A Business Plan for the Green Eco Gym

Mike Wieczorek
December 2008
Saskatoon, SK
Table of Contents

1.0 Executive Summary 3

2.0 Introduction to the Green Eco Gym 4

3.0 The Operations Plan 6

4.0 The Marketing Plan 13

5.0 The Financial Plan & Recommendations 21

Appendices

Appendix 1 – Securecom Quote 25

Appendix 2 – Location Improvements 25

Appendix 3 – Operating Equipment 26

Appendix 4 – Fitness Machines Costs 26

Appendix 5 – Paypal Fees 27

Appendix 6 – QuickBooks Price 27

Appendix 7 – Treadmill Energy Usage 28

Works Cited 29
1.0 Executive Summary

This plan’s purpose is to present to you a creative twist on something that has been around for
ages but has not really evolved much. It is a combination of 2 industries that have been
experiencing steady growth over the past 10 years and will continue to experience growth
according to all estimates.

So what do we get when we combine environmental concerns with the fitness industry?

The Green Eco Gym! Think of it as the smart car of the gym industry. Just like there has been a
shift from SUVs and trucks to small efficient cars in the automotive industry, I feel there will be
a shift in the gym industry.

The Green Eco Gym gets rid of all the costly amenities that have become a cliché in gyms such as
massive change rooms, showers, lights always on. If you really think about it, a big box club is
extremely inefficient in its space and energy usage. So simply being small is a large part of
reducing our environmental footprint.

People will prefer to use this type of gym because of its quick in/out layout, low prices of $50 per
month and no contracts as well as feeling good about supporting the environment.

The gym will be based on a 1,800 sq. ft floor plan instead of a typical big box club size of up to
32,000 sq. ft. It will be open 24/7, feature a high tech security and video surveillance system as
well as the latest fitness equipment.

The club will also feature a $15,000 custom made generator powered by the motion of its
members that will generate approximately 5% of the gym’s energy needs. All materials such as
equipment sprays and light bulbs will be environmentally friendly. The first gym to create power
from its members like this in the States opened in Portland last year and received nation wide
media coverage at no cost for several months. This is important to note because this means that
the club should be able to sell itself and we will not need to spend very much money on
advertising according to conversations with the StarPhoenix, the major local Saskatoon
newspaper.

The Club will be located at a very high traffic location on 8th Street right beside the existing
California Fitness gym. Our location should allow us to steal many customers from this
successful chain as soon as they find out they can work out in a gym with newer equipment, lower
monthly rates and a vision for being sustainable and responsible to the environment.

The start-up cost for this venture is low at $160,000 and as such this would be an ideal
investment for one or two retired couples.

A key differentiating factor of this gym compared to others is that it can be open 24/7 because of
its high tech security and video surveillance system that keeps users safe yet allows the gym to be
accessible without employee/owner supervision.
It seems quite feasible to think that Saskatoonians will soon be able to experience “the fastest,
greenest and most affordable way to stay fit and healthy!

2.0 Introduction to the

the Green Eco Gym

Background on Business Concept

To better understand the concept of the Green Eco Gym we must look south of the border where
we took notice of a franchise making waves with its explosive growth. Snap Fitness has been in
the top 10 franchises rankings for the past 5 years. For 2009, Snap Fitness is ranked #5 by
Entrepreneur Magazine. Its’ revolutionary leader is Peter Taunton. Here is what Peter has to say
about the small club concept:

“I managed “big box” clubs for 20 years. Though successful, I questioned the work and
capital needed to turn a profit. So, through analysis, trial and error, I down-sized,
stripping costly amenities and keeping only the bare essentials that ft in low-rent, well-
situated malls. I cut labor by using a high-security, key-card system to let members come
and go in a safe environment.

And I emphasized good value at a low price. My first test in rural Minnesota yielded 180
members in 30 days. From my point of view that was good enough financially. Pilots in
larger markets got similar results. I realized I had a tiger by the tail – and a business
model you can use to pursue your dreams.”

The Small Club Concept is the hot thing right now. The fitness industry’s fastest growing segment
is 24/7 express centers just like Snap Fitness and our soon to be Green Eco Gym.

There are several factors in this sectors recent explosive growth. Patrons love the flat monthly
fees with no contracts. All of the new small clubs also feature state of the art machinery as good
as the large clubs or even better.

Most existing gyms offer a sharp discount for members to sign a 1-3 year contract. The discount is
so large that people choose the contract option for savings but then later realize that if they are
not satisfied with the gym or find a better alternative, they cannot switch because they are locked
in. Gyms need these long term contracts because of the capital intensity of their facilities.

Most modern gyms are 5-10 times the size of our smaller, smarter Eco Gym and as such have
exponentially higher overhead costs. In addition to the size difference, ordinary gyms require
extensive organization structures and management to manage all their gym staff.

But no matter how nice the small club concept is to potential members, it could not be enjoying
the explosive growth it is at the moment, if it was not a lucrative proposition to potential club
owners and investors. With low overhead and a manageable investment cost, it is no wonder that
a franchise company such as Snap has sold over 1,500 franchises in the United States and Canada
in less than 5 years.
However, the small club concept brought into the spotlight by Snap Fitness is only half of the
inspiration for the Green Eco Gym.

The other comes from the Green Microgym in Portland, USA. When I started my online searches
for green gym information, this was the gym that came up most often.

Adam Boesel, owner of this gym, saw a television report about a Hong Kong gym with human-
powered equipment and set out to create an eco-friendly fitness center in his hometown. Mr.
Boesel’s Green Microgym opened in late August 2008 and has already registered more than 100
members.

He generates power through generators attached to his stationary bicycles, uses environmentally
friendly flooring and solar panels to generate about 40% of his gym’s energy.

The company gym will be able to start up approximately 1-2 months after signing the lease for
our property to allow for installations and modifications.

Vision:

Promoting a green and eco-friendly way for Saskatoonians to

Work out and stay healthy

Mission:

To facilitate health in an environmentally friendly way for life

Core Values:

o Helping all members achieve their fitness goals

o Helping all members become more environmentally friendly in other aspects of their lives
o Sustainable development/growth in the future
o Supporting & encouraging environment

Objectives:

The Green Eco Gym will strive to complete the following short-term and long-term strategic
objectives:

1. Short-term Objective No. 1: To have a 99% satisfaction rate for the clientele of The Green
Eco Gym.

As measured through a short monthly survey collected by the owners as patrons
come in to work out. If a member is not 100% satisfied they will be offered their
next month free and will be asked what can be done to improve their satisfaction.
If we cannot, improve their satisfaction in one month, we will suggest another
club that might fulfill their needs better because we only want satisfied clients
even if that means having less clients at some points.
 2. Short-term Objective No. 2: To create win/win partnerships with other green businesses in
Saskatoon to help promote and raise awareness of our businesses.

The Green Eco Gym will develop special promotions and partnerships with green
and sustainable businesses such as Dad’s organic market.

3. Long-term Objective No. 1: To break even every year or better.

Very conservatively, my main goal for this business is to raise awareness for the
environment and what ordinary people can do to be more green and
environmentally friendly. If we can sustain this gym at a breakeven or better, it
will be an extremely positive addition to the city.

3.0 Operations Plan

The green eco gym will strive to be a revolutionary gym chain that will go the extra mile to make
sure that every single product/machine/process is done in a way that is extremely environmentally
efficient. It will be a very simple in/out gym without large change rooms, showers or tanning
beds. Only cardio machines, weight machines and free weights will be present.

The club remains locked at all times, and members enter with an electronic keycard. The security
system includes surveillance cameras, window and door alarms, emergency alarms in the club
and portable alarms that members can keep with them during workouts. A person at the security
service is available to members at all times by pressing a button.

The reason for this is simple. Change rooms are often unoccupied yet the lights are always on. We
will provide several personal change rooms and then people can quickly leave the gym and
shower at home. Showers are a huge space and energy drain on gyms as well. Tanning beds are
another notorious energy user. We will let other companies who specialize in tanning take care of
this.

The gym will look to capture a small membership base quickly by pricing its membership at
similar levels to its non energy efficient competitors, yet we will not require a contract. Even
though the monthly fees will be the similar, the gym should enjoy much larger profit margins
than other gyms because of its low overhead costs and inexistent labor costs. Energy costs, one of
the largest expenses for a typical gym, will be reduced as the gym will be run by very efficient
equipment.

All cardio equipment models that require electricity to run will be the most efficient in their
class offering substantial energy savings to the outdated models some other gyms still use.

All mats/pads/training balls will be made of biodegradable materials. An example is the Golden
Earth Premium EnviroMat. It is Free from latex, phthalates, toluene and heavy metals unlike
most other mats. All sprays and cleaning materials will be all natural and safer than chemical
sprays.

Let’s go over the process for a person to get signed up with the Green Eco Gym.
The most important tool will be our website which will be used for both information and
marketing purposes. We are going to copy the design currently used by iContact.com which is one
of the leaders in online marketing.

As you can see, there will be 3 information tabs on the top that will focus on various features and
benefits of our gym. The most important feature to note is the pane on the right side that will
collect important information from visitors such as:
-first name
-last name
-email address
-phone number
-if they are current gym member or not
-most important thing they look for in a gym

In Marketing Terms, we will construct our front page to be a sort of “squeeze page.” A squeeze
page is a “web page that is specifically designed to compel visitors to opt in to your web site. A
well-designed squeeze page can convert as many as half of the people who visit it, into opt in
email list subscribers. In order for the squeeze page to be able to do its work most effectively,
there must be no other way for the visitor to get into your web site without opting in first to your
opt in email list.”

When, the person submits this information, the website automatically sends an auto-responder to
the person’s email with a FAQ file and more information on our gym. The website automatically
sorts whether the person has been approved for the offer immediately or if they must be put in
the cue line.
The information comes to the owner and he must review the information to make sure it is a real
person and then activate a card for the person and mail it to them. This process takes on average
5-10 minutes per new member.

Once a person has a key card, they can keep this card for life unless they lose it. In this case, we
simply send them another one in the mail after they contact us.

5 days before the person’s trial is about to expire, the website automatically sends an email to the
person asking for them to keep their access to the gym and to pay automatically by credit card. If
the person has not responded by the last day, the owner will call the person personally and try to
get the person to sign up and to ease any worries. The owner can also listen to suggestions on how
to improve the gym from both people who sign up and those who prefer not to at this time.

We will use the services of Paypal Inc. which is owned by Ebay. We know that everything will be
secure and using a large company like this for our payments adds credibility to our business.

Our costs for using this service are $35/month and 2.9% of the transaction plus $0.30 per
transaction. Paypal will be waiving the monthly fees for 2009 which can save us some money.

Included with the key card system is an online management panel that allows us to control and
review everything about access to our gym. We can see exactly who is in the gym at any time and
view a real-time security camera view at any time. We can also view people who use the gym the
most and least. This is very useful to try to monitor and check if there are any people who we
might think are sharing cards with their friends.

Our security system will be a custom one done by Securcom out of Lethbridge Alberta. The reason
we are using them is because they are one of the few official Bosch security system resellers in
Western Canada.

Our custom Bosch system was chosen because of unprecedented reliability and customization.
Chris at Securcom will build this custom system with 2 remote monitored cameras on each level,
the 24/7 key card system, motion sensored lighting, handheld emergency devices.

Patrons can choose to take one of these handheld devices if they want to which resemble pagers.
If at any time they feel uncomfortable, they can pull the cord and the alarm system will go off
and somebody from Commissionaires Security will come by to check if everything is ok. If
something bad happens, the owners are then notified by Commissionaires.

One of the key technological advancements that allows our gym to remain unstaffed most times is
the Door Detective by Fastlane.

Fastlane Door Detective is designed to increase the level of security at any door that uses
access control. The Door Detective creates an infra-red field across a doorway to monitor
the passage of every individual passing through the door, only alerting the security staff
to the presence of unauthorized entrants.

Door Detective helps the access control system overcome the age old problem of
controlling how many people pass through a doorway, and in which direction, once a
valid access card has been presented and the door is open.
The Fastlane system will be integrated into our online monitoring system. Often times, a relative
or friend of a current Green Eco Gym member will be one of the culprits but because they are
already accustomed to using our gym, if confronted about the situation, many will be willing to
sign up for membership and grow our subscriber base.

3.1 Organizational Structure

This gym will be run by the owner or owners. I suggested previously that it could be a perfect
investment for one or two retired couples because running this gym is only a part time job at
most.

The organizational structure is non-existent as there is only one or two people in charge of all
operations.

The organization will incorporate to enjoy the advantages this method offers such as limited
liability, lower tax rates and more flexible tax planning.

The company would use the expertise of Adam Boesel whenever needed. Adam is the owner and
founder of the Green Micro Gym in Portland which was started about a year ago. His gym is the
most successful in the United States and one of the best in the World. He charges $125/hr for
telephone conversations which I feel would be quite useful for owners of the company. I think
using his advice once per month for the first 12 months would be a great investment. The cost for
this per year would be $1500 but would pay off dearly and would allow us to increase our
efficiencies and decrease mistakes based on his experience.

The owner (s) would be the person who invests in this concept. He/she would be in charge of
running maintenance and marketing.

3.2 Site Plan and 5 Year Development Plan

The diagram above shows our tentative layout for our split layout design offered by our unique
retail location on 8th Street.
The diagram below shows a more ordinary layout used by Snap Fitness when they are locating all
machines on the same level.
Ways the Gym will be Green:

o Our SportsArt EcoPowr Treadmills use 30% less electricity than others
o Our solar panels generate an average of 8 Kilowatt Hours per day
o The Team Dynamo and Spin Bikes can collectively generate up to 350 watts continuous
o We are working with ReRev.com on ways to capture the excess energy from our elliptical
trainers
o We have recycled rubber, marmoleum, and eco-friendly cork flooring
o Our ceiling fans are EnergyStar rated
o All of our lights are compact fluorescents
o Our televisions are LCD TV's which use less electricity than plasmas
o Our lights, televisions, and ceiling fans are member controlled, so they will only be on
when needed.
o We have double flush toilets
o We use non-toxic soaps and cleaning supplies
 o The paper towels and toilet seat covers in the bathrooms are made from recycled content
o Our personal trainers often take their clients outside for workouts
o We have automated our payment and billing systems to reduce paper usage
o We will do our marketing mainly to surrounding homes and areas in the hope of
encouraging patrons to walk/bike/run/carpool to the gym to reduce gas use.

3.3 Describe Average Business Day, Week, Month, Year

The gym will be open 24 hours per day so that people can use the gym whenever they have time.
Most of the time the owner (s) won’t be at the gym. There is a high security card system to gain
access to the gym as well as high definition video monitoring.

It is estimated that the owner will need to devote approximately 20 hours per week to run the
gym. Every evening they will take one hour to clean the place and make it look good as usual.
Answering telephone inquiries which are directed to the owner’s cellphone will take
approximately 30 minutes per day; as well as another 45 for answering emails.

The owner will have to go to the post office many days to mail the new key cards for patrons
wanting to preview the gym.

Every week, he will look at gym attendance numbers using all information such as hours
accessed/demographics etc. We will track all advertisement and marketing currently being done
and analyzing results. The owners will have to spend 2-4 hours every 2 weeks to write up and
compile our members newsletter which will feature highlighted articles around the web from top
blogs.

The goal of this twice monthly newsletter will be to make members more attached to the club and
to have something they can forward to friends to boost membership. It will also promote green
living for all members and help them reduce their carbon footprint. Newsletters will be archived
in the members section so the content for members will grow as time passes.

Every month, we will look at overall locations and our monthly financial results to see what kind
of shape we are in.

Every year, we will file for taxes and set our new financial and membership goals for the
upcoming year.

3.4 Supply Analysis

There are several important supply partners.

First off, we will need a good fitness equipment supplier such as Flaman fitness to buy our
equipment from and service broken machines to ensure our equipment is always in good
condition and up for customer use. The standard warranty timeframe is 5 years parts and 2 years
labor. Flaman has a service representative on call 10 hours per day so if there are any repairs
required we will be covered well by them.

We need good relations with our marketing partners such as newspapers/websites/advertising

agencies. By giving paper writers exclusive interviews and first peeks at our gym before it is open
to the public we can increase our chances of getting favorable media attention.

The best part of our plan is that since all of our energy will be produced by us we can reduce our
supply risks for energy such as electricity and gas. Since these inputs have been on a steady rise
over the years, our investments in self sufficient energy systems are not only energy efficient and
money savers but also risk reducers.

3.5 Service Providers

We will rely on the services of our product distributor such as Flaman fitness to service and
maintain equipment. With Flaman, we get 5 year warranty on all parts and a 2 year warranty on
labor with in-gym repair on call.

All our bookkeeping will be done by the owner using Quickbooks. This software costs $199 per
year.

Our year end taxes and accounting will be done by a reputable accounting firm such as Northrup
and Associates. The cost should be in the $600 range.

All advice will be sourced out to paid consultants who are in the top ranks of their specialties.
Adam Boesel will be the most used. He is the creator of the Green Micro Gym in Portland which
was the first eco gym in North America. He charges $125/hour and we plan on using him once
per month for the first 24 months.

3.6 Technical Processes and Procedures

The gym business is in essence a very simple business operation. You need a building to house
your exercise equipment. However in our company, we will utilize several processes and products
that are known to other industries and applications but uncommon in the gym industry.

In our feasibility studies earlier in our research, we originally wanted to build one of, if not the
greenest gyms in the world. We wanted to build a LEED-platinum certified building somewhere
on the east side of the city. We wanted to spare no costs in our perfect building using thermal
glass, solar panels on the roof and geothermal rods heating and cooling the gym.

But the more we started looking at the costs associated with this, the more we thought we needed
a different way to do things.

A LEED building would have cost in the 1-2 million dollar range in addition to up to 500,000
for the lot. The building boom in Saskatoon has also created shortages of good locations to build
on.
When we started doing membership numbers on this type of building, we discovered that to
support those kinds of financing and investment costs, we would have to go big or go home.

And building another huge mega-gym like world’s gym is not our objective. So our alternative
was to downsize our gym and start from scratch. After reading about Snap Fitness, we decided on
a 1800-2400 sq. ft size and started looking at locations we could lease in this size range on the east
side. We found a good priced property right on 8th Street, right beside one of our competitors
which would be ideal to create awareness to people who already possess gym memberships and
might be willing to try our revolutionary gym.

3.7 Capacity Limits and Capital Budget

We are limited to how many people can access the gym at the same time because of space and
machine limitations.

If we have approximately 9 cardio machines, 12 fitness machines, 2 racks of free weights along
with the exercise room, we can handle a maximum of about 35 users at any given time. If we can
turn over once per hour times 12 hours busy time, we can come up with an approximate gym
membership capacity of 420 members.

It will be important to eventually encourage users to use the gym at non peak hours to prevent
lineups for equipment. Failure to do so will be a loss of clientele because nobody likes waiting in
line at the gym.

Cash Management

Our gym's cash cycle will be very short which is a great thing. We collect our monthly dues at the
beginning of the month and then people use the gym for the whole month. We can choose to pay
our bills at the end of the month using all our cash that we collected a full 30 days before.

We will have zero accounts receivables because if someone doesn't pay their membership dues,
they are not allowed to access the gym. Our online control system automatically limits access to a
card if payment has not been processed online.

4.0 Marketing Plan

Excitment is a word that can explain both Saskatoon's growth in 2007 and the outlook for 2008.

The Saskatoon region has consistently ranked among the top five growing regions in
Canada over the past five years, and 2007 was no exception. Outpacing all other regions in
Canada, Saskatoon experienced annual growth of 4.7 per cent in gross domestic product
(GDP). Major growth sectors included mining; oil and gas; construction; wholesale and
retail trades; finance, insurance and real estate; and agriculture.

Projected growth for 2008 is directly related to the labor market. The increasing need for
workers will have a direct effect on whether companies are able to expand and output can
 increase. It is expected that the unemployment rate will be 4.1 per cent in 2008, which
will keep the labour market at an almost 'fully employed' level. Demand for skilled trades
people and competition for existing workers will be the biggest challenge faced by
Saskatoon region employers.

Operating a business in the flourishing city of Saskatoon has never looked more
promising. “The Conference Board of Canada’s outlook pegged Saskatoon’s real domestic
product growth at 4.9 per cent, surpassing the country’s previous top performer, Calgary”.
Alan Migneault, chief executive officer of the Saskatoon Regional Economic
Development Authority Inc. (SREDA) has stated “We believe that Saskatoon’s economy
will continue to grow and exceed expectations on a national level.” In addition to the
phenomenal growth expected in Saskatoon, the advantages of running a business in
Saskatoon have been acknowledged on an international level. “Saskatoon has been ranked
most competitive among western Canadian locations in the 2008 edition of the
Competitive Alternatives: KPMG’s Guide to International Business Locations. The
Competitive Alternatives study looks at both cost and non-cost factors that would be
considered when choosing a location to do business”.

Marketing Research

The fitness industry is valued at $1.6 Billion in Canada alone with 4,700 members and 4.3
Million members. It has a continued history of success, with 8% compound annual growth since
1993 with positive trends in place such as the aging boomers and a more health-conscious society.
There are twice as many members today (14% of population) as in 1987.

Canadians are becoming more conscious about their impact on the environment. In our recent
election, about 11% of Canadian cited the environment as their #1 concern.

Canadian Market Statistics

o Total Industry Revenue

(USD): o $1,600,000,000
o Total Number of Clubs: o 4,700
o Total Number of Members: o 4,300,000
o Members as Percent of
Population: o 14.6 %

If we want to look at another country’s statistics, we can look at the UK numbers:

The UK’s £3.6 billion fitness industry is in the best shape of its 20 year history with more
members than ever before. This is the conclusion of the 2007 FIA State of the UK Fitness
Industry Report, the only comprehensive audit of the UK fitness industry. The market
intelligence report published on 12 July 2007 covers national overviews of both the public and
private sectors.
National Conclusions – UK

o Revenue is estimated at almost £3.6 billion

o 11.9 per cent of the UK population are now registered members of a health and fitness
club or publicly-owned fitness facility
o Like-for-like membership has grown by 3 per cent since 1st January 2006
o Over 230 new public and private fitness facilities have been added to the industry's
portfolio
o Almost 90 per cent of the UK population live within two miles of a private health club or
publicly-owned fitness facility

The Right Concept: Small Fitness Centers Lead the Pack

• Industry’s fastest-growing segment is 24/7 express centers and Snap is the segment’s growth-rate
leader 3

• Well-appointed, brand-consistent, state-of-the-art facilities

• No experience required; our turnkey systems support you

• Flat monthly fees – more fair and less costly than competitors

• The most consumer-friendly pricing and membership policies

Another possible boom for the Canadian gym industry could be an upcoming federal Tax Credit.
It has been successful at the kid’s level and there is research to suggest that an investment in it
could actually save the government money in the long run. The reason it would boost gym
memberships is because any investment in a gym membership would become an expense that
lowers your taxable income. Many people would get the membership for the tax savings and then
use it to varying degrees sometimes just because they have it.

“The federal government would save $2.5 billion over the next 21 years by extending the
benefits of the current Children’s Fitness Tax Credit program to adults, Dave Hardy,
President of the Fitness Industry Council of Canada (FIC) said today following the
release of an economic study on the effects of the program.

“The financial incentive offered by a federal adult fitness tax credit will encourage nearly
one million more Canadians to get active and healthier,” said Hardy. “These healthier
Canadians will need less health care and miss less work due to illness.”

In 1997, the total direct cost of obesity in Canada in 1997 was $1.8 billion – or 2.4% of
total health care expenditures. According to the Staff of the Parliamentary Information
and Research Service (PIRS) of the Library of Parliament report, The Obesity Epidemic
in Canada, the growing obesity epidemic in Canada is costing government “$4.3 billion by
most recent estimates.
 Considering in 2005, approximately 6.8 million Canadian adults ages 20 to 64 were
overweight, and an additional 4.5 million were obese, the cost of obesity in Canada is
likely to significantly increase over the coming years. Increased physical activity has the
potential to decrease national health care costs while reducing the risk of developing
terminal disease and debilitating conditions including heart disease, colon cancer, type II
diabetes, hypertension and osteoporosis.”

Product

We want to market this green eco gym as something more than a product. We want it to be an
experience and a different way of life for all our patrons.

Some patrons who join our club will join because they are doing all they can to stay green and
support the environment. Others though will be new to the green movement but curious.

If we are to meet our vision and goals, we must be there for our patrons to provide suggestions
and support on how to live a green and environmentally friendly lifestyle in all areas of their
life.

A further concept to be expanded could be that of the gym being a focal community center where
people not only go to work out and stay fit but to socialize about the environment and how they
can minimize their footprint.

This ideology goes with the well know marketing phrase of don’t sell the product, but sell the
dream. We are selling the dream and vision of everyone being more sustainable in their living.

Our bi-weekly email newsletter will help to achieve these feelings and goals.

Price

We initially wanted to set our gym monthly membership dues at 30 dollars per month and
market it with the slogan of “a dollar a day”. Everyone can afford a dollar a day and it is very
catchy to market products like this. Several companies such as MDG computers have built a
successful and profitable business on such a simple slogan.

However, as we ran our numbers, we found it very difficult to break even, let alone be profitable.

So then we looked at a flat monthly fee of $49.95 dollars a month with no contract. This would
still be a very good deal for people comparing gyms because we are offering a green and
environmentally friendly lifestyle at a similar cost to other gyms. This $49.95 price is about the
median in gym monthly memberships in Saskatoon.

However, we offer this price without a contract and without an activation fee. Almost all the
gyms we inquired to, acquire patrons on a contract basis. So when a customer wants to use the
gym, they must sign a 1 or 2 year contract pledging to pay the monthly fees every month for the
entire term of the contract. This is the same tactic cellphone companies use to predict their
revenues.

The reason gym companies have been doing this for a long time and are required to do so is that
ordinary gyms require an extraordinary upfront investment. To ensure they meet their financing
schedules and to ensure stability, long term contracts are beneficial, even if it means they offer
better rates to clients for the longer the length of time the customers sign off on.

Place

The pace at which Saskatoon's economy grew in 2007 is likely to occur again in 2008,
however, growth will continue to be reliant upon the number of available workers within
the region. Saskatoon's overall GDP growth is forecasted by the Conference Board of
Canada to reach three per cent in its Autumn Metropolitan Outlook, which is well within
the 10-year average of growth for the region. This growth forecast will certainly
contribute to a sustainable level of development for the city region, however, it is expected
that Saskatoon will surpass this forecast, due to the efforts of businesses in the region to
properly align with local economic conditions.

Increasing opportunities in the region will continue to draw people to the region; fueling the
economy, driving the construction and service industries, and growing our regional population.

o Competitor Analysis

o 3 large competitors in Saskatoon:

o World Gym

o Mawson Fitness

o California Fitness

o World Gym

o Not 24/7

o Charges vary from $54.99 to $44.99

o Capacity of 6,000 members

 Peak hours = 160-200 people at a time

o Drop-in once free

o Size is 32,000 sq. ft.

o Mawson Fitness

o Not 24/7
 o Fees from $69.95 - $44.95

o Pass cards

o 2 week free guest pass

o Over 2000 active members

o California Fitness

o Not 24/7

o $39.95 - $59.95

o 1 week free

o $149 activation fee – waived with 2 yr sign up.

o 2 locations in town

Targeting

Mainly target Males 25-54 who have their own work out plans and want to work out quickly,
efficiently and on good equipment.

Populations:

The following are the population amounts of Males in the following age categories in Saskatoon.

Age 25-44 33,195

Age 45-54 14,945

Promotions

Each owner would get vehicle wrap on their car

$2,800 each

Partnership with Supplement stores and other organic/green businesses in they city. We
would build a support network and help each other with the overall effect of growing all of
our businesses better than we could on our own.

3 week free pass on website

Other gyms offer 1-2 weeks but we would surpass them and offer a limited supply of 3
week memberships for people to try our gym. We will use a common psychology
technique to increase the awareness and interest in our club.

Before the club opens, there will be a couple good press releases sent and interviews
delivered to local media. Local media loves green business stories because they are
 innovative and interesting to read because a green business in better than an ordinary
business. We will mention that anybody can try our gym risk free for 3 weeks by
signing up on our website. It will mention that there is a limited amount of
membership. We will probably limit the number to 50 but there is a very high chance
that there will be more interest than 50.

So when people over the limit sign up, we will tell them that we are sorry but we
cannot offer them the 3 week pass because interest has been too large for our capacity.

However, we still value them so much so we will put them on a wait list for the 3 week
pass. Then 3 days later we will inform them that they are still on the waiting list but
they can come work out for one time on us with the special coupon attached to the
email. After many people try it and enjoy the vibe there, they will sign up. It is also
easy to push people into signing up if they show any interest at all because we can
always say that there is no contract like other gyms so you can cancel anytime.

The psychological technique we are using is that of people want more of what they
can’t have. When you limit supply, you make it seem in more demand and people want
it more. If we have an unlimited supply of free memberships, people won’t value it as
much.

Another positive from a marketing technique such as this is that it may create a
talking point for people that are not accepted to the 3 week trial. The next day at
lunch, there is a good chance they will tell their coworkers that they are astonished
that they were not able to get the 3 week pass because of too much interest!

Sign outside our building

We would have a big bright green sign outside the building that would get thousands
of views from 8th street as well as from the patrons of California fitness right across
the street. Situating ourselves within viewing distance of an existing gym is an
important part of our marketing strategy.

Members of existing clubs are one of the best potential future clients for our gym.
Because they already subscribe to a gym membership elsewhere, they will probably
want to continue working out and staying healthy.

However, not all subscribers are happy with their service and gym but they may be
locked in to contracts.

But when they see our gym signs and read the hype about our gym in the papers and
media, there is a very good chance they will do some research into our gym and
consider it when their contract expires.

No matter how green a gym is, its’ utmost goal must always be to help its members stay fit and
healthy because a gym is a gym!

The second most important objective is to achieve this goal at an affordable price. We could
still get hardcore environmentalists at a price of $100 per month but it might only be a
handful. Our goal is to make this environmentally sustainable gym available to people at
various stages of their environmental education and use.

For example, those people who are already recycling, reusing, eating organic foods will
require little coaching and advice. But they will surely be keen on spreading their knowledge
and advice to the lesser environmentally experienced members.

Our goal is to also sign up a lot of people who are interested in minimizing their
environmental footprint and being more green in their daily lives but are not sure how to go
about it or are just starting.

We could have information handy for them as well as a special members only discussion
forum on our website for our members to help each other out.

Marketing Expenses

Wraps = $2800

Outdoor Sign = $950

Regular Subscription prices

Simple $49.95 dollars per month flat rate. We will always keep this rate for the first 5
years. There is no contract associated with this price. We don’t believe in contracts
and don’t need them for profitable existence. Not having contracts with our members
will make us work harder to keep satisfaction levels at 99% because there are no
guarantees that any single member will still be with us the next month.

Automated credit card billing is extremely convenient for both us as a club and also
for the members. They don’t need to remember to pay bills every month. They are
automatically done for them. They also get points on their cards if applicable. For us
it is very good because we never have any bills outstanding and we will always get paid
on the first of the month. If there are any cancelled payments, the payment is linked
to the member’s membership card so they are not allowed access to the gym until they
pay their dues.

Brand Statement

The fastest, greenest and most affordable way to stay fit and healthy!

The statement above will be the first and main goal/objective of the gym. However, we
want there to be another smaller goal that is purely philanthropical and
environmental.

We want the gym to be a small community of members who help each other decrease
their impact on the environment and live totally fulfilling lives.

Revenue Projections

Year 1 100 members $60,000

Year 2 150 members $90,000

Year 3 225 $135,000

Year 4 315 $189,000

Year 5 410 $246,000

One of the key factors to the intensity of our growth is the amount of media coverage we can get.
The largest paper in Saskatoon is the StarPhoenix which would be the most important coverage
to get. I called two staff writers, Scott Larsen and Cassandra Kyle.

Every Saturday Scott Larson features small businesses that have recently opened in the city and
those that have moved or changed ownership. In our conversation, he was very interested in the
concept and took down my contact information. He said that if the business does startup he
would be very interested in doing a profile.

Cassandra Kyle, a general business writer for the paper was also very interested in the idea and
said she would definitely like to set up an interview if the business starts up.

But I wanted to also see the potential for national coverage in a paper such as the National Post.
I called in and talked to Matthew Stewart who is a general writer for the paper. He said he was
having a tough time finding a spin on the story but he was sure he would get something. He was
eager to take down my contact information and said to contact him if the plan goes through.

He said that the way the news delivery usually works is that local stories are written by National
Post affiliates such as the StarPhoenix and then the national paper will also run the story if they
feel it is interesting and intriguing.

Matthew suggested I get the story through to the Starphoenix first and then there would be a good
chance of national attention in the National Post.

5.0 Financial Plan

If club membership growth goes as predicted, the capacity could be reached in 4-5 years and then
either a membership freeze would have to be put into effect to avoid crowding or a new club could
be built.

Operating
Operating Expenses Overview:

Accounting/Consulting
Accounting/Consulting Fees: Total= $2923
$2923

Our accounting fees will be $600 for Northrup & Associates to do our year end accounting.
 Bookkeeping will be done by the owner. The expense for this is 1hr/week at $12 per hour
and $199 for the Quickbooks accounting Software

We will also include one hour per month of consulting by Adam Boesel of the Green
Micro Gym in Portland. Because Adam is the founder and creator of the first eco gym
like our in North America, we feel it is money well spent to consult with him once per
month and get advice and opinions on various topics on how to run our gym better.

Wages: Total= $12,480

We are estimating that the owner will spend about 20 hours per week on this gym. 30-60
minutes will be cleaning the gym at the end of the day. Answering phones and emails will
be about 60 minutes per day. The owner will spend 2-4 hours every two weeks composing
the bi-weekly email newsletter which will promote club loyalty and attempt to aide
members become more environmentally friendly.

We are starting with a wage of $12/hr with increases with the inflation rate. It may be a
bit on the low side but the owner is also enjoying benefits of capital appreciation and can
enjoy benefits of debt repayments and dividends in the future if the club does well. The
owner will be paid as an independent contractor so the corporation will not have to pay
employee benefits such as CPP and EI on top of his wages.

Credit Card Payment Processing:

Processing: Total= $2,460

Our payments will be processed by Paypal. Paypal offers us a very secure and reliable way
to get paid. Our members can pay using credit cards or bank accounts. Paypal helps us
because of their recurring billing options so that we can forget about always calling
people to ask for payment. Refer to appendix for their fee schedule.

Using that fee schedule we estimate year one expenses to Paypal to be $2460.

In our calculation of the total number of members, we assume to multiply the actual full
members total number by 1.4 and then add another 40% of this number who will try the
service but choose not to subscribe.

Lease/Utilities/Communications
Lease/Utilities/Communications:
/Communications: Total= $43,320
$43,320

The location we originally found for our fitness center is located right on 8th street which
one of the prime retail location in Saskatoon. The property would have been a special deal
for us because the property had 878 sq. ft on the main floor and 900 sq. ft in the basement.
However, the owners were only counting the main flour in the lease price. At a lease price
of $17/sq. ft., this would be like leasing a property for half price.

As the lease market is very strong in Saskatoon, there is a very strong likelyhood that by
the time we would be ready to start up our business, we would need to pay a market rate of
about $17/sq. ft. but paying for the whole space.
 To be conservative, we need to estimate our lease cost at $30,600.

Utilities would be estimated at $1000/month. Treadmills and ellipticals alone take about
$700. Please refer to appendix.. for our estimated calculations.

Our estimated phone bill would be $60/month.

Advertising/Promotions/Key
Advertising/Promotions/Key Cards:
Cards: Total= $1,696

The pass cards are the essential system for entry into our gym. They cost $1.20/unit.
Although we are estimating that we will have 100 members in our first year, we are
assuming not everyone will join and stay the whole time. To get the equivalent of 100 full
year members, we think that a number of 140 different members during this time is
reasonable. There is no exact way to predict this. In addition we estimate we will have to
print an extra 40 cards for trial where people will try the gym but won’t decide to join.

Our website hosting will cost $100 per year.

iContact.com membership which will be used to run our email lists will cost $15/month so
$180/year.

Printing expenses for various brochures, business cards etc will amount to $100/month.
We will not use any paid advertising at the beginning because we are banking on good
media coverage and word of mouth. We will aim for viral marketing and partnership
marketing with other eco friendly businesses such as Dad’s market and try to create
promotions with them that are mutually beneficial.

Repair & Maintenance: Total= $1200

We are estimating our repair and maintenance budget to be very small in the first two
years because all of our equipment will be covered under warranty. We think that
$100/month is fine. After year two is should double and continue to climb by 50%/year as
our equipment gets older and breaks down more frequently.

Capital Cost Allowance: Total= $13,425

Int. on L.T. Debt: Total= $ 2,400

Capital Expenditures

In 2011, that is our third year of operations, we will invest $15,000 in solar panel equipment that
will save us money on our power bills. These panels will save us an estimated $1200/year
according to our panel dealer. We feel it is more prudent to buy these panels after we start
making profits and not right when we open up. Solar panels are getting cheaper and more
efficient every year so it is possible that the return on investment will be better on these in 3 years
time than at the current moment. In addition to a better return on investment, we will have the
opportunity to get more media attention by releasing some press releases on our new additions.
The entire operation will require an investment of $160,000. We chose to make the investment
$50,000 debt and $110,000 equity. The debt is used to give the owner extra cash flow and we are
setting the length at a very short 5 years.

The company should be in very good shape to open a new location after year 5 with all of its debt
eliminated and a full subscriber base. IRR is 48% which surpasses our required rate of return
with a NPV of $91,268. Net Profit Margins rise to just over 50% after year 5.

Schedule 8: Ratio Analysis

Profitability
Gross Profit Margin 97.0% 96.5% 96.7% 96.8%
Net Profit Margin -34.9% -5.0% 30.0% 43.3%
ROA -13.8% -1.7% 28.9% 45.2%
ROE -23.5% -5.3% 32.4% 47.4%

Debt Ratio 32% 27% 15% 6%

Scenario Analyis

In our base case, we consider membership growth of 50-50-40-30% reasonable because we are
dealing with a small gym where 50% growth from year one to two is only 50 people.

We are using a required rate of return of 30% to be on the safe side and because this business
requires a large initial investment (comparatively). However, once the investment is made, the
profit margins are quite large.

A very bad scenario would be one where we have growth rates of 40-30-20-20%. In this case, we get
an NPV of (22,768) and an IRR of 23.8%.

We have to consider that we are using a very high required rate of return of 30% and if in this
case we use a more common rate of 20%, our NPV is $57,105 and our IRR is 30.9%

Conclusion

The Green Eco Gym business model, after a lot of tweaking, seems like a pretty good proposition.
If you believe in “if you build it, they will come,” this could be the right thing for you. The sectors
are growing and it is always easier to make money in a rising tide.

As in many businesses, the most important number is number of subscribers. However, if you hit
somewhere close to the predicted numbers, you will be in good shape.
Appendix 1

Appendix 2
Appendix 3

Appendix 4
Appendix 5: Paypal Fees

Appendix 6
Appendix 7 – Treadmill Usage

Looking at Treadmill Energy Consumption In a yr we use

HP 1 HP = 750 watts Consumption
3.6 750 2700 9855 kwh

If they are used 10 hrs/day total

27 KwH/day 0.1032 Energy Cost 2.7864 daily/unit

Times 30 Days Time 9 Machines

monthly energy cost for exercise

83.592 $ 752.33 equipment
Sources:

http://www.snapfitness.com/franchise_us/testimonials.cfm

SNAP_Franchisee_Investment_Summary.pdf from Snap Fitness Investment Package

SnapSalesBrochure2.pdf from Snap Fitness Investment Package

http://www.buysaskatoon.com/resources/pdfs/WI%20B50B51.pdf page 1

http://www.english.ficdn.ca/index.php?module=pagemaster&PAGE_user_op=view_page&PAGE
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http://fastlane-turnstiles.com/tailgatedetection/door-detective.html

http://www.snapfitness.com/franchise_us/index.cfm

http://www.businesstimes.on.ca/tricity/articles.aspx?assetId=18772

http://www.buysaskatoon.com/resources/pdfs/SREDA_Saskatoon_Demographics_Jan-07.pdf

http://www.theleisuredatabase.com/news/news-archive/healthy-growth-in-the-uk-fitness-market

http://www.entrepreneur.com/franzone/fastestgrowing/

http://www.tmcnet.com/usubmit/2008/12/07/3839092.htm

http://ezinearticles.com/?Online-Business---What-is-a-Squeeze-Page?&id=383454

http://fastlane-turnstiles.com/tailgatedetection/door-detective.html

http://www.wailana.com/yogastore/product.php?pid=518