more strategically viable option, combining financial
accessibility with a unique market position that leverages the growing trend towards personalized
and convenient fitness solutions. With a high gross profit margin and a reasonable break-even
point, this model offers a promising path to profitability and sustainability in a competitive
industry. Looking ahead, the success of this venture will hinge on effective marketing, consistent
service quality, and the agile management of operational risks. As consumer preferences
continue to evolve towards personalized health and wellness services, Esah's mobile fitness
business is well-positioned to adapt and thrive, potentially expanding its offerings and client base
as the market develops. This strategic choice not only aligns with current market trends but also
sets a solid foundation for future growth and adaptation in the dynamic landscape of the fitness
industry.
References
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