Starting a new business venture among rapid changes an enhanced competition is fraught with various challenges. A new business venture may also be regarded as a small business. Many ventures will be invested by one or more groups with the intention of business bringing in financial benefits for all the promoters (Cañeque & Hart, 2017). Before establishing the new business, the entrepreneur needs to obtain different sources and analyze the challenges which he/she may confront in the future. For any person starting a new business, it is very important to forecast the potential risks and challenges and develop the activities and strategies accordingly. This report is focused on starting a new business venture of Fitness Center named as Go Healthy that will be established as a sole proprietor type business in Australia. The report includes the discussion about the capital sources which are required by sole proprietor while starting this new business venture of fitness center. Moreover, it describes the difficulties and challenges which can be faced by this new business in the future. There is the discussion about some specific risks which are involved in opening the fitness center in Australia. New venture needs to make a contingency plan and strategies to deal with these risks and challenges.
Under this report, the business entrepreneur is planning to launch a new business venture of fitness center for both males and females. It will be sole proprietor type business that will not be an independent business entity. It will be the business processes and activities which will be run under the name and responsibility of a single owner (Baik, Lee & Lee, 2015). This fitness center i.e. Go Healthy will be located in Sydney, Australia. The major reason behind introducing this business is that fitness sector is booming with a market which is always looking for innovative ways to get in shape. The entrepreneur is planning to offer different services like fitness classes, weight reduction training, exercises, cardiovascular training, physical training, swimming, indoor games, massage, physical therapy etc. For female customers it will also provide the childcare center where they can leave their kids while doing exercises. Thus, the major focus of this new venture will be on women segment (Sahut & Peris-Ortiz, 2014).
Establishing a fitness center or gym is not very easy, but it can be tremendously rewarding if an entrepreneur is willing to put in hard work. When an entrepreneur plans to establish new business venture it needs to acquire various resources which are essential to operate the business. For this acquisition, first the entrepreneurs need to gain the capital sources and then they can make capital investment. Capital investment refers to the funds which are invested in a venture for goal of fostering its objectives (Carbajo, 2018). It may refer to the venture’s acquisition of assets like machinery, plant which are forecasted to become productive over the years. New business ventures should be capitalized carefully so entrepreneurs need to recognize their start-up capital needs.
In order to starts this new fitness center, the sole proprietor needs to acquire capital from different sources. For establishing this business, there will be need of making capital investment to purchase different resources like land, machines, gym equipment, technology, space, trainers, licensing and permits etc. Go Healthy is sole proprietor type business so it has limited sources to raise the capital from outsiders (Blair & Marcum, 2015). It has decided to source the capital of $50000 that will be generated from different sources:
|
Source |
|
Amount |
|
Personal Capital |
$25,000 |
|
|
Debt Loan Angel Investors Friends and Family |
|
$15000 $7000 $3000 |
|
Total Capital Requirements |
$50000 |
For Go Healthy Fitness Center, there are different types of capital sources which this venture will make efforts to obtain. These capital sources are discussed below:
This is one of the primary sources that can assist this sole trader to establish this fitness center in Sydney. The entrepreneur will invest his/her own savings into this business. The owner of this venture is confident about the future projections of the business so he has invested his savings in this business (Kunz & Dow, 2015). Go Healthy is doing this so that other bankers and investors can understand that entrepreneur has long term commitment in this fitness center’s business and he is ready to bear the risks. This is the best capital source for this fitness center as it prevents the gym owner from liability of interest payments and enables him to keep a complete control on this business.
In addition to this, owner of fitness center will approach any bank and financial institution so that they can apply for a loan. For this new venture, business loan will be taken under the name of owner. The owner will made the decision regarding loan amount on the basis of his credit worthiness. This is sole proprietor business so it will get a limited amount of loan. In addition to this, the business owner can go ahead with the trade credit because this source does not need to mortgage the business assets. This fitness center will prefer to generate capital through this source because this is the most secured over accounts receivables (Carbajo, 2018).
This is the easiest way to obtain the funds and capital for new business venture. In order to establish this fitness center in Sydney, an amount of money will be loaned by the family, relatives, friends and spouse who have much capital and sufficient equity in their business. Generally, bankers and investors consider this capital source as patient capital. It is decided that entrepreneur will repay the loaned amount later when the profits of business will be increased.
For Go Healthy Fitness Center, the capital will be sourced from angel investors also. These investors will provide private equity to this sole proprietor business to finance its startup operations of fitness center. Before approaching angel investors, the venture will create a detailed business plan and submit it to the investors with the application form. After this, the investors will review the applications. If they will accept, this start-up will obtain the capital from investors (Center for Capital Markets, 2011).
In addition to above capital sources, the fitness center will purchase the required assets like gym equipment and machines from private organizations who are interested in and want to promote their products by sponsoring this fitness center (Scarborough, 2016).
There are various external challenges which this fitness center may face in Australia. These difficulties and challenges can affect the start-up operations and growth of Go Healthy (Van Aardt & Bezuidenhout, 2014). Some of the expected challenges are discussed below:
Legal challenges are the major challenges which a fitness center may face in the future. Being a fitness center, legal issues can be emerged in the health and safety matters. Go Healthy needs to comply with the strict rules and regulations related to quality of equipment used. For this business venture, laws are both restrictive and plentiful. It needs to pay the attention to fitness treatment specific needs. Go Healthy needs to have a qualified and well-trained staff that will increase its staff costs. As it is a sole proprietor business so it is important to ensure that it has complied with all the paperwork needs and taxes.
Nowadays, gyms and fitness centers are advancing their services by using updated technologies. It can pose competitive threat on Go Healthy in Australia. Considering this fact, the equipment and exercise machines need to be up to date. Go Healthy needs to install advanced equipment to provide satisfaction to customers (Song, Fisher & Kwoh, 2018). It can increase the cost of establishment for this fitness center. In order to get a significant competitive position, this new venture needs to have wide options and modern technology in fitness center.
The level of political challenges will be lower for this business. These issues can include the government legislations and policies. For Go Healthy, there will be very little concern about the tax and trade restrictions. Political factors can have positive impact on the business operations as government is engaged in launching various campaigns related to becoming active, healthy and fit. It can enhance the business operations of Go Healthy among Australian people (Kvedaraite, 2013).
Economic challenges are the major factors for this new business venture. Basically, the organization will be offering leisure services in Australia. In the situation of economic downturn, there might be a decline in the number of customers. With the less disposable income, the Australian population will not prefer to spend money on fitness activities. In the country, the current economic position is comparatively weak and people are not feeling enough wealthy to make spending on health and fitness treatments (Jansen, 2017). Additionally, the factors like water and electrical rates can increase the running costs of fitness center. These economic factors can pose challenges to the operations of Go Healthy Fitness Center in the future.
In this aspect, Go Healthy Fitness Center may confront the difficulties related to lower class people of society and cultural diversity. At any fitness center, there will be the people from different cultures and backgrounds that can generate some conflicts among them. It may have the impact on new venture’s revenues and sales. Still, there are so many people who prefer to do exercises and yoga at their home only that will have effect of Go Healthy’s growth. People from rural areas are still unaware about these services.
In addition to above challenges, environmental challenges may come in the way of this fitness center. In this business, consumption of energy is high as all the equipment and machines run on electricity. Additionally, environmental protection laws and regulations can affect its business. Other challenges may be related to the use of hazardous substances like cleaning chemicals, massage oils and chlorine in the swimming pool (Hyytinen, Pajarinen & Rouvinen, 2015).
Thus, these are the possible challenges which this new business venture can confront in Australian market. Among all the challenges, economic and legal challenges are major that can have huge impact on the organization’s business operations and growth. To overcome these challenges and difficulties, this venture needs to develop effective strategies and plan. It should predict the possible threats before establishing the business and implement accordingly.
Apart from the above-mentioned challenges, there may be some risks which can be involved in the process of establishing the new business venture of fitness center (Ben-Ari & Vonortas, 2007). The potential risks are stated below:
There are various financial risks which can be confronted in operating this fitness center in Australian state. The owner needs to have a significant amount of capital when he/she open the gym in order to recruit the staff, buy high-end equipment for fitness and promote the business to local fitness freaks. In the future, the venture may have some legal claims which can affect its financial stability. These legal claims can include some examples like poor image due to customer injury, down times, bad reviews, lower number of members etc. These are the major factors which can influence fitness center’s finances. The business plan of fitness center needs to have a detailed financial plan; otherwise it may be at the risk of losing the investment (Jang & Choi, 2018). To minimize these financial risks, the fitness center needs to create a risk management plan.
In addition to financial risks, this new business venture may face the risks related to safety and security of gym members. There are some safety risks fitness center might be exposed to. In the fitness center, the utilization of gym equipment can cause serious illness and medical conditions. It can be due to carelessness of employees that can harm the members. There may be a situation where a person with heart disease might not reveal this and after doing harsh workout, go into a cardiac arrest. If the employees are not trained in the first aid and premises do not have automated external defibrillator, then it can increase the wellness and safety risks for the business.
Go Healthy Fitness Center may be at the risks of civil litigations and fines if it does not follow proper laws and regulations to operate this business. It needs to comply with the compliance rules and regulations. In the case of any injury and non-compliance of laws, it may be forced to pay different fines and penalties (Dawson & Henley, 2015).
It is one of the common and biggest risks which can impact both the investor decisions and entrepreneur. For example, Go Healthy is a fitness center and if it is unable to understand the needs and expectations of customers regarding fitness activities, it can be problematic for this new venture (Thompson, 2014). With inadequate data about changing needs and trends of market, its services will not be able to meet the demands of targeted customers. For Go Healthy, this situation will be regarded as risk as it can affect its business operations (Eftekhari & Bogers, 2015).
In addition to above risks, there are some other risks which can be involved in the establishment and operations of Go Healthy Fitness Center in Australia. These risks may be related to gym equipment, injury, trainers, insurance, treadmill injuries and emergency losses etc. There may be situation of any accident like violent acts, explosions etc. that can impact both financial stability and reputation of new venture. In the premises of fitness center, if equipment is not placed in proper working order then it can hurt the members. It can increase the medical costs of the fitness center (Micelotta, Washington & Docekalova, 2018). If the trainers and other staff members will not be well-trained and familiar with all the operations then it will increase the chances of accidents. It is very risky to Go Healthy Fitness Center as it can affect its brand image among targeted population and lower the membership.
Thus, it can be stated that it is very risky to start a new business venture. The new business venture may face various risks. So, new business needs to develop a risk management plan before its establishment (Vonortas & Kim, 2015).
Conclusion
In the limelight of above report, it can be concluded that starting a new business is not everyone’s cup of tea. It is not easy to operate a new business successfully. There are various challenges and problems which an entrepreneur may face while establishing new venture. The above report includes the discussion about different aspects related to establishment of a new fitness center in Sydney, Australia. It discusses about different sources of capital which can be used by this fitness business. For an entrepreneur, it is not possible to open this business without confronting risks and challenges. These challenges may come from different external factors and clients who get injuries while using the gym equipment and other facilities. To overcome the challenges and mitigate the related risks, the new venture should develop some risk management practices. It will assist in addressing the associated risks and challenges. To attract more capital sources, the venture should create an effective business plan so that they show the interest to invest in new business venture.
References
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