Starting a Fitness Business

That’s correct. All those items will need to be reviewed, along with their projected costs and potential revenue, to help Ron decide whether to lease the new space.

Before you jump into an expansion, you will need to do a business plan for the project.

What are the costs associated with leasing, renovations, new equipment, and staffing? You will need to divide these into capital costs, such as the onetime renovation cost and equipment purchase, and operational or monthly costs, such as facility leasing and staffing. What are the additional revenues that you will bring in as a result of these expenditures? Based on these numbers, you can determine when you will break even or pay off your facility expansion expenses. If these numbers show that you will break even in 1 to 2 years, is that reasonable for you? If these numbers show that you will not break even for 5 years, you will have to consider whether this is a reasonable investment for you. This number crunching can get confusing, so the best advice here is to consult your accountant. Your accountant can guide you on the steps to take so that you can project realistic numbers as well as advise you on the risks and benefits associated with your expansion scenario.

Think of the long list of expense items that will need to be considered with a new addition. Please review pages 71 to 81 of the textbook.