Report-Case Esah
Report-Case Esah
Report-Case Esah
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.
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
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
Break-even Analysis:
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:
Return on Assets (ROA): Assuming initial investment in equipment and lease improvements of
$60,000:
Current Ratio:
Break-even Analysis:
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.
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.
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