Fitness Equipment Business Plan Fitness Equipment Business PlanCircuit Fitness Importing is a start-up business that has been formed as an Oregon registered LLC. The company has been formed to become the exclusive importer of the Wega Corporation’s innovative Esercitazione Diritta (Exercise Standing) fitness equipment. Circuit Fitness Importing is poised to receive the exclusive license to sell this patented equipment, already very popular in Europe, in the U.S.A.
The Market
The American fitness market, a smaller subset of the sporting goods industry has sales of $5.8 billion. The last 10 years has seen significant spikes in membership and usage of this equipment. Americans, on a societal level are beginning to realize that their unhealthy eating habits and lack of physical activity can have a profound impact on their lives. Consequently, fitness participation is booming. Circuit Fitness Importing has identified three customer segments that are particularly attractive:
The Product
Esercitazione Diritta, Wega Corporation’s flagship fitness equipment is a patented technology applicable to strength fitness equipment. All other strength fitness equipment manufacturers have users placed in a seated position when performing the exercises. Esercitazione Diritta, instead, has the user stand. This is advantageous for several reasons. First, this strengthens lower body muscles that hold the body upright. It also strengthens central motor skills needed to maintain an upright position relative to the offsetting forces generated from the weight lifting. Esercitazione Diritta is protected patented technology which provides Circuit Fitness Importing a competitive edge. Additionally, Esercitazione Diritta is built on casters allowing the units to be moved as necessary.
Management
Circuit Fitness Importing will be led by Max Peruggio. Max has achieved numerous accomplishments that will provide him with the necessary skill set to execute on this well researched business model:
The combination of a exceptional products, the exclusive license to import the patented technology and an experienced sales and project manager will allow Circuit Fitness Importing to quickly gain market share. Revenue for years two and three have been forecasted to reach $1.0 million and $1.2 million respectively. For the same years net profit will be 6.0% and 6.98%.
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Circuit Fitness Importing’s mission is to offer the finest, most innovative fitness equipment to the U.S.A. market. Circuit Fitness Importing will ensure all of their customer’s expectations are exceeded. By only offering the highest quality product with premium support, Circuit Fitness Importing will become the premier fitness equipment importer.
Circuit Fitness Importing has been formed as an Oregon LLC with the express purpose of importing the finest fitness equipment from Italy into the U.S. The company was founded by Max Peruggio in January of this year.
Circuit Fitness Importing is in the process of opening an office in anticipation of receiving an exclusive importing contract from Wega regarding their innovative Esercitazione Diritta exercise equipment. The office is located in Portland and requires the following equipment and service provider expenses:
| Start-up Funding | |
| Start-up Expenses to Fund | $17,900 |
| Start-up Assets to Fund | $182,100 |
| Total Funding Required | $200,000 |
| Assets | |
| Non-cash Assets from Start-up | $15,000 |
| Cash Requirements from Start-up | $167,100 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $167,100 |
| Total Assets | $182,100 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $0 |
| Long-term Liabilities | $85,000 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| Total Liabilities | $85,000 |
| Capital | |
| Planned Investment | |
| Max Perrugio | $40,000 |
| Family and Friends | $75,000 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $115,000 |
| Loss at Start-up (Start-up Expenses) | ($17,900) |
| Total Capital | $97,100 |
| Total Capital and Liabilities | $182,100 |
| Total Funding | $200,000 |
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| Start-up | |
| Requirements | |
| Start-up Expenses | |
| Legal | $2,000 |
| Accountant fees | $2,000 |
| Brochures | $750 |
| Website development | $4,000 |
| Insurance | $150 |
| Rent | $1,000 |
| Research and Development | $0 |
| Expensed Equipment | $8,000 |
| Other | $0 |
| Total Start-up Expenses | $17,900 |
| Start-up Assets | |
| Cash Required | $167,100 |
| Start-up Inventory | $0 |
| Other Current Assets | $0 |
| Long-term Assets | $15,000 |
| Total Assets | $182,100 |
| Total Requirements | $200,000 |
Max Peruggio is the sole owner of Circuit Fitness Importing. To finance operations, Max has invested $40,000 in the business, and has received money from friends and family as well as taken on bank debt.
Esercitazione Diritta is a new and unique type of strength training fitness equipment. Unlike all other strength fitness equipment where you sit when you are doing your exercise, Esercitazione Diritta (Exercise Standing), as the name implies, has the user stand. Standing while doing exercises has many advantages.
All of the Esercitazione Diritta machines are commercial quality, crafted in Italy of the highest grade steels. In addition to being made to handle constant use, they have casters, allowing them to be easily moved anywhere in the club. Esercitazione Diritta has machines for a wide variety of body zones and muscle groups including:
Esercitazione Diritta is organized into a circuit of machines. Within a 45 minute period, a user can efficiently and effectively use all of the machines in a circuit for a complete workout.
Wega has received multiple international patents on their unique Esercitazione Diritta system of standing while performing strength exercise. Esercitazione Diritta is currently distributed in Europe and the manufacturer is interested in distribution into the U.S. fitness market. Wega has requested a importation proposal in the form of a business plan to choose a sole U.S. distributor.
Max Peruggio, founder of Circuit Fitness Importing has been requested by Wega to submit a proposal for the creation of an exclusive U.S. importer of Esercitazione Diritta. Because of Max’s Italian heritage, language skills, and past importation experience Wega is very interested in working with Max and Circuit Fitness Importing. It sounds as if the “proposal,” this business plan is a mere formality due to the good match of Max’s skills and Wega’s need for an importer.
Circuit Fitness Importing has identified three distinct customer segments that will be targeted for sale of the fitness equipment:
The following section provides detail regarding each respective segment as well as background information regarding the industry, a large growing industry. The competition that Circuit Fitness faces is also provided.
Fitness equipment is distributed in the U.S. through distributors or direct from the manufacturer/importer. The majority of sales are done through distributors. Distributors typically carry one (sometimes a couple of) vendor for each type of equipment (strength, cardiovascular, etc.) and this explains the large number of distributors in the U.S. Manufacturers will typically provide an exclusive geographic area for each distributor to sell the products.
Large corporations (whether fitness clubs, franchises, corporations, etc.) that have significant buying power are often able to sidestep the distributor layer of the distribution channel by buying direct from the manufacturer. This means that Circuit Fitness Importing will have distributors as well as end consumers as target customers.
Distributors
As previously mentioned, distributors sell the bulk of fitness equipment. Data is sparse regarding distributors because the various industry associations (the primary association being IHRSA [International Health, Racquet and Sports club Association]) serve manufacturers more than distributors. The key information is that 60% of the fitness club market is composed of independent clubs, all of which purchase their equipment through distributors. The remaining 40% is composed of chains, franchises, etc., some of which purchase from distributors, some of which exert their superior buying power and purchase direct from the manufacturers.
Health Clubs
Health clubs are the second largest market of fitness equipment behind home fitness equipment (of a lower grade and price point relative to commercial equipment). The 1990s saw a significant increase in health club membership, 76% or 30.6 million people from 1997 to 1999.
In addition to significant increases in membership, health clubs have seen a shift in their customer demographics.
The demographic shifts are significant. Fitness clubs were once populated primarily by 18-34 year olds who were interested in body building. As Americans have made a paradigm shift they are now making the cognitive connection of fitness and health. Consequently, there is far greater cross section of the population having fitness club memberships. This is evidenced by the huge increase in club membership for over 55 year olds who are intuitively more interested in overall health than just fitness and strength. Additional demographics includes:
Sales of fitness equipment to clubs in 1998 was approximately $445 million. The projected figure for 2003 is $565 million, representing a 21% increase. The typical useable life of the fitness equipment in a fitness club (variances include maintenance, initial quality, and use) is 7 years.
Vertical Markets
Another market that will be attractive to Circuit Fitness Importing is the vertical market which includes non-health club environments such as hotels, hospitals, apartment complexes, corporations, universities, and senior citizen centers. This relatively new market is growing fast as consumers are increasingly valuing convenient access to exercise facilities.
Hotels
Senior Living and Apartment Complexes
Corporate Wellness
As a cost saving measure and a source of employee fringe benefits, corporations have been installing fitness centers within their offices. In a recently published study in the Journal of Occupational and Environmental Health, workers who participated in Xerox’s health-risk appraisal program which included active participation with the company’s fitness facilities, there was a 37% reduction in worker compensation claims and a 31% decrease in costs per injury. This provided Xerox over a two-year period with a 5 to 1 return on investment (ROI).
For Johnson & Johnson who studied the impact of a large-scale corporate health and wellness program, employees who participated within the program each saved the company $225 annually. The savings were generated from reduced hospital admissions, mental health visits and outpatient service. The bulk of the savings occurred between years three and four. When Johnson & Johnson evaluated medical expenditures for five years before the program and four years after the start of the program, the company saved $8.5 million annually. Both the Xerox and Johnson & Johnson studies provide solid quantifiable evidence that corporate wellness programs can have significant financial gains for the company.
Hospital Fitness Centers
Other Non-health Club Markets
| Market Analysis | |||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
| Potential Customers | Growth | CAGR | |||||
| Distributors | 3% | 1,200 | 1,236 | 1,273 | 1,311 | 1,350 | 2.99% |
| Health clubs | 5% | 12,545 | 13,172 | 13,831 | 14,523 | 15,249 | 5.00% |
| Vertical markets | 6% | 30,000 | 31,800 | 33,708 | 35,730 | 37,874 | 6.00% |
| Total | 5.64% | 43,745 | 46,208 | 48,812 | 51,564 | 54,473 | 5.64% |
