To build or buy

Posted: August 12th, 2013

To Build or Buy

Name:

Institution:

Date:

To Build or Buy

1. Craft a brief (1-2 pages) strategy for a business concept that would directly compete with the small business you selected.

The business I have selected is a fitness center located in Centerville, where I live. I have selected this business because I have a business strategy that would change the current business from its current financial position. Currently, the business is open from Tuesday to Friday for only a few hours. My business concept aims at transforming this business from its current position, to a well-known place in the region. It will do this by strengthening the weaknesses of the current business operations, and adding more features. The business has the potential to do well, seeing that it is in a prime location with a high population of middle to high-income earners. My idea is to purchase the business from the current owners, who are already looking for a buyer, renovate it, and market it to the people. The current gym does not have data on current membership because most people who frequent it come and go as they please. I aim to change this by making the gym profitable. There are many changes to be made for the business to operate well and become more profitable. Currently, the owners of the business are not fully dedicated and committed to the business, thus, the dwindling membership and lack of service. I have realized that what the business needs is a strong administrator, who will be there to ensure that everything is running smoothly. The business needs to hire trained personnel, who are well versed in this business. It needs some renovations, in terms of the design layout and the decor. The refurbishment will ensure increased space. It needs some renovations in different areas such as bathrooms. Such changes will attract clients to the business.

 2. Determine if it would make more sense to open the new business you describe or to purchase the existing business you selected

Purchasing the current business would be more sensible and practical. This business requires a lot of capital investment. It requires one to spend a lot of money in purchasing the necessary equipment. Purchasing the business will enable me to save a lot of money, which will be needed for renovation purposes. I will be able to save money since I will not incur the same costs purchasing the existing equipment, as would be the case if I were to purchase all the equipment when new (Quinn, 2010).

3. Discuss the most appropriate form of ownership for your new business

The most appropriate form of ownership in this case would be a partnership. Although this business has some disadvantages in terms of lesser profits realized compared to sole proprietorship, it is the most suitable form of business ownership currently because of my financial situation. Forming a partnership will enable me to have enough money for the business, which is necessary for implementing all the necessary changes. I will look for partners who share the same vision and ideals. I will lay out the plans for the business, including the required costs. I will decide on the number of partners needed, based on how we are able to meet the financial obligations of the company. All the partners will have to sign the partners’ agreement, which lays out the terms and conditions of being a partner.

The agreement protects the interests of the member partners. It lays out the details of profit and liability sharing. The agreement will describe the methods that the partners will use, and the action they will take in case of disagreements. It will also describe how the members can terminate the business partnership, and how they can receive their share of investment if this happens. This will also determine the action taken if one of the partners decides to quit the business while it is operating under a loss, or when there are no profits to be shared among the members. The partnership that the members will form will determine the responsibilities that the members will have, and the agreement will contain this. The partnership business is a sensitive business, which can end when the members fail to agree on certain issues. Having a partner’s agreement reduces the chances of such occurrences. It gives the members a chance to understand what they are getting themselves into when becoming partners. Members who feel that they cannot work under such conditions are free to leave the partnership, or they can decide to negotiate the terms of the contract, before signing it. Such actions increase the success of a partnership business. Each partner will contribute a certain percentage of the capital necessary to start the business. There are several benefits of choosing partnerships as forms of business ownership. Perhaps the greatest benefit is that this form of business ensures shared liabilities and contributes more financial resources for the business. The partners are able to contribute money to meet all the expenses needed, and responsibilities are not left to one individual (Moye, 2004).

4. Business plan

Executive summary

The proposed All-Sleek gym aims at improving people’s health by giving them the opportunity to exercise and keep fit. Currently the business has one trainer, but it is intending to increase the number of trainers to seven, with the proposed changes. It is a fitness center located near the leafy suburbs of Centreville. The current management of the All-Sleek Gym is considering closing the gym because of the high costs they are experiencing, and because they do not have the time to run it well. The gym is located in a nice environment. The place is not too crowded, and it allows for privacy. There is no other gym near the location although there are many people from the suburbs. Most of the people in the area are middle and high-income earners. There is a potential to improve the current situation in the gym. Because of its location, it is possible to have a high record of membership, and gain some profits when operating the business.

Company description

The All-Sleek Gym is a fitness center that will serve the fitness needs of the people in Centerville area. The gym is well equipped with modern exercise and fitness equipment including treadmills, weight and neck lifts, benches, free weights, rubber mats, stationery exercise bikes, rowing machines, Swiss balls, leg presses, hack squat machines, lat pull downs, elliptical machines, and stair steppers. This is, in addition to the swimming pool, sauna, and tennis court. These exercise equipment will meet the customers’ demands since the customers will use the machines for their exercise needs. The location of the fitness center and long opening hours of the business, coupled with the added personal trainers will provide a competitive advantage that the business needs.

Market analysis

The fitness industry is one of the most profitable industries in the country with annual revenues of about $25bn. The industry has continued to grow as more people become aware of the need to stay healthy. There are different customers in this industry. They include athletes, who have a daily exercise routine, health conscious people who want to remain fit and maintain their weight, people on rehabilitation, such as those who have been injured in accidents or who have suffered life-threatening conditions such as diabetes, stroke, and heart diseases. Others include overweight people with the desire to lose weight, and older citizens who want to improve their health conditions. Currently, the rates of overweight and obese teens and children continue to increase, and the industry is targeting this market.

The All-Sleek Gym will concentrate on two market segments. The first segment will be the health conscious, either fit people who want to remain healthy or overweight people who want to improve their lifestyle and the second segment will be children and teens having weight problems. These are the largest segments of all customers, and they have the potential to increase. The needs of these segments in the Centerville area are not being met because of the poor operations of the available gym. Only the few individuals who have the time and money can drive to the nearby town where the next available gym is located. Because of this, I expect to have a majority of the market share in the region. People who have had an interest in keeping fit but could not find a place to do so will now have a gym in their neighborhood.

Organization and management

The company will be a partnership of like-minded individuals from different sectors. Each partner’s share of the business will be based on his or her initial investment in the business. There will be a maximum of seven partners. The partners will be the owners of the company, but they will hire a full time administrator who has experience working in a gym. The partners will decide on the person to hold the position, based on his or her education level, areas of expertise, and the level of experience. The administrator will be responsible for the daily operations of the gym. He or she will open and close the business, receive clients, hire trainers and other staff, and ensure that all the gym equipments are in proper condition. He or she will ensure that the business is operating legally, by having the necessary business licenses, permits, and insurance. The administrator will have professional qualifications in exercise and fitness, as well as be well versed in business management principles. The administrator will have one assistant, who will assist him in running the business. The expected annual salary of the administrator will be $75, 000, while that of his or her assistant will be $55, 000.

Service or product line

Some people fear going to gyms because they do not have an idea how to start. The company will have professional trainers, who will be responsible for guiding first time beginners. The trainers will ensure that the customers exercise at a suitable rate. They will assist customers in forming a practical and realistic fitness program. The idea to include a teen and children section, separate from the adult section is a good and beneficial idea. This will ensure that parents can bring their children with them to the gym. The section will be different from the adult section and it will have programs that are especially suited to this market. The children will enjoy fun activities such as dancing and swimming lessons, during the workout program. The children will work out at a comfortable pace and time. This is one activity they will enjoy doing, since they do not have to worry about any qualifications.

Marketing and sales

The company will embark on a marketing campaign, which is intended to introduce the potential customers to the business. It will develop different marketing and promotional strategies. The company’s employees will hand out flyers with company information. They will target different meeting centers including the city’s retail stores, grocery stores, recreational areas, restaurants, churches, and schools. The company will invite members to try out the new equipment at no charge for one week. During this time, the trainers will be available, and will operate as they would if they were dealing with paying customers. The trainers will guide the customers during the training program, and they will show the customers how to use the equipment.

Funding request

Although the company will not purchase most of the gym equipment, it will still incur some expenses, as it will need to renovate the gym. This will require about $35 000. These funds will come from individual member contributions, and they will be used as working capital. The money will be used to improve the décor by adding mirrors, lights, television screens, music systems, and other security features. It will add more showers, locker rooms, and changing rooms, and improve the existing ones. The money will also be used to add a sauna, since the gym does not currently have one. Part of the money will go towards the marketing campaign.

Financial projections

The company will have grown substantially within the next five years.

Financial projections for five years