Financial Feasibility Analysis

WILL YOUR BUSINESS MAKE A PROFIT?

Keep in mind that we are still in the Gym, Health, and Fitness Clubs business in Texas. You found an existing building or land and can grow faster than the industry average. Porter’s Generic Model of Competition has helped you pinpoint an entry wedge with unique customers. 

For Students Using Readers

This lesson starts with a multi-piece diagram. I will cover more details of Michael Porter’s Generic Model of Competition in the lesson that follows. I can’t use the exact image due to copyright laws. Let me describe my adapted model above. Barrowed from the “Twilight Zone,” imagine if you will.

The model is anchored with a long slender rectangle in the middle of the page. The rectangle recognizes the importance of the end user and measuring the customer’s value proposition. On each side of the rectangle are two smaller boxes for a total of four boxes. Coming from each box is an arrow facing the slender rectangle. The boxes represent arenas where firms can compete. Arena one is located in the top right-hand side and represents the Ford Automobile position of broad market and low cost. I designate arena one as one-dollar sign. Located in the top left-hand corner, arena two is a box representing the Mercedes position or broad market differentiated. Arena two is characterized by two-dollar signs. 

Moving over to the bottom right-hand corner, arena three is a box that represents the Ferrari position of narrow market and special. Keep in mind that this product or service is expensive. Arena three is characterized by three-dollar signs. If we look to the bottom left-hand side of the page, we see arena four. Here we very high-end products and services such as the Bugatti Chiron position of an extremely narrow high-end market. Pricing is afforded by only a few high-net-worth individuals. Four-dollar signs. 

Purpose

The purpose of this assignment is to test the money aspect of the business. This will determine if we have a business, a pipe dream, or a hobby. This assignment will explain the differences between 1) cost and price, and 2) customer vs target market. Remember that each box above has a unique cost structure, pricing, target market, brand image, supply chain, and customer expectations. Once again, we shop at Walmart for painting clothes for a reason. 

Mechanics

Start with chapter 8 and then pages 98-103 of the textbook. (Submit the assignment file to Canvas as Lastname.Firstname.FINA.docx.)

Your written report (Technical writing) should be key boarded, possess both a cover page and works cited, utilize the American Psychological Association (APA) citation format, and be 3 pages in length (excluding cover page and works cited). Use 12-point Arial font, left justified, 1/4-inch indentions, levels 1-2-3 headings, page numbers, and single line and character spacing. (Use the “No Spacing” box selection on the Microsoft Word ribbon to produce single line and character spacing). Do space between paragraphs for readability.

I am expecting a professional report that (a) demonstrates a command and understanding of the topic, (b) uses sound presentation logic and well thought through justifications, and (c) displays use of appropriate graphs, charts, and tables. I have provided you with levels one and two headings to get started. You may not use ChatGPT, Grammarly, or any AI application on this assignment.  

Turn in your Word files to Canvas for submission to www.turnitin.comLinks to an external site.. (Use the control button and select the Word and Excel files to upload to Canvas). Do not send me assignments in PDF, HTML, HEIC, Pages®, Word Perfect®, linked to Microsoft 365®, linked to OneNote®, linked to Sharepoint.com®, or linked to Google Docs®. All submissions will be graded as to following instructions, content, punctuation, grammar, citations, and sentence structure. Late submissions will not be accepted (unless covered by university policy). Please view the videos below (citations and headings) and answer the following questions in paragraph form.

Assignment

Now, explain to me in a Word document where and how the numbers were derived. Also, share if you will be above industry averages or below and how/ why. i.e. The ratios for a Gym business may be higher than the industry average due to economies of scale. The key is to be as efficient as possible in order to make a profit. Start-up cash will cover the start-up expenses and real estate. You will bring 20% to the table and ask for a loan for the rest. Second year cash flow should provide breathing room on expenses. The point here is to make you aware of what it takes to run a successful Gym business. 

Use the 2024 Gym Fitness Center Financial Feasibility Assignment Spreadsheet.xlsx. Download 2024 Gym Fitness Center Financial Feasibility Assignment Spreadsheet.xlsx. You will need to change the numbers to fit your situation like revenue based on customer purchases. I have also inserted the typical averages for certain categories (in the cells) as per the industry report. The numbers in the cells should change as you change the revenue number. There is no need for you to find the industry numbers on your own. However, you may change these based on lower costs. 

Next, you must determine the average sale per customer for your Gym business concept. i.e. Do you have variable pricing due to seasonal fluctuations? Are you open seven days a week? Then multiple that by the number of days you are open for business times the daily customer count.

Financial Feasibility Analysis (level one heading)

Level two headings follow with writing prompts. 

• Capital Requirements 

How much cash and securities do we need to get started? We will bring 20% with us for a loan. 

• Estimated Earnings 

Can we beat the industry averages in the IBIS report? What do the numbers look like? Do we lose money at first while developing the company? What expenses do you have? Are your expenses higher or lower than industry averages? How did you accomplish this? 

• Return on Investment 

Can we beat the industry average? What is the normal return on an investment like this? How soon do we expect to make a return on investment? 

Remember that you can estimate your expenses using the IBIS industry report. Start with your customer count, percent of occupancy, and estimated sales. Then estimate your expenses using the averages listed in the IBIS report.

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