ActiveKids Academy provides extracurricular activity clubs for children, offering classes in gymnastics, dance and martial arts. Established eight years ago, the academy has built a strong reputation among parents for providing high-quality instruction and a safe, supportive environment for child,dren. The academy’s mission is “To inspire confidence, fitness and fun through extracurricular activities”
The academy currently operates in two locations and is planning to expand to a third. The new location will allow the business to reach more families and offer more classes. However, this expansion will require significant investment. The costs include renting the new facility, purchasing equipment, such as gymnastics mats and martial arts gear, and hiring qualified instructors
ActiveKids Academy estimates the following costs and revenue for the new location:
Fixed costs (e.g. rent and salaries): $45,000 per year
Variable costs (e.g. equipment and utilities): $12 per student per session
Revenue: $40 per student per session
To decide whether the expansion is financially viable, the academy is using a breakeven analysis. This will help determine how many students need to enrol each year to cover all costs. The management team is also considering ways to increase the margin of safety to ensure the venture is profitable even if student numbers fluctuate
In the past, ActiveKids Academy has used a variety of promotional strategies to attract customers. Social media campaigns targeting parents in local communities have been highly effective, especially when combined with short-term offers such as discounted enrolment fees for new students. Partnerships with local schools have also been successful, with the academy hosting free taster sessions at school events. However, other strategies, such as print advertisements in local newspapers, have not been as successful, as they generated few enrolments when compared to the costs involved
For the new location, the academy plans to focus on promotions that directly engage parents and children. Free trial sessions will allow potential customers to experience the classes first-hand. Loyalty programmes, such as discounts for repeat enrolments or siblings being enrolled, are also being considered. To measure success, the academy will track key metrics, including enrolment numbers during promotions and conversion rates from trial sessions
The academy plans to promote the new location by combining elements of the marketing mix. Its product strategy will focus on offering popular and high-demand classes, such as gymnastics and dance, while introducing new classes such as yoga for kids. Pricing will remain competitive to attract parents, but premium classes with smaller group sizes may be offered at higher rates. Promotion will include free trial sessions, targeted social media ads and partnerships with local schools to build awareness
ActiveKids Academy’s stakeholders, including investors, are keen to understand the profitability of this new venture. Management is preparing a forecast to show the expected revenue, costs and breakeven point, as well as ideas for improving profitability over time
Table 1: Estimated costs and revenue for the new location
Metric | Value ($) |
---|
Fixed costs | 45,000 |
Variable cost per student | 12 |
Revenue per student | 40 |
Table 2: Financial forecast (first year)
Metric | Amount |
---|
Expected revenue ($) | 85,000 |
Total costs ($) | 73,000 |
Margin of safety (number of students) | 200 |
Table 3: Market research results
Aspect | % | Insight |
---|
Parents interested in new classes | 75 | Strong demand for gymnastics and dance |
Parents who prefer flexible pricing | 60 | Interest in discounts for multiple siblings |
Parents likely to attend trial sessions | 50 | High potential for promotional events |