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Business Plan for
SALVEO FITNESS LTD.
Presented to MPAcc Investments Ltd.
July 12, 2010
Presented by TFLN Consulting LLP
Donna Kuo
Kevin Baldwinson
Kory Wickenhauser
Paul Moore
TABLE OF CONTENTS
1.0 EXECUTIVE SUMMARY .............................................................................................................. 3
1.1 Introduction .......................................................................................................................... 3
1.2 Marketing Overview ............................................................................................................. 3
1.3 Operational Overview ........................................................................................................... 3
1.4 Human Resources Overview ................................................................................................. 3
1.5 Financial Overview ................................................................................................................ 3
2.0 BUSINESS OVERVIEW ................................................................................................................ 4
2.1 Vision ..................................................................................................................................... 4
2.2 Mission Statement ................................................................................................................ 4
2.3 Objectives.............................................................................................................................. 4
2.4 Opportunity and Value Proposition ...................................................................................... 4
3.0 MARKETING PLAN ..................................................................................................................... 5
3.1 The Market ............................................................................................................................ 5
3.2 Market Analysis ..................................................................................................................... 6
3.3 Segmentation, Targeting, and Positioning............................................................................ 8
3.4 Marketing Mix ....................................................................................................................... 9
3.5 Value Curve Analysis ........................................................................................................... 12
4.0 OPERATIONAL PLAN ................................................................................................................ 15
4.1 Organizational Structure and Management Team ............................................................. 15
4.2 Building Plan........................................................................................................................ 15
4.3 Classes ................................................................................................................................. 16
4.4 Day-to-Day Operations ....................................................................................................... 17
4.5 Working Capital Requirements ........................................................................................... 20
4.6 Capital Budget ..................................................................................................................... 20
5.0 HUMAN RESOURCES PLAN ..................................................................................................... 21
5.1 Job Descriptions .................................................................................................................. 21
5.2 Wages and benefits ............................................................................................................ 22
5.3 HR Strategy ......................................................................................................................... 23
5.4 Training Programs ............................................................................................................... 24
6.0 FINANCIAL PLAN...................................................................................................................... 25
6.1 Financial Model ................................................................................................................... 25
6.2 Business Valuation .............................................................................................................. 26
6.3 Financial statement projections ......................................................................................... 26
APPENDIX A – SAMPLE CLASS SCHEDULE ..................................................................................... 27
APPENDIX B – CASH FLOW FORECAST & VALUATION .................................................................. 29
APPENDIX C – BALANCE SHEET FORECAST ................................................................................... 31
APPENDIX D –INCOME STATEMENT FORECAST ........................................................................... 32
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1.0 EXECUTIVE SUMMARY
1.1 Introduction
Salveo Fitness Ltd. (Salveo) is a fitness club that offers premium group-style fitness classes to
women in Saskatoon. Its vision is “to enable its clientele to achieve their fitness goals by
offering the premiere fitness experience in Saskatoon.” Salveo aims to dominate a niche market
that is developing as a result of demographic and economic factors.
1.2 Marketing Overview
Salveo will offer a product that differentiates from the typical gym experience by providing its
members with more intimate group fitness and dance classes. Salveo will use targeting
promotional materials and word of mouth to reach its target market of well-off females in their
late 20’s through early 50’s.
1.3 Operational Overview
Salveo will lease space in downtown Saskatoon in order to be convenient for its target market;.
It will be renovated to create two studio rooms in which to conduct classes. Salveo will initially
offer 5 different classes in order to be able to differentiate itself within those classes. Salveo will
be open 7 days a week and will offer classes at strategic times during the day.
1.4 Human Resources Overview
Salveo will require a business manager, an on-duty supervisor, front desk staff, and instructors.
Instructors will be paid at the upper end of the salary range for fitness instructors in Saskatoon
in order to attract the best instructors. Training programs will also be a focus.
1.5 Financial Overview
Salveo’s business plan requires an initial equity investment of $450,000. No debt is required.
Based on financial projections, Salveo shows strong viability and positive cash-flows by the end
of operations in the year 2012. Dividend payouts could begin as early as 2013. A required rate
of return to investors of 25% yields an NPV of $710,000.
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2.0 BUSINESS OVERVIEW
2.1 Vision
Salveo’s vision is to enable its clientele to achieve their fitness goals by offering the premiere
fitness experience in Saskatoon.
2.2 Mission Statement
Salveo’s mission statement is to provide the most intimate and comfortable array of unique
fitness classes through smaller class sizes taught by premiere instructors.
2.3 Objectives
Salveo’s primary objectives are as follows:

To establish and dominate the niche group fitness market in the City.

Through our differentiation strategy, enable our investors to receive positive returns

To establish positive cash-flow early in operations and maintain it for the future

To minimize the risk associated with heavy capital investment
2.4 Opportunity and Value Proposition
Saskatoon is currently one of the fastest growing economies in Canada. Further, there is an
increasing focus on health and fitness in Canada’s populous, specifically when in group settings.
As there is currently no current premiere fitness centre in Saskatoon, there is no business that
satisfies the current and growing market demands for different types of fitness. Salveo intends
to fill this gap through its differentiation approach of unique classes whilst focusing on
profitability per member rather than uncontrolled growth.
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3.0 MARKETING PLAN
3.1 The Market
The women’s fitness market within Saskatoon and Canada continues to grow due to changes in
the social and economic trends affecting women today.
With respect to social changes there has been resurgence in the general public whereby both
businesses and individuals are placing an emphasis on a healthy lifestyle.
Modern businesses have adopted human resource policies that promote a healthy life style by
providing employees with access to either gym memberships housed in the employer’s on site
premises or allowances to support expenditures on such fitness memberships. Employers see
benefit in investing in employees who actively engage in physical activity as a healthy
employees can reduce employer health costs. More and more employers are starting to see fit,
healthy employees - as happy less costly workers1.
In addition, there has been a paradigm shift in the general public away from fast-food diets and
towards a more balanced lifestyle in light of the prevalence of diabetes and obesity. Therefore
we are seeing the public not only invest in their eating habits but also individuals are making a
concerned effort towards committing themselves to an active lifestyle.
Aside from the general public shift towards a healthier lifestyle, women themselves are more
independent and financially capable now then every before to pay for and commit themselves
to fitness goals. According to a 2004 Statistics Canada survey 47% of women in Canada were
employed and 37% of the population of Canada had management positions filled by women 2.
Therefore we are seeing women both capable and often in most cases committed to health
initiatives through fitness in Canada.
1
2
http://www.allbusiness.com/education-training/curricula-physical-education/14205489-1.html
http://www.statcan.gc.ca/daily-quotidien/060307/dq060307a-eng.htm
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3.2 Market Analysis
Current Markets and Services to be Provided
In light of the current demographic conditions in the Saskatoon fitness and health markets, we
propose erecting Salveo to be an alternative to the typical gym experience. Salveo would aim to
provide its members with access to group fitness and dance classes.
All Salveo’s programs would be customized to improve one’s cardio, strength, and shape.
Furthermore, classes would be structured such that members would be provided access to a
more intimate experience with their instructor due to effective scheduling practices at Salveo.
Competitive Landscape
Salveo would face competition in Saskatoon through a large presence of both retail gyms as
well as fitness alternatives.
There is a large presence of retail gyms in Saskatoon that offer a weight-oriented work out such
as the World Gym and the Physical Activity Complex at the University of Saskatchewan. Retail
gyms differentiate themselves from Salveo in terms of their product offerings. These gyms offer
a wider range of products and services as members have access to weight-room and cardio
workouts in addition to some group fitness classes that patrons can sign up for. In addition, the
retail strategy does not distinguish their customer base between men and women and
therefore they have a higher volume of customers that frequent their businesses. Where Salveo
anticipates an advantage relative to retail gyms is along the perceived interests of women’s
taste in fitness. Specifically, Salveo feels that there is a niche market of women interested in
fitness who are not attracted to either a weight-oriented workout (with less fitness classes) or
working out comfortably in front of their male peers.
Salveo would also face competition from “women-only” gyms such as Ladies California Fitness
or Curves. The “women-only” centers more directly compete with Salveo as their service and
product offerings are tailored to the needs of women. In addition, these businesses have large
dominance across the North American landscape which makes them a well-known name with
consumers. However, Salveo would be able compete with these “women-only” centers by
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offering customers a more directed workout experience focused on group instruction through
trainer development rather than a combination of a weight room and fitness experience.
Aside from the retail and “women-only” competitors (classified above), there is also a broad
class of “other” competitors that Salveo would face with respect to people’s fitness interests.
This category includes yoga studios, self-defense classes, weight watcher programs, and
recreational team sports. The “other” competitors compete with Salveo along the fitness
population’s interest level in the defined category of fitness. Specifically, if an individual was
interested in joining a competitive soccer team the recreational sports alternative is a good
match. However, some of these alternatives are cyclical and even seasonal in the case of some
sports; therefore Salveo would offer a more routine based exercise option.
Size of Market
The size of the market in Saskatoon for a woman-oriented fitness experience appears to be
ever-changing. A 2006 Statistics Canada survey indicated that the median age of women in
Saskatoon was 37.4 years of age3. In addition, the size of the population continues to increase
from just over 200,000 people to nearly 270,000 residents in 20094.
Specifically, recent market surveys conducted in Saskatoon have indicated that there are nearly
50,000 women currently living in Saskatoon between the ages of 25 to 555. Of these women,
50% of them were actively involved with one of Salveo’s potential competitors.
3
"2006 Community Profiles". Statistics Canada. Government of Canada. 2009-02-24.
http://www12.statcan.ca/census-recensement/2006/dp-pd/prof/92-591/index.cfm?Lang=E. Retrieved 9 March 2009.
4
Statistics Canada. http://www.stacan.ca
5
Kory Wickenhauser Research Study Conducted June 29, 2010
7
Exhibit 1: Distribution of Women in Saskatoon relative to Salveo’s Competitors
Other Competitors
Retail Gyms
Women Only Gyms
Based on these findings we believe that there is not only people within our target market that
are not actively involved in fitness that we could attract to our new establishment, but there is
also the opportunity to get patrons of our competitors to switch over to our new fitness center
based on our proposed intimate class size focus.
3.3 Segmentation, Targeting, and Positioning
We believe that Salveo can establish a strong-hold in the women’s fitness market. To
accomplish this goal we have analyzed Salveo’s approach to attacking this niche market in
women’s fitness through Segmentation, Targeting, and Positioning of their Marketing Strategy.
To achieve these goals it will be useful to identify the customer base and market that Salveo will
offer its services to.
In terms of segmenting the market, Salveo has already identified a niche market in Saskatoon
that specifically focuses on women’s fitness.
To target a segment of this market under the proposed business plan Salveo will look to target
women who are between their late 20’s to early 50’s and who desire a group fitness
experience. Addressing this specific age range is in line with demographic and social trends
indentified in the competitive landscape – as these women will not only have access to
8
committing themselves financially to such a fitness experience, they will typically have a desire
and interest to live a healthy lifestyle.
Although other competitors have targeted this defined market already, Salveo intends to
position itself such that it offers an unmatched fitness experience that is built on a intimate
group fitness experience and an experience that is delivered by qualified instructors. Below is
our consideration for the premiere fitness class that Salveo could become.
3.4 Marketing Mix
In light of the competitive landscape in Saskatoon for women’s fitness, we have proposed the
following Marketing Strategy for Salveo with respect to its Product & Service Offerings, Pricing,
Promotion, and Placement.
Product and Service Offerings
We have noted that some of Salveo’s competitors offer a variety of fitness classes that compete
for the general public interest. However having such a large variety of classes would not only
complicate the administrative strategy of scheduling members for the plethora of classes; it
also weakens a company’s ability to contract and fill all of these classes with premiere fitness
instructors as the more classes one offers the more qualified instructors they have to attain.
As a result our business plan looks to administer the following five beginner and advanced
fitness classes to its target market:

Hot Yoga

Pole Dancing

Zumba

Kick-boxing

Basic Aerobics
These offerings are not only based on market research results conducted by our marketing
team but these offerings provide us with the depth and breadth to compete in the fitness
9
market6. With reference to depth, we are still offering several fitness classes that members will
want to rotate into their monthly schedule. In addition, on the breadth side of our product
offering, the range of the classes offered allows us to compete directly with the “other”
competitors who offer yoga, self-defense, and self-directed work outs as we have comparative
classes in hot yoga, kick-boxing, and basic aerobics; respectively.
Pricing
With respect to pricing, Salveo intends to differentiate itself from the competitors based on its
premium pricing strategy. Specifically, Salveo intends to charge its members a premium on
membership fees to differentiate itself from the competition and establish itself as premiere
fitness studio.
The following is out proposed pricing structure:
Exhibit 2: Proposed Pricing Structure for Salveo
Members
Membership Fee
$50 per year
Session Pricing
$140
Classes Included
8
Non-members
$0
$170
8
The details of our pricing strategy have been organized along a “members-only” approach to
marketing our fitness center. Here we ask members to pay an upfront $50 yearly membership
fee in order to be a member at our studio. This upfront fee is critical from a business
perspective as it enhances our cash flow at the start of the year which is essential when we
have expenditures associated with opening the studio.
From a customer perspective paying the membership fee provides members with discounted
pricing on sessions booked. Typically customers will pay at the beginning of the month for one
session. Thus, it will motivate non-members to become a member at our fitness studio because
even if they booked two sessions at $340 they would be paying an extra $60 as compared to a
6
Kory Wickenhauser Research Study Conducted June 29, 2010
10
member who would get those same sessions at $280 each – therefore an incentive to pay the
upfront $50 membership fee.
Note that it is not Salveo’s intention to have significant non-member participation in classes.
Non-members will be only be able to register in a single course over their lifetime; if they wish
to sign up for another course, they will have to pay a membership fee. The existence of a nonmember price is primarily for psychological purposes; it will indicate to potential members that
there is value gained for the membership fee.
Promotion
Our vision for promoting Salveo looks to employ a targeted marketing strategy to increase our
movement towards a premiere fitness studio.
To address filling our class sizes to near capacity we intend to focus on businesses and locations
that are regularly visited by our target market as indicated below:

Professional Offices – as we have noted earlier businesses are making a concerned
effort towards promoting both a healthy and balanced lifestyle. Having understood this
recent trend we intend to visit large local businesses and promote through brochures
and word of mouth our new fitness experience.

Frequent Shopping Outlets – as we are attracting middle-aged women that have enough
disposable income to attend our premiere studio it is our intention to also target higherend shops that range from spas to kitchen and appliance stores in order to disseminate
our promotional brochures.
Once we have established our initial member targets then new patrons can only join by referral.
By establishing a limit to our member targets it will prevent our organization from growing too
quickly and not retaining profitability. In addition, limiting class sizes promotes a friendly,
intimate atmosphere for women to feel comfortable working out in.
Placement
In unison with demographic and social-economic trends in Saskatoon we proposed that Salveo
look to locate its office at #101 – 23 Street East in Saskatoon, SK. This location is ideal for our
11
prospective clientele as we are anticipating recruiting a large amount of business women into
our clientele base.
In addition, the downtown core of Saskatoon will allow members working downtown the
convenience to attend classes in the morning, lunch, and afternoon without having to leave the
comfort of downtown.
Exhibit 3: Proposed Location of Salveo – Downtown Saskatoon, SK
In unison with our efforts to continue to reduce costs and remain not committed to an
intensely capital venture we propose that Salveo will lease the premises and not purchase the
downtown location.
3.5 Value Curve Analysis
To analyze Salveo with respect to our proposed Marketing Strategy relative to its competition
defined above we have conducted a value chain analysis along six various factors that Salveo
can compete on relative to the competition.
The six criteria identified are as following:

Price – with respect to price Salveo intends to differentiate itself from it nearest
competition such as Curves (Women-oriented) through a premium price differentiation
12
strategy that looks to not only alleviate its presence as a premiere fitness center but also
increase the profitability of the current operations.

Intimacy of class size – the other primary focus of our marketing strategy is to build on
the publics need to for smaller more intimate class sizes. Again, Salveo’s closest
competition would be Curves and this is only because its offerings are limited to only
women and the numbers of patrons at Curves is significantly smaller as compared to
retail work-out centers such as World Gym.

Variety of class offerings – the variety of course offerings under our vision will be limited
and thus competition will have a vantage point here, nonetheless, our focus on five
accepted training courses should stand as unchallenged due to the instructors we intend
to attract.

Number of group classes – the number of classes offered by Salveo will be the largest as
compared to competitors as class instruction will be Salveo’s sole revenue source as
compared to competitors who offer fitness classes to supplement workout facilities.

Degree to which the classes are oriented to women – lastly the value curve analyzes
Salveo relative to its competition based on the degree to which the service outlet is
marketed and designed for the enjoyment of women.
Exhibit 4: Value Chain Analysis of Salveo Relative to Competition
4
3
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13
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2
Women Only
Gyms
It is clear from the value chains analysis that our marketing strategy is poised to position Salveo
as the premiere, intimate fitness experience for women.
14
4.0 OPERATIONAL PLAN
4.1 Organizational Structure and Management Team
Salveo will operate under the following organizational structure:
Exhibit 5: Organizational Chart
Board of Directors
Business Manager
On-duty Supervisor
Instructors
Front Desk Staff
The board of directors will consist of investors who wish to take an active role in overseeing the
business. Board meetings will take place quarterly and attendance is mandatory.
4.2 Building Plan
Salveo will operate in a facility with 1496 square feet and will be comprised of an
entrance/reception area, a manager’s office, change rooms, and 2 large studios where the
group fitness classes are held.
15
Exhibit 5: Facility Floorplan
One of the instruction rooms will be dedicated to Hot Yoga whereas the other two will be ready
for Zumba, kickboxing, pole dancing, and basic aerobics. The room dedicated to Hot Yoga will
need leasehold improvements to ensure it is ready for the appropriate temperature and
humidity as well as have flooring and walls that are anti-fungal and anti-microbial. The other
rooms will require half an hour before each pole dancing class for set up purposes.
4.3 Classes
Types of Classes
Salveo will initially offer five classes; this will enable Salveo to . These offerings may be modified
or expanded as Salveo’s membership base grows in order to meet member expectations and
address market considerations.

Hot Yoga*: Traditional yoga techniques are performed in a room heated to 40 degrees
Celsius with about 40% humidity. These classes run about 90 minutes.
16

Zumba: Combines Latin salsa- and merengue-inspired dance moves to make fitness fun!

Kickboxing*: Easy-to-follow choreography using a combination of boxing and kickboxing
movements.

Pole Dancing*: Get in touch with your fun and sensual side without nudity. Learn to
build all over body strength with the use of a pole.

Basic Aerobics*: Great cardiovascular workout incorporating beginner, intermediate,
and advanced step patterns.
Difficulty levels.
Thes classes marked with a “*” above will be offered at different levels of experience:
Beginner, Intermediate, and Advanced.
Early in Salveo’s operations, an emphasis will be placed on Beginner courses. Over time, as
Salveo’s members become more experienced with the classes, the class mix will shift towards
Intermediate and Advanced classes in order to meet their needs. Beginner courses will still be
offered to attract new members.
Descriptions of the difficulty levels are as follows:

Beginner: Perfect for those with little experience in the class or who would like to
become more comfortable with the basic movements.

Intermediate: Clients who feel they are getting too comfortable with the beginner level
and would like more of a challenge mentally and physically.

Advanced: Ideal for those who have a lot of experience with the class and would like a
challenge. Clients in advanced classes will be pushed to their limits.
4.4 Day-to-Day Operations
Hours of Operation
Salveo’s hours of operation will be:

Monday to Friday: 6:30AM to 10:00PM

Saturday and Sunday: 9:00AM to 5:00PM
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Our weekday hours are such that the working female is able to come to an early fitness class
before work, shower, get ready in our change rooms, and go straight to work feeling refreshed
and ready for a productive day.
Class Organization
Class Size
The maximum class size has been set at 15 per class which is small in comparison to fitness
classes offered by competitors. This allows our clients to work out comfortably in an intimate
group thereby enhancing their fitness experience.
Each class will be led by one instructor.
Class Duration
A given Salveo session will consist of one class a week for 8 weeks.
By default, Salveo classes will be 60 minutes long, consisting entirely of instructional time.
Exceptions to this are as follows:

Hot Yoga – Scheduled for a total of 120 minutes, consisting of 90 minutes of instruction
and a 30 minute cool down period.

Pole Dancing – Scheduled for a total of 90 minutes, consisting of 60 minutes of
instruction and 30 minutes for set-up and take-down of equipment.
Class Timing
Initially, classes will be offered at strategic times in order to minimize classes with low
attendance. These strategic times have been determined based on the fact that many of
Salveo’s members will work full time and will therefore have to schedule their workouts around
their work hours.
The strategic times are as follows:

Weekday Morning – Before the start of the standard workday, generally from 6:30 to
9:30 am.

Weekday Lunchhour – During lunch breaks, generally from 11:30am to 2pm.
18

Weekday Evenings – After the end of work, generally from 4:30 to 10pm.

Weekend Mornings & Early Afternoons – Based on the expectation that most members
will want to work out earlier in the day.
As Salveo’s membership level grows, more classes will be offered, thereby decreasing idle
rooms.
Sample weekly schedules for both of the fitness studios can be found in Appendix A.
Typical Day at Salveo
Each morning, the front desk staff will be the first to arrive and unlock the doors and the fitness
rooms. The front desk staff acts as receptionists as well as help prospective and current clients
sign up for memberships and classes. In addition, they help to answer questions posed by
clients and maintain records.
The instructors will then arrive shortly after. The first class offered will be Hot Yoga at 6:30AM
which is perfect for those who would like a workout before work. The second class of the day
starts at 7:30AM and will vary by day. The instructors will be coming and going throughout the
day depending on which classes they teach. Instructors will teach (ie. be the lead instructor) no
more than two classes in a row.
The business manager will then arrive at 9:00AM and stay until 5:00PM. The business manager
ensures the clients are having a positive fitness experience as well as recruiting for highly
qualified instructors. They will also be supervising the front desk staff and making sure each day
runs smoothly.
The on-duty supervisor will work between 4:00PM and 10:00PM on some weekdays and
9:00AM to 5:00PM on weekends however if any problems arise, the business manager will also
be accessible by phone during the evenings and weekends. The supervisor’s duties are to
manage the operations at Salveo when the business manager is not present and in essence,
acts as the business manager’s assistant.
19
4.5 Working Capital Requirements
Working capital at Salveo will consist only of cash and accounts payable as the Company will
have no accounts receivable as all payments are made with cash or credit card each month.
Lease payments will be made at the beginning of each month therefore financing will be
required to cover the first lease payment. Registration and membership fees will be paid for
upfront by clients and will cover future lease payments. The other major payments Salveo will
face are salaries to management, the instructors and the front desk staff which are paid semimonthly. In addition, Salveo will maintain access to a line of credit for extenuating
circumstances only.
4.6 Capital Budget
The initial cash outlay is minimal for Salveo. The building lease will be signed for five years. The
major capital expenditures include leasehold improvements, office equipment, and minor
exercise equipment.
Leasehold improvements include general costs associated with renovations. In addition, the Hot
Yoga room will have to have special leasehold improvements put in to bring the room up to
standard. The flooring and walls will need to be antifungal and antimicrobial since the room
temperature required for Hot Yoga is about 40 degrees Celsius as well as 40% humidity.
Office equipment will include desks, chairs, computers, printers and the like for the manager’s
office and front desk. Also included in equipment are stereo systems, speakers, and mirrors
required for use in the fitness studios. Minor exercise equipment includes the poles for the Pole
Dancing class, yoga mats, and small hand weights.
Salveo will incur regular repairs and maintenance expenses. These include replacing of the
aforementioned equipment and routine repairs to the building and leasehold improvements.
Please refer to the appendices for the five year forecast of cash flows (Appendix B) and income
(Appendix C) from operations.
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5.0 HUMAN RESOURCES PLAN
5.1 Job Descriptions
It is important for each staff member at Salveo to fulfill their specific duties.
Full-Time Staff
Full-time staff will include those with management responsibilities as follows:
Business manager
The business manager will be responsible for planning and managing the day-to-day operations
of Salveo in order to ensure that owner and member expectations are met. This position will
require an individual capable of operating in a “jack-of-all-trades” role. The business manager
will be on-site at Salveo for 40 hours per week. Specific duties include

Preparing monthly reporting packages for the board of directors

Recruiting instructors and front-desk staff

Developing and modifying classes with the input of instructors

Overseeing the marketing of Salveo

Ensuring that the facility is properly maintained

Supervising instructors and front-desk staff

Interacting with potential and existing members

Addressing member inquiries and concerns
Part-Time Staff
The majority of Salveo’s staff will be part-time.
On-Duty Supervisor
The On-Duty Supervisor will manage the operations of Salveo when the business manager is not
present. Specific duties include:

Scheduling classes and instructors

Supervising instructors and front-desk staff
21

Addressing member inquiries and concerns

Interacting with potential and existing members

Assisting the Business Manager as required
Instructors
Instructors are the centre of Salveo’s business. Their focus will be on meeting the in-class
expectations of Salveo members. Specific duties include:

Teaching group fitness classes

Setting up and taking down equipment for each class

Addressing member inquiries and concerns when possible and bringing them to the
attention of the Business Manager or On-Duty Super when not

Assisting the Business Manager in developing and modifying classes
Front-Desk Staff
Front-desk staff will act as the receptionists for Salveo. A front-desk staff member will be onduty whenever Salveo is open. Specific duties include:

Handling the paperwork for registration of new members

Maintaining Salveo records

Addressing member and other inquiries and concerns when possible and bringing them
to the attention of the Business Manager or On-Duty Super when not
5.2 Wages and benefits
Our only salaried employee will be the business manager who will receive and annual salary of
$55,000. Our estimate of benefits for the business manager will be 7% of salary. This level of
compensation and benefits is consistent with market salaries of managers in similar positions in
Saskatoon. All other employees will be paid an hourly wage. Average Saskatoon wages from
PayScale.com are used for the On-duty Supervisors and Front Desk Staff. Instructor wages are
based on upper-end instructor wages in Saskatoon from PayScale.com
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The cost break-down of staff in the first year of operations is as follows:
Hours
FT /
per
Salary
Annual
Number PT
week
or wage Benefits cost
1
FT
40
$55,000 $3,850
$58,850
Supervisor
1
PT
40
$14
$0
$28,000
Front Desk
2
PT
20
$10
$0
$20,000
Instructors
Varying
PT
Varying $25
$0
$24,063
Total
19
Business
Manager
On-duty
40
$58,850
^Instructors will be paid between $22-30 per hour depending on qualifications and class.
Average of $25 is used for planning purposes. See Financial Projections for break-down of
classes offered.
5.3 HR Strategy
Salveo is planning on paying a premium on market wages for class instructors. As such, we will
be looking to hire top quality instructors who are up to date with their qualifications. Further,
they must have a strong work ethic and strong communication and interpersonal skills to make
our members feel comfortable at all times. Typically instructors teach classes at multiple fitness
centers and there is no requirement for our instructors to be exclusive to our fitness centre.
However, given that we offer unique classes, our instructor contracts will contain clauses
preventing them from teaching the same classes at another centre. It is also very important for
our staff to know one another to help bolster our comfortable environment. As such, weekly
staff meetings will take place where our staff can meet each other and to offer them an
opportunity offer ideas to the business manager.
23
5.4 Training Programs
As our instructors will be well qualified for the classes they teach, Salveo will focus mainly on
culture development. Orientations for all new staff and instructors will be mandatory to
promote an extremely positive environment for members. Further, new employees will
complete mandatory job shadowing for one week to help with the transition to our unique
culture.
24
6.0 FINANCIAL PLAN
6.1 Financial Model
Capital Structure
In order to facilitate contributions from multiple investors and to limit investor liability, Salveo
will be structured as a corporation.
Salveo’s will rely primarily on equity financing through the purchase of shares. Although debt
financing is an option, Salveo’s lack of tangible capital assets will likely mean that lenders will
require personal guarantees from investors. This increases the risk to investors by removing the
limited liability afforded by the corporate structure. As such, significant debt financing is not an
attractive option.
As discussed previously, Salveo will have an operating line of credit. The line of credit is not
expected to be used significantly.
Equity Investors
Initial Investment
Under the projected financial model, Salveo will require an initial equity investment of
$300,000. This will be used to fund start-up costs and assist with cash flow management in the
first year of operations.
The $300,000 will be obtained primarily through family and friends of the founders of Salveo.
Dividends
The dividend payout policy will be done on a discretional basis, based on annual meetings with
the board of directors. The dividends will be paid out in a manner that provides reasonable
compensation to the shareholders without harming the financial viability of the business.
Based on Salveo’s financial projections, dividend payouts could start as early as 2013, the third
year of operations.
25
6.2 Business Valuation
Using cash flow forecasting (Appendix B), Salveo’s estimated net present value (NPV) is
$710,000 (assuming a discount rate of 25% required by investors). These initial figures include
an estimated terminal value using the same required discount rate of investors of 25% and
assuming perpetual operations at capacity levels similar to that of 2015. Please refer to the
same Appendix for a sensitivity analysis based on changing required discount rates to investors.
6.3 Financial statement projections
Balance sheet (Appendix C) and Income Statement (Appendix D) financial figures have been
established for Salveo’s pre-operating period and subsequent 5 years of operations. These
projections are used to assess the financial viability of Salveo’s business plan. The results of our
projection show strong viability and positive cash flows by the end of Salveo’s second year of
operations in 2012.
26
APPENDIX A – SAMPLE CLASS SCHEDULE
ROOM 1: HOT YOGA
Sunday
6:30
7:00
7:30
8:00
8:30
9:00
9:30
10:00
10:30
11:00
11:30
12:00
12:30
13:00
13:30
14:00
14:30
15:00
15:30
16:00
16:30
17:00
17:30
18:00
18:30
19:00
19:30
20:00
20:30
21:00
21:30
22:00
Monday
Tuesday
Wednesday
Thursday
Friday
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
Saturday
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY HY HY HY HY Intermediate Intermediate Intermediate Intermediate Intermediate
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
HY Beginner
27
ROOM 2: OTHER
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
6:30
7:00
7:30
BA BA BA Z
Z
Beginner
Beginner
Intermediate
8:00
8:30
KB KB KB Z
Z
Beginner
Intermediate
Beginner
9:00
BA BA Intermediate
9:30 Intermediate
10:00
Z
Z
10:30
11:00
11:30
KB KB KB BA Z
Beginner
Beginner
Beginner
Advanced
12:00
12:30
BA KB Z
Z
Z
Beginner
Beginner
13:00
Z
Z
13:30
14:00
BA BA Beginner
14:30 Beginner
15:00
KB KB Intermediate
15:30 Intermediate
16:00
16:30
17:00
17:30
BA KB KB BA KB Beginner
Beginner
Beginner
Beginner
Beginner
18:00
18:30
KB KB Z
Z
Z
Beginner
Beginner
19:00
19:30
PD PD PD PD PD 20:00
Beginner
Intermediate
Beginner
Intermediate
Beginner
20:30
21:00
PD PD PD PD 21:30
Intermediate
Beginner
Intermediate
Beginner
22:00
28
APPENDIX B – CASH FLOW FORECAST & VALUATION
Pre-Startup
Cash Flow Forecast
Operations
Cash received
Initiation fees
Yearly fees
Class fees
Cash paid out
Leasing
Labour
Salaries
Wages
Maintenance
Marketing
Office & other
Taxes
Interest
Cash flow from operations
Investment
Leasehold improvements
Equipment expenditures
Cash flow from investment
Financing
Equity investment
Line of credit
Dividends paid
Cash flow from financing
Total
Total cash flows
Opening cash balance
Ending cash balance
2011
2012
2013
2014
2015
2016+
-
8,750
161,700
170,450
10,300
9,013
470,453
489,765
9,283
19,892
735,204
764,378
8,195
30,050
963,785
1,002,031
5,628
39,393
1,210,147
1,255,167
5,796
40,575
1,246,451
1,292,822
-
(245,376)
(252,737)
(260,319)
(268,129)
(276,173)
(284,458)
(14,713)
(25,000)
(39,713)
(39,713)
(58,850)
(72,063)
(27,800)
(10,000)
(1,600)
(415,689)
(245,239)
(60,616)
(119,448)
(28,634)
(7,500)
(1,648)
(470,583)
19,182
(62,434)
(148,172)
(29,493)
(4,500)
(1,697)
19,211
(487,405)
276,973
(64,307)
(175,383)
(30,378)
(4,500)
(1,748)
(72,690)
(617,134)
384,896
(66,236)
(203,057)
(31,289)
(4,500)
(1,801)
(110,382)
(693,438)
561,729
(68,223)
(209,149)
(32,228)
(4,635)
(1,855)
(113,693)
(714,241)
578,581
(125,000)
(25,000)
(150,000)
(1,500)
(1,500)
(1,545)
(1,545)
(1,591)
(1,591)
(1,639)
(1,639)
(1,688)
(1,688)
(1,739)
(1,739)
450,000
450,000
-
-
-
-
-
-
260,288
260,288
(246,739)
260,288
13,549
17,637
13,549
31,186
275,382
31,186
306,568
383,257
306,568
689,826
560,041
689,826
1,249,867
576,842
29
Valuation
Total business cash flows
Cash flows to owners
Discount factor
Discounted cash flows
Estimated Value
Less: initial investment
Net present value
Pre-Startup
260,288
260,288
1.00000
260,288
2011
(246,739)
(246,739)
0.80000
(197,391)
2012
17,637
17,637
0.64000
11,288
2013
275,382
275,382
0.51200
140,996
1,160,539
(450,000)
710,539
30
2014
383,257
383,257
0.40960
156,982
2015
560,041
560,041
0.32768
183,514
2016+
2,307,369
2,307,369
0.26214
604,863
APPENDIX C – BALANCE SHEET FORECAST
Pre-Startup
Current assets
Cash
Non-current assets
Leaseholds
Equipment
Accumulated amortization
Total assets
Liabilities
Operating line of credit
2011
2012
2013
2014
2015
260,288
260,288
13,549
13,549
31,186
31,186
306,568
306,568
689,826
689,826
1,249,867
1,249,867
125,000
25,000
(15,000)
135,000
125,000
26,500
(45,000)
106,500
125,000
28,045
(75,000)
78,045
125,000
29,636
(105,000)
49,636
125,000
31,275
(135,000)
21,275
125,000
32,964
(157,806)
158
395,288
120,049
109,231
356,205
711,101
-
-
-
-
-
1,250,024
-
Equity
Share capital
Retained earnings
(450,000)
54,713
(450,000)
329,951
(450,000)
340,769
(450,000)
93,795
(450,000)
(261,101)
(450,000)
(800,024)
Total liabilities & equity
(395,288)
(120,049)
(109,231)
(356,205)
(711,101)
(1,250,024)
31
APPENDIX D –INCOME STATEMENT FORECAST
Pre-Startup
2011
2012
2013
2014
2015
Income Statement
Revenues
Class revenues
Initiation & yearly fees
Cost of services provided
Instructor wages
Gross profit
Operating expenses
Rent
Salaries & other wages
Maintenance
Marketing
Depreciation
Office & other costs
Interest expense
Profit before tax
Income taxes
Net income
-
161,700
8,750
170,450
470,453
19,313
489,765
735,204
29,175
764,378
963,785
38,245
1,002,031
1,210,147
45,020
1,255,167
-
(24,063)
(24,063)
(70,008)
(70,008)
(97,249)
(97,249)
(122,932)
(122,932)
(149,033)
(149,033)
-
146,388
419,757
667,129
879,099
(14,713)
(25,000)
(15,000)
(54,713)
(245,376)
(106,850)
(27,800)
(10,000)
(30,000)
(1,600)
(421,626)
(252,737)
(110,056)
(28,634)
(7,500)
(30,000)
(1,648)
(430,575)
(260,319)
(113,357)
(29,493)
(4,500)
(30,000)
(1,697)
(439,367)
(268,129)
(116,758)
(30,378)
(4,500)
(30,000)
(1,748)
(451,513)
(276,173)
(120,261)
(31,289)
(4,500)
(22,806)
(1,801)
(456,829)
(54,713)
(54,713)
(275,239)
(275,239)
(10,818)
(10,818)
227,762
19,211
246,973
427,586
(72,690)
354,896
649,305
(110,382)
538,923
32
1,106,135