Running head: FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 1

Assignment 2

Feasibility Study for Extreme Boutique Fitness Center

Name：Jiazhi Weng

Student Number：3449054
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 2

Executive Summary

This feasibility study details a proposed business plan for a boutique fitness center. The business

by the name of Extreme boutique has not started operations and this plan is a litmus test detailing

key factors that will influence profitability as well as viability of the business. The introduction

section details the core services to be provided by Extreme Boutique Fitness Center. The services

emulate Jazzercizes service model where the firm seeks to provide a combination of aerobics and

dance exercises at a relatively lower price than the premium prices charged by competitors. The

second section presents a description and overview of business while the third section provides

information on the market and general information about market segments and trends. The fourth

section details competitors where the proposed Toronto City is noted as having many alternative

services especially the gyms. This section is followed by a preliminary marketing plan detailing

service offering, pricing strategy, promotion strategy and budget as well as distribution plans.

The financial session is composed of costs, and profitability analysis in addition to pro forma

financial statements. This section puts to doubt the business idea because of the long period

required to break even. This is followed by the future plans where it is noted that the business

would not be as profitable.

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 3

Table of Contents

Executive Summary.........................................................................................................................2

1.0 Introduction...........................................................................................................................5

2.0 Description and Overview of the Business Concept............................................................6

2.1 Genesis and History of Business Concept........................................................................6

2.2 Principal Value Proposition and Competitive Advantage................................................6

2.3 Current Status of Business................................................................................................7

2.4 Strategy to be pursued.......................................................................................................7

2.5 Business Objectives..........................................................................................................7

2.6 Benefit to Customers.........................................................................................................7

3.0 Overview of the Market........................................................................................................8

3.1 General Target Market......................................................................................................8

3.2 Market Need and How to Take Advantage of It...............................................................8

3.3 Profile of Target Customer Segments...............................................................................9

3.4 Location, Size, Trends, Seasonal Patterns and Characteristics of Potential Market.........9

3.5 Indicator of Market Acceptance of Concept...................................................................10

4.0 Competition........................................................................................................................10

4.1 Estimated Sales and Market Share..................................................................................10

4.2 Differences in Products and Services..............................................................................11

4.3 Market Offering in terms of Pricing, Promotion and Distribution.................................11

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 4

4.4 Major Strengths and Weaknesses...................................................................................11

5.0 Preliminary Marketing Plan................................................................................................12

5.1 Service Offering..............................................................................................................12

5.2 Pricing Strategy...............................................................................................................12

5.3 Promotion Strategy and Budget......................................................................................13

5.4 Distribution Plans............................................................................................................14

6.0 Cost/Profitability Analysis and Pro Forma Financial Statements......................................15

6.1 Estimated Startup Expenses/ Requirements....................................................................15

6.2 One Time Starting Costs.................................................................................................15

6.3 Pro forma Income Statement...........................................................................................16

6.4 Pro forma Cash Flow Statement.....................................................................................18

6.5 Pro forma Balance Sheet.................................................................................................20

6.6 Breakeven Analysis.........................................................................................................22

7.0 Future Plans........................................................................................................................23

8.0 References...........................................................................................................................24

9.0 Appendix.............................................................................................................................25
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 5

1.0 Introduction

The concept of starting a boutique fitness center was motivated by the increase in demand

for health and fitness services. A 2017 Ibis report on gym and fitness in Toronto, Canada notes

that proliferation of health campaigns encouraging people to fight obesity related ailments and

positive consumer trends have strengthened the growth of the industry (Ibis World, 2018). The

economy has grown significantly thus more households have a higher per capita disposable

income. This income is expected to increase over the next five years. As much as this is the case,

consumers are wary of discretionary expenditures, such as health club and gym memberships.

Because of this, they have a preference for small-scale and personalized gym services as opposed

to making subscriptions for personal trainers. For these reasons, more Canadians have a

preference for boutique gyms than ever before. The fitness industry is currently estimated at $3

billion with an annual growth of 2.3% in the years 2012 to 2017.

The selection of this business is further backed by the high score using Buskirk’s factors

model where boutique fitness center scored an aggregate of 140 points out of a possible 190

points. This score is above average when compared to other business alternatives, namely;

software programming venture and storage and transport business. The model pointed at greater

strengths thus justifying the viability of this business. On the contrary, the business’s biggest

weakness is the lack of proprietary rights. This factor scored 4 points implying that new entrants

could easily infiltrate the market. It is possible for big sports and fitness firms to venture into the

business and attract most of the customers. At the same time, the cost of new entry into the

market is relatively low, while the customers switching cost is low. This makes it elusive to

survive in the industry without having a sustainable competitive advantage.

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 6

2.0 Description and Overview of the Business Concept

2.1 Genesis and History of Business Concept

The idea to come up with Extreme Boutique Fitness Center was motivated by my interest

and passion in health and fitness. I like working out, dancing and doing aerobics. This is what

motivated me into starting a business that would perfectly be in line with my interests. The

business does not have a definitive history, nonetheless, the industry has a long history that dates

back to traditional gyms and fitness centers. Unlike the traditional gym, a boutique fitness center

provides a conducive environment for personalized services. Florida and Boone, (2018) describe

this type of business as focusing on providing an up-close and a personalized environment for

customers since it pays attention to specific areas. This way, it enables the trainers to monitor

progress and achieve better results. This is unlike personal training which is exorbitantly priced.

Likewise, traditional box model gyms are too crowded to the extent that only aggressive clients

benefit from their subscription and membership fees. Boutique fitness center bridges this gap by

providing personalized services at a competitive price.

2.2 Principal Value Proposition and Competitive Advantage

The principle value proposition for this business is tied to its main attributes. This

includes provision of personalized services. This business will offer small exercise classes suited

to satisfy particular needs of the clients. Such small classes encourage interactions between client

and instructor thus achieving better results. The personal knowledge of their clients helps

customize fitness exercise to the benefit of the client. The friendly environment fosters customer

loyalty while the community like atmosphere in such centers bind clients thus encouraging them

to sign for long term membership. Apart from this, the workout sessions have to be guided by an

experienced trainer. Boutique fitness centers also offer additional services that enhance the value
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 7

proposition promised to clients. This enhances their levels of satisfaction. Second, the business

model enables cost cutting thus allowing for competitive pricing. Its competitive advantage will

be derived from its low leadership strategy where the firm will provide the lowest prices in

boutique fitness.

2.3 Current Status of Business

The business is currently in the seed stages. I intend to transform the idea into a fully-

fledged business that will employ 10 people. This will be achieved by transitioning through the

start-up, growth, expansion, maturity and exit phases respectively. The exit would be through a

buyout.

2.4 Strategy to be pursued

The primary strategy will be cost leadership. This will be complemented by provision of

unique and differentiated fitness activities focusing on middle income earners, millennial and

young adults.

2.5 Business Objectives

a. The business anticipates to create awareness and visibility for its boutique fitness

programs. This will enable it to attract more clients, as it expands and grows in terms of

scale of operations.

b. Creating awareness will help achieve 13% annual growth for the next five years.

c. To attract and hire the best trainers in the market.

d. To provide quality services that satisfy customers fitness needs.

2.6 Benefit to Customers

a. Quality services at a competitive price

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 8

b. Sharing of fitness information and dietary advice with current and potential customers,

free of charge.

3.0 Overview of the Market

3.1 General Target Market

As reported by Grenier (2017), the number of seniors has outnumbered that of youths in

Canada. This trend has been associated with declining fertility and ageing baby boomers.

According to statistics Canada, the population age groups 24 and below has been registering a

significant decline over the last four decades. For instance, since 1971 until 2010, the number of

youths has declined from 48.1% until 29.9% of the population. This challenge was however

noted in Eastern Canada. In fact, Toronto has continued to attract a growing number of

millennial and young adults living an active lifestyle. This raises prospects for tapping into this

market segment. A more detailed analysis is summarize in the appendix, where figure 1 shows

the proportion of Canadian youths by age group while figure 2 depicts concentration of youths in

major cities (Statistics Canada, 2018). The information justifies Toronto as having the highest

number of youths and young adults who represent the target market.

3.2 Market Need and How to Take Advantage of It

The target market needs facilities to help them keep fit and live an active lifestyle. This

follows increased awareness on healthy living. Canadian youths have the highest rate of obesity

among developed countries. The percentage of obese youths has increased from 29% in 1970s to

45% in 2010. Youths have been reluctant to meet their physical activity guidelines of 150

minutes of exercise per week. Because of this, one in fourth youths in ages 20 to 29 is

experiencing poor health. It is required that youths and young adults keep active and fit (Garcia,

2015). The challenge is that these groups have busy lifestyles, which could derail their
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 9

commitment to fitness. The reason for merging aerobic exercises and dance in order to appeal to

a bigger and more committed segment.

3.3 Profile of Target Customer Segments

The profile of customers can be categorized into; geographic, demographic,

psychographic, and behavioral segments.

Geographic segment will be limited to Toronto. Extreme Boutique Fitness will

concentrate on marketing and creating awareness of its fitness activities in this region. The

second segment is determined by demographic factors such as gender, religion, ethnicity, race,

income, education, occupation and marital status. The firm will operate based on the business to

consumer model and it will target all races, ethnicities, religion, education, occupation and

marital status. The age groups will range from 18 years to 40 years. Target customers will have a

household income in excess of $200,000 (Harito, 2017). The business will equally market itself

to corporations in Toronto so as to solicit contracts to provide fitness services to its employees.

In terms of behavior, the business will target high usage, active individuals keen on maintaining

fitness and good health. They have to be passionate about working out, aerobics and dance.

3.4 Location, Size, Trends, Seasonal Patterns and Characteristics of Potential

Market

Grant, (2018) notes that Toronto is the mostly youth friendly city in Canada. This is

evident in figure 4 in appendix. One third of the population is composed of youths with a

significant number of young adults, who are potential target customers. Toronto has a population

of 2.73 million people meaning that it has more than one million of the potential target

customers. Out of this population, it will require 1000 customers, with almost half being loyal

and consistent customers to operate a sustainable businesses. The current trend involves creating
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 10

publicity through social media, especially among millennial customers. This trend has been

complimented with the availability of sites such as Instagram which showcases fitness regiments.

With this trend in town, it becomes easier to target and convert desirable customers. The industry

is mostly stable with few seasonality patterns. Nonetheless, most customers prefer taking on

fitness exercises before summer to achieve a ‘bikini body’. The potential market is characterized

by high disposable income, love for luxurious living, frugal spending habits and love for social

networking.

3.5 Indicator of Market Acceptance of Concept

The concept is highly acceptable. This is evidenced by Hill, (2018) who notes that

boutique fitness is the new trend and this increases prospects for increased demand for fitness

services both currently and in the near future.

4.0 Competition

Toronto has more than 500 fitness clubs. Out of this, only 100 have attracted a large

number of loyal customers. The best fitness clubs include Wynn Fitness Club with a rating of 3.9

out of 5 points. Equinox Bay Street is rated at 3.8 points, Snap Fitness has 4.4 points, Equinox

Yorkville has 3.6 points, Fit Factory Fitness has 4.8 points, Mayfair Clubs with 4.6 points, Body

and Soul Fitness with 4.7 points, and Adelaide Club with 4.6 points (Harito, 2017). Others

include Good Life Fitness Toronto, Anytime Fitness, Generate Fitness, Area Fitness, Ultimate

Athletics, Vive Fitness and Hone Fitness.

4.1 Estimated Sales and Market Share

Out of the identified fitness centers, the direct competitors that are most liked by clients

based on their ratings include; Vive Fitness, Wynn Fitness, Hone Fitness, Area Fitness, Adelaide
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 11

Club, Body and Soul Fitness, Snap Fitness, Orange Theory Fitness, Dwell Gym, Bomb Fitness

and Fit Factory Fitness (Harito, 2017). These firms collectively represent 80% of the boutique

fitness industry in Toronto. The only direct competitor is Jazzercise and it not currently operating

in Toronto (Jazzercise, 2018).

4.2 Differences in Products and Services

Majority of these fitness centers and gyms provide personal training services as well as

group fitness activities. Only five major on aerobics while none has incorporated dancing into

their aerobic exercises.

4.3 Market Offering in terms of Pricing, Promotion and Distribution

Half of the fitness centers market themselves through social media especially Facebook

and Instagram. Their pricing is mostly determined by membership to the clubs where loyal and

long term members get higher discount rates and other offers to entice them. In term of

distribution, the firms operate in fixed premises thus customers have to visit the fitness centers,

unless for personal training services where the trainer goes to the clients premises.

4.4 Major Strengths and Weaknesses

The major strength is offering aerobics and dance. This combination is aimed at making

the sessions more fun. This distracts clients from thinking of fitness as a hard thing to do.

Instead, it makes them believe they can achieve their body goals through dance and regulated

aerobic exercises. Major weakness is ease of imitating the idea by other competitors and new

entrants.
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 12

5.0 Preliminary Marketing Plan

5.1 Service Offering

The Extreme Boutique Fitness Center will offer fitness services. This will include a

combination of aerobic exercises and dance sessions. A combination of these two activities will

make the fitness sessions entertaining thus helping retain clients while attracting new ones.

Additionally, combining dance and aerobic exercises, is bound to create a new experience that is

not common in Toronto. The only providers of similar services is Jazzercize which is a USA

firm operating only two of such entities in Canada. Jazzercize is currently in Alberta and

Calgary. Additional services offer will range from publishing articles and videos on fitness on

the company’s website, blog and social media pages as well as selling its branded merchandise in

future. This includes making own label exercise kits and shoes among others. These services are

unique to this particular target segment because it lacks direct competitors, instead, the brand

will compete against substitutes such as gym and general fitness centers. The main setback with

these services however is the lack of proprietary rights. This makes it prone to duplication by

competitors.

5.2 Pricing Strategy

Consumers in the fitness industry are price sensitive, thus tend to prefer a value

proposition that offers best price and value. Traditionally, the boutique fitness sector is known to

attract premium pricing. However, given the increasing desire for customized fitness exercises

by the millennial consumers who are noted as being frugal and constantly on the lookout for

better propositions, this firm will use competitive pricing strategy. Unlike our competitors who

will charge their services at a premium, Extreme Boutique Fitness will consider the current

pricing for similar services and charge the lowest prices compared to competitors. This pricing
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 13

will be complemented by discounts and other offers and freemiums to attract new and retain

current customers (Stein, 2014). Apart from considering pricing and prices offered by

competitors, Extreme Boutique Fitness Center will consider the cost of providing these services.

This will help identify the total costs of running the business thus, determine a markup that

should be profitable for the business. It is believed that by considering competitors and lowering

operational costs, in order to achieve the lowest possible costs will translate into the realization

of the cost leadership strategy. The business will be operated from a single location in Toronto,

thus eliminating the need for a distribution chain. This will significantly lower costs for

providing services. For instance, only five trainers will be required on a part time contract basis.

This is unlike competitors who prefer employing full time employees. This option of using full

time employees is expensive, and it is the reason why boutique fitness is charged at a premium.

Monthly membership fee will be $100.

5.3 Promotion Strategy and Budget

According to Internicola, (2014) promotional activities have to consume 20% of the total

annual revenues realized by the firm. In this case, 20% of the budgeted revenue will be $24,000.

In order to lower promotional budgets while creating a big impact, it is important that Extreme

Boutique Fitness uses both digital media and traditional media to reach out to more clients. A

combination of these tools will entail the use of social media to reach out to the tech savvy

millennial consumers and young adults. In addition, using promotional channels such as

television advertisements and radio will enhance the visibility of the brand. In the long run, it is

anticipated that the business will be marketed also through user generated content encouraging

more potential customers to use our services. The tables below detail a breakdown of the overall

promotion budget.
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 14

Promotion Activities Annual Expenditure

Social Media Campaigns $2,000
Radio adverts $9,000
Television adverts $13,000
User Generated Content 0 (free)
Total Promotion Budget $24,000
Table 1: Overall promotion budget

Table 1 above also presents information on allocation of expenditures to various media

and personal selling. This is shown under radio and television adverts as well as social media

campaigns. This three activities will require $24,000. This will be the first year of operations. It

is expected that by the end of second year, the business would have broken even thus releasing

10% of the annual revenues for public relation activities such as financing community health

awareness programs.

The business will use the slogan – ‘keep fit for better health’

5.4 Distribution Plans

The business will be located at the Extreme Fitness Boutique Center in Toronto’s middle

class estates. This location is convenient for easy access during any hour of the day. The services

will not be distributed but rather offered by an experienced trainer to groups of customers. The

business model is not dependent on intermediaries such as retailers and wholesalers.

Nonetheless, videos on fitness exercises will be made and shared on the internet to motivate

customers.

6.0 Cost/Profitability Analysis and Pro Forma Financial Statements

6.1 Estimated Startup Expenses/ Requirements

Schedule 1 Required Start-Up Funds for Extreme Boutique Fitness  

 
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 15

Estimated Monthly Expenses  

Column 1 Column 2 Column 3  

Cash Required
Your Estimate of Number of Months of To Start
Item Monthly Expenses Cash Required to Cover Business
Based on Sales of Expenses (Column 1 X
$120,000 Per Year Column 2)*  
Salary of Owner $400 12 $4,800  
All Other Salaries and Wages $2,000 12 $24,000  
Rent $500 12 $6,000  
Advertising $400 6 $24,000  
Delivery
Expense/Transportation $0 0 $0  
Supplies $0 0 $0  
Telephone, Fax, Internet
Service $100 12 $1,200  
Other Utilities $200 12 $2,400  
Insurance $12,000 1 $12,000  
Taxes Including Employment
Insurance $4,320 1 $4,320  
Interest $0 0 $0  
Maintenance $1,000 1 $1,000  
Legal and Other Professional
Fees $0 0 $0  
Miscellaneous $0 0 $0  
 
Total Cash Requirements
for Monthly Recurring
Expenses: $78,720  
Table 2: Estimated Startup Expenses/ Requirements

6.2 One Time Starting Costs

Starting Costs You Only Have to Pay Once

Cash Required to Start Business

Fixtures and Equipment $15,000
Decorating and Remodeling $2,200
Installation of Fixtures and Equipment $5,000
Starting Inventory $5,000
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 16

Deposits with Public Utility $2,500

Legal and Other Professional Fees $0
Licenses and Permits $1,200
Advertising and Promotion for Opening $2,080
Accounts Receivable $500
Cash $500
Miscellaneous $0

Total One-Time Cash Requirements: $33,980

Total Estimated Cash Required to Start

Business: $113,700

Table 2: One Time Starting Costs

6.3 Pro forma Income Statement

Pro forma Income Statement for Extreme Boutique Fitness

For the year Ending July, 2019

  Month Month Month Month Month Month Month Month Month Month Month Month
  1 2 3 4 5 6 7 8 9 10 11 12 TOTAL
 
 
1. Gross Sales 2,000 4,000 6,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 120,000
2. Less: Cash Discounts 0 0 0 0 0 0 0 0 0 0 0 0 0
                           
A. NET SALES 2,000 4,000 6,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 120,000
 
Cost of Goods Sold:
3. Beginning Inventory 0 0 0 0 0 0 0 0 0 0 0 0 0
4. Plus: Net Purchases 0 0 0 0 0 0 0 0 0 0 0 0 0
5. Total Available for Sale 0 0 0 0 0 0 0 0 0 0 0 0 0
6. Less: Ending Inventory 0 0 0 0 0 0 0 0 0 0 0 0 0
                           
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 17

B. COST OF GOODS
SOLD $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $33,980
                           
C. GROSS MARGIN $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $186,020
 
Less: Variable Expenses
7. Owner's Salary 400 400 400 400 400 400 400 400 400 400 400 400 4,800
8. Employee's Wages and
Salaries 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24,000
9. Supplies and Postage 0 0 0 0 0 0 0 0 0 0 0 0 0
10. Advertising and
Promotion 2,080 400 0 400 0 400 0 400 0 400 0 400 4,480
11. Delivery Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
12. Bad Debt Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
13. Travel 0 0 0 0 0 0 0 0 0 0 0 0 0
14. Legal and Accounting
Fees 0 0 0 0 0 0 0 0 0 0 0 200 200
15. Vehicle Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
16. Maintenance Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
17. Miscellaneous
Expenses 0 0 0 0 0 0 0 0 0 0 0 0 0
 
D. TOTAL VARIABLE                          
EXPENSES $4,480 $2,800 $2,400 $2,800 $2,400 $2,800 $2,400 $2,800 $2,400 $2,800 $2,400 $3,000 $33,480
 
Less: Fixed Expenses
18. Rent 500 500 500 500 500 500 500 500 500 500 500 500 6,000
19. Utilities (Heat, Light,
Power) 200 200 200 200 200 200 200 200 200 200 200 200 2,400
20. Telephone 100 100 100 100 100 100 100 100 100 100 100 100 1,200
21. Taxes and Licenses 1,200 0 0 0 0 0 0 0 0 0 0 4,320 5,520
22. Depreciation 0 0 0 0 0 0 0 0 0 0 0 7,000 7,000
23. Interest 0 0 0 0 0 0 0 0 0 0 0 0 0
24. Insurance 0 0 0 0 0 0 0 0 0 0 0 0 0
25. Other Fixed Expenses 0 0 0 0 0 0 0 0 0 0 0 0 0
                           
E. TOTAL FIXED
EXPENSES $2,000 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800 $12,220 $22,120
                           
F. TOTAL OPERATING
EXPENSES $6,480 $3,600 $3,200 $3,600 $3,200 $3,600 $3,200 $3,600 $3,200 $3,600 $3,200 $15,220 $55,600
                           
G. NET OPERATING
PROFIT (LOSS) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $64,400
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 18

 
   
H. INCOME TAXES
(estimated) $4,320
   
I. NET PROFIT (LOSS)
AFTER INCOME TAX $60,080
Table 3: Pro forma Income Statement

6.4 Pro forma Cash Flow Statement

 
Pro Forma Cash Flow Forecast for Extreme Boutique Fitness
12 - Month Cash Flow Projections
 
Minimum Cash Balance 60,08
Required = 0
 
 
  Month Month Month Month Month Month Month Month Month Month Month Month YEAR 1

  1 2 3 4 5 6 7 8 9 10 11 12 TOTAL
Cash Flow From
Operations (during month)
1. Cash Sales 2,000 4,000 6,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 120,000
2. Payments for Credit
Sales 0 0 0 0 0 0 0 0 0 0 0 0 0
3. Investment Income 0 0 0 0 0 0 0 0 0 0 0 0 0
4. Other Cash Income 0 0 0 0 0 0 0 0 0 0 0 0 0
                           
A. TOTAL CASH FLOW ON $10,00 $12,00 $14,00 $15,00 $16,00
HAND $2,000 $4,000 $6,000 $8,000 $9,000 0 $11,000 0 $13,000 0 0 0 $120,000

 
Less Expenses Paid
(during month)
 
5. Inventory or New
Material 0 0 0 0 0 0 0 0 0 0 0 0 0
6. Owner's Salary 400 400 400 400 400 400 400 400 400 400 400 400 4,800
7. Employee's Wages and
Salaries 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24,000
8. Supplies and Postage 0 0 0 0 0 0 0 0 0 0 0 0 0
9. Advertising and
Promotion 2,080 400 0 400 0 400 0 400 0 400 0 400 4,480
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 19

10. Delivery Expense 0 0 0 0 0 0 0 0 0 0 0 0 0

11. Travel 0 0 0 0 0 0 0 0 0 0 0 0 0
12. Legal and Accounting
Fees 0 0 0 0 0 0 0 0 0 0 0 200 200
13. Vehicle Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
14. Maintenance Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
15. Rent 0 0 0 0 0 0 0 0 0 0 0 0 0
16. Utilities 0 0 0 0 0 0 0 0 0 0 0 0 0
17. Telephone 0 0 0 0 0 0 0 0 0 0 0 0 0
18. Taxes and Licenses 0 0 0 0 0 0 0 0 0 0 0 0 0
19. Interest Payments 0 0 0 0 0 0 0 0 0 0 0 0 0
20. Insurance 0 0 0 0 0 0 0 0 0 0 0 0 0
21. Other Cash Expenses 0 0 0 0 0 0 0 0 0 0 0 0 0
B. TOTAL $4,48 $2,40
EXPENDITURES 0 $2,800 0 $2,800 $2,400 $2,800 $2,400 $2,800 $2,400 $2,800 $2,400 $3,000 $33,480
 
Capital
 
Purchase of Fixed Assets 0 0 0 0 0 0 0 0 0 0 0 0 20,200
Sale of Fixed Assets 0 0 0 0 0 0 0 0 0 0 0 0 0
C. CHANGE IN CASH
FROM PURCHASE OR $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $53,680
SALE OF ASSETS
 

Financing
Payment of Principal of
Loan 0 0 0 0 0 0 0 0 0 0 0 0 0
Inflow of Cash From Bank
Loan 0 0 0 0 0 0 0 0 0 0 0 0 0
Issuance of Equity
Positions 0 0 0 0 0 0 0 0 0 0 0 0 0
Repurchase of Outstanding
Equity 0 0 0 0 0 0 0 0 0 0 0 0 0
D. CHANGE IN CASH
FROM FINANCING $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

 
E. INCREASE
(DECREASE) IN CASH $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
F. CASH AT
BEGINNING OF
PERIOD $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $100,000
G. CASH AT END OF
PERIOD $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $120.000
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 20

 
MEET MINIMUM
CASH BALANCE A A A A A A A A A A A A A

 N/B: A means acceptable

Table 5: Pro forma cash flow statement

6.5 Pro forma Balance Sheet

Pro Forma
Balance Sheet
SCHEDULE 4   for (Company)          

 
 
 
End of Year
  Opening 1
 
  ASSETS          
 
Current Assets:
1. Cash 100,000 0
2. Accounts Receivable 0 120,000
3. Inventory 5,000 0
4. Other Current Assets 0 0
               
A. TOTAL CURRENT
ASSETS $0 $0
 
Fixed Assets:
5. Land and Buildings 0 0
less depreciation 0 0 0
6. Furniture and Fixtures 15,000 0
less depreciation 0 0 0
7. Equipment 0 0
less depreciation 0 0 0
8. Trucks and
Automobiles 0 0
less depreciation 0 0 0
9. Other Fixed Assets 0 0
less depreciation 0 0 0
               
B. TOTAL FIXED $120,000 $0
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 21

ASSETS
               
C. TOTAL ASSETS $120,000 $120,000
 
  LIABILITIES          
 
Current Liabilities
(due within 12
months)
10. Accounts Payable 20,000 60,000
11. Bank Loans / Other
Loans 0 0
12. Taxes Owed 0
               
D. TOTAL CURRENT
LIABILITIES $0 $60,000
 
Long-term Liabilities
13. Notes Payable 0 0
(due after one year)
14. Other Long-term
Liabilities 0 0
               
E. TOTAL LONG-
TERM LIABILITIES $0 $0
               
F. TOTAL LIABILITIES $0 $0
 
 
  NET WORTH (Capital)        
 
SHARE CAPITAL
Common Shares 0 0
Preferred Shares 100,000 60,000
RETAINED EARNINGS     0       0
G. TOTAL NET
WORTH $100,000 $60,000
               
H. TOTAL LIABILITIES AND
NET WORTH $120,000 $120,000
  BALANCED BALANCED
Table 6: Pro forma balance sheet
 FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 22

6.6 Breakeven Analysis

Break-even Point for First Year

 
 
Operating Expenses
 
Owner's Salary 4,800
Employee's Wages 24,000
Supplies and Postage 0
Advert. and Promotion 4,480
Delivery Expense 0
Bad Debt Allowance 0
Travel 0
Professional Fees 0
Vehicle Expense 0
Maintenance Expense 0
Other Variable Expenses 0
Rent 6,000
Utilities (Heat, Light, Power) 2,400
Telephone 1,200
Taxes and Licenses 5,520
Depreciation 7,000
Insurance 6,000
Other Fixed Expenses 2,400
 
TOTAL OPERATING EXPENSES $63,800
 
 
CONTRIBUTION MARGIN = 186,020 1.55
  120,000

 
 
BREAKEVEN POINT ($Sales) = 63,800
  1.55
 
  41,161 units
Table 7: Breakeven Analysis

7.0 Future Plans

The financial analysis conducted in the section above justifies this business as viable and

thus, seconds the need for starting it. The strengths of this evaluation as exhibited in the

estimated startup expenses sections, one time staring costs, pro forma income statement, pro
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 23

forma cash flow statement, pro forma balance sheet and break even analysis is that the business

will be profitable. Other advantages include simplicity of the idea and the ease of setting up such

a business. However, its weakness is that it will take relatively long to break even given that it

requires the business to sale 41,161 units (memberships) in order to break even.

According to the feasibility study, the business is likely to be profitable. The only

challenge is the high cost of purchasing equipment and making initial fixtures prior to beginning

operations. Other expenses that will significantly reduce the profitability of the business is the

licensing and other regulatory requirements which have to be settled. These expenditures,

coupled with the seasonality of the industry will greatly impact on the reliability of revenue

collection. The evaluation notes that the business is viable but might not be sufficiently attractive

to proceed unless some moderations are made to the financials section.

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 24

8.0 References

Florida, R. & Boone, A. (2018). The Urban Fitness Revolution. Available at:

https://www.citylab.com/life/2018/01/the-urban-fitness-revolution/549467/

Garcia, T. (2015). Boutique fitness studios are leading growth in the health club industry.

Available: https://www.marketwatch.com/story/boutique-fitness-studios-showing-the-

most-growth-in-the-health-club-industry-2015-09-16

Harito, L. (2017). The Best Fitness Clubs in Toronto. Available at:

https://www.blogto.com/toronto/the_best_fitness_clubs_in_toronto/

Ibis World. (2018). Gym, Health & Fitness Clubs - Canada Market Research Report. Available

at: https://www.ibisworld.ca/industry-trends/market-research-reports/arts-entertainment-

recreation/gym-health-fitness-clubs.html

Internicola, D. (2014). Boutique fitness studios harden bodies with personalized approach.

Available at: https://www.reuters.com/article/us-fitness-studios/boutique-fitness-studios-

harden-bodies-with-personalized-approach-idUSKCN0J81FK20141124

Jazzercise. (2018). This is Jazzercise. Available at: https://www.jazzercise.com/

Stein, P. (2014). Gym nauseum: Does DC «s new wealth explain the boutique-fitness boom. City

Paper.
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 25
FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 26

9.0 Appendix

Figure 1: Proportion of Canadian Youths by Age Group (Statistics Canada, 2016 Census)

Figure 2: Concentration of Youths in Major Cities (Statistics Canada, 2016 Census)

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 27

Figure 3: Youths Participating in Fitness Activities (Statistics Canada, 2016 Census)

FEASIBILITY STUDY FOR EXTREME BOUTIQUE FITNESS CENTER 28

Figure 4: Youthful Cities 2018 Canadian Index (Grant, 2018)