Pelo Fitness
“Marin SBDC Advisor, Paul, helped me get my financial house in order, turn empty space into retail sales opportunities set up a solid strategic plan for future expansion and secure the capital necessary to pull it off.”
Pelō Fitness, located in San Rafael, CA, is a dedicated indoor cycling studio built from the ground up to give people the best cycling and fitness experience possible. With the help of the Marin SBDC, Pelo Fitness was able to stablize its finances, turn empty space into retail sales opportunities, and set up a solid strategic plan for future expansion.
Profile
In addition to indoor cycling, Pelo offers Body Align and TRX strength training classes – all designed specifically to complement and complete the cycling workout. In one hour, with professional instruction, great music, and the top-of-the-line bikes. Pelo offers a workout calibrated to meet each person exactly where they are.
Pelo was started by Alan Roberts who has a passion for cycling and fitness and who has personally experienced the big difference being on a bike has made in this own life. His vision was to make cycling classes and fitness easy, available, and fun for people of all fitness levels.
One of Pelo’s unique competitive advantages is a simplified process that lets participants register online, choose their bike online (just like an airline seat), show up, climb on and ride.
Alan’s long-term vision is to have 5-8 locations in the greater bay area and then expand the brand through franchise and licensing opportunities.
Challenge
When Alan first started working with Paul Bozzo, SBDC advisor, Pelo fitness was just nearing its one year anniversary. While the brand was beginning to gain momentum there were still several challenges present. Many of the challenges are common with start-ups in the first few years of operations.
One of the biggest challenges was managing liquidity on a monthly basis. With Pelo being a new business there was no historical record of the expenses and revenues from month to month to draw from. And like many start-ups a lot of money went into getting the operation up and running so there was not a huge reserve of cash to draw upon each month. There was also a certain portion of the start-up expenses currently held as debt that could benefit from being restructured.
Alan also was concerned about the lack of full utilization of his facility. It was a beautiful space in a great location but the rent was at a premium and there was a lot of underutilized space that was not contributing revenue to the bottom line.
Alan’s vision from the start was to create and grow a business that investors would be interested in. He was unsure what type of business Pelo needed to be to secure investor attention and capital. He did not have a clearly defined business model for growth and needed a solid business strategy to secure investment capital for expansion.
Game Plan
During the first few months of working with Paul, most of the attention was devoted to effectively managing the dynamic cash flow situation. Alan and Paul spent several meetings analyzing what historical information was available to create forecasts and budgets that Alan could use to start predicting revenues and expenses to ensure there was adequate liquidity. An extensive analysis of all major expenses was conducted to determine if any expenses could be eliminated or reduced. Also examined were all the current debt and equity tables to understand what opportunities there were to reduce the amount of cash out on a monthly basis to service start-up debt.
The next step was to determine if there were any ways to utilize the retail space to generate additional revenue. All options were examined including adding more classes, expanding the types of classes, integrating retail merchandise, and selling cycling accessories.
“One of the best things about working with [SBDC Advisor] Paul and the SBDC is that it helped me grow at a pace I could handle.”
ALAN ROBERTS, OWNER, PELO FITNESS
As Pelo was creating a lot of forwarding progress on the financial aspects of the business, Paul and Alan turned the focus of their meetings into creating a business model and expansion plan that would allow Pelo to grow to five regional locations and attract the investment capital required to fuel the expansion.
Results
- Began with a studio that was half empty to now you can’t even get into the classes on the weekend!
- Increased sales by 25% in 12-months.
- Turned empty space into money through merchandise sales – making $3-5K/month in boutique sales alone
- Leveled cash flow – Now have guaranteed monthly income with different fitness programs and packages, so no need to worry about hitting monthly expenses
- Learned that is was best to grow organically and not too fast
- Have obtained $160,000 in equity investments
- In 2014, will be opening up another location in SF
- Managed to turn location of studio into a hot spot for fitness
- Hired 14 employees
