regional finals pack05

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National Schools Business Competition 2005 Question Pack – Regional Finals, September: 

National Schools Business Competition 2005 Question Pack – Regional Finals, September You may mark this pack as you wish although you will need to hand it in at the end of the competition

The question: 

The question Sue Hoyle is a budding entrepreneur in the fictional town of Haytown. Ms. Hoyle is a fitness enthusiast and particularly interested in ‘alternative’ forms of exercise. The town of Haytown has several gyms providing general exercise and fitness options, but Ms. Hoyle believes that there is space in the market for an exercise business focused on one of these alternative fitness pursuits. Ms. Hoyle wants you to come up with a plan – firstly for one site and then to get to a chain of five sites. This booklet contains details on the fitness activities that Ms. Hoyle is considering and some data on participation in these kinds of sports. It also contains details on the town of Haytown, and some hints on pricing and cost factors. Your answer should take the form of a PowerPoint presentation, which should last no more than seven minutes. As a guide, ten slides is probably the maximum appropriate length for your presentation. Keep them clear, uncluttered, and make sure the text is large enough to be read in a hall. You should rehearse what you are going to say, and be clear and precise, without going in to too much detail. There will be about four minutes after that for questions from the audience about your plan. Be careful and make sure that pictures/graphics/text look good on a large screen (many of the photos are not of the appropriate resolution to be blown up). You may select one or more fitness activities from the list, or you may select something similar from your own knowledge. If you pick more than one, you should be sure to try hard to convince Ms. Hoyle that this is a coherent business (i.e. that the activities fit together). The town contains gyms that offer specific classes in each of these activities – think what that means for your business. The general criteria that the judges will use to assess your plans will be: Feasibility of the idea Quality of the marketing plan Plausibility of the financial details Quality of your computer presentation Quality of the verbal presentation Originality of ideas A good format is to explain your concept idea, go through a marketing plan, and then look at the financials of one site before looking at how much investment and time you need in order to get to five sites and what profit you will make at that scale. Remember to read through the whole booklet – there may be relevant information sprinkled throughout (particularly on the ‘advice’ pages!). Good luck!

Description of Haytown: 

Description of Haytown The (fictional) town of Haytown is in the Midlands. It has a population of about 260,000 including its suburbs. The town is relatively well-contained, i.e. it is not part of a major urban conurbation. The town is very mixed in terms of affluence. There is a large population of students at several universities in the town who are not technically very affluent but probably tend to spend beyond their means. The overall unemployment rate is higher than average and the employment rate much lower, but that hides some quite affluent people, many of whom would be termed ‘young professionals’ employed in well-paying office jobs. Those statistics are shown up in the age profile of the town. Sue Hoyle has rightly identified the presence of a higher than average number of 15-35 year olds in the area, and she thinks that this is an excellent target for the alternative fitness services she plans to offer. However, given the size of the town, there are also plenty of other adults in the town who may be under-served by the fitness facilities in the area. Indeed, many older people are interested in some of the activities detailed in this booklet. The town is a fledgling commercial centre with a number of office headquarters, accountancy firms, solicitors and similar. The town also has quite a strong reputation for the arts (linked with the student population in the town). The fitness facilities in the town are limited to several general gyms, which generally charge between 30 and 75 pounds per month in membership fees (+ joining fees equal to a month’s fees). All of the facilities which Hoyle is thinking about are offered as part of a wide range of exercise options at one or more gyms in the town.

Data on Haytown (1): 

Data on Haytown (1)

Data on Haytown (2): 

Data on Haytown (2)

Activities - Yoga: 

Activities - Yoga The word yoga means ‘union’ in Sanskrit. Yoga is a posture and breathing technique designed to induce relaxation and improve posture and physical fitness. Yoga classes are taught by an instructor to a class. It is usual to group participants in to different levels of experience – beginners are rarely taught with experienced practitioners. Classes tend to last an hour. Yoga is practiced by both men and women, although the majority of participants tend to be women. Yoga is popular with a wide variety of age groups from young people to senior citizens, although the different age groups tend to take part in different styles of yoga which emphasise different types of postures and levels of physicality.

Activities - Karate: 

Activities - Karate Karate is a martial art typically used in the western context as a form of self defence, although in its purest form it has higher goals to train etiquette and self-control as much as physical prowess. The literal meaning of the word ‘karate’ is ‘empty hand’ – as it is a weapon-less martial art. Training is generally divided in to the practice of basic techniques, form, and sparring. There are competitive sparring competitions (generally non or low-contact), although many practice just for exercise or for self-defence which they may never use. There are also several derivations of karate that may be relevant – other martial arts and more ‘exercise-focused’ programs which use the physical moves from karate for fitness without teaching etiquette and self-control and similar. Participants in martial arts are generally younger. Both men and women participate.

Activities - Pilates: 

Activities - Pilates The Pilates method was developed by Joseph Pilates, who had been a sickly child and was determined to do something to heal himself. Pilates uses controlled exercises in the form of mat exercises or equipment exercises to tone and strengthen the body. Pilates was a student of yoga and there are some similarities in the two methods. Pilates focuses on strengthening core muscles (abs, lower back) whilst improving flexibility and strength. The method is often favoured by dancers but has recently gained increased popularity as a more general exercise method. It is typically favoured by women.

Activities – Tai Chi: 

Activities – Tai Chi Tai Chi is an ancient Chinese discipline that integrates mind, body and spirit. Practitioners use meditation and deep breathing as they move through a series of continuous exercises (called forms) which resemble slow-moving ballet. Although Tai Chi originated as a martial art, it is now practiced more for its therapeutic benefits, which include reducing stress, promoting balance and flexibility, and even easing arthritis pain. For hundreds of years, groups of Chinese people, many of them elderly, have performed its graceful, fluid movements in parks in order to attain the benefits of staying vital. Participants in Tai Chi tend to be a little older as it is low-impact and its benefits are more appealing to the older age groups.

Activities - Spinning: 

Activities - Spinning Spinning is a form of exercise that involves using a stationary bike in a classroom setting. The concept originated in New York in the 1980s. A typical class involves a single instructor at the front of the class who leads the participants in a number of different types of cycling. The routines are designed to emulate terrain and situations encountered in actual bicycle rides, including hill climbs, sprints and interval training. (However, there is no coasting downhill!) The instructor uses music and enthusiastic coaching to motivate the students to work hard. Spinning classes are usually conducted to music. Riders synchronise their pedaling to be in time with the rhythm of the music, providing the stimulus to retain tempo. Spinning is generally favoured by young, physically fit men and women. Bikes cost about 800-1000 pounds each.

Activities - Aerobics: 

Activities - Aerobics The term ‘aerobics’ is defined from aerobic exercise; exercise in which muscles draw on oxygen in the blood as well as fats and glucose to increase cardiovascular endurance. Aerobics first became popular in the United States, and enjoyed a boom in the 1980s. An instructor leads a group in exercises set to music. Aerobics is generally popular with women, although there are many different types of aerobics with different intensity levels that may appeal to different age groups. Studio aerobics feels competition from videos and DVDs.

Activities - Climbing: 

Activities - Climbing Indoor climbing is an increasingly popular form of rock climbing performed on artificial structures that attempt to mimic the experience of real rock climbing but in a more controlled environment. The first indoor walls tended to be made primarily of brick leaving little scope for interesting routes as the steepness of the wall and variety of the hand holds were somewhat limited. The most common construction method involves screwing resin hand holds on to wooden boards. The boards can be of varying height & steepness (from completely horizontal 'roofs' to not even vertical 'slabs') and have a large variety of holds (from very small 'crimpers' to huge 'jugs') attached. This variety, coupled with the ability for the climbs to be changed by attaching the holds onto the wall differently has resulted in indoor climbing becoming a very successful sport. Participants tend to be younger with a good mix of men and women. Assume that a wall costs 50,000 pounds to install.

Activities - Dance: 

Activities - Dance There are a number of ways in which dance can be found in an exercise concept. One way is in the formal training of types of dance such as ballet. Another increasingly popular dance class is one where a single instructor teaches a group moves from a genre such as hip-hop. Another option is for a teacher to teach couples such styles as salsa or swing dancing. Use your imagination!

Advice: 

Advice The following is provided as general advice. If you do not have a piece of data that you need, try to make a sensible assumption. Revenue: Most traditional gyms charge a monthly membership fee. You can do that or you can charge on a per-class basis. Think about what the right rate would be. You should build this up from X people doing an activity paying Y pounds each time. Also think about what other sources of revenue you might be able to come up with – will your business sell anything else? Make sure that this doesn’t distract from the core mission of your scheme. Cost of goods sold: Your main direct costs (i.e. those that vary with revenue) are the cost of any instructors who have to teach any classes which you offer. Assume that a trained instructor for any of these activities earns 25-65 pounds for an hour-long class, depending on how good they are. You may also have other direct costs if you are selling other products – make sensible assumptions if necessary. Your revenue minus your direct costs gives you a gross margin. Fixed costs. Your main cost here is the cost of the building. Assume that you can take out a lease on a building at ~100 pounds per square metre per month (you will have to decide roughly how large the building will be). Assume that this pays for sites with a high-street entrance (but the majority of the building is upstairs etc) or a stand-alone building slightly away from the town (i.e. all buildings have the same cost). You may also have to employ receptionists/administrators and so forth (to handle membership, do accounts etc). Assume that these people earn between 20,000 and 30,000 per year (make a sensible assumption given what they are doing). You can also use hourly staff for between 5 and 15 per hour depending on your needs. Add 10% for NI and other costs. For marketing, assume that you can send an e-mail to 10,000 people for ₤250, place a small advert in the local paper for GBP50, and send out 20,000 leaflets with local papers for ₤400. Try to think of creative ways you can advertise – make a sensible assumption about the costs here. Don’t forget that your brand, target market and marketing plan is a major part of your answer. There may be other costs not listed here. Your gross margin minus your fixed costs gives you your cash profits. You also need to consider capital expenditure. Assume that a general refurbishment of a site costs 100,000 to 300,000 pounds depending on the type of finish, and on top of this you may have to buy specialist equipment (e.g. spinning bikes etc). For the first site you should look at the upfront investment and then the ongoing profit and calculate the time for payback. Ms Hoyle asks you to think about how you might get from one site to a chain of 5 sites in the town. If you open five sites at once you will require a big upfront investment and not have the time to test and refine your idea. If you wait until one site pays for the next site it will take you a long time – somewhere in-between is probably about right (think about what the right time is). The table on the next sheet gives you a template for the financials of one and then several stores. You are not supposed to think about where you will get the start-up money from – just how much you need.

Financials - template: 

Financials - template

Other data: 

Other data

Other data (2 - from General H/H survey): 

Other data (2 - from General H/H survey)

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