Sightseeing Bus Tours Business Plan
Double Decker Tours of Washington, LLC (DDTOW), located in Washington, DC, is a new sightseeing company focusing on high-quality, reasonably priced tours away from the city center. This position allows us to capture a significant portion of the current market.
Our mission is to provide safe, reliable, and fun sightseeing tours to visitors using London-style double-decker buses. Nine of these buses will be open top for sunny days and three will be closed for cold weather.
DDTOW will offer daily sightseeing tours and charter services in Washington, DC. Our routes will include popular landmarks such as the White House, Capitol Building, Supreme Court, Senate Office Buildings, House Office Buildings, Museums, Library of Congress, as well as Adams Morgan, the U Street Corridor, Catholic University, and other important sites.
Our marketing and sales strategy will focus on projecting our message of fun through the airwaves, print, and targeted events. We plan to allocate $80,000 to pre-opening marketing and, as we profit, approximately 1% of gross revenues for ongoing advertisement and marketing. We will also distribute survey cards to gather feedback from our customers.
Our main competitors in the Washington sightseeing market are Tourmobile, Historic Tours of America (HTA), Grayline, and Zohery Tours.
According to recent figures from the Washington Convention and Tourism Corporation, millions of people visit Washington, DC each year and spend billions of dollars on sightseeing and tourism activities. Visitors primarily come to see historical places and museums, and shopping is also a popular activity. Our target market includes solo travelers, business travelers, and families with high incomes.
Our management team includes Michael Frank Coleman, a seasoned professional with extensive experience in the sightseeing industry, and Paul F. Williams, a business development manager with over 30 years of entrepreneurial experience.
Ticket sales and boarding will take place at the MCI Center in Northwest Washington, ensuring accessibility for our customers. Buses will be stored and serviced by Peter Pan Bus Service in Tuxedo, Maryland, ensuring top-notch service.
Our research indicates that there is sufficient demand for sightseeing tours in Washington to generate revenues of over $14 million in the first year of operations. We anticipate capturing 453,000 customers out of a potential customer base of 22 million people. Second year revenues are expected to exceed $17 million, with net profits of $13 million in year one and $15 million in year two.
Our long-term goal is to become a major player in the region by offering quality, fun, and safe tours. If we meet our targets in the first two years, we will consider expanding into new markets.
We are aware of the risks involved in a new venture, including competition from established tour operators. However, we believe that our unique offerings and aggressive marketing will ensure our success.
DDTOW is seeking $800,000 in financing for start-up costs, primarily for purchasing buses, covering operating expenses, hiring and training staff, marketing and advertising, administrative and legal costs.
In conclusion, our sightseeing bus tours business plan highlights the opportunities and potential for growth in the Washington, DC market. We aim to provide exceptional experiences for our customers, capture a significant market share, and expand into new markets in the future.
1.1 Objectives
Double Decker Tours of Washington aims to:
– Establish and operate a new tour company focusing on monuments, memorials, museums, and government buildings in the capital city, as well as historic neighborhoods outside the city center.
– Implement an organizational and marketing strategy to achieve an average load per bus of 65-85% in the first months of operation, increasing to 75-100% later on, maximizing revenues and reducing risk.
– Generate revenues of $14 million in the first year, exceeding $20 million by the third year, and expand into new markets in the Baltimore-Washington corridor.
– Attain net operating profits of 60-70% within the first year and facilitate future growth of the company.
– Obtain twelve 70-passenger London-style doubledecker buses initially and expand the fleet along with growing demand.
– Present a professional and growth-oriented image, setting the stage for rational expansion and forming strategic alliances with key organizations and tourism groups in Washington.
1.2 Keys to Success
The five critical keys to success for Double Decker Tours of Washington are:
– Employing an experienced, highly professional management team that combines vision, financial ability, knowledge of the Washington tour market, and belief in the benefits of the latest computer technology.
– Implementing intelligent, progressive, and aggressive marketing that distinguishes the company as a player with higher standards and professionalism than usual in the Washington region.
– Conducting market research to identify underserved routes in the city, enabling high load factors and profitable operations.
– Utilizing a fleet of London-style doubledecker buses that provide an unobstructed view of the city, comfort, safety, and fuel and operational efficiency.
– Leveraging information technology to reduce operational costs, expand the potential market, capture sales opportunities, and enhance customer satisfaction.
1.3 Mission
Double Decker Tours of Washington’s mission is to provide safe, professional, and reasonably priced sightseeing services. The company aims to fill a niche in the Washington sightseeing market by showcasing both familiar and lesser-known sites. It prioritizes maintaining clean buses, employing friendly and informative driver guides, and delivering outstanding customer service. DDTOW aspires to set new standards for other companies in the industry.
Double Decker Tours of Washington offers daily sightseeing tours in Washington DC. It operates from the MCI Center as its sales and boarding point, with administrative offices on Third Street. The company focuses on:
– Providing regular sightseeing tours of the nation’s capital, including monuments, memorials, and other attractions.
– Offering charter services for special groups.
– Conducting tours of historical and notable venues outside the city center.
2.1 Company Ownership
Double Decker Tours of Washington is a closely held private Limited Liability Company based in Washington, DC. It is owned by its founder and principal investors.
2.2 Company Locations and Facilities
DDTOW utilizes the MCI Center as its boarding and return point, benefiting from its safe and accessible location. Ticketing outlets at MCI and a small office on Third Street handle administrative and order processing tasks. The Peter Pan bus maintenance yard in Tuxedo, Maryland, is used for maintenance, reducing staffing and fixed costs.
2.2.1 Hours of Operation
DDTOW is open seven days a week, with tour services starting at 8:30 am in spring and summer and 9:00 am in winter. Evening tour services begin at 6:30 pm in winter and 7:30 pm in spring and summer. The company is closed on Thanksgiving and Christmas.
2.3 Start-up Summary
Start-up costs are allocated to the following areas:
1. Purchasing twelve 70-passenger London-style double-decker sightseeing buses, including nine open-top and three closed-top buses, for a total budget of $225,000.
2. Installing an audio-visual system on the buses, budgeted at $80,450.
3. Establishing a cash reserve to cover operating costs for the first three months.
4. Recruiting, training, and paying operational crews.
5. Marketing, advertising, and public relations activities, including setting up a website for online sales and reservations, as well as print and broadcast advertising.
6. Administrative and legal costs related to business setup and tour operations.
7. Setting aside a reserve for overall operating costs, excluding bus operating costs, for at least the first three months.
Start-up capital will come from investments and long-term loans. Further details are provided in the table below.
Start-up Requirements
Start-up Expenses
Legal $10,000
Stationery etc. $2,500
Professional Services $11,500
Brochures $5,000
Pre-opening Promotion & Advertisement $80,000
Rent (pre-opening) $25,000
Salaries (pre-opening) $75,000
Bookkeeping & financial setup $6,000
Computers & Web page setup & Photo processing $35,000
Phones $3,500
License/Fees $10,000
Uniforms $40,000
Paint Job for Buses $100,000
Membership Fee for Board of Trade $1,000
Membership Fee for Chamber of Commerce $350
Membership in Washington Convention & Tourism Corporation $700
Business travel $15,000
Total Start-up Expenses $420,550
Start-up Assets
Cash Required $114,000
Other Current Assets $0
Long-term Assets $305,450
Total Assets $419,450
Total Requirements $840,000
Start-up Funding
Start-up Expenses to Fund $420,550
Start-up Assets to Fund $419,450
Total Funding Required $840,000
Assets
Non-cash Assets from Start-up $305,450
Cash Requirements from Start-up $114,000
Additional Cash Raised $0
Cash Balance on Starting Date $114,000
Total Assets $419,450
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $800,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $800,000
Capital
Planned Investment
Michael Coleman $25,000
Frank Williams $15,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $40,000
Loss at Start-up (Start-up Expenses) ($420,550)
Total Capital ($380,550)
Total Capital and Liabilities $419,450
Total Funding $840,000
Services
Double Decker Tours of Washington will provide double-decker bus sightseeing tours throughout Washington and close-in memorials. We will survey the national monuments, White House, US Capitol, and the many government buildings during a 2-1/2 to 3 hour tour. DDTOW will run 12 converted London-style double-decker buses, giving our tour customers an unobstructed photo opportunity of the beautiful sites in Washington.
To differentiate ourselves from other companies, we will aggressively advertise our services and strive for the best service, tours, and customer service. We will gather customer feedback through surveys and continually evaluate our services to improve. Each night, our buses will be cleaned and serviced, and each day, we will ensure that we are presentable to our customers. In the future, we plan to install a multilingual audiovisual system on each bus to cater to foreign visitors.
3.1 Service Description
Double Decker Tours will offer full-service sightseeing tours and charters for special occasions. Our extensive knowledge of the city’s history and local attractions will ensure a well-narrated tour. We aim to provide competitive rates and prioritize customer satisfaction to foster repeat business. Our tours will cover a wide range of sites, including the White House, Capitol, Smithsonian Museums, and many more.
3.2 Competitive Comparison
The Washington DC tourism market has seen a decline since 9/11, but the city still attracts millions of visitors for business and pleasure. With over 4 million residents in the metro area, Double Decker Tours will cater to a large customer base. We will leverage areas that are still open to tailor our tours and meet the demand of visitors.
3.3 Sales Literature
We will produce brochures locally to showcase our tours and services and distribute them to hotels, information service kiosks, and the Washington Visitor Center. We will also utilize direct mail, advertisements, and sales promotion literature as needed.
3.4 Special Interest Tours
In addition to regular sightseeing tours, Double Decker Tours of Washington will offer special interest tours to highlight the city’s diverse cultural aspect. We will organize themed tours for events such as Black History Month, Veteran’s Day, and the Cherry Blossom Festival. Multilingual narrators will be employed to accommodate foreign visitors. Expansion to Annapolis and Baltimore markets is planned for the future.
Market Analysis Summary
The travel and tour industry is a significant retail business in the United States, generating over $100 billion in revenue. The Washington area tour industry alone contributes over $10 billion. The city attracts millions of visitors annually, and with the completion of the new Washington Convention Center, more people are expected to visit. There is a steady demand for sightseeing tours, as evidenced by the number of conventions and meetings booked by the Convention Center.
In recent years, overnight leisure travel has increased, and average trip expenditures have risen. Visitors are interested in historical places, museums, and shopping. Our target customers include day trippers, leisure travelers, honeymooners, budget-conscious travelers, business travelers, families, students, and seniors.
4.1 Market Segmentation
Our main customers will be sightseers, honeymooners, and those visiting for special interests. We will also cater to high-income travelers who prioritize quality over price. Budget-conscious travelers, families, students, and seniors will find our competitive pricing and top-notch tours appealing.
Overall, our market consists of both DC visitors and Washington area residents.
Market Analysis
| Market Analysis | |||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
| 18,000,000 | 19,000,000 | 20,000,000 | 21,000,000 | 22,000,000 | 5.14% | ||
| 4,000,000 | 4,100,000 | 4,150,000 | 4,200,000 | 4,250,000 | 1.53% | ||
| 22,000,000 | 23,100,000 | 24,150,000 | 25,200,000 | 26,250,000 | 4.51% | ||
Target Market Segment Strategy
Double Decker Tours, located in Washington, DC, attracts millions of visitors each year due to its monuments, museums, and other points of interest. Updates to the city, such as the new convention center and additional museums, are expected to bring in even more potential customers. All visitors, whether they are here for a day trip or an extended stay, will be part of our target market. We will focus on attracting these customers through word-of-mouth advertising, paid advertisement in local media, and our strategic location at the MCI Center in the heart of the entertainment district.
Market Opportunities
In addition to the 18 million annual visitors to Washington, there are approximately 4 million area residents. Both of these groups represent potential customers for Double Decker Tours. Market research shows that our potential customers often take sightseeing tours to familiarize themselves with the historic monuments and points of interest in the city.
Service Business Analysis
The US travel and tourism industry generates over $100 billion in revenue annually. The industry can be divided into two main categories: business travel and leisure travel. While domestic travel accounts for more than 70% of the industry’s revenue, both categories contribute significantly to the overall market. Leisure travel can be further classified into various groups based on the types of trips, age, and income.
Competition and Buying Patterns
There are several companies in Washington that provide sightseeing, tours, and charter services. While they may use different types of vehicles and shuttle systems, Double Decker Tours stands out by offering clean buses and informative tours from a single pick-up and drop-off point. During warm evenings, we offer a three-hour tour with stops at the Jefferson, Lincoln, and Roosevelt memorials.
Main Competitors
Our main competitors in the Washington sightseeing industry are Tourmobile, Historic Tours of America (Old Town Trolley), Grayline, and Zohery Tours. Each company has its own unique services and vehicles, but Double Decker Tours sets itself apart by exploring areas beyond the traditional monuments and memorials. By targeting emerging markets and collaborating with local organizations, we can provide a fresh and exciting tour experience for our customers.
Strategy and Implementation Summary
Double Decker Tours will initially focus on providing tours in and around Washington, DC. With over 18 million visitors spending billions of dollars in the city, there is a significant market for our services. Our goal is to capture 2% of the potential market, servicing approximately 453,000 customers and generating over $14 million in sales in our first year. We will advertise heavily in the region, host unique events, and offer personalized photo souvenirs to enhance the customer experience and attract repeat business.
Competitive Edge
Double Decker Tours aims to fulfill a niche market by offering tours beyond the traditional monuments and memorials. While other companies focus on specific areas or use shuttle systems, we provide double-decker buses and specialized tours in the scenic and entertainment sections of Washington. By capitalizing on the promotion efforts of local organizations and targeting new and emerging markets, we can differentiate ourselves and attract customers looking for a unique and comprehensive tour experience.
Marketing Strategy
Our marketing strategy revolves around creating and keeping customers happy. We will promote the capital city’s monuments, memorials, and historical sites, as well as showcase the lesser-known areas of Washington. Our tours will take customers to neighborhoods featured in movies, entertainment districts, and other prominent sites. Our goal is to leave each customer with a memorable experience and encourage word-of-mouth referrals. We will also gather feedback through survey forms to continuously improve our services.
Pricing Scheme
Double Decker Tours’ pricing will be competitive with other sightseeing options in Washington, ranging from $15 to $40. By setting our price at $30, we can appeal to budget-conscious travelers while still attracting customers who value the quality of our tours. With a potential market of over 22 million people per year, we anticipate servicing 453,000 customers in our first year.
Promotion Scheme
Our promotion efforts will highlight our unique buses, the fun and excitement of traveling with Double Decker Tours, and the quality of our tours. We will utilize print media, broadcast media, hotel guides, and various other channels to reach our target market. Additionally, we will leverage the power of the internet to communicate and distribute information about our services. We will also provide brochures and literature to customers at our kiosks and bus stops, and explore advertising opportunities on cable television, radio, and other cost-effective mediums.
Futuristic Plans and Strategic Opportunities
After successful operation for two years, Double Decker Tours plans to expand its services to other cities such as Baltimore, Annapolis, Miami, and eventually Atlanta. We will seize strategic opportunities in these locations based on market demand and available resources.
Sales Strategy
Double Decker Tours will employ aggressive sales strategies to showcase the benefits of touring with us. Our initial actions will include a major advertisement campaign, hosting events for concierges at major hotels, engaging with local business and government officials, and utilizing various media outlets. In the future, we will offer special discounts and tours for schools, families, and specific interest groups. We will focus on maximizing customer satisfaction and generating positive word-of-mouth referrals, which will contribute to our sales growth.
Our sales forecast is based on capturing 2% of the over 18 million annual visitors to Washington, along with the approximately 4 million residents in the metro area. We plan to service 453,000 customers in the first year, which will generate significant revenue. Additionally, we will offer a digital photograph option to our customers, with an estimated 1 in 15 customers choosing this add-on service.
Our commitment is to provide customers with a memorable and enjoyable experience, making Double Decker Tours a prominent player in the regional tour and sightseeing market. We will allocate a portion of our gross revenues to advertising, contributing to the growth and success of our business.
Sales Forecast
| Sales Forecast | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | |||
| Sightseeing | $14,368,000 | $17,241,600 | $20,689,920 |
| Photographs | $322,366 | $354,603 | $390,063 |
| Charters | $75,500 | $83,050 | $91,355 |
| Total Sales | $14,765,866 | $17,679,253 | $21,171,338 |
| Direct Cost of Sales | Year 1 | Year 2 | Year 3 |
| Photo processing & Internet connection | $46,631 | $48,962 | $51,410 |
| Fuel | $96,000 | $115,000 | $140,000 |
| Subtotal Direct Cost of Sales | $142,631 | $163,962 | $191,410 |
5.4 Milestones
Double Decker Tours of Washington’s milestones are detailed in the following table. Setting goals helps determine a company’s strategy and tactics, and maintain focus. The milestones are progress points to measure DDTOW’s success in reaching its goals.
What the table doesn’t show is the commitment behind it. Our business plan includes provisions for plan-vs.-actual analysis, and we will hold monthly follow-up meetings to discuss variances and make course corrections.
Milestones:
– Business Plan: 1/1/2003 – 4/1/2003 | $5,000 | Coleman | Admin
– Get Financing: 4/16/2003 – 4/15/2004 | $15,000 | Coleman-Williams | Admin
– Hire Staff: 4/16/2004 – 4/30/2004 | $5,000 | Coleman | Admin
– Grand Opening: 6/1/2004 | $80,000 | Coleman | Admin
– World Wide Web Presence: 4/1/2004 – 4/15/2004 | $3,000 | Coleman | Admin
– Break-even: 12/1/2004 | $0 | Coleman | Admin
– Develop Special Tours: 11/1/2003 – 4/1/2004 | $8,000 | Staff | Operations
– Order Buses: 4/1/2004 – 4/30/2004 | $225,000 | Coleman | Operations
– Training: 4/15/2004 – 5/30/2004 | $20,000 | Coleman | Operations
– Set-up Offices: 11/16/2003 – 5/30/2004 | $10,000 | Coleman | Admin
– Totals: $371,000
Web Plan Summary:
DDTOW will establish a web presence on the Washington Visitor Center website to promote tours, answer queries, and take reservations.
Management Summary:
Mike Coleman and Paul Williams will serve as member managers. Administrative staff will share management duties. Prerequisites for employees include cash handling, personnel management, computer skills, and tour experience. Continuous training will be provided. Operations staff will consist of experienced driver/guides. Maintenance of buses will be contracted to Peter Pan in Tuxedo, Maryland.
7.1 Personnel Plan:
DDTOW will begin with 22 full-time positions, including Member Manager, Member Business Development, Marketing/Sales Associates (4), Courtesy Captains (4), and Driver/Guides (12).
Member Manager – Michael F. Coleman: Local sightseeing and tour experience. Previously sold health care products and worked as a software and database consultant.
Member Business Development – Paul F. Williams: Over 30 years of entrepreneurial experience in business development and trade consulting.
Marketing/Sales Associates: Experienced in local tourism and sightseeing industry. Responsible for marketing, sales materials, and campaigns.
Courtesy Captains: Customer service experience. Responsible for assisting customers, answering questions, and taking photographs.
Driver/Guides: Required to have Commercial Drivers License and Tour Guide License. Responsible for safety and providing informative tours.
Personnel Plan:
– Member Manager: $72,000, $84,000, $96,000
– Member Business Development: $50,000, $60,000, $72,000
– Driver/Guides: $432,000, $450,000, $500,000
– Marketing/Sales Associates: $100,000, $125,000, $156,000
– Courtesy Captains: $96,000, $120,000, $172,000
– Total People: 22, 24, 29
– Total Payroll: $750,000, $839,000, $996,000
7.2 Compensation and Incentive Plan:
– Member Manager: $72,000 + 10% of profit after taxes
– Member Business Development: $50,000 + 5% of profit after taxes
– Marketing/Sales Associates: $25,000 + 5% of gross monthly sales
– Courtesy Captains: $20,000 + Tips and Monthly Customer Service Awards
– Driver/Guides: $30,000 + Tips and Monthly Customer Service Awards
Courtesy Captains and Driver/Guides will receive overtime pay and be covered under a health, dental, and vision plan. Profit sharing or 401(k) plans will be available.
7.3 Advisory Committee:
Mr. Coleman is assembling a board of advisors from established businessmen.
7.4 Professional Support:
Accountants: Stitcher, Mosley & Company, PA
Insurance: DH Lloyd and Associates
DDTOW’s financial plan projects a substantial profit after the first two quarters. Income estimates are based on capturing 2% of the tourism market in Washington, with a 20% growth rate for the next three years. Loans and financing of $800,000.
8.1 Important Assumptions:
– Market growth projections may be affected by war fears.
– Local economic conditions are expected to remain favorable.
– International conditions are expected to shift from war to peace, increasing tourism.
8.2 Break-even Analysis:
Break-even analysis based on a monthly fixed cost of $121,200. Only 4,000 riders per month are needed to break even. On average, 134 riders per day or 12 riders per bus per day. Expected to surpass this number during fall, spring, and summer months.
Break-even Analysis:
Monthly Revenue Break-even: $111,821.
Assumptions:
Average Percent Variable Cost: 1%.
Estimated Monthly Fixed Cost: $110,741.
8.3 Projected Profit and Loss:
Our projected profit and loss table shows increasing sales from over $14 million in the first year to over $21 million in the third year. Profits vary significantly during the start-up phase. In the first year, we expect a profit from 2% of the 22 million city visitors, amounting to 453,000 customers. This equals an average of 1,286 customers per day, with each customer taking two tours per day using 12 buses.
Similar to the break-even analysis, we have taken a conservative approach in projecting our cost of sales and gross margin. We anticipate our cost of sales to be lower and gross margin to be higher than projected. This conservative projection allows us to ensure sufficient cash flow.
Detailed monthly projections are provided in the appendices.
Pro Forma Profit and Loss
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $14,765,866 | $17,679,253 | $21,171,338 |
| Direct Cost of Sales | $142,631 | $163,962 | $191,410 |
| Other Cost of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $142,631 | $163,962 | $191,410 |
| Gross Margin | $14,623,235 | $17,515,291 | $20,979,928 |
| Gross Margin % | 99.03% | 99.07% | 99.10% |
| Expenses | |||
| Payroll | $750,000 | $839,000 | $996,000 |
| Sales and Marketing and Other Expenses | $144,000 | $180,000 | $220,000 |
| Depreciation | $61,090 | $81,090 | $101,090 |
| Rent | $84,000 | $92,400 | $101,640 |
| Utilities | $9,600 | $11,520 | $13,824 |
| Insurance | $18,000 | $21,600 | $25,920 |
| Payroll Taxes | $0 | $0 | $0 |
| Local Taxes | $24,000 | $28,800 | $34,560 |
| Bus Maintenance | $120,000 | $144,000 | $172,800 |
| Bookkeeping/Payroll | $18,000 | $21,600 | $25,920 |
| Professional Asst. | $6,000 | $7,200 | $8,640 |
| Telephones and Nextels | $7,200 | $8,640 | $10,368 |
| Office Supplies | $3,000 | $3,600 | $4,320 |
| Brochures | $4,200 | $5,040 | $6,048 |
| Licenses/Permits | $1,800 | $2,160 | $2,592 |
| Website Maintenance | $18,000 | $18,000 | $18,000 |
| Miscellaneous | $48,000 | $57,600 | $69,120 |
| Uniforms | $12,000 | $28,800 | $34,560 |
| Total Operating Expenses | $1,328,890 | $1,551,050 | $1,845,402 |
| Profit Before Interest and Taxes | $12,565,035 | $15,903,677 | $19,088,979 |
| EBITDA | $12,626,125 | $15,984,767 | $19,190,069 |
| Interest Expense | $73,075 | $59,848 | $44,757 |
| Taxes Incurred | $2,998,070 | $3,802,519 | $4,570,613 |
| Other Income | |||
| Interest Income | $0 | $0 | $0 |
| Other Income Account Name | $0 | $0 | $0 |
| Total Other Income | $0 | $0 | $0 |
| Other Expense | |||
| Interest Expense | $74,157 | $60,564 | $45,547 |
| Profit tax | $737,335 | $927,140 | $1,107,878 |
| Total Other Expense | $729,310 | $60,564 | $45,547 |
| Net Other Income | ($729,310) | ($60,564) | ($45,547) |
| Net Profit | $9,493,889 | $12,041,310 | $14,473,609 |
| Net Profit/Sales | 64.30% | 68.11% | 68.36% |
8.4 Projected Cash Flow
Cash flow projections are critical to our success. Our analysis shows strong cash generation over the projected period. Some of our assumptions for the cash flow table below are as follows:
– We start repaying the $800,000 five-year long-term loan at the beginning of our operations. The first few months are critical for maintaining a strong cash balance.
– We do not plan any additional long-term asset purchases, except for those summarized in the start-up table earlier in this document, for the first year. During the second and third year, we budget $100,000 for each year for additional long-term assets, which may include some additional or replacement buses.
– We assume the collection of the District of Columbia’s sales tax (5.75%) off the ticket sales. These sales taxes will be paid out quarterly. For all additional purchases (i.e., operational expenses and capital assets) we assume prices inclusive of applicable sales taxes.
The monthly cash flow is shown in the illustration below, with one bar representing the cash flow per month, and the other representing the monthly cash balance. The annual cash flow figures are included here, and the more detailed monthly numbers are included in the appendices.
Pro Forma Cash Flow
| Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $14,765,866 | $17,679,253 | $21,171,338 |
| Subtotal Cash from Operations | $14,765,866 | $17,679,253 | $21,171,338 |
| Additional Cash Received | |||
| Non Operating (Other) Income | $0 | $0 | $0 |
| 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 | $14,765,866 | $17,679,253 | $21,171,338 |
Projected Balance Sheet
The balance sheet in the following table shows managed but sufficient growth of net worth and a sufficiently healthy financial position. Monthly estimates are included in the appendices.
| Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $9,911,187 | $21,800,947 | $36,191,013 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $9,911,187 | $21,800,947 | $36,191,013 |
| Long-term Assets | |||
| Long-term Assets | $305,450 | $405,450 | $505,450 |
| Accumulated Depreciation | $61,090 | $142,180 | $243,270 |
| Total Long-term Assets | $244,360 | $263,270 | $262,180 |
| Total Assets | $10,155,547 | $22,064,217 | $36,453,193 |
We expect to maintain healthy ratios for profitability, risk, and return. The following table outlines some important ratios from the Sightseeing tour company industry, based on the Standard Industry Classification (SIC) code, 4725.9902.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 19.73% | 19.75% | 5.03% |
| Percent of Total Assets | ||||
| Other Current Assets | 0.00% | 0.00% | 0.00% | 38.77% |
| Total Current Assets | 97.59% | 98.81% | 99.28% | 63.07% |
| Long-term Assets | 2.41% | 1.19% | 0.72% | 36.93% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | ||||
| Accounts Payable | 0.36% | 0.42% | 0.55% | 31.32% |
| Long-term Liabilities | 6.60% | 2.39% | 1.01% | 17.81% |
| Total Liabilities | 10.26% | 4.12% | 2.26% | 49.13% |
| Net Worth | 89.74% | 95.88% | 97.74% | 50.87% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 99.03% | 99.07% | 99.10% | 39.36% |
| Selling, General & Administrative Expenses | 9.89% | 9.64% | 9.43% | 28.53% |
| Profit Before Interest and Taxes | 85.10% | 89.96% | 90.16% | 1.07% |
| Main Ratios | ||||
| Current | 26.64 | 56.95 | 79.26 | 1.51 |
| Quick | 26.64 | 56.95 | 79.26 | 1.17 |
| Total Debt to Total Assets | 10.26% | 4.12% | 2.26% | 2.79% |
| Pre-tax Return on Net Worth | 137.07% | 74.90% | 53.45% | 55.37% |
| Pre-tax Return on Assets | 123.01% | 71.81% | 52.24% | 6.25% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 64.30% | 68.11% | 68.36% | n.a |
| Return on Equity | 104.18% | 56.92% | 40.62% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 10.03 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 30 | 28 | n.a |
| Total Asset Turnover | 1.45 | 0.80 | 0.58 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.11 | 0.04 | 0.02 | n.a |
| Current Liabilities to Liabilities | 0.36 | 0.42 | 0.55 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $9,539,165 | $21,418,156 | $35,734,430 | n.a |
| Interest Coverage | 171.95 | 265.73 | 426.51 | n.a |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Assets to Sales | 0.69 | 1.25 | 1.72 | n.a |
| Current Debt to Total Assets | 4% | 2% | 1% | n.a |
| Acid Test | 26.64 | 56.95 | 79.26 | n.a |
| Sales to Net Worth | 1.62 | 0.84 | 0.59 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
Appendix
| Sales Forecast | |||||||||||||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||||||
| Sightseeing | $1,512,000 | $1,512,000 | $2,268,000 | $1,512,000 | $1,008,000 | $756,000 | $756,000 | $756,000 | $756,000 | $1,008,000 | $1,008,000 | $1,516,000 | |||||
| Photographs | $16,967 | $33,933 | $33,933 | $33,933 | $33,933 | $16,967 | $16,967 | $16,967 | $16,967 | $33,933 | $33,933 | $33,933 | |||||
| Charters | $5,000 | $5,000 | $7,000 | $7,000 | $7,000 | $4,000 | $3,500 | $3,500 | $5,000 | $7,500 | $9,000 | $12,000 | |||||
| Total Sales | $1,533,967 | $1,550,933 | $2,308,933 | $1,552,933 | $1,048,933 | $776,967 | $776,467 | $776,467 | $777,967 | $1,049,433 | $1,050,933 | $1,561,933 | |||||
| Direct Cost of Sales | Month 1 | Month 2 | Personnel Plan | ||||||||||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||||||
| Member Manager | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | |||||
| Member Business Development | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | $4,167 | |||||
| Driver/Guides | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | $36,000 | |||||
| Marketing/Sales Associates | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | $8,333 | |||||
| Courtesy Captains | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | |||||
| Total People | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | |||||
| Total Payroll | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | $62,500 | |||||
| General Assumptions | |||||||||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
| Plan Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |
| Current Interest Rate | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | 5.00% | |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | |
| Tax Rate | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Pro Forma Profit and Loss | |||||||||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
| Sales | $1,533,967 | $1,550,933 | $2,308,933 | $1,552,933 | $1,048,933 | $776,967 | $776,467 | $776,467 | $777,967 | $1,049,433 | $1,050,933 | $1,561,933 | |
| Direct Cost of Sales | $11,000 | $12,500 | $12,500 | $12,500 | $12,150 | $11,800 | $11,606 | $11,574 | $11,000 | $11,500 | $12,000 | $12,500 | |
| Other Cost of Sales | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
| Total Cost of Sales | $11,000 | $12,500 | $12,500 | $12,500 | $12,150 | $11,800 | $11,606 | $11,574 | $11,000 | $11,500 | $12,000 | $12,500 | |
|
[table] [tr] [td colspan="14" style="text-align: left"]Pro Forma Cash Flow[/td] [/tr] [tr] [td style="text-align: right"]Month 1[/td] [td style="text-align: right"]Month 2[/td] [td style="text-align: right"]Month 3[/td] [td style="text-align: right"]Month 4[/td] [td style="text-align: right"]Month 5[/td] [td style="text-align: right"]Month 6[/td] [td style="text-align: right"]Month 7[/td] [td style="text-align: right"]Month 8[/td] [td style="text-align: right"]Month 9[/td] [td style="text-align: right"]Month 10[/td] [td style="text-align: right"]Month 11[/td] [td style="text-align: right"]Month 12[/td] [/tr] [tr] [td style="text-align: right"]$1,533,967[/td] [td style="text-align: right"]$1,550,933[/td] [td style="text-align: right"]$2,308,933[/td] [td style="text-align: right"]$1,552,933[/td] [td style="text-align: right"]$1,048,933[/td] [td style="text-align: right"]$776,967[/td] [td style="text-align: right"]$776,467[/td] [td style="text-align: right"]$776,467[/td] [td style="text-align: right"]$777,967[/td] [td style="text-align: right"]$1,049,433[/td] [td style="text-align: right"]$1,050,933[/td] [td style="text-align: right"]$1,561,933[/td] [/tr] [tr] [td style="text-align: right"]$1,533,967[/td] [td style="text-align: right"]$1,550,933[/td] [td style="text-align: right"]$2,308,933[/td] [td style="text-align: right"]$1,552,933[/td] [td style="text-align: right"]$1,048,933[/td] [td style="text-align: right"]$776,967[/td] [td style="text-align: right"]$776,467[/td] [td style="text-align: right"]$776,467[/td] [td style="text-align: right"]$777,967[/td] [td style="text-align: right"]$1,049,433[/td] [td style="text-align: right"]$1,050,933[/td] [td style="text-align: right"]$1,561,933[/td] [/tr] [tr] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [td style="text-align: right"]$62,500[/td] [/tr] [tr] [td style="text-align: right"]$13,216[/td] [td style="text-align: right"]$396,029[/td] [td style="text-align: right"]$388,535[/td] [td style="text-align: right"]$549,052[/td] [td style="text-align: right"]$379,347[/td] [td style="text-align: right"]$266,416[/td] [td style="text-align: right"]$206,441[/td] [td style="text-align: right"]$206,141[/td] [td style="text-align: right"]$206,069[/td] [td style="text-align: right"]$207,990[/td] [td style="text-align: right"]$267,892[/td] [td style="text-align: right"]$272,426[/td] [/tr] [tr] [td style="text-align: right"]$75,716[/td] [td style="text-align: right"]$458,529[/td] [td style="text-align: right"]$451,035[/td] [td style="text-align: right"]$611,552[/td] [td style="text-align: right"]$441,847[/td] [td style="text-align: right"]$328,916[/td] [td style="text-align: right"]$268,941[/td] [td style="text-align: right"]$268,641[/td] [td style="text-align: right"]$268,569[/td] [td style="text-align: right"]$270,490[/td] [td style="text-align: right"]$330,392[/td] [td style="text-align: right"]$334,926[/td] [/tr] [tr] [td style="text-align: right"]$6,667[/td] [td style="text-align: right"]$85,118[/td] [td style="text-align: right"]$126,304[/td] [td style="text-align: right"]$85,032[/td> [td style="text-align: right"]$57,503[/td> [td style="text-align: right"]$42,611[/td] [td style="text-align: right"]$42,494[/td] [td style="text-align: right"]$42,395[/td] [td style="text-align: right"]$42,406[/td] [td style="text-align: right"]$57,060[/td] [td style="text-align: right"]$57,011[/td] [td style="text-align: right"]$84,710[/td] [/tr] [tr] [td style="text-align: right"]0.00%[/td] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$10,331[/td> [td style="text-align: right"]$10,417[/td> [td style="text-align: right"]$10,504[/td> [td style="text-align: right"]$10,591[/td> [td style="text-align: right"]$10,680[/td> [td style="text-align: right"]$10,769[/td> [td style="text-align: right"]$10,858[/td> [td style="text-align: right"]$10,949[/td> [td style="text-align: right"]$11,040[/td> [td style="text-align: right"]$11,132[/td> [td style="text-align: right"]$11,225[/td] [td style="text-align: right"]$11,318[/td] [/tr] [tr] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td> [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [td style="text-align: right"]$0[/td] [/tr] [tr] [td style="text-align: right"]$1,441,253[/td> [td style="text-align: right"]$996,868[/td> [td style="text-align: right"]$1,721,090[/td> [td style="text-align: right"]$845,758[/td> [td style="text-align: right"]$538,903[/td] [td style="text-align: right"]$394,672[/td] [td style="text-align: right"]$454,173[/td] [td style="text-align: right"]$454,482[/td] [td style="text-align: right"]$455,952[/td] |
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Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
Welcome to my digital space, where every piece of advice is a step closer to financial clarity and success!