Case Study: Gymnastics, Dance and Cheerleading Academy
Motivation and Priorities
Our client, a well-established gymnastics, dance and cheerleading academy, was unable to expand its programs because of space constraints and aging facilities. The leadership team wanted to understand whether the organization’s performance trends and broader market potential would support an investment in a new building. Our client also wanted to ensure that the ownership group and key members of the management team recognized the financial implications of the decision and that their interests were aligned. Finally, our client wanted a set of documents that could be used in conversations with potential financiers to communicate the company’s overall condition and trajectory as well as relevant business risks.
In order to build a complete revenue profile for our client, Meridian began by extracting data from the company’s separate registration and accounting systems and collecting detailed information about the client’s existing facilities and operating capacity. Based on its analysis, Meridian developed a management reporting framework around five distinct lines of business corresponding to the client’s major programs. Meridian also created a reporting distinction between the client’s “core” revenue (consisting of recurring registration fees and program tuition) and “non-core” revenue from less stable, more transactional sources.
Next, our team performed a geospatial analysis using the addresses of the client’s current and former students to understand the distribution of both groups within the local market, verify historical boundaries and visualize the impact of competitors opening new facilities in high-potential population centers.
Meridian combined advanced demographic data, regional sports participation rates and growth forecasts to estimate the size of the client’s addressable local market, both in terms of the number of students and their core and non-core revenue contributions. By comparing the client’s enrollment and revenue numbers to market size estimates, Meridian helped our client understand the company’s point-in-time market share as well as growth potential (a concept we refer to as “headroom”).
Finally, Meridian created a “what-if” model that our client could use to easily evaluate the cash flow impact of various factors, including enrollment growth rates, program pricing, staffing decisions and new facility financing costs.
Throughout our work, Meridian coordinated closely with the client’s attorneys and accountants to clarify governance, upgrade financial reporting and ensure compliance as the company positioned itself to seek outside financing.
For the first time, our client had a useful framework for understanding the company’s revenue performance and managing its underlying drivers. In particular, senior management was able to predict how much enrollment growth would be required to cover the added costs of building and maintaining a new facility. As a result of Meridian’s process, the ownership group also gained insights into the value of the company as well as their own tolerance for risk.