Introduction
Various sports facilities in the sport industry are specifically equipped for different purposes. Some are specifically furnished for outdoor activities, others specifically for body fitness, while some for indoor activities. Locafit Sporting Facility provides a one-stop experience for indoor and outdoor activities, besides being well equipped for body fitness exercises. The goal of the facility is to provide modern equipment and professional sports-specific training to athletes and other persons locally.
The premises shall be furnished with an indoor sports facility, a soccer field and work out area. Thus, the facility will offer professional training for athletes enrolled as members to the facility, in addition to sports-specific training for indoor games and physical fitness. Further, Locafit shall also offer personal sporting equipment for sale such as soccer balls, jerseys, training kits, footwear indoor sporting equipment, and any other sportswear. The facility shall make these sporting equipment and services readily available and accessible to athletes, children and other interested persons.
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Locafit Sporting Facility shall be located within a residential area, hence, the ideal customers for the business would be residents within the locality including athletes, school children, soccer sports fanatics, families, senior citizens, in addition to making provisions for the disabled. Trainers shall be provided for sports-specific coaching across the assorted range of customer base. However, the business is confronted with competition from well-established sporting facilities and other businesses that offer a wide range of sports equipment for sale: since the facility is constrained to soccer, indoor games and sporting facilities.
The facility shall be managed by experienced sports-specific trainers and a qualified business line manager. Since the business is a start-up, it shall require full funding for the initial capital and other initial expenses incidental to acquiring assets and procuring the services of professional trainers.
Company Description
Mission Statement
At Locafit Sporting Facility our mission is to conduct a business that conveniently avails sporting facilities and training to individuals within local reach.
Goals
In the short-term, the business aims at availing all necessary equipment for indoor sports, soccer and body fitness. Further, the business intends to provide professional training for indoor sports, soccer and body fitness: to encourage fitness and instill confidence in athletes. In the long-term, the business intends to establish other locations for the sporting facility and expand from limitation to indoor games, cocker and body fitness, to other fields of sports.
Industry
In the last two decades, the sporting industry has been registering consistent growth in the United States and other parts of the world. As more people get involved in both indoor and outdoor sporting, Locafit makes the sporting experience accessible to people of different social groups in the comfort of their residential areas: which makes the business more competitive in the industry.
Legal Structure
Locafit Sporting facility shall be incorporated Limited Liability Company (LLC) after reservation, verification and registration of the name. Due to the future intentions to expand the business, Locafit would require additional equity capital: thus the need to invite the public to subscribe to the company’s shares. Further, as a start-up, the company would require investors and lenders who would only own up to 45% percent of the shares in the company.
Products and Services
Regarding indoor sporting, in addition to providing a batting netted area, Locafit shall offer for sale equipment such as full range badminton and table tennis equipment, futsal goals, and nets for soccer, and other relevant sportswear incidental to those sporting activities. The products shall be supplied from major sports equipment manufacturers such as Adidas, AEO Sports, and Amer Sports among others: with whom we shall conclude exclusive agreements for supply of the equipment. Similarly, the Locafit shall offer sports-specific training services in soccer, indoor sports and instruction in the fully equipped workout area.
Regarding the pricing of the services, the business shall adopt a freemium strategy: where all members officially enrolled to training services shall be allowed free access to services at the work out area if they subscribe to either soccer or the indoor sporting services. This would ensure that the business enrolls many members in its initial stages, since most customers would prefer to enroll and enjoy the free workout services. However, this would change as the business becomes more stable.
On the other hand, the sporting equipment shall be offered for affordable and competitive market prices as recommended by the manufactures. Further, in order to make the equipment more affordable and accessible, Locafit shall offer sporting equipment for leasing at affordable rates within predetermined durations. Leasing would attract more customers to subscribe to the services as professional sporting equipment shall be accessible to those who may not afford to purchase them instantly.
Marketing Plan
SWOT Analysis
Strengths
Locafit competes for a share of the $620 billion worth of the global sports industry (Collignon, Sultan, & Santander, 2014). The affordable pricing and the initial freemium strategy would help attract more customers residing in the residential location where the main premises of the business shall be located. Further, the company shall exploit online marketing and use of social media to create awareness of the goods and products offered at Locafit Sporting Facility. By being based within local confinements, it would be easier during marketing, to create a brand for the business among the locals: by featuring sporting products and services that they relate to and those services that are relevant to them.
Weaknesses
The main weakness attributed to the business is its confinement to only three areas if sports, that is soccer, the indoor sports and the workout facility. For this reason, most residents that prefer other kinds of sports not forming part of the business may seek membership with other established competitors. Thus, the main weakness of the business is stiff competition from the established sporting facilities with popular brands and assorted sports alternatives and equipment.
Opportunities
Based on the growing trends in the market, the business is likely to acquire a significant proportion of the market share, which is dominated by soccer (Collignon, Sultan, & Santander, 2014) . With the prospective plans to expand to other locations, the business is likely to secure a greater portion of the market share in the sporting industry. With the opportunities to expand and include additional sporting activities besides the three outlined under the products and services.
Threats
Similarly, during the initial stages of the business, Locafit may be confronted with high startup and marketing costs. By virtue of the nature of equipment used, it will be important to invest in expensive sporting equipment and professional services. Further, being new in the market, the company business shall also be confronted with difficulties in popularization of the brand as its recognition among the residents would be critical to enrolling more members in the society. Further, the company may be vulnerable to changes in the economy, technology and any other legal provisions and regulations which may be detrimental to the business.
Operational Plan
Regarding production, the sports equipment available at the facility shall be procured from supplies by renowned sports equipment companies. As a matter of consistency, we shall engage the suppliers in exclusive agreements to supply: as a matter of quality control. While operating within the identified residential location, the company shall comply with relevant business permits or licenses required for the operation of the business within that area.
Employees in the company shall include three professional trainers and an administrator to the institution. The trainers would be required to guide and instruct customers, while the administrator shall coordinate the management and administrative work within the facility including registration of new members, maintenance of records, and financial management. The trainers and the administrator shall be hired as independent contractors for operation and management of the business.
Financial Plan
Initially, during the inception of the business, the following expenses shall be incurred with regard to setting up a LLC in the United States of America;
The incorporation fees - $750
License for liability insurance - $3,500
Leasing out real property that will host the business - $800,000
Amount required for Acquiring initial assets - $50,000
Payment of Bills and Staff members - $100,000
Additional expenditure in marketing - $10, 000
Miscellaneous - $10,000
Therefore the initial amount of capital required for startup of the business would sum up to $974,250
3-year Financial Projection
| Year 1 | Year 2 | Year 3 | |
| Revenue |
$200,000.00 |
$ 300,700.00 | $ 450,000.00 |
| Cost of Sales |
$90,000.00 |
$ 130,900.00 | $ 155,500.00 |
| Gross Margin |
$110,000.00 |
$169,800.00 |
$294,500.00 |
| Expenses | $ 10,840.00 | $ 11,200.00 | $ 13,700.00 |
| Net Income | $ 99,160.00 | $ 158,600.00 | $ 280,800.00 |
Table 1. The 3-year financial projection
The three-year projection reflects a lower net income for the opening year. This is would be the legitimate expectation as the business would still be in its initial stages. During the opening year, the company’s brand would still not be popular with the residents, hence the relatively lower net income. However, it is estimates that the net income would exhibit a steady rise throughout the subsequent financial years since more subscribers are anticipated to enroll as members in the facility. In the same vein, the cost of sales and the expenses are expected to be relatively higher due to costly marketing expenditures incurred to match the competition. The expenses would include the operating recurrent expenditures and remuneration for the professional trainers at the facility.
Cash Flow Projection
The following is a cash flow statement that reflects the anticipated records of Locafit’s financial liquidity in its first three years of operation. Being part of mandatory reporting, the statement indicates the cash equivalents that go in and out of the business within the specified period. The estimate of the beginning and ending cash balances would help to estimate the amount of actual cash that the company generates and spends within the year. The projections for the first three years in the business would be as reflected in the tabular representation below.
| CASH FLOW STATEMENT | Year 1 | Year 2 | Year 3 | |
| Net Income | $ 99,160.00 | $ 158,600.00 | $ 280,800.00 | |
| Cash flow from operating activities |
$206,097 |
$ 365,214.00 | $ 415,236.00 | |
| Cash Flows from investing activities | $ 79,328.00 | $ 141,621.00 | $ 83,268.00 | |
| Cash Flows from financing activities | $ 59,496.00 | $ 111,213.00 | $ 61,485.00 | |
| Beginning Cash Balance | $ 76,852.00 | $ 138,650.00 | $ 77,865.00 | |
| Ending Cash Balance |
$144,125 |
$251,030 |
$348,348 |
|
| cash flow | $ (67,273.00) | $ (112,380.00) | $ (270,483.00) |
Table 2. 3-year cash flow projection
Projected Balance Sheet
From the statement of the company’s assets, shareholders’ equity liability, it is apparent that the business would strategically restrict the amount of capital invested by shareholders to less than 40% of the company’s ownership. Further, the business shall as well limit the amount of credit that it takes out from lending institutions. The imminent layout of Locafit’s balance sheet is represented in the table below.
| BALANCE SHEET | Year 1 | Year 2 | Year 3 |
| Total Assets | $ 111,560.00 | $ 146,980.00 | $ 216,471.00 |
| Total Liabilities | $ 66,936.00 | $ 88,188.00 | $ 129,882.60 |
| Total Equity | $ 44,624.00 | $ 58,792.00 | $ 86,588.40 |
| Total Liabilities and Equity | $ 111,560.00 | $ 146,980.00 | $ 216,471.00 |
Table 3. Projected balance sheet
Ratios
While assessing the feasibility of the business based on the projections, the following indicators were considered; the Return on Assets (ROA), Return on Equity (ROE), the business’ leverage and its efficiency. The results were as indicated in the table below.
| RATIOS | Year 1 | Year 2 | Year 3 |
| Return on Assets (ROA) |
0.89 |
1.08 |
1.30 |
| Return on Equity (ROE) |
2.22 |
2.70 |
3.24 |
| Leverage |
1.67 |
1.67 |
1.67 |
| Efficiency |
1.79 |
2.05 |
2.08 |
Table 4. Ratios
First, the company would record a sound ROA from its inception and consistently improve in the first three years. The ratio of the company’s net income in relation to its total assets indicates that proper earnings will be generated from the assets that the company shall invest in. This indicates that Locafit would effectively convert its investments into income, hence sound profitability. On the other hand, the ROE registered by the company from inception indicates that the company generates a significant proportion of its net income from the shareholders’ equity (Mikoluk, 2014). This would instill confidence in shareholders to invest more in the company, especially during the initial stages when the company would float its shares to the general public.
Further, over the three year projection, it is apparent that the company maintains a lower leverage ratio. The low figures of 1.67 all through indicate that a lower percentage of the company’s capital originates from debt finance (Mikoluk, 2014). A leverage ratio of less than 2 would instill confidence in an investor to consider stock in the company. Similarly, the company would also record a sound efficiency ratio throughout the first three years which would indicate its effectiveness in utilizing its inventory and machinery.
Exit Strategies
In the unlikely event the business becomes unsustainable, it would be prudent to secure an exit strategy to protect against massive loss. For instance, the business may resort to merger and acquisition or liquidation and closure of the company. Regarding merger and acquisition, the company may opt to merge the company with another similar entity in the same line of business to establish a joint extensive business (Zwiling, 2011). This strategy would be appropriate in the event the business fails to live up to the first three-year financial projection and initially estimated in the financial plan.
On the other hand, the company may consider liquidation and closure as an alternative to exiting the business platform. The alternative comes as a last resort after efforts to merge the company with a similar on are in vain (Zwiling, 2011). It would, therefore, involve liquidation of all assets for venture into other businesses or in order to save the entire business from ultimate loss.
Conclusion
Locafit Sporting Facility is a potentially profitable business alternative in the sporting industry. Availing the sporting facilities for indoor, outdoor, and workout activities within residential areas would secure the business a significant portion of the target market in the industry. Despite competition from well-established sporting entities, the business is prone to survive stiff competition due to its accessibility, the high quality of services, and the proficient sporting equipment that the precincts would be furnished with. The business shall also be financially sound in a way that will attract investment in the company. Amidst a strategic market strategy and exit strategy, it is certain that the business shall make significant returns and competitively thrive in the sporting industry.
References
Mikoluk, K. (2014, January 7). Udemy . Retrieved from Business Strategy Examples: Four strategies businesses use to make money: blog.udemy.com/business-strategy-examples/
Zwiling, M. (2011). Five smart exit strategies. Startup Professionals Musings , 93-117.
