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SPACE & LIGHT STUDIOS: COST-VOLUME-PROFIT ANALYSIS AND THE BUSINESS OF YOGA

HBP No. NTU060 Publication No: ABCC-2014-002 Print Copy Version: 8 Apr 2014

Chua Wei Hwa, Koh Wei Chern and Wee Beng Geok

As yoga grew in popularity in Singapore, there were many new yoga studios set up in attempts to tap into this growing service industry. Space & Light Studios Pte Ltd was one of them. A small and medium enterprise set up in December 2012, it differentiated itself by offering yoga classes that emphasised on the optimal alignment of the body. This case study explores the entrepreneurial journey of the owners of Space & Light Studios and examines the viability of this yoga business utilising Cost-Volume-Profit analysis – a management accounting tool.

Assistant Professor Chua Wei Hwa, Assistant Professor Koh Wei Chern and Dr Wee Beng Geok prepared this case. It is based on interviews and public sources. Priya Subramanian provided research support and assistance in writing this case. As the case is not intended to illustrate either effective or ineffective practices or policies, the information presented reflects the authors’ interpretation of events and serves merely to provide opportunities for classroom discussions. COPYRIGHT © 2014 Nanyang Technological University, Singapore. All rights reserved. No part of this publication may be copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without the written consent of Nanyang Technological University. For copies, please write to The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798 Phone: +65-6790-4864/5706, Fax: +65-6791-6207, E-mail: [email protected]

This document is authorized for use only by Elise Thauvoye in LLSMS2101+LLSMS2121: Management Accounting taught by Charlotte Antoons, Other (University not listed) from Feb 2022 Mar 2022.

For the exclusive use of E. Thauvoye, 2022. Asia Case .com

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It is our wish that the transformational practice of yoga will help people find contentment, happiness and peace and in this way contribute to the well-being of this planet. May our shared humanity encourage us to open our hearts to live mindfully, love deeply and shine brightly so that together we will light up the world.1

yoga instructors. At the same time, to be viable, they had to be able to balance managing the costs of their operations and pricing their yoga classes competitively. This was essential to retaining and attracting new students, while becoming profi table.

Lynn and Sumei

In December 2012, two ‘Anusara-Inspired’ yoga teachers, Lynn Yeo and Sumei Shum, took over the yoga business segment of Verita. At that time, Verita was a Singapore-based health and wellness centre that offered services ranging from health and nutrition consultations, and health assessments, to spa services and fitness classes. The duo incorporated an equally owned limited exempt private company, and named their new yoga business – Space & Light Studios Pte Ltd (SLS). With a vision to promote and share the practice of yoga with as many as possible, the two partners focused on both retaining and expanding the studio’s yoga clientele. In addition, they believed that this would be the key to ensuring a sustainable business in the long run.

In 2008, the yoga industry in Singapore was reported to be worth S$15 million to S$25 million a year.2 In the first decade of the 21st century, yoga gained traction in Singapore, rising from the 19th most popular sport in 20013 to the 13th most popular in 2011.4 According to a 2011 Singapore Sports Council survey, there were approximately 37,000 regular yoga practitioners (those who practised yoga at least once a week), 85% of whom were females, making yoga the 8th most popular sporting activity among women in Singapore that year.5 Well-attended mass yoga events were also testament to the increasing popularity of yoga. The first large mass yoga event, Yogamania, was held in 2009 and featured the opportunity to do yoga on the Singapore Flyer6 itself.7 In the same year, another mass yoga event - Yoga by the Sea, a women-only outdoor mass yoga workout event, earned an entry in the Singapore Book of Records for 2,068 participants doing yoga together.8 By 2012, Yoga by the Sea had 2,700 participants.9

By May 2013, six months after taking over the yoga business, Lynn and Sumei had experienced the challenges of running a business and made difficult choices. Central to the issues they faced was how to minimise costs while maximising revenue. They needed to find ways to maximise the studio space they had rented from Verita, negotiate shared services and facilities with Verita, and manage their team of

The growing popularity of yoga had been associated by some to be due to an increasing interest in maintaining a healthy work-life balance. By the beginning of the 21st century, yoga, an ancient Indian practice that incorporated breathing techniques, physical exercise and meditation, had spread beyond its birthplace to become a popular “mind-body” practice in many countries across the world. To many yoga enthusiasts,

INTRODUCTION

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THE YOGA SCENE IN SINGAPORE

Space & Light Yoga. Anusara yoga Singapore, Lynn Sumei, Space & Light Yoga. Retrieved October 26, 2013, from http://www.spaceandlightyoga.com/ Yong, D. (2008, November 30). Yoga practised here is secular, say instructors. The Straits Times. Singapore Sports Council. (2006, March 22). Sports Corporate - More Singaporeans Participating in Sports. Retrieved May 30, 2013, from http://www.ssc.gov.sg/publish/Corporate/en/news/media_releases/2006_media_releases/More_Singaporeans_Participating_in_Sports. html Singapore Sports Council. (2011). National Sports Participation Survey. ibid. The Singapore Flyer is a Ferris wheel in Singapore, which in 2013 stood as the largest Ferris wheel in the world. At a height of 165 metres, it is 5 metres taller than the Star of Nanchang and 30 metres taller than the London Eye. Alphonso, J. (2009, March 19). Chance to fly high with yoga this April. My Paper. Yoga by the Sea sets record for most participants. (2009, October 5). Channel NewsAsia. Yourhealth. (2012, October 8). AsiaOne. Retrieved July 16, 2013 from http://yourhealth.asiaone.com/content/singapores-largest-yogaevent-sees-record-turnout.

This document is authorized for use only by Elise Thauvoye in LLSMS2101+LLSMS2121: Management Accounting taught by Charlotte Antoons, Other (University not listed) from Feb 2022 Mar 2022.

For the exclusive use of E. Thauvoye, 2022. Asia Case .com the Asian Business Case Centre

the practice promoted the maintenance of a good physical form as well as the cultivation of a healthy mind.10 Furthermore, anecdotal evidence suggested that yoga could correct physical misalignments like scoliosis11,12 and helped in the management of lower back pain.13 In a census of sport facilities conducted by Singapore Sports Council in 2010/2011, there were 336 yoga studios in Singapore. These yoga studios varied in the size of their operations. In 2013, Pure Yoga, one of the larger studios in Singapore, had two locations. Its location in Singapore’s central business district was 11,000 square feet (sq ft). It had four studios for group classes and one personal training studio. The other Pure Yoga location, in the heart of Singapore’s shopping district, was 16,000 sq ft. It had five studios and offered over 150 classes per week. At that time, Pure Yoga also had establishments in Hong Kong, Taipei and New York.14 In 2013, customers of Pure Yoga paid an average of $136 per month (depending on tenure of membership) for unlimited classes in the month.15 True Yoga was another big player in the yoga industry in Singapore and had a very similar set up to Pure Yoga. In 2013, True Yoga’s location in Singapore’s central business district was 21,000 sq ft. It had nine studios (a mix of group and personal training classes) and offered over 200 classes weekly.16 True Yoga’s branch in Singapore’s central shopping district was 13,000 sq ft and had seven studios, which offered over 200 classes weekly. True Yoga’s customers paid (i) a one-time ‘drop-in’ rate of $44.90; (ii) $35 to $40 per class (depending on number of classes bought) for class packages; or (iii) $150 to $190 per month (depending on tenure of membership) for unlimited classes in the month.17 Both Pure and True Yoga offered a large variety of yoga classes such as

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Ashtanga yoga, Hatha yoga, Hot yoga, Yin yoga and Yoga Therapy, just to name a few. In contrast, an example of a boutique yoga studio in close physical proximity to SLS, was COMO Shambhala (COMO). In 2013, COMO offered yoga and pilates18 classes, naturopathy and massage therapy; it occupied 7,000 sq ft in a shopping mall right on the fringe of Singapore’s central shopping district. The space housed four yoga studios, two private pilates training studios, one group pilates reformer studio, one Gyrotonic studio, three massage and treatment rooms, and a retail space. COMO offered over 60 group yoga classes weekly and charged customers (i) a ‘drop-in’ rate of $40; (ii) $25 to $35 per class (depending on number of classes bought) for class packages; or (iii) $350 to $400 per month (depending on tenure of membership) for unlimited yoga and pilates group classes (packaged with naturopathy consultations, massage therapy sessions and complimentary private pilates sessions). COMO offered a smaller variety of yoga classes such as Hatha yoga, Iyengar yoga and Pre- and Post-Natal yoga.19 Another example of a relatively smaller yoga studio was Yoga Movement (YM). In 2013, YM was set up in two locations on the fringe of Singapore’s central business district, one of which was 2,500 sq ft and the other was 3,500 sq ft. Altogether, YM had four yoga studios for group classes and offered almost 100 group classes a week. The studio offered generic hot and non-hot yoga classes. Their pricing reflected the studio’s no-frills philosophy. In 2013, YM charged customers a $25 one-time ‘drop-in’ rate, $17.50 per class for a block of 20 classes, and $19 per class for a block of 10 classes. However, there were additional charges for rental of towels and purchase of drinking water.20

10 U.S. National Institutes of Health. (2013, June). Yoga for Health. National Centre for Complementary and Alternative Medicine. Retrieved October 26, 2013, from http://nccam.nih.gov/health/yoga/introduction.htm 11 Yoga helped fi x her spine. (2009, July 27). The Straits Times. 12 Forrest, Ana T. Fierce medicine: Breakthrough practices to heal the body and ignite the spirit. (2011). Harper Collins Publishers 13 U.S. National Institutes of Health. (2013, June). Yoga for Health. National Centre for Complementary and Alternative Medicine. Retrieved October 26, 2013, from http://nccam.nih.gov/health/yoga/introduction.htm 14 Pure Yoga Singapore. (2013). Retrieved October 31, 2013, from http://www.pure-yoga.com/en/singapore/ 15 Phone liaison with Pure Yoga’s customer service officer. (2013, April 18). 16 True Yoga - Singapore. (2013). Retrieved October 31, 2013, from http://www.trueyoga.com.sg/home 17 Phone liaison with True Yoga’s customer service officer. (2013, April 18). 18 Pilates is a body conditioning routine that helps build flexibility and muscle strength. 19 COMO Shambhala. (2013). Yoga Singapore: Official site COMO Shambhala Urban Escape Singapore. Retrieved November 1, 2013, from http://www.comoshambhala.com/singapore 20 Yoga is the Movement. (2012). Yoga movement. Retrieved November 1, 2013, from http://yogamovement.com.sg/

This document is authorized for use only by Elise Thauvoye in LLSMS2101+LLSMS2121: Management Accounting taught by Charlotte Antoons, Other (University not listed) from Feb 2022 Mar 2022.

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THE SPACE & LIGHT STORY Lynn and Sumei’s yoga journey started with Ashtanga yoga, in 2001 and 2003 respectively; when Lynn was a practising ophthalmologist and Sumei was a corporate lawyer. In 2005, they discovered Anusara yoga. This form of yoga emphasised optimal alignment of the body (based on scientific principles of biomechanics) in yoga poses, and also explored the connection between yoga as a physical form of exercise and the philosophical aspects of its practice. Anusara yoga’s philosophy is uplifting and classes typically emphasised the ‘celebration of the heart’.21 As strong believers that an emphasis on optimal body alignment in yoga would promote safe practice and prevent injuries, Lynn and Sumei started formally training to be ‘Anusara-Inspired’ yoga teachers in 2009. They discovered that there were limited opportunities to learn Anusara yoga in Singapore and decided to set up an events management company - Space & Light Yoga LLP to organise Anusara yoga workshops. Their events management company brought acclaimed yoga teachers from abroad to Singapore to conduct Anusara yoga training workshops. Meanwhile, Lynn and Sumei had also started teaching yoga to their friends and family. Through the many informal classes they were holding, word about their yoga events spread among yoga enthusiasts in Singapore. In April 2010, a friend introduced them to the owner of Verita who was interested to feature yoga classes as part of his wellness centre. By September 2010, Lynn and Sumei had started teaching ‘Anusara-Inspired’ yoga classes in the then newly opened Verita. The holistic health and wellness centre was located in a complex made up of old colonial-style buildings, which was formerly a government ministry’s office complex.22 Situated on the outskirts of Singapore’s central district, Verita offered a lush green and serene environment where its customers could practice yoga in studios with open windows and fresh air. In addition to yoga, Verita also offered Pilates classes, spa services, corporate health retreats, educational

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workshops and seminars. There were also nutritional counselling and naturopathic consultations as well as a café that served healthy meal options.23 The goal was to provide science-based alternative methods that were complementary to conventional medical treatment programmes. In July 2012, when Verita’s yoga manager left for another job opportunity, Lynn and Sumei were asked to take over the vacant role temporarily. In the months that followed and after discussions with Verita’s owner, the idea of them taking over the yoga segment of the wellness centre’s business took shape. As personal believers of a healthy and holistic lifestyle, Lynn and Sumei were excited at the prospect of owning and running the yoga studio at Verita.

THE TAKEOVER Lynn and Sumei officially took over the yoga business on 1 December 2012. Instead of paying Verita a lump sum to “buy over” its yoga business, SLS took on the liability of honouring all existing yoga client packages that remained unfulfilled as of that date. There were more than 70 clients who had purchased one-year unlimited class packages at a promotional price offered by Verita and these packages had varying outstanding tenures. In addition, there were over 100 clients with fully paid, but unfulfilled classes, with varying time validity (time validity lasted no more than a year). SLS rented a 1,900 sq ft space within the Verita building. At that time, the minimum monthly rent for a commercial space in Verita’s vicinity in Singapore was $1.62 per square foot. The median rent was $5.89 per square foot and the maximum rent was $19.06 per square foot.24 Initial costs outlay for SLS included a refundable security deposit amounting to 3 months rent, paid to Verita. The lease agreement would end in August 2014, with an option to renew for another 3 to 5 years. SLS also paid a monthly fee of $3,500 to Verita for the use of shared facilities and administrative services. Such facilities included SLS yoga clients’ use of shower and towel facilities in Verita. Furthermore,

Friend, J. (2009). Anusara® Yoga Teacher Training Manual. (12th ed.). Anusara Press. Office space slump? 2 state-owned sites pull in strong bids (2008, July 18). The Straits Times. Verita. (2013). Verita – Personalised Integrated Health. Retrieved August 1, 2013, from http://www.verita.com.sg Figures were obtained from Realis Real Estate Information System for commercial properties in Singapore’s central region from Jan 2013 to Jun 2013. Realis was provided by the Urban Redevelopment Authority of Singapore, Singapore’s land use planning and conservation authority.

This document is authorized for use only by Elise Thauvoye in LLSMS2101+LLSMS2121: Management Accounting taught by Charlotte Antoons, Other (University not listed) from Feb 2022 Mar 2022.

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Verita’s front desk receptionists handled some parts of SLS’s miscellaneous administrative matters (for example, signing clients in for yoga classes). SLS also paid Verita for use of the ‘Salt Cave’ for conducting salt stretch classes at a graduated rate based on headcount. There was also discussion on revenue sharing between Verita and SLS when SLS’s business hit a minimum profi t threshold. Lynn and Sumei spent an additional $10,000 to build a partition to divide the studio into two smaller spaces of approximately 1,100 sq ft and 800 sq ft. They named the larger room, Space studio, and the smaller one, Light studio. This division would enable them to increase the number of class offerings.

THE SLS YOGA BUSINESS Lynn and Sumei continued to be the primary yoga teachers at SLS subsequent to the takeover. They continued to teach ‘Anusara-Inspired’ yoga classes. While not all the teachers at SLS were ‘AnusaraInspired’, all yoga classes at SLS were focused on proper physical alignment in yoga poses. Lynn and Sumei maintained a team of teachers that shared this teaching philosophy. In 2013, there were three main categories of yoga classes offered at SLS – (i) group classes, (ii) classes conducted in the ‘Salt-Cave’ (these were semi-private classes); and (iii) private classes. Group yoga classes were the predominantly offered type, and there were about 40 group yoga classes a week held in the Space studio and the Light studio (See Exhibit 1 – Space & Light Studios – Generic Weekly Group Class Schedule). SLS clients could choose to pay a ‘drop-in’ rate when they attended a class, buy a fixed number of classes with varying time validity, or buy an unlimited number of classes for a fixed period of time. (See Exhibit 2 – Space & Light Studios – Yoga Price List in 2013). Salt stretch classes were conducted in a ‘Salt Cave’ within Verita. At that time, Verita offered halotherapy as part of its spa facilities. The ‘Salt Cave’ was an enclosed room where fi ne particles of therapeuticgrade pure salt were dispersed into the air by a nebuliser. The belief was that salt had anti-bacterial and anti-inflammatory properties, which could accelerate

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wound-healing. Hence, inhaling salt particles could clear the respiratory tract and break down mucous. In addition, the anti-inflammatory qualities of salt could also possibly repair and regenerate tissue in skin conditions. Therefore, holding yoga classes in the ‘Salt Cave’ had the added benefi t of halotherapy. These salt stretch classes required prior appointment and a minimum of two clients. There was also a limit of five clients maximum in the class. For each salt stretch class, SLS would pay Verita a minimum of $30 for rental of the ‘Salt Cave’; and a maximum of $45, depending on the headcount. For clients who preferred more individual attention or required therapy for injuries, SLS offered...