Sunday, July 09, 2006

RGYM performing better than expected – earnings forecast increased by 33%!

[Cross-posted on The Gym at Rhosgobel; for more background see these three posts.]

In June of 2005, Radagast and SO started Rhosgobel's Gym (RGYM), a website dedicated to tracking their production of exercise units. In January of 2006 RGYM implemented a new manufacturing process, with initial predicted production of 300 units of exercise in the fiscal year (split evenly between Radagast and Radagast's SO). Based on January pricing of the units, RGYM anticipated earnings between $750 and $1,500 for the fiscal year (earnings, unfortunately, not in thousands).

Analysts were mixed as to whether RGYM could meet these aggressive goals, but through an aggressive marketing campaign, active marketplace analysis, and synergistic employee motivation plans, RGYM is proud to announce that in the first six months of 2006 it produced 213 units of exercise, for a total mid-year earnings of more than $900. RGYM exceeded its mid-year expectations by more than 40%.

As a result of this outstanding performance, RGYM is adjusting its annual production goal to 400 units of exercise (split evenly between Radagast and SO); earnings estimates have been proportionally raised as well.

The highest income-producing exercise class for RGYM in the first two quarters of 2006 was walking, with a total of more than 125 units produced. Unfortunately, due to the market saturation of walking-type exercises (and relatively low heart-rate increase per unit of walking produced), RGYM is revising the predicted earnings-per-unit for walking-type exercises. Specifically, walking for more than 40 minutes will be rebranded to walking for more than 30 minutes, and will be priced at $2.50 instead of $5. While this change will reduce our per-unit income, we anticipate that the reduction in per-unit walking amount should increase our exposure in the coveted low-duration walking market while concurrently reducing our manufacturing cost. Our signature walking to the store (and lugging back groceries) product will still retain its $2.50 price.

Additionally, RGYM is actively responding to current marketplace demand for walking by introducing a new product: walking for more than 60 minutes. This product will maintain the $5 price point of the (now discontinued) 40 minute walking product, and is excepted to attract the walking addict niche market.

While RGYM has historically produced products in the video and light aerobic fitness market, RGYM is now expanding its product line to enter the lucrative weightlifting market. Late in the second quarter RGYM introduced their initial weightlifting product: weightlifting for more than 30 minutes, at an introductory price of $5. The ratio of health gains to manufacturing cost make this product an exciting new addition to the RGYM line, and RGYM expects to see solid gains as a result of this product in the second half of the fiscal year.

RGYM's expenses to date have been well within predictions for the fiscal year. Radagast's SO incurred an initial employee compensation expense of $505 in the first quarter; while this expenditure required deficit spending, it was expected to reduce overall compensation expenses by taking advantage of temporary market fluctuations. As a result, Radagast's SO's cash balance was negative for much of the first two quarters. However, Radagast's SO is forecast to have a positive cash balance early in the third quarter of 2006. Radagast has not had any employee compensation expenses, and thus had a large positive cash balance at the end of the second quarter.


RGYM is a world-class provider of exercise unit production tracking for Radagast and SO. RGYM was founded by Radagast and SO, and currently “employs” two people. More information on RGYM's innovative product line, including daily updates on production, can be found at

Translation from business-speak:

My SO and I thought that it would be a blast to write our mid-year exercise report as a mock business press release; we hope you've enjoyed it. Now, to summarize the above in human-readable terms:

1) We are upping our annual exercise goal to 200 bouts of exercise per person per year (up from 150 originally). Considering that we both exceeded 100 bouts in the first six months of the year, this should be attainable.

2) We are slightly revising our earnings per exercise type; here is the updated list (see the original list here):

$5 exercise:
  • Walking for 60+ minutes
  • Gardening for 60+ minutes
  • Weightlifting for 30+ minutes
  • Body Basics
  • Fat Burning Workout
  • Yoga for Strength
  • Yoga for Beginners
$2.50 exercise:
  • Walking to the grocery store (and lugging back groceries)
  • Walking for 30-59 minutes
  • Gardening for 30-59 minutes
  • A.M. Yoga
  • P.M. Yoga
  • Pure and Simple Stretch
So far we've found this reward scheme to be very motivating; for instance, we'll often decide to walk somewhere so we can get our exercise income.

[Disclaimer: Neither of us is in business, so please forgive anything that doesn't sound right.]

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