Does your new venture need a feasibility study?
We combine decades of experience in all aspects of the fitness industry to provide you with expert guidance.
Convenience is still the number one reason why people join a club, but now, because of a plethora of low-priced clubs, the cost vs. perceived value has become a very important factor.
What will your Unique Sales Proposition (USP) be? What features, programs, or services can you offer that a competitor doesn’t have? That being said, it is highly unlikely that your market will consist of a certain radius (i.e. 5 miles). Likely, it will be a polygon based on issues such related to traffic patterns and density.
For the months leading up to that point you will project operating at a deficit. Therefore, you will need to have contingency/operating capital included in your start-up costs to cover those months of losses. Be sure to include an escrow for repairs and capital improvements as they will be necessary to add equipment and make renovations as time goes on. Finally, run multiple scenarios to see what your success will look like in a best case and worst case. If profitability looks good for your conservative model you have a good chance for success.
At a minimum, the Business Plan should include:
- An executive summary
- Market analysis
- Site analysis (if one has been selected)
- Competitive analysis
- Sales & marketing strategies
- Financial projections
- Start-up costs
After speaking with several commercial lenders, there is not an appetite for fitness/hospitality/hotel type businesses. They also noted that if such a loan were even to be considered, they would run the loan through the SBA to limit exposure on their end. While this will require more regulations and paperwork, it may be the only option for a commercial loan. In addition, the collateral needed is likely to be a minimum of 100% of the loan up to 120% in some cases.
Without that personal relationship, private investors will likely be too risk averse to venture into the fitness industry. We recently helped a client open a club by using funds that his wealthy brother provided. A young woman opened her dream studio with funds from her parents.
Another client is working with a real estate investor to pick up a club that is situated in a very up and coming neighborhood. The club will provide the income to pay off the loan as the property values increase. These opportunities exist.