Detailed Marketing Plan for Unlimited Travel International - Case Study Example

Unlimited Travel International Business Plan Executive Summary Tourism Industry is among the major industries worldwide that have experienced unsurpassed major growths over the past decades. This is mainly attributed to the dawn of a world without borders as well as increased and enhanced information dissemination over the magnificent sceneries worldwide, even to Australia. Unlimited Travels International (UTI) seeks to take this opportunity of rapid annual growth in the tourism industry to venture in to the tourism business and offer services comprising travel as well as adventure packages. With staff that is both dedicated as well as experienced, effective management, effective marketing, and excellent networking, the company will offer these packages to the Australian Tour enthusiasts mainly in the western region, and also Australia as a whole. The founders of UTI are travel-industry professionals. Staff with higher qualification and experience will be employed for the company to effectively compete with other established tourism giants. Table of Contents 1.0 INTRODUCTION 5 1.10 Services 6 1.12 Founders 6 1.13 Opportunity 6 1.14 Differentiation strategy 7 1.15 Product positioning 7 1.16 Situation Analysis 7 Unlimited Travels International is yet to commence its operations. Proper reception of its services is currently being planned and reviewed as marketing is to take a central position since it is critical in its continued success as well as future profitability. The basic need in the market is quality, prompt and reliable agency services for the Australian clients, as also stated in ABS (2006). The target market actually appreciates personalized attention, quality gourmet food, prompt services, as well as upscale accommodations. Unlimited Travels International will therefore meet the market need with quality, prompt, reliable and intensive services. 7 1.17 Objectives 7 To continuously provide quality and enjoyable services and quality that is timely and budget-fitting. 7 To ensure that the clients are enthusiastically satisfied throughout 7 To ensure that the market presence that guarantees short and long-term profitability, along with growth and prosperity, is established. 8 To be fully commit to enhancing growth and development in both the tourism as well as the general economy of Australia. 8 To ensure positive contribution to the community 8 1.18 Mission Statement 8 1.19 Vision Statement 8 1.20 Values 8 1.21 Positioning Strategy 8 1.22 Keys to success 9 The success keys to UTI operations will undeniably be an effective segmentation of the market through appropriate identification of more niche markets as well as implementation strategies. Some key factors included are excellence in promise fulfillment, timely customer request responses, fruitful as well as solid strategic alliances, and marketing know-how. 9 2.0 COMPANY SUMMARY 9 2.1 Start-up summary 9 2.2 Company Ownership 10 UTI is basically a sole proprietorship and is owned by Charlo McMark who also operates the chain in Australia. The owner of UTI is currently researching if it is possible to establish UTI either as a Limited Liability Partnership (LLP) or as a Limited Liability Company (LLC). The expected result may be after two years of operation. 10 2.3 Company Locations and its Facilities 10 UTI has currently identified some potential locations for its offices. The potential locations are situated in Sydney, Tasmania and Brisbane and have adequate population for tourism success. The areas measure between 800 to 1000 square feet. 11 3.0 SERVICES 11 3.1 Competitive comparison 11 3.2 Service Description 11 UTI should be considered as an agency delivering all services and which sells standard goods as well as services offered by travel agencies, including travel packages along with airfare. Other services are passport assistance, provision of best equipment as well as supplies, and also superior provisions comprising above-average entertainment, terrain, activities and accommodation. UTI has a value added on its familiarity, specialty focus, expertise and competitive rates. The main concern for Adventure Travel entails hard and soft adventure, both of which involve active activities. Entailed in hard adventure are activities involving risk, confidence, and competence. Soft adventure is quite the opposite. Economic indicators, as also stated in ABS. (2009), point to increased adventure travel demand, and the company aims to offer the market best quality, full service travel packages, including numerous sporting trips. As a top quality provider in the market, the company will deal with top-notch professional having established backgrounds. In case of supplier failure to adhere to the company specifications, their product and services shall be terminated. 11 3.4 Sales Literature 12 3.5 Fulfillment 12 3.6 Technology 13 3.7 Future Services 13 4.0 MARKET ANAYSIS SUMMARY 13 4.1 Market Segmentation 14 4.2 Strategy of Target Market Segment 14 Service Business Analysis 15 5.0 STRATEGY AND IMPLEMENTATION SUMMARY 16 Marketing Programs: With details of clients’ address, residence and occupation available, both traditional and modern marketing methods will be utilized. Internet communication will be quite utilized depending on the market research outcomes. Sales extension to national and global arena will take effect as soon as resources and opportunities are available. 18 Corporate Social Responsibility: To improve lives of individuals, contribute to, and develop the community sustainably, UTI will support several projects having long-term community benefits including education, cleanliness and health campaigns. 19 6.0 MANAGEMENT SUMMARY 19 7.0 FINANCIAL PLAN 20 Break-even analysis will be cost-based to ensure comfortable operation above the break-even. 21 The Projected Cash Flow, balance sheet, and the business ratios are indicated in table 6, table 7 and table 8 respectively. 22 8.0 CONTROLS 22 9.0 CONCLUSION 22 10.0 BIBLIOGRAPHY 23 APPENDICES 24 1.0 INTRODUCTION Tourism has a greater impact on the lives of the citizens. It creates job opportunities as well as other forms of investments which are basically aimed improving the living standards of the local community. The growth of tourism is mainly attributed reduced restriction of movements of people across the borders. Unlimited Travels International (UTI) is a company that has decided to venture into the business to explore the available opportunities. Due to its adequate capital base and qualified staff members, the company aims at explore the available opportunities in the in the sector to ensure that the highest set objectives are efficiently met. 1.10 Services Services and products that UTI will initially provide are pre-arranged tours, travel consultation; custom packages designed according to customer specifications, consultations on travelling, and with also will make lodging reservations including the related services. 1.12 Founders The UTI founders are George Collimore, MBA, Jerry Jordans, MBA, Charles McMark, MBA. On top of the MBA status, the founders of UTI are travel-industry professionals with a higher experience and who are also passionate about services UTI seeks to promote as well as offer. The staff that will be employed will also posses higher experience in the industry and will also be highly qualified in order for the company to effectively compete with other established tourism giants. UTI is just about to penetrate a highly lucrative market within the growing industry. The existing trend towards the increasing tourist numbers entering and mostly leaving Australia for other destinations presents UTI a greater opportunity of entering the market. 1.13 Opportunity The opportunity for successful UTI entrance and operation exists mainly because tourism has been noted as a rapidly growing industry and with about 5% annual growth. In this however, adventure travel experiences a 16% growth annually, according to OECD (2010). Currently there are a small number of providers offering these services to the upscale clients. There are also less than 5000 provides of these services in the industry that experiences such a significant growth. Moderate competition is experienced in the portion of city travel. 1.14 Differentiation strategy UTI will differentiate itself primarily as the leading mobile operator of adventure in the Whole Australia. 1.15 Product positioning The positioning of UTI services will be done very carefully. The services will be of an extremely higher quality, will be informative, designed according to the client expectations and very comfortable in that the clients will highly appreciate 1.16 Situation Analysis Unlimited Travels International is yet to commence its operations. Proper reception of its services is currently being planned and reviewed as marketing is to take a central position since it is critical in its continued success as well as future profitability. The basic need in the market is quality, prompt and reliable agency services for the Australian clients, as also stated in ABS (2006). The target market actually appreciates personalized attention, quality gourmet food, prompt services, as well as upscale accommodations. Unlimited Travels International will therefore meet the market need with quality, prompt, reliable and intensive services. 1.17 Objectives To continuously provide quality and enjoyable services and quality that is timely and budget-fitting. To ensure that the clients are enthusiastically satisfied throughout To ensure that the market presence that guarantees short and long-term profitability, along with growth and prosperity, is established. To be fully commit to enhancing growth and development in both the tourism as well as the general economy of Australia. To ensure positive contribution to the community To create reliability and a good image by ensuring good rapport not only with the clients but also with relevant stakeholders, other travel agencies, hotels, and many tour operators. 1.18 Mission Statement UTI aims at connecting newcomers as well as veterans in the adventure travel with various exceptional service providers, accommodations fitting client desires, skill levels as well as budget, and adventure activities. 1.19 Vision Statement To be the iconic travel agency in Australia 1.20 Values Connection, enthusiasm, innovation as well as respect 1.21 Positioning Strategy UTI seeks to position itself as a specialist in provision of tourism services. 1.22 Keys to success The success keys to UTI operations will undeniably be an effective segmentation of the market through appropriate identification of more niche markets as well as implementation strategies. Some key factors included are excellence in promise fulfillment, timely customer request responses, fruitful as well as solid strategic alliances, and marketing know-how. 2.0 COMPANY SUMMARY UTI should be viewed as a travel agency that offers all services and which specializes in the adventure travel. It provides recreations with experienced professional service along with excellent consultations. UTI will definitely position itself as the leading specialist in the adventure travel arena hence generates much of the income from the segment. 2.1 Start-up summary The start-up expenses entail three main noteworthy features. These features are: The expenses related to research and development Investments in sales collateral Need for operational base. The total start- up of UTI requires a capital of approximately $103,000; this start-up will receive funding through the personal investment of the owner as well as a long-term note that is secured from the Commonwealth Bank of Australia. Expenses These will include rent, the office supplies, the consultant’s fee, utilities, and the insurance among others. The highest start-up expense will mainly originate from computer installation. Assets The start-up assets will be primarily cash in addition to computers Investment The greatest part of investment will originate from loans to be obtained from the personal savings of Charlo McMark. Loans A total of $85,000 has been obtained from the Commonwealth Bank of Australia The start-up requirements and funding are illustrated in table 1 2.2 Company Ownership UTI is basically a sole proprietorship and is owned by Charlo McMark who also operates the chain in Australia. The owner of UTI is currently researching if it is possible to establish UTI either as a Limited Liability Partnership (LLP) or as a Limited Liability Company (LLC). The expected result may be after two years of operation. 2.3 Company Locations and its Facilities UTI has currently identified some potential locations for its offices. The potential locations are situated in Sydney, Tasmania and Brisbane and have adequate population for tourism success. The areas measure between 800 to 1000 square feet. 3.0 SERVICES 3.1 Competitive comparison The market for travel agency businesses is very competitive, while technology, mainly the Internet and Computerized Reservation Systems (CRS) is deemed as having changed the operations of travel agencies, as stated in Hopken et al (2009). Internet permits individuals as well as agencies to engage in research related to travelling. This advantage has been grasped by several competitors who offer their tickets online and at discounted rates hence raising price competition. UTI has currently identified 4500 competitors and will compete with them while offering adventure travel alternatives, having ability to organize adventure travel personally, and having established relations with the clients 3.2 Service Description UTI should be considered as an agency delivering all services and which sells standard goods as well as services offered by travel agencies, including travel packages along with airfare. Other services are passport assistance, provision of best equipment as well as supplies, and also superior provisions comprising above-average entertainment, terrain, activities and accommodation. UTI has a value added on its familiarity, specialty focus, expertise and competitive rates. The main concern for Adventure Travel entails hard and soft adventure, both of which involve active activities. Entailed in hard adventure are activities involving risk, confidence, and competence. Soft adventure is quite the opposite. Economic indicators, as also stated in ABS. (2009), point to increased adventure travel demand, and the company aims to offer the market best quality, full service travel packages, including numerous sporting trips. As a top quality provider in the market, the company will deal with top-notch professional having established backgrounds. In case of supplier failure to adhere to the company specifications, their product and services shall be terminated. 3.3 Macro Environment Research basically demonstrates that tourism undergoes rapid and unsurpassed growth nature as individuals attempt to experience not only higher serenity and beauty, but also more attractions, cultures and activities in other places. With intensive marketing of these places, there is increase in tourist enthusiasts travelling hence presenting a massive potential market (William et al. 2003; OESR, 2004) 3.4 Sales Literature Brochures for entertainment, travel locations, as well as companies handling car rentals are acquired from wholesale houses as well as service providers dealing with UTI. A local company dealing with graphic arts also handles UTI brochures, which are mailed upon potential customer’s request. Literature such as print ads, materials of sales promotion and direct mail will be used according to the need. UTI will also have a database where customer details and address is drawn. 3.5 Fulfillment Good relationship with companies offering the products as well as services relevant in tourism industry has been established by UTI. Three major airline companies have already been chosen as ticket providers since an agent’s profit is not capped on the tickets, hence the company captures more ticket sales. The market research has been fruitful in indentifying and developing good relationship with the great service providers worldwide. Opportunities have been identified and advantages will be taken, including trade shows and publications for quality monitoring. 3.6 Technology ATI will mainly rely on the Computerized Reservation System (CRS) to ensure efficient and better client reservations. It enables the travel agencies to recognize customer requirements while ensuring quick information availability. Internet will also be necessary not only in communications, but also in market research. 3.7 Future Services UTI intends to open other agencies in additional locations. After maturity of the adventure travel market, other travel segment markets will be tapped. Potential opportunities mainly for the future sales are currently being researched. The goal remains for UTI to be established as the leading and internationally recognized adventure travel, hence providing the corporate focus as well as the differentiated offering. 4.0 MARKET ANAYSIS SUMMARY The initial efforts of UTI will be on the Australian market for travel adventures, under the category of leisure travel. 4.1 Market Segmentation Focus will be on health-conscious couples as well as individuals seeking leisure travel and excursions, ages 18-65, and those with $50,000 household income median. 4.2 Strategy of Target Market Segment UTI will ensure that the target customers receive right, quality, and on budget services promptly. It focuses on promotion as well as sales of adventure travel to individuals as well as corporate clients in Australia. Market Needs: Several potential clients have no surety of locations they intend to travel. Since travel agencies have knowledge on destinations, clients seek sound advice and competitive price from them, according to. UTI is quite confident on its ability to handle this timely, efficiently and satisfactorily. Market Trends: According to ABS (2003), outbound tourism is currently high, and with Australia’s ageing population increasing and becoming affluent, a larger travel market has been created. Lifestyles have also changed and more emphasis is placed on safety, natural and spiritual lifetime experiences and holistic recreation activities thereby fuelling demand for outbound travels. Increased deregulation has also created differentiation need while lowering airfare prices along with prices of other travel-related services. Market Growth: Cooper & Michael (2005) states that the growth in this sector is currently on increase due to a better domestic economy and currency devaluation in some destinations. Adventure travel, growing at about 10 annually, is among the first growing segments. Service Business Analysis TRA (2009) states that tourism will continuously become a major player in the Australian economy. With the market divided in to business and leisure travels, UTI seeks to have a pivotal role in tourism development by providing its clients with impeccable services. Service Distribution: The main pattern of distribution that is functional in travel industry is specifically from the supplier, to the agent, to the consumer. The supplier and the given agency regulate their distribution through various ways including a conference system. Suppliers can also be reached through the Computerized Reservation System (CRS). UTI services can also be distributed to client through word-of-mouth from satisfied clients, World Wide Web, Competition and buying patterns: There are numerous activities and travel types for people contemplating adventure vacation. The substituted services as well as products present a part of competition. Direct competition is presented by nearly any agency, and many agencies provide adventure travel, according to Buhalis & Darcy (2011). Adventure travelers’ purchase decision is based on desire to mix vacation time mainly with athletic interests. On average, an adventure traveler will likely engage in the very activity every 12-18 months. In this business, clients directly compare the travel agencies. Main Competitors: Several competing companies have been identified, where Australia has 4500 travel agents. Also, the main retail travel networks here include Flight Centre, Travelscene American Express, Jetset Travelworld, Harvey World Travel and Travellers Choice. These competitors have some common key characteristics. The said companies have been in business for long, they have strong brand names, a large number of assets, and a good business positioning due to successful marketing. However, these competitors lack the focus, strategy and innovation we intend to bring in. 5.0 STRATEGY AND IMPLEMENTATION SUMMARY UTI’S initial focus will be on the local market, expanding to other markets with time. The marketing strategy will mainly emphasize focus directed at quality services for its clients. The strategy entails growing the business through nurturing clients and service differentiation (through quality service and better staff behavior). For the company to achieve the aims and objectives, UTI’s reputation will be established as differentiated service provider and accomplished through various marketing communication programs using various media. Provide an unparalleled service to ensure repeat business while building trust. Entailed here will be the provision of superior service in every phase of operation including timely transactions. Aggressive promotion of the company’s services will also be conducted. Value Proposition: UTI’s value proposition originates from the experience and love of adventures. Confidence among employees on UTI activities originates from enthusiasm they share with clients on UTI services, initiating the beginning of long-term faith and relationship Competitive Edge: UTI’s competitive edge is the focus, passion as well as the experience. It provides differentiated offering through necessary management experience, commitment as well as capital. SWOT analysis: Strengths Diversified client base Skill combinations Intensive advertisement and marketing Weaknesses Lack of reputation New practices as well as personnel without prior experience of working together (team work) Limited financial strength Absence of clearly understood strategic allies Opportunities Government’s encouragement of the indigenous entrepreneurs to participate in tourism Current rapid tourism growth rate Trend in international tourism indicating the tourists’ desire for more than just 'sun and sea' conventional vacations Threats Established lodges, hotels and travel agencies Better marketing strategies from established companies. Existing competition Other start –ups propelled and generated by robust economic growth. Marketing Strategy: The Company sticks to the goal of creating and maintaining clients, which is also reflected in the marketing strategy. The company offers more than just travel, including adventure, ensuring sweet memories and freedom, and adventure travel benefits including excitement, good health and personal growth. Pricing strategy: UTI will have competitive price according to the market dictates and standards. Attempts will be made at maintaining 10%margins on airline travels, while other products’ margin will vary but average 20%. Strategy on a penetrating pricing will ensure customers are attracted. Promotion strategy: During its first operation, grand opening and sponsoring of various events related to travel will be organized and participants rewarded. Other strategies will include personal selling, direct marketing, internet marketing, and use of local radios, and phone solicitations, publications. Positioning statement: For clients desiring to have memorable adventure travel. UTI is the leading agency in the provision of adventure travel in Australia. Sales Strategy: The selling process in the short-run will aim at attracting and informing clients, while utilising direct selling and World Wide Web. Sales forecast is illustrated in Table 2. Marketing Programs: With details of clients’ address, residence and occupation available, both traditional and modern marketing methods will be utilized. Internet communication will be quite utilized depending on the market research outcomes. Sales extension to national and global arena will take effect as soon as resources and opportunities are available. Strategic Alliances: Strategic alliances and partnerships with several companies, hotels, lodges as well as travel agencies are a possibility so that clients enjoy their preferences, an essentiality in the competitive environment. The significant milestones are given in the detailed table and reflect the value of goal setting in the company. Corporate Social Responsibility: To improve lives of individuals, contribute to, and develop the community sustainably, UTI will support several projects having long-term community benefits including education, cleanliness and health campaigns. 6.0 MANAGEMENT SUMMARY The element of human resource remains an essential component in service delivery. Even though Charles McMark will be the general manager, employees will contribute in decision making and management tasks. Employee prerequisites include more than 5 years in travel industry, ability, proper qualifications, and skills to undertake the task. Functional organization structure shall be engaged where focus will be on prime expertise areas. With experienced founders, the management team shall include experienced staff to ensure total service delivery. The table gives the first year monthly personnel plan. There is no anticipation of significant increase of staff in 2-3 years time. Table 3 illustrates the personnel plan. Internal training shall be continuous and will handle all aspects while increasing knowledge of the industry to ensure company goals and customer expectations are met. Marketing sessions will be conducted regularly. In feedback and control, employees must understand the company goals, continuous communication of developments will be done, encouragement of development opinions from the staff will be ensured, and proper working communication will be ensured for harmonious working environment. 7.0 FINANCIAL PLAN Financial plan is essential in meeting objectives and is intended to finance the growth through the cash flow as well as equity. UTI, in the first two quarters, will experience a slow growth as a start-up company. UTI has enough cash-flow to overcome the negative cash flow. Gross margin as well as sales volume is expected to increase. Significant assumptions include accuracy in market growth projections and no decline in favorable national as well as international travel conditions (table 4). The main financial indicators point to UTI anticipating sales growth and steady operating expenses, the favorable economic conditions as well as positive forecasts in growth support this. Projected profit ansd loss is indicated in the table. Profit improves in third quarter while gross margin grows by 3% from first year to second year (table 5). Break-even Analysis Break-even analysis will be cost-based to ensure comfortable operation above the break-even. Break-even Analysis Monthly Revenue Break-even $33,902 Assumptions: Average Percent Variable Cost 78% Estimated Monthly Fixed Cost $7,375 The Projected Cash Flow, balance sheet, and the business ratios are indicated in table 6, table 7 and table 8 respectively. 8.0 CONTROLS Regular evaluations of the plan will be conducted throughout the year to ensure we stay on course with the intended objectives. Activities will include tracking, follow up, focus on market segment, and client follow-up. 9.0 CONCLUSION With the rapid growth in the tourism industry, it is quite definite that travel agencies will take the opportunity. UTI is no exception as it seeks to tap in to the ready market. Forecasts have already indicated a possibility of further growth; hence with proper implementation of such an effective and detailed plan, the company is set to be highly competitive in the market. 10.0 BIBLIOGRAPHY Organization for Economic Co-operation and Development, 2010, OECD Tourism Trends and Policies 2010, OECD Publishing. Tourism Research Australia (TRA), 2009, Tourism Forecasting Committee Forecast, issues 2, 2009. William, H. et al., 2003, Progressing tourism research, Bristol: Channel View Publications. Australian Bureau of Statistics (ABS), 2003, Survey of Disability, Ageing and Careers. Buhalis, D. & Darcy, S., 2011, Accessible tourism: concepts and issues, Bristol: Channel View Publications. ABS. (2009), Australian Bureau of Statistics Overseas Arrivals and Departures, Australia (ABS Cat. No. 3401.0); Tourism Research Australia International Visitor Survey, December quarter 2009. Hopken, W. , Gretzel , U. & Law, R.,2009, Information and Communication Technologies in Tourism 2009: Proceedings of the International Conference in Amsterdam, the Netherlands, 2009. New York: Springer. Australian Bureau of Statistics, 2006, Australian Social Trends 2006 7/02.0. Cooper, C. & Michael, C., 2005, Oceania: a tourism handbook. Bristol: Channel View Publications Office of Economic and Statistical Research (OESR), 2004, The Contribution of International and Domestic Visitor Expenditure to the Queensland Economy 2003-04. APPENDICES Table 1 The start-up requirements Start-up Requirements Start-up Requirements Start-up Expenses Legal $550 Stationery etc. $500 Brochures $1,000 Consultants $2,000 Insurance $400 Rent $2,625 Equipment $16,000 Other $500 Total Start-up Expenses $23,575 Start-up Assets Cash Required $35,000 Other Current Assets $17,500 Long-term Assets $26,925 Total Assets $79,425 Total Requirements $103,000 Start-up funding Start-up Funding Start-up Expenses to Fund $23,575 Start-up Assets to Fund $79,425 Total Funding Required $103,000 Assets Non-cash Assets from Start-up $44,425 Cash Requirements from Start-up $35,000 Additional Cash Raised $0 Cash Balance on Starting Date $35,000 Total Assets $79,425 Liabilities and Capital Liabilities Current Borrowing $0 Long-term Liabilities $85,000 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities $85,000 Capital Planned Investment Owner $18,000 Investor $0 Additional Investment Requirement $0 Total Planned Investment $18,000 Loss at Start-up (Start-up Expenses) ($23,575) Total Capital ($5,575) Total Capital and Liabilities $79,425 Total Funding $103,000 Table 2 Sales forecast sales forecast: The table illustrates anticipated sales forecast in a three year period Sales Forecast Year 1 Year 2 Year 3 Sales Agency locations $427,685 $382,245 $258,751 National $42,768 $70,568 $97,032 Internet $10,693 $47,046 $97,032 Corporate $53,058 $88,210 $194,063 Total Sales $534,204 $588,069 $646,878 Direct Cost of Sales Year 1 Year 2 Year 3 Agency locations $333,595 $294,329 $196,651 National $33,900 $54,337 $73,744 Internet $8,417 $36,225 $73,744 Corporate $42,081 $67,922 $147,488 Subtotal Direct Cost of Sales $417,993 $452,813 $491,627 Table 3 Personnel Plan Year 1 Year 2 Year 3 Manager/President $6,000 $6,240 $6,490 Accountant $13,200 $13,728 $14,277 Travel Agents $36,000 $37,500 $39, 000 Marketing & Advertising Dir. $13,800 $13,800 $13,800 Total People 7 7 7 Total Payroll $69,000 $71 ,268 $73,567 Table 4 General Assumptions Year 1 Year 2 Year 3 Plan Month 1 2 3 Current Interest Rate 10.00% 10.00% 10.00% Long-term Interest Rate 10.00% 10.00% 10.00% Tax Rate 30.00% 30.00% 30.00% Other 0 0 0 Table 5 Profit and Loss Year 1 Year 2 Year 3 Sales $534,204 $588,069 $646,878 Direct Cost of Sales $417,993 $452,813 $491,627 Other Costs of Sales $0 $0 $0 Total Cost of Sales $417,993 $452,813 $491,627 Gross Margin $116,211 $135,256 $155,251 Gross Margin % 21.75% 23.00% 24.00% Expenses Payroll $45,000 $46,248 $47,546 Marketing/Promotion $26,100 $26,280 $26,280 Depreciation $0 $0 $0 Rent $10,500 $10,500 $10,500 Utilities $4,500 $4,500 $4,500 Insurance $2,400 $2,400 $2,400 Payroll Taxes $0 $0 $0 Other $0 $0 $0 Total Operating Expenses $88,500 $89,928 $91,226 Profit Before Interest and Taxes $27,711 $45,328 $64,025 EBITDA $27,711 $45,328 $64,025 Interest Expense $8,078 $7,330 $6,550 Taxes Incurred $5,890 $11,399 $17,243 Net Profit $13,743 $26,599 $40,233 Net Profit/Sales 2.57% 4.52% 6.22% Table 6 Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash Received Cash from Operations Cash Sales $400,653 $441,052 $485,159 Cash from Receivables $100,048 $143,639 $158,031 Subtotal Cash from Operations $500,701 $584,691 $643,190 Additional Cash Received Sales Tax, VAT, HST/GST Received $0 $0 $0 New Current Borrowing $0 $0 $0 New Other Liabilities (interest-free) $0 $0 $0 New Long-term Liabilities $0 $0 $0 Sales of Other Current Assets $0 $0 $0 Sales of Long-term Assets $0 $0 $0 New Investment Received $0 $0 $0 Subtotal Cash Received $500,701 $584,691 $643,190 Expenditures Year 1 Year 2 Year 3 Expenditures from Operations Cash Spending $45,000 $46,248 $47,546 Bill Payments $415,328 $533,008 $555,493 Subtotal Spent on Operations $460,328 $579,256 $603,039 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 Principal Repayment of Current Borrowing $0 $0 $0 Other Liabilities Principal Repayment $0 $0 $0 Long-term Liabilities Principal Repayment $7,800 $7,800 $7,800 Purchase Other Current Assets $0 $0 $0 Purchase Long-term Assets $0 $0 $0 Dividends $0 $0 $0 Subtotal Cash Spent $468,128 $587,056 $610,839 Net Cash Flow $32,574 ($2,365) $32,351 Cash Balance $67,574 $65,208 $97,559 Read More