Alpha University College (AUC)

Project Feasibility Study Report

Feasibility Study Report on Fitness Center

Prepared by: Roba Eyi Gemeda

In partial fulfillment of the course: SEMINAR IN PROJECT MANAGEMENT (MBA-PM 724)

Date: June 10/2017

0|Page
 Table of Contents

1 Project Description ...................................................................................................................1

1.1 Business Case ...............................................................................................................1
1.2 Situation Analysis .........................................................................................................1
1.2.1 SWOT Analysis ..............................................................................................1
1.3 Perform Feasibility Study .............................................................................................2
1.4 State Vision, Mission and Value Statements ................................................................2
2 Project Overview and Planning ................................................................................................3
2.1 Key Stakeholders ..........................................................................................................4
2.2 Project Benefits ............................................................................................................4
2.3 Project Planning ...........................................................................................................4
3 The Project Framework ............................................................................................................5
4 Project Requirement Definition ................................................................................................5
5 Organization Structure ..............................................................................................................6
6 Financial Plan ...........................................................................................................................7
6.1 Project Cost ..................................................................................................................7
6.2 Estimates of Sales, Production, and Profitability .........................................................9
6.3 Source of Finance .......................................................................................................14
7 Financial Analysis ..................................................................................................................14
8 Benefit and Impact Analysis...................................................................................................15
9 Implementation and Monitoring Plan .....................................................................................15
10 Procurement Plan ....................................................................................................................16
11 Quality plan ............................................................................................................................16
12 Risk Management Plan ...........................................................................................................16
13 Marketing Plan .......................................................................................................................16
14 Communication Plan ..............................................................................................................17
15 Manpower Recruitment and Training Plan ............................................................................17
16 Acceptance Plan .....................................................................................................................17
17 Appendices .............................................................................................................................19

i|Page
1 Project Description

1.1 Business Case

As part of the requirement for the completion of the course seminar in project management, I
supposed to prepare project feasibility study which is practically applied on the ground.
Accordingly I select a feasibility study for Fitness Center.

The project feasibility study was prepared by Roba Eyi who is the founder and General Manager
of the center. The main question that this business plan will answer is if there is market for
running a fitness center in shashamaneto answer this question it is important that the research
material is defined with even further with sub questions. The sub questions which were used to
answer the main question were as follows.

What are the opportunities on the market?

How about the market demand?
SWOT analysis evaluations.
Factors which considered are Economy, Competition and populations?
What is the start-up cost?
Break-Even analysis.
What is the estimated return time?

Fitness center will satisfy the thirst of those demanding a new and better fitness center in
shashamane. The Fitness Center will be fully equipped and able to serve as many as 30 to 40
people at a time. This is accommodating from 180-240 trainees per a day.

1.2 Situation Analysis

1.2.1 SWOT Analysis

SWOT analysis the internal and external environment of a company to arrive at its strengths,
weaknesses, opportunities and threats. When selecting a strategy company should try to take
advantages of its organizational strengths and environmental opportunities at the same time try to
minimize organizational weaknesses and environmental threats.

1|Page
Strength Weakness
Good Location No spa
High level of service quality Unknown market demand
Multiple pricepackages Uncertainty in finance
Opportunities Threats
Have many stakeholders like YSO Seasonal demand
Branch expansion Newcomers on the market
Governmental funding Constantly new substitutes emerging

1.3 Perform Feasibility Study

In this industry, like many others, the market demand is somewhat seasonal. Every summer there is a
boom in sales of membership cards at fitness center due to high school, college and university students
are at break. Then sales decrease somewhat in September and then pick back up again those that bought
annual cards and have not been using them start coming again and new members join as well.
The greatest risk deliberating the success of fitness Center Company is market risk. The
opportunities for fitness Center Company are significant, and the company is in a position to
become a major force in the industry, providing fitness programs .this can only be established
with adequate resources available capital and strategic marketing implementation.
Constraints
Loan process dalliance.
Increments of house rent.
Electric power frustrations.

1.4 State Vision, Mission and Value Statements

Vision
To provide first class comprehensive fitness center to enhance its members health and
wellbeing.
Mission
Relocating to a large and more appropriate location facility after five years of operation.
To create comfortable fitness environment.
To increate membership satisfactions.

2|Page
Values
1. Customer-centric:we will have no start and end time counter for our trainees.
2. Excellence: We are committed for quality and efficiency so that we are able to ensure
excellent customer experience.
3. Accountability: We carry out our activities with quality, latest technology, integrity,
transparency and honesty
4. Impartiality: We are committed to be impartial and serve without any bias.
5. Sharing: We always try in working together so as to accomplish the mission of our center
and value with time and resources.

Goals
To have a good market share in fitness center in shashamane
To introduce a profitable business sector in Oromia.
To set the standardized fitness center with in a short time.

Objective
To have qualified employees who create great customer value and have the opportunity
of further increasing their skill.
Provide large facility with quality equipment to meet high customer demands.
Create customer value through high quality service
Building up well-known brand.
To produce productive citizen.

2 Project Overview and Planning

Fitness center employees have to be aware of constantly changing environment. The nature of
the fitness industry is that it is constantly changing with new technology breakthrough and
understating of the human body. The employees need to be able to provide the costumer with the
information and exercises he needs. It is crucial to be aware of trends that come and go and be
able to adapt to new methods quick. These changes in the market environment can be managed
by going to expos and by keeping an eye out for new routines that seem to be coming popular.

For Fitness center to being located in its own facility and able to customize it to meet the needs of their
target market will be used to their advantage. What makes fitness center unique in shashamane is offer its
customers a subscription of one month to six month card with discount which is not available at any other
center in shashamane. Fitness center will also provide an instructor to show them how to work the
equipment/machine located at the center.

3|Page
By planning in advance companies are able to expect and react more quickly to rapid changes in the
market place.

2.1 Key Stakeholders

Shashamane town youth and sport office for follow up.
Different government and non-government organization employees.
Any young people in Shashamane.

2.2 Project Benefits

With technological breakthrough and social changes these past decades exercise has become less
and less of an unconscious activity of our day to day lives. Our culture has moved from labor
intense work over to sitting in front of computer screen barely moving at all. This has lead us to
not move enough at their jobs and have to seek out alternatives in exercise like attending training
at fitness centers.

Fitness Center market target is all of those that live in shashamane town from the age of 16 and
above.

2.3 Project Planning

The main purpose of this business plan is to start fitness center at shashamane town to expand
the opportunity with fair price and excellent quality. Currently there is two fitness center but
there is no fitness center in 01 kebele (around new bus station).regarding to this the main purpose
of fitness center is to meet the needs of the peoples for a quality fitness center.

The most intense months for fitness center demand is in two month of summer (July and August)
And target market which is 16 years old to 35 year old.
These factors are what makes fitness center unique on the market in shashamane.
Customer Guidance through the beginning phase of exercising.
No date limitation Expect every Sunday.
Fair price

4|Page
3 The Project Framework

Project Location

A location plays an important role in starting any businesses. Before starting any business we have to take
a decision about the location of the business. We have to select location because once a location selected
it cannot be changed in the future easily. The following should be taken into considerations:

Availability of market
Availability of labor
Availability of transport
Availability of power and telecom infrastructure.
Location of the center is determined on the basis of the proximity to the market for final services. The
main factors were easy access to the market; availability of basic infrastructure like transport facility,
electricity, water, road, telephone, and colleges and university colleges are the main factors to select
specific locations.

The Fitness center will established in shashamane, 01 kebele (around new bus station) because of 01
kebele is center for colleagues, schools and government organizations. In addition to this is many youth
population live around this and the house rent is also preferable.

4 Project Requirement Definition

Our marketing strategy will aggressively exploit our partners strength and also competitors
weaknesses. During the startup phase we will run large ads in the business section via brochures,
local newspapers and posting advertising paper around colleges areas in mass. These
advertisements will focus on our advantages, including on-site service, competitive rates and
turnaround times. We will announce our opening date, and include a coupon with 10% discount
for first 10 trainees.

The objectives of this business plan are to make cost analysis and to show with numerical conclusion if
there is a market for running a fitness center in shashamane with considerable profits. The objective is
also to use this business plan to apply for funding from financial institutes, such as banks and financial
services and also potential investors.

The numbers that the calculations are built on are estimations. Hard to estimate sales without a
market research.

5|Page
 Even though the market objectives are based on creating new customers and offering
multiple payment agreements as well as trying to target those that are considered to be in
a bad physical state.

5 Organization Structure

Specific duties of the concerned bodies:

General Manager
Fitness Center needs to be run by someone that has experience in business, preferably someone
with an education in business administration. Former experience from running a similar business
is required. The role of the managing director is to supervise all factors of the business and
observe if everything is running according to schedule. His role will also be to see that the
customer satisfaction is met and goals for market size are sustained.

Reception / customer service. There will be one reception with a fulltime job and two receptions
with a par time jobs.Their main occupation will be to answer the phone and daily checking/ticking
cards of trainees. Their educational requirements are minimal but they need to have service
motivation and able to take initiative. On the side when there is a down time they can clean around
the facility. There has to be at least on receptionist of each gender to be able to clean the shower
rooms. Cleaning will be written in their employment contract.

Maintenance. At fitness center there is a lot of equipment that needs to be attended to on a

regular basis. The equipment has many movable parts that need to be lubricated to minimal wear
and tear. The customers demands that the equipment that he is intending to use will be working
at its optimal so it is important that there is someone that will be able to fix the equipment right
away. There is a possibility that there will not be a person in maintenance on payroll but instead
hire a contractor whenever something breaks. But will be included as staff member in the income
statement.The maintenance expert will also have to be able to instruct or guide new trainers.

6|Page
 Gross
salary Gross base total
Number of salary by by salary years
Employment Salary Employees hour Month by year salary
General Manager 1 3,500 42,000
Reception agent 3 1500 54,000
Maintenance/technical
trainer 1 2500 30,000 126,000

6 Financial Plan

Our financial plan call for gradual grouth from month to month until reachs the maximum
number of trainee. These projections are based on sound market research and ratios for
comparable businesses. As we grow, we will keep our expenses down, and maintain a positive
cash balance as we repay our long term loan.

6.1 Project Cost

The total investment cost of the project including working capital is estimated at Birr 300,000.00
(three hundred thousand Ethiopian Birr only). The details of the costs are listed in the below
table.

7|Page
All equipments and materials purchased from local suppliers (Marathon and Estifanos Sport house).

Measured Total Price

S/No Lists of Materials Quantity Unit Price (ETB) Remark
by (ETB)
1 Dump Bell 15 Pieces 750 11250
2 Indoor Bike 2 Pieces 12,500 25,000
3 Spin Bike 1 Pieces 13,000 13,000
3 treadmills 1 Pieces 75,000 75,000
4 Bench Press 1 pieces 1,0000 10,000
5 Dipping Bar 1 Pieces 6,000 6,000
6 Leg extension Machine 1 Pieces 12,000 12,000
7 Vibration plate 1 Pieces 9500 9,500
8 Barbells 10 Pieces 1500 15,000
9 Hammer Strength 1 Pieces 12,000 12,000
10 Pull Down Machine 1 Pieces 11,500 11,500
11 Abdominal Bench 1 Pieces 8,000 8,000
12 Jump Rope 5 Pieces 30 150
43 Inch LG
14
Television 1 Inch 16500 Television
Meter 85birr/meter
15
Sticker square square 8,500
16 Office Supplies 15000
17 Clock 250
18 Locker 32 Pieces 5200
19 Speaker 1 28,000
20 House rent 70 meter 160 112,00 10 meter
square square for
reception
office
21 Other unforeseen Cost 15,000
22 Total 296,850
All equipments and materials purchased from local suppliers (marathon and Estifanos sport house).

8|Page
 6.2 Estimates of Sales, Production, and Profitability
Objective for first year of operation: - fitness center will have 358,650birr at the end of first year.

1ST YEAR
Daily card Every Sunday 1 month Card 3month card 6 month card TOTAL
card total card total card total card total card total INCOME IN
Month sold Income sold Income sold Income sold Income sold Income A YEAR
October 5 250 15 300 10 4000
November 5 250 20 400 10 4000 30 32400
December 5 250 20 400 10 4000
15 32400
January 5 250 25 500 15 6000
February 5 250 20 400 10 4000 30 32400
March 5 250 20 400 10 4000
April 5 250 20 400 10 4000
May 5 250 20 400 10 4000 30 32400
June 5 250 20 400 20 8000
20 43200
July 5 250 15 300 30 12000
August 5 250 15 300 30 12000 100 108000
September 10 500 20 400 10 4000
TOTAL 65 3250 230 4600 175 70000 190 205200 35 75600 358650

9|Page
 First year Profit

Total Income 358,650 Remark

Employee Salary 126,000

House Rent 134,400
other utilities Expense 15,000
Total Expense 275,400.00
Total net profit 83,250.00
Second year of operation: fitness center will have 374,850birr at the end of 2ndyear

2ND YEAR
TOTAL
Daily card Every Sunday 1 month Card 3month card 6 month card
INCOME
card total card total total total card total IN A YEAR
Month card sold card sold
sold Income sold Income Income Income sold Income
October 5 250 15 300 10 4000
November 5 250 20 400 10 4000 30 32400
December 5 250 20 400 10 4000
20 43200
January 5 250 25 500 15 6000
February 5 250 20 400 10 4000 35 37800
March 5 250 20 400 10 4000
April 5 250 20 400 10 4000
May 5 250 20 400 10 4000 30 32400
June 5 250 20 400 20 8000
20 43200
July 5 250 15 300 30 12000
August 5 250 15 300 30 12000 100 108000
September 10 500 20 400 10 4000
TOTAL 65 3250 230 4600 175 70000 195 210600 40 86400 374850

10 | P a g e
 Second year Profit
Total Income 374,850 Remark
Employee Salary 126,000
House Rent 134,400
other utilities Expense 15,000
Total Expense 275,400.00
Total net profit 99,450.00
rd
3 year of operation:fitness center will have 406800birr at the end of 3rdyear

3RD YEAR
TOTAL
Daily card Every Sunday 1 month Card 3month card 6 month card
INCOME IN A
card total card total card total card total card total YEAR
Month
sold Income sold Income sold Income sold Income sold Income
October 5 200 25 500 10 4000
November 5 200 20 400 10 4000 30 32400
December 5 200 20 400 10 4000
25 54000
January 5 200 25 500 15 6000
February 5 200 20 400 10 4000 35 37800
March 5 200 20 400 10 4000
April 5 200 20 400 10 4000
May 5 200 20 400 10 4000 30 32400
June 5 200 20 400 20 8000
30 64800
July 5 200 15 300 30 12000
August 5 200 15 300 30 12000 100 108000
September 10 400 20 400 10 4000
TOTAL 65 2600 240 4800 175 70000 195 210600 55 118800 406800

11 | P a g e
 3rd year Profit

Total Income Remark

406,800
Employee Salary 126,000
House Rent 138,600 House rent increased(165birr/m2)
other utilities Expense 15,000
Total Expense 279,600.00
Total net profit 127,200.00

12 | P a g e
 4th year Profit

Total Income 417,600 Remark

Employee Salary 126,000

House Rent 138,600
other utilities Expense 15,000
Total Expense 279,600.00
Total net profit 138,000.00

13 | P a g e
 5th year Profit
Total Income 428,400 Remark
Employee Salary 126,000
House Rent 138,600
other utilities Expense 15,000
Total Expense 279,600.00
Total net profit 148,800.00

According to the Estimation

year1 year2 Year3 Year 4 Year 5 total

Total Income 83,250 99,450 127,200 138,000 148,800 596,700
6.3 Source Of Finance
The source of the finance 30% of the total investment costs are covered by owner and the rest 70% of the
costs are covered via long term loan from credit association with interest rate of 8.5% and monthly
account payable installment from salary for maximum of 10 years or 120months.

Equivalent
Loan period 10 years
total cost of loan 300,000
total payback payment 446,348.40
yearly proportion Cost 44,634.84

7 Financial Analysis

Payback period=2.89 years

Cash Net Cash

Flow Flow
Year 0 296850 296850
Year 1 83250 213600
Year 2 99450 114150
Year 3 127200 13050
Net present Value=143,238.09Birr

Internal Rate of return=25.560%

14 | P a g e
8 Benefit and Impact Analysis

Main purpose of fitness center marketing strategy is to:

To increase sales
Publish and promote the company and its services.
Increase demand for the service that fitness center provides.
Build up and establish fitness center as a brand name.
Help those that need to get in better physical state.

9 Implementation and Monitoring Plan

Table-. Implementation schedule

Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun-
S/No Main Activities
17 17 17 17 17 17 18 18 18 18 18 18
Remark
1 Feasibility study Collection
2 Financial Support Finding
3 House rent processes
4 Material purchases
Fitness Center Furnishing
5 and some Machines
installation
6 License and Approval
7 Recruitment of Employees
8 Promotion and advertising
9 Registration
10 Operation (fitness

15 | P a g e
How will this Implemented?

Through Advertisements in media

Through public relations by encouraging the trainers to be active in writing articles on the
internet, build up good corporate image.
Through co-operation with colleagues and Government offices.

10 Procurement Plan

Different Equipments will be needed to start the business. And to get the resources needed for operation
will be purchased once.

11 Quality plan

The future of the business is planned to be the main fitness center in the city; so to achieve the goals of
the business the quality issue is critical and customers must be satisfied with the service. To do that our
plan is fulfilling all the necessary materials will provided which are needed for giving quality service for
customers

12 Risk Management Plan

Business risk
Trainer turn over.
Machine and other Equipments Broken
Marketing risk
Different market price
Competitive risks
13 Marketing Plan

SCHEDULE
Date Time(in local time) Remark
Monday 11:30 AM-2:30 PM for all
Tuesday 11:30 AM-2:30 PM for all
Wednesday 11:30 AM-2:30 PM for all
Thursday 11:30 AM-2:30 PM for all
Friday 11:30 AM-2:30 PM for all
Saturday 11:30 AM-2:30 PM for all
Sunday 11:30 AM-6:30 PM special trainee(for only subscriber for a day)

16 | P a g e
14 Communication Plan

Advertisement Channels
Environment advertisement.
.Advertisement in stores, restaurants and theaters.
Brochures and other printed material.
Internet.
Creating Facebook page and using other social media.

15 Manpower Recruitment and Training Plan

Fitness center owned and managed by owner. He has four years technical experience at
Ethiotelecom and 1 year General IT expert experience. He have two years fitness center
experience and he his familiar with business.

Fitness center manpower details

Provided
S. Employee Educational
Field Certifications by Experience Remark Position
No Name background
(Organization)
Certificate in
Roba Eyi Project General
1 MBA Fitness center 1 year .
Gemeda management Manager
training
Reception/ Reception
2 Level III Accounting 1 year
Agent ist
Certificate in Maintena
Maintenance
Fitness Center nce/Techn
3 /Technical Level III Maintenance 1
equipment ical
trainer
maintenance trainer

16 Acceptance Plan

Our center price is fair so it is acceptable by our customers.

17 | P a g e
18 | P a g e
17 Appendices

Fitness Center Business Plan sample (Xavier & Associates, 2010)

Glussa Gym-Business Plan (Jhon Freyr Johannsson, 2011)

19 | P a g e