favorable contracts with the landlord. In addition to the fi nancial analysis, it is crucial to understand the market, your position, and in the end, have a good gut feeling for the route you choose. Have you considered enlarging and


upgrading your existing club, AND building a new one? Effectively making a little 2-club cluster with the advantages that can bring.


Dag W. Lee, Taipan Invest, chairman, ACTIC Fitness, board member


A


First calculate the cost of each alternate investment. Be as accurate as possible. Don’t leave anything out. Miscalculating costs could result in a poor decision. Now that you have an idea of what


each alternative costs you want to know what they’ll generate in cash fl ow. Prepare estimated revenues and operat- ing costs for each option and be meticu- lous. When expanding an existing club, make sure you have a clear understand- ing of what the additional space will be used for to create a reliable basis for es- timating net cash fl ows. A new club fa- cility will require even more thoughtful


analysis. If you have a geographic area identifi ed engage a professional to con- duct a market analysis estimating both demand and supply in the trade area. For each alternative, create a best case, worse case and an average cash fl ow forecast. The fi nal step is to use a net present


value calculation to determine which option is best. You can use an NPV cal- culator online. When doing so it might be wise to use a higher discount rate for a completely new facility as op- posed to adding on space, given the added risks. Finally, have you considered what


your strategic end game is for your busi- ness ? Managing multiple clubs can be far more challenging than a single loca- tion. Take time to really consider the op- tions and what you are committing to and good luck.


Bryan O’Rourke, CSO & Principal, Fitmarc Visit us at canfitpro’s Visit us at


Reprinted with permission from IHRSA. For more information visit: www.ihrsa.org/industryleader


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September/October 2011 Fitness Business Canada 13


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