Business plan of Towing Service Company - Research Paper Example

Business plan of Towing Service Company AFFILIATION: Business plan of Towing Service Company Introduction – Towing Service Company The service industry is among the fastest growing sectors in US which has been expanding its horizon with zeal. In the last few years, the demand of towing service companies has increased significantly as the customers are looking for the professionals who can assist them in taking their vehicles to the auto repair outlets (Marsh, 2013). Since Orlando, Florida is offering huge potential for the towing service company, our organization will commence its business operations in January 2014 in this region. Brief description of the business and principals involved Our company has been present in the wrecker/towing service industry for many years and has been evaluating various expansion options so that it can offer the customized services to the customers. As the number of vehicle owners is increasing with the advent of time, it has become imperative for them to avail the services of a registered towing company who can provide them quick solutions for their auto related issues (Haq, 2013). We will make sure that the customers are provided all the required services with utmost ease and convenience. Since the vehicles can get broken down any instant on the road or any emergency situation can arise, the business of towing service will assist people who are caught up in such situations in resolving their matters quickly. All of our service providers will perform all the mandatory services with perfection so that the issues are avoided in future. This business will be beneficial for the society as the transportation safety will be enhanced by our expert offerings. Method of setting up the business In order to start the new venture in Orlando, Florida, we have developed a tentative feasibility report to assess the potential of this market. Initially, the company will open one outlet in the region where the customers can meet our representatives. However, we will develop a website from where the consumers can access us round the clock. In addition to these modes, we will offer mobile towing services so that our experts can reach our customers anywhere in Florida 24/7. Financial Resources needed As our company’s main aim is to offer towing services to the customers at affordable prices, the key financial sources which will be considered are investment amount, the trucks required for operations, personnel for running the office and managing the website, customer support staff for handling the queries on telephone and drivers for operating the towing trucks. In the towing service industry, the professionalism of the experts is the key distinguishing feature (Marsh, 2013) and our company will make sure that our personnel are highly trained and well-experienced in their work. Reimbursement We have developed a contingency plan in case our business is unable to achieve the desired results. In the early phase of our venture, we have decided that we will try to achieve break-even level. If the company will realize that it cannot attain the expected outcomes, then it might consider offering only online or mobile services. Although we will provide the wrecker services to the customers but they will have to pay our fees along with the servicing charges of their vehicles. Business Description The Towing Service Business The companies in the towing industry are offering their services for heavy and lightweight motor vehicles along with various storage services for the vehicles and roadside assistance (Hoovers, 2013). There are two major categories of towing services i.e. non-consent towing and consent towing. In consent towing, the customer’s damaged vehicle is towed to a specific location such as the automotive repair facility. In this service, the customers have to pay for the service availed (“NYC: Department of Consumer Affairs”, 2013). On the other hand, non-consent towing is ordered either by the law enforcement agency or owners of private property and the charges have to be paid by the owner of the vehicle. Those vehicles are liable for non-consent towing charges which are parked in a marked two-way zone or in an accidental situation (“The Professional Wrecker Operators of Florida”, 2013). Vision and Future Plans The vision of our company is as follows: To meet the towing servicing needs of the customers with perfection by being available for them round the clock. We will offer the entire range of services from consent towing to non-consent towing so that we follow the traffic safety laws efficiently. Our company strives to meet the demands of the society by making sure that the vehicle owners’ follow the safety laws and we comply with the tow service statutes in each area of our operations. Our employees are the major driver of our business who offer the customers’ the best solution in a highly professional and expert way. We will enhance our presence in every state in US in the future. After capturing the market in Orlando, Florida, our company will expand its operations in other regions of the state. However, on the broader level, we are aiming to enhance our online presence on platforms like Amazon and eBay so that everyone in the country can reap the benefits of our competent services. The major issues which need to be addressed are the technological advancements, amplification of the fleet communication, up gradation of the customer services, improvisation of the fleet utility and other societal issues (Haq, 2013). Since we will be buying the current models of trucks for our towing services, we will have to upgrade them to make sure that our service level is enhanced. The fleet will have to be communicated frequently to make sure that they have clarity about the organizational goals and vision. Likewise, the license and legal requirements of Orlando, Florida will have to be reviewed regularly to make sure that the company operates within the legal code of conduct (“2012 Florida Tow Truck Statutes”, 2012). Business Trends and competition possibilities In the towing service industry, the crucial factors which prompt the demand for the towing services are the US automobile fleet, enforcement of the parking laws by the municipalities and private property owners and the number/rate of the automobile accidents. The success of the leading wrecker service companies is dependent on the efficiency of the operations and the effective marketing campaigns. It is believed that the small companies are more successful than the large ones as they can take advantage of the economies of scale (Hoover, 2013). Since attaining the license for operating the towing service business is difficult and time-consuming, majority of the start-up companies are reluctant to allocate their resources in the process of registration. But the possibility of earning huge amount of profits make the industry attractive and it is expected that the number of towing companies will increase extensively in the future which will intensify the competition among the players of the industry. Organization fees and obtaining ownership Our company has already acquired the permission of starting its operations in Orlando Florida from The Professional Wrecker Operators of Florida so that it can initiate its business from January 2014. All the fees are paid and organization has fulfilled the legal and financial obligations to move ahead with its latest business venture. Management, personnel and consultants Since it’s a family run business, the management will comprise of four individuals i.e. Phillips Walter (Managing Director), Steve Jack (Operations and Services Head), Maria Stewart (Marketing and Research Head) and Elizabeth David (IT, HR and Administrations Head). In order to manage the business operations, three professionals will be hired for the company’s outlet in Orlando, Florida. A web expert will be appointed for administering the website and responding effectively to the customer queries and FAQs on the website. There will be eight drivers who will be appointed from the tow driver service agency so that the cost of drivers can be curtailed. By availing the service of the agency, it will be assured that the personnel have excellent driving skills and are professional drivers as well. The Marketing Plan Services Since there is a wide range of services offered by the towing service companies, our organization will provide following crucial ones to the customers: 1. Light-weight towing and pavement services 2. Heavy-weight towing and pavement services 3. Roadside assistance for SUVs, autos, motor homes, autos and vehicles 4. Lockouts 5. Delivery of fuel 6. Changing of standard tires 7. Lockout services 8. Jump-starts All of these services will be offered twenty-four hours, seven days a week so that the customers can avail them whenever such turbulent situation arises. We have made sure that all of our services are trustworthy so that the customers can trust us and can get relieved of their worries as soon as possible. Market Analysis The company will focus on complying with the demands of the local residents and towed vehicles drop-ins from the freeway and local traffic traveling on the nearby freeways. We will even establish business relationships with few well-known local tow truck companies for the referral businesses of suspended vehicles which need to be towed to the auto repair facility. It is estimated that in Orlando, Florida, about 70% revenues will come from the client customers and remaining 30% from the freeway and local tow vehicle drop-ins. The total population of Orlando is 238,300 among the complete population of 18,801,300 in Florida as of 2012 (“Orlando, FL Demographics”, 2013). Hence, our company will keep its target on the middle and upper classes and will aim at building highly regarded image in the target market’s mindset. The foremost areas which will be used for creating competitive edge are offering convenient services, advising the auto repair services, excellent customer services and establishing relationships with other small scale towing firms. Competitive Analysis In Orlando, Florida, the top ranked companies are American Auto Towing and Wonder World Towing Services. The main features which are used by customers for competitive analysis are services offered, time taken for completing the service, mobile service availability, professionalism of the staff members and fees charged to the customers. The competition among the firms is driven by the service traits i.e. reliability, professionalism, work quality, end customers’ feedback, ability for handling large workload and ability for quick turnover of work. Location Analysis Orlando is a beautiful city in the US State of Florida and is famous for being an excellent destination for tourists. It is located in the Central Florida and is in the center of the Greater Orlando metropolitan region. It is the 77th largest city in US which has a population of about 238,300 in 2012 (“Orlando, FL Demographics”, 2013). The region is known for being the Island city which offers the visitors an aesthetic tourism experience. Pricing Plan According to NYC: Department of Consumer Affairs (2013), the prices of the towing facilities have to be regulated so that the customers are charged normal fees. A brief outline of our pricing plan in compliance with the Florida tow truck services is as follows: 1. The vehicles registered for 10,000 pounds or low will be charged for $125 for tow to storage facility. 2. The vehicles registered for more than 10,000 pounds will be charged $140. 3. Initial three storage days will be charged $25 for each day. 4. Fourth storage day and afterwards will be charged $27 for each day. 5. Tow to location besides the storage facility of tower will add $4 for each mile in addition to tolls. Sales Size Potential Since there is huge potential for the towing service company, we are targeting to achieve sales of $250,000, $300,000, $350,000 and $400,000 in the four quarters of 2014. The direct cost of sales will be 15% of the direct sales so that the revenues can be earned and profitability targets can be achieved. Marketing strategies In order to attract the customers and enhance the company’s sales, the marketing strategy will comprise of the following elements: 1. Development of Website and offering the services to the customers online 2. Word of mouth by delivering the promised quality of services 3. Direct sales services so that the customers can be demonstrated the efficiency level of the professionals 4. Advertising on the social networking sites so that the customers can discuss about the company on these virtual platforms The operations Plan Implementation Plan In order to make sure that we are successful in managing our operations, we have developed certain milestones. These short-term goals will allow us to keep track of our performance and will assist us in moving in the right direction. The website of our company has been developed and it is in the testing phase. Even the office avenue has been bought and the platform is being modified to offer excellent personal customer services. Our company has acquired the relevant funds from the bank and personal reserves to move ahead with the operations in the coming year. In the first quarter, we will make sure that we offer two major services i.e. roadside assistance and heavy weight and light weight towing services. Once we are successful in capturing the pre-defined market share, we will start other services along with our online and mobile services in the second quarter. In the third quarter, we will apply for government grants so that we can enhance our expansion plan. Materials, licenses and sources of supply Since the company is already present in the market and we are starting our operations in a new region, we will avail the services of our existing suppliers. We have made sure that we have the latest trucks for carrying out towing services so that we can comply with our customers’ requirements. Even the tools and equipment required for offering roadside assistance services, fuel delivery and emergency services have been bought so that there are no material issues in our business operations. We already have the license for commencing our services in January 2014. Methods of production The crucial requirement for maintaining our business operations are the towing trucks and we will make sure that our personnel are competent in offering the customers the entire range of services with perfection. It is our policy to enhance the satisfaction level of our valuable clients by making no compromises on the service level. Recordkeeping Since the IT world has advanced extensively and there are various forms of IT systems available in the market, our management team has agreed to implement a ERP system which will help us in handling our business tasks efficiently. It will even assist in keeping our records updated and every detail about the company will be stored in the system. Risk Management and Legal issues In order to mitigate the risks associated with our business, it will be the responsibility of our Managing Director to remain alert about the changes happening in the markets. The person will make sure that any changes in the customers’ demands are addressed instantly and they are provided access to our superior quality services with ease. Likewise, we will make sure that we comply with the legal requirements of running the business by following 2012 Florida Tow Truck Statutes. The Financial Plan Investments needed and information about investors and lenders In order to run the business effectively, we will need total investment of $3,000,000. We have reserves of about $1,000,000 and $1,000,000 will be obtained in the form of loan from the bank. The remaining $1,000,000 will be taken as a loan from a relative so that there are sufficient funds available for running the business. Cash flow projections and Financial Statements and supporting documents Since it is mandatory to develop an estimated cash flow projections and financial statements, we have worked out these aspects and they are represented in the Appendix section of the report. Conclusion Our company is aiming to prosper in the towing service industry by offering the residents of Orlando, Florida a wide range of towing services. The company is planning to offer the online services with perfection by never compromising on the quality level. Once the market position is successfully achieved, we will start our online services so that we can offer the services to everyone in US. We will make sure that our trucks, tool and equipment are upgraded at frequent intervals and the management team will monitor the company’s performance at regular intervals. We are targeting a specific region initially and will expand gradually in other areas. The marketing will be done by social networking sites, direct sales and word of mouth. In order to run the business efficiently, we will invest $3,000,000 which will help us in meeting our expenditures and making sufficient amount of profit. Reference 2012 Florida Tow Truck Statutes. (2012). Retrieved November 21, 2013 from http://www.wftv.com/news/news/local/2012-florida-statutes/nTTKs/ Haq, S. (2013). Five critical issues for towing companies. Retrieved November 21, 2013 from http://www.teletrac.com/fleet-management/topics/five-critical-issues-for-towing-companies Hoovers. (2013). Motor Vehicle Towing Industry. USA: Hoovers – A D&B Company. Marsh, B.J. (2013). Quality Towing Companies. Retrieved November 21, 2013 from http://ezinearticles.com/?Quality-Towing-Companies&id=7970140 NYC: Department of Consumer Affairs. (2013). Towing service guide. Retrieved November 21, 2013 from http://www.nyc.gov/html/dca/html/publications/publications_towing.shtml Orlando, FL Demographics. (2013). Retrieved November 21, 2013 from http://www.areavibes.com/orlando-fl/demographics/ The Professional Wrecker Operators of Florida. (2013). Retrieved November 21, 2013 from http://www.pwof.org/ Appendix – Financial Statements and Cash flow projections Projected Income Statement 2014 1015 2016 $ $ $ Sales 450,000 550,000 675,000 Direct cost of sales 67,500 82,500 101,250 Gross Margin 382,500 467,500 573,750 Expenses Payroll 120,000 150,000 180,000 Administration charges 35,000 40,000 42,000 Utilities 60,000 60,000 60,000 Insurance 5,000 5,000 5,000 Marketing 45,000 55,000 70,000 Rent 10,000 10,000 10,000 Telephone and Internet 1,500 1,500 1,500 Office Expenses 2,000 2,000 2,000 Maintenance Expenses 1,800 1,800 1,800 Taxes and Licenses 1,500 1,500 1,500 Supplies 1,700 1,700 1,700 Others 2,500 2,500 2,500 Total Operating expenses 286,000 331,000 378,000 Profit before Interest and Taxes 286,000 331,000 378,000 Interest Expense 1,000 1,000 1,000 Taxes Incurred 2,500 2,500 2,500 Net Profit 282,500 327,500 374,500 Projected Balance Sheet 2014 2015 2016 $ $ $ Assets Current Assets Cash 750,000 900,000 1,000,000 Accounts Receivable 200,000 300,000 450,000 Other current assets 100,000 150,000 200,000 Total Current Assets 1,050,000 1,350,000 1,650,000 Fixed Assets Trucks 200,000 200,000 350,000 Tools and equipment 50,000 70,000 85,000 Long-term assets 55,000 75,000 90,000 Total Fixed Assets 305,000 345,000 525,000 Total Assets 1,355,000 1,695,000 2,175,000 2014 2015 2016 $ $ $ Liabilities and Capital Current Liabilities Accounts Payable 120,000 150,000 180,000 Current Borrowings 40,000 50,000 65,000 Total Current Liabilities 160,000 200,000 245,000 Long-term Liabilities 35,000 295,000 685,000 Total Liabilities 195,000 495,000 930,000 Capital 1,000,000 1,000,000 1,000,000 Total Liabilities and Capital 1,355,000 1,695,000 2,175,000 Projected Cash Flow Statement 2014 2015 2016 $ $ $ Cash Received Cash Sales 450,000 550,000 675,000 Total cash sales from operations 450,000 550,000 675,000 Other Cash Received Sales Tax, GST, VAT 0 0 0 Sales of long-term assets 0 0 0 Sales of current assets 0 0 0 New current borrowing 0 0 0 New long-term liabilities 0 1,000,000 0 New investment received 0 500,000 500,000 Total other cash received 0 1,500,000 500,000 Total cash received 450,000 2,050,000 1,175,000 Expenditures Cash spending 286,000 331,000 378,000 Total cash spending from operations 286,000 331,000 378,000 Other Cash Spending Sales Tax, VAT, GST paid 0 0 0 Long-term liabilities payment of principal amount 0 0 50,000 Other liabilities of repayment 0 0 0 Dividends 0 0 0 Purchase of current assets 0 0 100,000 Purchase Long-term assets 200,000 100,000 300,000 Total other cash spent 200,000 100,000 450,000 Total cash expenditure 486,000 431,000 828,000 Net Cash Flow (36,000) 1,619,000 347,000 Read More