Business Proposal
Jorge Torres
University of Phoenix
Economics 561
R. David Flesh
July 30, 2012

It seems that every time we turn on the television we are bombarded with fitness gadgets and weight loss supplements, all which are developed due to the obsession of getting the ideal everyone desires. Do these fads really work, or are they just another marketing scheme to take money from people. Studies have shown that most of the fitness gadgets and supplements have very little effect and do not give the results people want to get. The bottom line is someone wants to lose weight and achieve that desirable body, one needs to put in work at the gym and have a proper nutrition plan. As the owner of I.V Fitness, I service the community by providing a great gym with all the amenities someone needs to stay healthy and achieve their dream body. I.V Fitness is always trying to come up with ways to improve their gym and that it is why we want to incorporate Cross Fit in our gym.
Cross Fit is a fairly new fitness type of workout that has been circulating the country more and more everyday. It has exploded within the last several years. Cross Fit started in 2007 and has then become very popular. I.V fitness wants to add Cross Fit to their gym because that is what a lot of people are looking to do. The reason why Cross Fit has become very popular is because it has a great effect on people and it is a designed specific workout in which it is already set up for the individual. Cross Fit workouts are not your ordinary workouts you see in the gym, they compose of free weights and need a lot of space. Cross Fit gyms are expensive compared to the ordinary gym such as I.V Fitness. I.V Fitness believes that they can incorporate this service within their gym and maximize profit.
To increase revenue we will offer this service to our current members as well as advertise it to the public. Since our gym only charges $35 a month, we plan on keeping that rate but charging an additional $30 a month for people that want to use the cross fit area. This will drive in more members and be getting more money from our existing ones. A lot of the equipment that is used will not cost us that much because we own a lot of it already. We will need to build a room designed specifically for our cross fit workouts. We should be able to break even fast with our additional income coming in. There is very high demand for this type of workout and with the nearest cross fit gym being 25 miles away, we do not have any competition.
We plan to have approximately 100 members join the cross fit workouts. If we have 50 members using that facility we will be making $6500 a month revenue. The expenses for the new addition will be $2000 a month for personal trainers and an additional $2000 a month for other expenses such as maintenance of the new equipment and utilities. We estimate that the new cross fit area will bring in about $2500 a month more profit to the gym. We will only be using 2 personal trainers to supervise proper form and only at certain hours of the day. We will not have the personal trainers the whole day therefore we only have to pay them the 4 hours a day they go supervise. The workouts will only be Monday through Fridays, 3 hours in the morning and 3 hours at night. This will maximize profit until we see an increase on members and that is when we will get more personal trainers. Since this part of the gym is not operating at all times and is being used under supervision, the new equipment will suffer less wear and tear (McConnell 2009) .
The marginal revenue of the gym will be an increase of $30 per member that already is in the gym. This does not take into account the new members that will attract by offering this service. The marginal cost cannot be determined because the number of members that will join the gym is unknown (Calculating Marginal Cost 2007). We need to know how many members are going to use this service to determine the marginal cost. This is hard to determine in a business such as a gym because members come unexpectedly and leave unexpectedly.
My mix of pricing will be the members who attend the cross fit workouts and the members who only use the normal facility. According to the cost plus pricing (Dickson,1969), you should set your price higher than what it would cost you to make it but in this case, since what costs money to do these workouts. The competition base pricing usually costs around $100 a month for cross fit only workouts. Cross fits that have a gym like I.V Fitness usually charge over $200 a month. Since the cost of living here in the Imperial Valley is not high, keeping it at a lower price than the competitor should be enough to attract many people. Once we have established a good amount of clientele, we will look into raising the prices to that of our competitor here in the Imperial Valley. The price we are choosing is based on how much the people can afford. Since we live in a small community, we cannot skim the price and start off charging $100 a month. Even though this service we are providing is worth it, we will not attract a large amount of people. We want to introduce the concept of cross fit to I.V Fitness members and the community to see that these workouts work and that the extra money they are investing in is worth it.
In termination, adding cross fit workouts to I.V Fitness would be very beneficial to our business. It will increase profit with not much of an investment. The main cost is the personal trainers who develop these workouts but most of the other material we already have as part of our normal gym. We will be careful on strategizing how much we will charge because typically people get scared of when they see a high cost for a gym membership. We are confident that people will be satisfied and they will spread the word out about service to many people.

References

Calculating Marginal Cost. (2007). Bloomsbury Business Library – Actionlists &
Checklists, 53.
Dickson, H. (1969). MARGINAL COST AND MARGINAL REVENUE IN
ELEMENTARY TREATMENT OF THE PROBLEM OF PROFIT
MAXIMIZATION. Swedish Journal Of Economics, 71(2), 127.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems,
and policies (18th ed.). Boston, MA: McGraw-Hill Irwin..