ED Assignment 2

Business Plan Of a GYM

An Assignment Submitted to
SHRI RAMDEOBABA COLLEGE OF ENGINEERING AND MANAGEMENT, NAGPUR.
(An Autonomous Institute of RashtrasantTukodjiMaharaj Nagpur University)

Submitted by
Prajwal.P.Rahangdale(102)

Under the Guidance of

Prof.M.R.Jain

Department of Industrial Engineering

Shri Ramdeobaba College of Engineering and Management

Shri Ramdeobaba College of Engineering and Management,
Nagpur
(An Autonomous Institute of RashtrasantTukodjiMaharaj Nagpur University)

Department of Industrial Engineering

CERTIFICATE

The Assignment on creating a Business plan for a GYM is submitted by

Prajwal.P.Rahangdale(102) of VI Semester in Industrial Engineering, is a record
of original work carried out by them. This work has been carried out under my
supervision at the Department of Industrial Engineering, Shri Ramdeobaba
College of Engineering and Management, Nagpur during the academic session
2020-21. The work is comprehensive, complete and fit for evaluation, to the
best of my knowledge.

Date: 20-02-2021

Prof. M. R. Jain
Department of Industrial Engineering
 DECLARATION

I hereby declare that the Assignment on creating a Business plan for a GYM is
submitted herein for the partial fulfillment of VI Semester in Industrial
Engineering has been carried out by me in the Department of Industrial
Engineering of Shri Ramdeobaba College of Engineering and Management,
Nagpur. The work is original and has not been submitted earlier as a whole or
in part for the award of any degree / diploma at this or any other Institution /
University.

Date: 20-02-2021

Prajwal.P.Rahangdale(102)
GYM LOGO
 EXECUTIVE SUMMARY

Spartans Fitness Club is an organization that will ensure that people stay fit by
exercising regularly and maintaining a healthy lifestyle. We are going to be
located at Narendra Nagar, Nagpur.

We are able to secure a standard facility along the road in the heart of the city.
Our facility will be equipped with advanced technology.  We will work towards
ensuring that we provide our clients /members with a daily schedule of
exercises and diet that perfectly suit their lifestyle and also to help them
achieve their desired results and to help them create lasting healthy habits.

One of our major goals of starting Spartans Fitness Club is to encourage adults
and teenagers, to cultivate the habit of regularly exercising and to stay healthy.
Our gym facility is specifically designed and built to take care of adults and
teenagers, we have membership packages that will be highly discounted for
our regular clients.

We will run a fitness club that will help members who want to lose weight,
achieve their goal without stress. We have a weight management consultant
who will work with individual based on customized fitness and nutrition needs.

Spartans Fitness Club is an organization that will provide all round health and
fitness services to the residents of Narendra Nagar, Nagpur, which is why we
have been able to put up a facility that can help us achieve the goal. We are
optimistic that everyone who enrolled in our gym and fitness club will
definitely reap the promised value for their money.
 TABLE OF CONTENT

 Introduction to the organization

 Comparison with others

 About the venture

 Operation strategy

 Marketing strategy

 Financial plans
 Investment plan
 Forecasted Financial Statements
 NPV and IRR of Venture
 Sensitivity analysis of NPV

 SWOT analysis

 Growth prospective
 INTRODUCTION TO THE ORGANIZATION

Gym business is gaining more grounds in recent times. People are now more
aware of the immeasurable benefits they stand to gain when they enroll in a
gym. It is now obvious to a myriad of people that they can stay healthy,
improve their lifestyle and live longer if they exercised regularly.

Statistics has it that there is a steady increase in the number of people that
enroll in gyms and the fact that gym facilities are now closer to residential
areas that makes this possible. In order words, with the increase in the number
of people that enroll in gyms, comes the increase in the revenue generated by
gyms.

Some people enroll in gyms not because they don’t have the money to
purchase some of the basic gym equipment, but because exercising regularly
requires discipline and that is part of what they desire to get when they enroll
in a gym with an instructor at hand.

Different people visit gyms and fitness centre’s for various reasons. Some
people enroll in the gym basically to shed some weight through proper
exercising, while others go to the gym to train for muscle building and
transformation.

These are the services and amenities that will be made available to our clients;

 Personal Trainer’s
 Cardio Equipment’s
 Free weight, and strength training equipment
 Locker Facilities
 Nutrition Counselling
 First Aid Facility
 OUR COMPETITIVE ADVANTAGE

Spartans Fitness Club is located in Narendra Nagar, Nagpur which is an

upmarket area; this is obviously going to give us an edge amongst our
competitors. We equally have a team of highly qualified professionals who will
work with all our clients in helping them achieve their goals and lastly our
membership package is one of the best that anybody living in Narendra Nagar
can get; it’s quite affordable.

We can confidently say that the location of our gym will definitely count as a
positive for us amongst any competitor that might start a gym and fitness club
in the same location as ours. We will continue to work hard to ensure
continuous improvement in our facility and service delivery.

ABOUT THE VENTURE

Our Vision Statement

Spartans Fitness Club will profoundly improve the quality of life for thousands
by educating, inspiring and providing the most efficient, effective and safe
exercise program and nutrition life-style system ever created. Our employees
will be life changers and will have extensive growth opportunities while
fulfilling their passion and servicing their clients.

Our Mission Statement

Spartans Fitness Club will provide clients with the most time efficient and
productive High Intensity Strength Training, Nutritional Consulting, and Post-
Rehabilitation experience possible in a highly consistent professional manner
in the most clinically controlled state-of-the art facilities in the industry in the
safest means possible.

OPERATIONAL STRATEGY

Spartans Fitness Club is in business to become the leading family gym facility in
Narendra Nagar, Nagpur, and we are fully aware that it will take the right
facility, management and organization – structure to achieve our goal. We will
ensure that we recruit only the best hands that can help us achieve all that we
are set to achieve.
Our business will not be built only for the purpose of giving our members /
customers value for their money, but also, we will ensure that we make our
work environment highly conducive for all our employees. We will provide
them with facilities that will help them stay motivated and deliver on their
various tasks and goals. In view of that, we have made provisions for the
following positions to be occupied by highly qualified and experienced staff:

 Gym Manager (Owner)

 Trainers (2)

ROLES AND RESPONSIBILITIES

Manager (Owner):

 Responsible for providing direction for the business

 Creates, communicates, and implements the organization’s vision, mission,
and overall direction – i.e. leading the development and implementation of
the overall organization’s strategy.
 Responsible for fixing prices and signing business deals
 Responsible for recruitment
 Responsible for payment of salaries
 Responsible for signing checks and documents on behalf of the organization
 Evaluates the success of the organization
 Responsible for managing the daily activities in the gym
 Prepares budget and reports for the organization
 Responsible for payment of tax, levies and utility bills

 Training Instructors (2)

 Creates training rosters for members

 Assists members during exercise session
 Guides members on how to make use of gym and fitness equipment.

MARKETING STRATEGY

Market research:
No matter how good the product or service is, the venture cannot succeed
without effective marketing. This begins with the careful, systematic research.
It is very dangerous to assume that you already know about your intended
market. Thus, market research is conducted to ensure the success of the
organization.
Health clubs and gyms are a mature industry with a steady revenue increase of
3.6% in 2012. And since residents of Narendra Nagar have abundant wealth as
evidenced by their sumptuous living. It would be right to set up a GYM in that
area.
A considerable sized sample study was also conducted and it was analysed that
there is a need to open up a fitness club in Narendra Nagar, Nagpur.

Target customer:
The target market for gym and fitness centres can be categorized into three
various groups.
The first group is the people who are looking towards shedding some weight
through proper exercising and under the guidance of a qualified instructor. The
other group of people are those who are interested in muscle building, and the
last group of people are those who wants to achieve the desired
transformation under the watchful eyes of a qualified trainer.
Spartans Fitness Club will work towards providing services, facilities and
environment that will help us reach out to our target market. These are the
category of people that we intend marketing our gym and fitness club to;

 Corporate Executives/Business People

 Service Sector People
 Sportsmen and Sportswomen
 Young enthusiasts.
 Teenagers.

Main focus will be in providing great opportunities to the middle class or upper
middle-class section of the society in Narendra Nagar, Nagpur.
Marketing aspect/ Promotional Strategies:
The marketing channel that would be considered by the club would be simple
and will aim to satisfy and fulfil the customers need through the following –
0 Word-of-mouth publicity
1 Small social groups like friends, relatives, students etc.
2 Website of the club, page on Facebook and Twitter.

Pricing strategy:
The pricing strategy is the mix of both – penetration pricing + psychological
pricing.
Penetration pricing - The price charged for products and services is set
artificially low in order to gain market share. Once this is achieved, the price is
increased. 
Psychological Pricing. - This approach is used when the marketer wants the
consumer to respond on an emotional, rather than rational basis. 
 FINANCIAL PLAN

The Venture will be funded by my father solely from his savings.

Initial Investment:
Particulars Amount (Rs.)

Renovation (F) 2,00,000

Machinery (F) 5,61,920

Furniture (F) 61,000

Rent deposit (F) 90,000

Electricity deposit (F) 3,000

Total 915920

Expected expenses which would occur:

Particulars Amount (Rs.)

Rent P.M. 30000

Salary P.M. 24000

Electricity P.M. 3000

Maintenance P.A. 3000

Advertisement expenses (Annual) 20000

Administrative expenses P.m. 1000

The rent and salary will be increased by 10% every Year and other expenses will increase by
4% i.e. inflation rate of the Indian economy.

Revenue generation:
S.No. Particulars Amount (Rs.)
1. For one month (1000*10*12) 1,20,000
2. For three months (2500*30*4) 3,00,000
3. For six months (4800*15*2) 1,44,000
4. For one-year membership (8500*12) 1,02,000
5. For PT (9000*15*4) 5,40,000
TOTAL 12,06,000

Gym membership fees will stay constant for the following 2 years after commencement of
venture and then will increase by 15% on yearly basis.

Furniture Details Amount (Rs.)

Counter 12,500
Chairs 5,500
Water Cooler 9,500
Music System 17,400
Fans 8,100
Led Lights 5,000
Switches & Boards 3,000

This is estimated to be a total of Rs. 61000 and will be annually depreciated by straight line
method with 10 % depreciation rate.
 Machinery & Equipment Details Amount (Rs.)
Treadmill 1,00,000
Leg Press 28,000
Cable cross station 32,000
Chin-up + Parallel Bar 12,000
Squat stand 20,000
Leg Extensions + Leg Curls 40,000
Pec Deck Fly 20,000
Lat Machine 12,000
Seated Rowing 15,000
Preacher Bench 7,500
Decline Bench 5,200
Flat Bench 5,200
Incline Bench 5,200
Dumbbell Stand 4,200
Weight Stand 4,000
Flat Bench Individual 2,000
Incline Bench Individual 2,200
Spinners 30,000
Dumbbells 95,040
Plates 46,980
Twister 2,000
Rod Stand 5,000
3 Olympic Rods 3,600
3 Feet 800
4 Feet 900
6 Feet 1,000
Yoga Mat 2,600
Stepper 2,700
Mirrors 40,000
Exercise Mat 15,000
Exercise Ball 1,800

The Machinery and Equipment are estimated to cost around Rs. 561920 and have an
estimated life of total 7 years and after that their scarp value is estimated to be 10% of their
 original cost. And at the end of 7 th year new machinery and equipment will be purchased
worth 50% of the year ending Capital.

The Followings are the forecasted Income Statement and balance Sheet of
the said Venture:
Income and Expenditure Account (Rs.)
Particulars Yea Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
r0
Revenue 0 1,206,00 1,206,00 1,386,90 1,594,93 1,834,17 2,109,30 2,425,69
0 0 0 5 5 2 7
Less: Operating
Expenses
Rent 0 (360,000 (396,000 (435,600 (479,160 (527,076 (579,784 (637,762
) ) ) ) ) ) )
Salary 0 (288,000 (316,800 (348,480 (383,328 (421,661 (463,827 (510,210
) ) ) ) ) ) )
Electricity 0 (36,000) (37,440) (38,938) (40,495) (42,115) (43,800) (45,551)
Maintenance 0 (3,000) (3,120) (3,245) (3,375) (3,510) (3,650) (3,796)
Expenses
Advertisement 0 (20,000) (20,800) (21,632) (22,497) (23,397) (24,333) (25,306)
expenses
Administrative 0 (12,000) (12,480) (12,979) (13,498) (14,038) (14,600) (15,184)
Expenses
EBITDA 0 487,000 419,360 526,026 652,582 802,378 979,309 1,187,88
8
Depreciation 0 (78,347) (78,347) (78,347) (78,347) (78,347) (78,347) (78,347)
EBT - 408,653 341,013 447,680 574,235 724,032 900,962 1,109,54
1
Tax 0 (7,933) (4,551) (9,884) (27,347) (57,306) (92,692) (145,362
)
PAT - 400,720 336,462 437,796 546,888 666,725 808,269 964,179
 Balance Sheet (Rs.)
Liabilities Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Capital 915,92 915,920 1,316,64 1,653,10 2,090,89 2,637,78 3,304,51 4,112,78
0 0 3 9 6 2 1
Add: Current - 400,720 336,462 437,796 546,888 666,725 808,269 964,179
Year Profit
Total 915,92 1,316,64 1,653,10 2,090,89 2,637,78 3,304,51 4,112,78 5,076,96
0 0 3 9 6 2 1 0
Assets
Machinery & 561,92 561,920 561,920 561,920 561,920 561,920 561,920 561,920
Equipment’s 0
Less: Sales - - - - - - - 56,192
Less: - 72,247 144,494 216,741 288,987 361,234 433,481 505,728
Accumulated
Depreciation
Add: Purchases - - - - - - - 2,538,48
0
Net Machinery 561,92 489,673 417,426 345,179 272,933 200,686 128,439 2,538,48
& Equipment 0 0
furniture 61,000 61,000 61,000 61,000 61,000 61,000 61,000 61,000
Less: - 6,100 12,200 18,300 24,400 30,500 36,600 42,700
Accumulated
Depreciation
Net Furniture 61,000 54,900 48,800 42,700 36,600 30,500 24,400 18,300
Deposits 93,000 93,000 93,000 93,000 93,000 93,000 93,000 -
Misc. 200,00 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Expenditure 0
Cash & Bank - 479,067 893,877 1,410,01 2,035,25 2,780,32 3,666,94 2,320,18
9 4 6 2 0
Total 915,92 1,316,64 1,653,10 2,090,89 2,637,78 3,304,51 4,112,78 5,076,96
0 0 3 9 6 2 1 0

If the same amount is invested in market, then the return would generate a return of 12% of
the total investment made i.e. Rs. 109910 yearly. The proposed venture promises to provide a
return of 44% on the total investment and 33% net profit margin on Revenue.
 The net present value of the project is calculated as below:
Particulars Year0 Year1 Year2 Year3 Year4 Year5 Year6 Year7
1,206,00 2,109,30
Revenue 1,206,000 0 1,386,900 1,594,935 1,834,175 2 2,425,697
Rent 360,000 396,000 435,600 479,160 527,076 579,784 637,762
Salary 288,000 316,800 348,480 383,328 421,661 463,827 510,210
Electricity 36,000 37,440 38,938 40,495 42,115 43,800 45,551
Maintenance Expenses 3,000 3,120 3,245 3,375 3,510 3,650 3,796
Advertisement expenses 20,000 20,800 21,632 22,497 23,397 24,333 25,306
Administrative Expenses 12,000 12,480 12,979 13,498 14,038 14,600 15,184
Contribution 487,000 419,360 526,026 652,582 802,378 979,309 1,187,888
Depreciation 78,347 78,347 78,347 78,347 78,347 78,347 78,347
Tax 7,933 4,551 9,884 27,347 57,306 92,692 145,362
Net Profit 400,720 336,462 437,796 546,888 666,725 808,269 964,179
Free Cash
Flow (915,920) 487,000 419,360 526,026 652,582 802,378 979,309 1,187,888
Less Tax (7,933) (4,551) (9,884) (27,347) (57,306) (92,692) (145,362)
Add
Deposits - - - - - - - 93,000
Add Scrap
Value - - - - - - - 56,192
Cash inflow (915,920) 479,067 414,809 516,142 625,235 745,072 886,616 1,191,717

All the Future Cash inflows are discounted by 12% (market rate of return) i.e. expected rate
of return if the sum is invested in market. After discounting all of the cash inflows NPV of the
whole Project is 2,934,184.00 and the Internal Rate of return of the said project is estimated
to be 55.90%. And the Pay-Back Period of Investment is 2 Years 15 days.
Following shows the sensitivity analysis when the two core variables
fluctuate i.e.
1. Market Rate of return or expected rate of return
2. Rate by which the membership fee is going to be increased after two
years.

    NPV Sensitivity analysis

    Market Return

NPV 2,934,183.90 9% 10% 11% 12% 13% 15%

11% 2,818,146 2,714,876 2,617,203 2,524,756 2,437,190 2,275,451

12% 2,933,211 2,824,199 2,721,134 2,623,618 2,531,284 2,360,831

13% 3,050,997 2,936,095 2,827,497 2,724,780 2,627,555 2,448,164

Increase 14% 3,171,560 3,050,613 2,936,338 2,828,286 2,726,044 2,537,487

in Fees
15% 3,294,953 3,167,805 3,047,707 2,934,184 2,826,796 2,628,840

16% 3,421,234 3,287,725 3,161,654 3,042,519 2,929,855 2,722,261

17% 3,550,458 3,410,425 3,278,229 3,153,339 3,035,265 2,817,791

18% 3,682,684 3,535,960 3,397,483 3,266,693 3,143,072 2,915,469

 SWOT ANALYSIS

Sculpture Fitness Club is in business to help its clients achieve their health and
fitness goals and at the same time to make profit. We are aware that there is
competition in the gym and fitness industry which is why we took out time to
conduct an effective SWOT Analysis, here is a preview of the result we got
from the SWOT analysis:

 Strength:

One of the obvious strengths that will definitely stand as a plus for Spartans
Fitness Club is the fact that our facility is located in an upmarket area; our
location is in fact one of our major strength.
We equally have a team of highly qualified professionals who will work with all
our clients to achieve their goals or enrolling in our gym and lastly our
membership package is one of the best that anybody living in Narendra Nagar
can get; it’s quite affordable

 Weakness:
Having critically looked into our business model, we were able to identify two
major weaknesses. One is the fact that we are a new business and the second
is the fact that we may not have the financial resources required to match up
with existing gyms in Nagpur when it comes to acquiring latest gym equipment
and generating the needed hypes that can drive traffic towards our facility.
 Opportunities:

 Growing demand for fitness: People are extremely focused on fitness

and more and more people have started frequenting the gym. This growing
demand for fitness is an opportunity that our gym can capitalize on.
 Value-added services: The gym can no longer afford to exist by just
providing fitness services. There is a strong need for value-added services like
diet and nutrition and also cafes and food courts. All this can be charged as a
premium which will help to improve the revenue prospects.
 Growing health concerns: With changing lifestyles like increased
consumption of fast food, obesity, lifestyle diseases etc. more and more
people are trying to become part of weight loss programs. This has created a
growing need for gyms.

 Threat:

Some of the threats that are likely going to confront our gym are unfavourable
government policies, demographic / social factors, downturn in the economy
which is likely going to affect consumers spending and lastly, the emergence of
new competitors within the same location where our gym and fitness club is
located.
 GROWTH PROSPECTIVE / THE PATH AHEAD

Healthy diet and daily exercise are key things to stay fit and healthy in old age.
The awareness of the new generation about keeping a healthy body is far
better from the previous generations. As more and more population gets
enlighten towards the necessities of working out and keeping our bodies fit for
better future the business of Gym is expected to be grow on a rapid growth
rate.