Executive Summary
Saudi Arabia fitness Centre targets boys aged between 8 and 16 years.The business proposal is quite viable owing to the fact that young children live unhealthy lifestyles. Since the current fitness centres are unsafe and unviable for the young generation, young boys in Saudi Arabia are in desperate need of a fitness centre. Moreover, the economy of Saudi Arabia and its population growth presents a healthy potential growth for the fitness business. The mission of this business is to curb the burgeoning problem of a sedentary lifestyle in Saudi Arabia. By targeting young people, the business is likely to nurture a generation of health-sensitive individuals considering the intention to expand the business into all major Saudi cities.
Company Description
The main promoters of the fitness centre comprise of a group of young individuals who are advocating on the importance of healthy living. Currently, the group intends to secure part of funding from Angel Investors. In future, the fitness centre plans to have its initial public opening, where, it will have its stock listed in the Saudi’s stock exchange market. The management structure of the venture will comprise of two directors, and several employees in the administration department, training department, and the nutrition department. One of the managers will have articulate business management skills while the other manager should have some experience in managing a fitness centre. All employees will report to the two managers, whereas, the managers will forward their appeals to the board of directors.
Business aims and objectives
Aims
The main aim of the business is delivering the promise of reshaping the lifestyles of the young boys. Through hard work and dedication, the team will work together to eradicate obesity in Saudi Arabia. The promoters will encourage the culture of keeping fit, and regardless of the challenges, the team will keep on with the spirit of remaining in business without compromising the business motives.
Objectives
The main objectives of the young youths are to attain various milestones in every year. The objectives are as listed below.
- To have registered a minimum of 350 members into the fitness program by the end of the first year;
- To have a turnover of approximately SAR 2,650,000, and to have a variable costs of not more than SAR 1,000,000by the end of the first year;
- To manage to break even by the end of the third year where it should also start gaining some profit in the third year of operation;
- To have registered at least 600 members, which equates to 14.6% of the target market of the selected schools by the end of the third year;
- To be established, well known to the public, and to comfortably raise the membership fee from SAR 4500 to SAR 5000 in the third year.
Services offered at the fitness centre
The centre will mainly focus on the physical well-being of all its members. The trainers will ensure they help overweight members to shed off some weight through vigorous activities, and they will help other members to maintain their physical well-being. At the initial stages, the centre will offer their services to boys aged between 8 and 16 years. However, with time, the centre will could expand its services to welcome female members of the same age group in a female only gym, and it will proceed to offering its services to the adults.
Secondly, the centre will have a dedicated nutritionist who will tailor the nutrition concerns of the clients. Young boys, especially those aged between 8 and 10 will obtain nutrition education. The nutritionist will enlighten the boys of the best eating habits that would upgrade their health. The youth gym will have a specified range of cardiovascular, resistance and interactive fitness equipments specially designed for youngsters.
S.W.O.T. Analysis
Strengths
Saudi Arabia fitness centre has the potentiality to offer the latest and most sophisticated interactive games to help the boys to engage in physical activity for longer periodsis a great strength. The centre will have specialized interactive fitness equipments that would strengthen the fitness centre. Moreover, the fact that fitness centre will offer nutrition services will increase its competitive advantage. Finally, featuring games and other products specifically designed for young boys to have fun while participating in the program is a great strength for the fitness centre.
The specialized interactive fitness equipments that would strengthen the fitness centre include:
- Active floor and wall in the training rooms.
- XBI-bikes with PlayStation gaming.
- Specialized cardiovascular equipment.
- Dance Mat Zones.
- View-Do Boards.
Weaknesses
The program starts by targeting a small group of slippery boys. Dealing with boys aged between 8 and 16 years is too demanding. The newly trained employees may have difficulties handling the group. Secondly, the fact that the boys depend on their parents’ approval and funding may cause promoters to have difficulties in marketing the program and convincing the parents. Lastly, the start up cost is quite high and the process of recouping the investment may be inefficient.
Opportunity assessment
The increasing number of obese children in Saudi Arabia is a clear indication that there is a need for a fitness centre. Studies in Saudi Arabia show that 24% of the children in Saudi Arabia are obese, and the rates are expected to keep rising owing to the sedentary lifestyles of most Saudis. A customer survey in 20 parents proved that the youngster’s fitness centre was indeed a viable business. About 80% of the respondents said their children only exercised in schools in one or two days, and 70% of the respondents indicated that they would enrol their children in youngster gyms if there were one present.
Threats
The existing traditional gyms such as Fitness First and Fitness Time are strongly recognized, and they are the greatest threat of the proposed business. With the evolving technologies, the existing traditional gyms might want to expand their products line and compete for the market share. Another threat is the recovering economy that forces people to budget all their monies in business developmental projects. Finally, the fitness centre is dependent on the few suppliers of equipments and children’s outfits who may decide to inflate the prices for selfish reasons.
Market Analysis
Political factors
Saudi Arabia entered WTO in 2005, and since then, the business environment in the country became transparent and predictable. The political climate in Saudi Arabia is excellent as resident capital companies and non- Saudi residents will find it easy to register and run the fitness centre.
Social factors
Over 50% of the children between the ages 8-16 have weight issues ranging from overweight to obesity, and this population will definitely require fitness services to regain their normal lifestyles.
Economic factors
The economic performance in Saudi Arabia is a clear indication of a thrilling economy that will offer an ample business environment in the future. The average GDP is $906.8 billion, the average GDP growth is 6.8%, and the average GDP per capita is $24,500.
Technological factors
The presence of the oil refining industry in Saudi Arabia has played a great role in upgrading technology in the nation. Importing improved technology will enable the fitness centre to have the latest fitness equipments with much ease.
Environmental factors
Impurities are eradicated because competitors are not allowed to play dirty business games at the expense of those in the same line of business. A code of conduct that obligates the businesspeople to be answerable to all their actions.
Legal factors
The reliability and predictability is because the kingdom does not have the porous democratic nature that changes laws constantly.
The target market will comprise of students who are dependent on their parents for financial support.
Marketing Strategy
The youth fitness centre will reach its target market through local schools. Local schools will be able to offer their students with special rates to join the youth centre. To motivate the local schools, the students will receive a commissions of 5% based on the number of student referrals.
Advertising and use of social networks will be the other forms of marketing strategy. Flyers will be distributed around the local community and neighbouring schools on a quarterly basis.
The intention to expand into other major cities is a strategy to reach as many customers as possible.
Firstly, the youth centre will be based in Dammam, Saudi Arabia. Thereafter, the group of youths intend to expand the business to have at least one centre in all major cities as follows.
- Open a new branch in Khobar in the 4th year.
- Open a second branch in Riyadh in the first half of the 6th year.
- Open a third branch in Jeddah in the second half of the 6th year.
- Open a fourth branch in Mekkah in the first half of the 7th year.
- Open a fifth branch in Madinah in the second half of the 7th year.
Market trends
The fitness centre is likely to take the primary markets trend that would have repeated market trends on a yearly basis. Essentially, the four seasons, winter, summer, spring and autumn will determine the market trend as they determine the periods during which students are on or off the school sessions.
Competitive advantage
A competitive advantage that the fitness centre has is its location. The centre is conveniently located in schools and local community centres to capture the interest of the children. Secondly, the equipments to be installed in the fitness centre are incredible for the targeted population. Moreover, in relation to opportunity creation, the centre will try to expand into traditional gym markets to capture more customers.
Profile of competitors
The main competitor is the Fitness First and Fitness Time gym. The gym has existed for a considerably long period. The Saudis know the gym very well, as such; it has a large market share. However, all existing gyms do not have suitable fitness centres for the youngsters. Therefore, Saudi Arabia fitness centre for young boys will scoop the youngsters who are in desperate need of the fitness services.
Benefits to clients
The youngsters who have grossly limited necessary outdoor activities will have an opportunity to exercise and shed off excess fats. They will have an opportunity to interact and share with their peers in a comfortable environment. Most importantly, the parents will have value for their money.
Pricing Strategy
Yearly membership will cost youngsters approximately SAR 4500 which is cheaper than the average gym SAR 6,500. The forecast is that within the first year, 350 new members will join. The amount would vary across the years depending on the following factors.
- Prices charged by the competitors.
- Competition level in the market.
- Customers’ perception on quality of the services of the fitness centre.
- Overheads costs.
- The customers’ bargaining power.
Competitive Strategy
Product differentiation and high quality services will be the main competitive strategies. For the youth fitness to do well and stay ahead of the competition, the executives will employ the following competitive strategies.
- Format: The centre will offer a wide variety of activities ranging from classes, sports, and specific training that are interesting to the 8-16 year olds.
- Location: The location of all the new branches will be easily accessible. The location must be central, close to schools and possibly, near traditional gyms.
- Staff: The fitness instructors will be experienced professionals with credentials from recognised institutions.
- Safety: The layout and instructions will promote safety and avoid injuries at all cost.
- Insurance: The centre will have updated liability insurance to protect all the customers who are injured during the workout.
Staffing and Operation
- Director 1 should be a current master’s student with a bachelor in business management, have a CF30 qualification by the financial services authority (FCA now), and be a former asset investment manager.
- Director 2 should be a former business development employee at “alqoua fitness,” and have relevant experience in fitness centre construction and expansion.
- The trainers should have at least 2 years experience of dealing with youngsters, and they should have certifications from fitness education provider.
- The nutritionist must be a registered dietician with at least for 3 years experience. He/ she must have specialized training in nutrition for youngsters.
- The salesperson/ receptionist must have a high school diploma with at least 5 years work experience in sales.
Roles and responsibilities
Director 1 and 2 report all the pleas of the other staff to the board of directors.
With a ratio of one personal trainer to 10 customers, the trainers will develop training sequencers and strategies, creating training materials, prepare manuals to support staff and customers, organizing feedback and reports on training, and goals. The trainers will report the progress of customers’ health and weight, where, the subordinate trainers will report to the head trainer.
The nurse will analyze tests, recommending nutritional plans or diets, offer nutritional education, and observe the progress of the clients.
The salesperson will handle the sales tasks, administrative tasks, promote the business, and deal with complaints and general enquiries.
Sales and operational plan
The demonstration shows the regular process that a customer will follow when joining the gym.
Opportunity vs. risk management
From the 5D opportunity model and the RAMP model, it is evident that the fitness centre investment is viable. The scores are above average in all cases. The two highly risky factors are the investment and capital resources and the return on investment, which have below average scores in the 5D opportunity scores and RAMP model respectively.
Financial plan
Payment terms
For the first two years, the centre will always offer free week training for new members. At the end of that week, the members will have to pay SAR4500 in one instalment for annual membership. Thereafter, there will be an automatic renewal of membership via direct debit, unless the customer opts out with a written notice one month in advance.
Financial projections overview
The company should expect losses in the first year because of the high onetime costs of purchasing and shipping of the required equipments (1500000). Therefore, the company might have a margin loss of -62%. In the second year, the business will not have to make the same capital investments. Therefore, the business should break even at SAR472288 at the end of the second year. Based on estimates, the company may start making some profit in year 3 with a margin of 55%.
The estimates fixed costs through the years are as listed below.
Fixed costs, total = SAR 1,000,000.
Rent: SAR 490,000 (rent per square meter is SAR *1000-2500) (4500sq. metres needed for the fitness centre).
Employees will cost the centre SAR 55,000 which equates SAR 660,000 a year rising to 69,000 and 78,000 a month in year 2 and 3 respectively.
Capital investment costs:
Equipment:1,500,000, property SAR 1000 per square meter, Capital needed SAR 2.5 Million).
The estimated cash balance for 2015 will be (1,265,375).
The estimated cash balance for 2016 will be (472,288).
The estimated cash balance for 2017 will be 763,462.
At the Opening day balance sheet the total current assets would be SAR4,490,000, and a liabilities of 23,625.
An important assumption made was the depreciating value of the equipment, where, the equipment depreciation rate in the industry is 15% a year (consultation from Mr.Mohammed Radwan, a former business development employee at “alqoua fitness” ).
Opening Day Balance Sheet
The company will have a total liability and net worth of € 4,490,000.00.
The owners’ equity (Net worth)will be estimated at € 4,466,375.00, while the total liabilities will be € 23,625.00 as at 2nd January 2015.
After operating for some time, the business will start having some short-term debts, long-term debts, and other entries that will be included in the balance sheet.