Sample Business Plan2222
Sample Business Plan2222
Sample Business Plan2222
The following document is a sample of a finished business plan. In your final plan, you have the
opportunity to elaborate on those ideas in your outline that you feel are most integral to your
business. In composing your business plan, you can follow your outline as loosely or closely as
you choose. For instance, in the sample plan, the Executive Summary, which is the last section of
the Business Planning Wizard, is presented first in order to emphasize the most impressive
features of the business. Your goal in composing a finished business plan is to construct the most
comprehensive, thorough document possible, in order to attract investors and to confirm that you
have taken the time to explore as many potential issues for your business as may arise.
My attorney, Mr. William Hollands, suggested I write to you regarding my business, Northwind
Traders. I am currently seeking funding, and I believe that my company would coincide with your
interest in businesses relating to the travel industry makes my company a great investment for
you.
Northwind Traders is positioned to take advantage of the significant market opportunities available
in the customized travel-planning field. Through a professional approach to marketing,
experienced management, and an emphasis on outstanding customer support and service,
Northwind Traders can become the Greater Seattle area’s premier provider of planning services
for European adventure travel through a strong marketing campaign, experienced management,
and an emphasis on outstanding customer support and service. From that base, the company will
expand to become a regional force.
We are seeking $83,500 in funding, and anticipate this to be the extent of the funds required. The
funds will be used to refurbish the shop, to expand the staff, and to developincrease marketing
activities, primarily our Web site and databasee development.
I appreciate your consideration of the business plan for Northwind Traders. I will contact you next
week in approximately ten days to see if you have any questions andor to discuss how we may
proceed. Thank you.
Sincerely,
Heather Mitchell
President
Northwind Traders Sample Business Plan 2
Northwind Traders Sample Business Plan 3
Northwind Traders Sample Business Plan 4
Table of Contents
EXECUTIVE SUMMARY......................................................................................................................................... 1
MARKET RESEARCH.............................................................................................................................................. 8
BUSINESS STRATEGY........................................................................................................................................... 15
CUSTOMER INCENTIVES.......................................................................................................................................... 15
ADVERTISING AND PROMOTION.............................................................................................................................. 15
SALES AND MARKETING......................................................................................................................................... 16
COMMISSION.......................................................................................................................................................... 17
OPERATIONS.......................................................................................................................................................... 17
FORECASTING....................................................................................................................................................... 18
SALES FORECAST................................................................................................................................................... 18
CASH FLOW PROJECTIONS...................................................................................................................................... 20
INCOME STATEMENT.............................................................................................................................................. 20
BALANCE SHEET.................................................................................................................................................... 21
PERFORMANCE RATIOS........................................................................................................................................... 21
BREAK-EVEN......................................................................................................................................................... 21
FUNDS REQUIRED AND TIMING............................................................................................................................... 21
FUNDING OPTIONS.................................................................................................................................................. 22
BUSINESS CONTROLS.......................................................................................................................................... 23
ACCOUNTING SYSTEM............................................................................................................................................ 23
QUALITY CONTROL................................................................................................................................................ 23
NEW TOUR OPERATORS.......................................................................................................................................... 23
CAPACITY.............................................................................................................................................................. 23
LONG-TERM GOALS............................................................................................................................................... 24
STEPS FOR ACHIEVING GOALS................................................................................................................................ 24
POSITION................................................................................................................................................................ 25
RISKS ASSOCIATED WITH GROWTH......................................................................................................................... 25
EXECUTIVE SUMMARY......................................................................................................................................... 6
THE COMPANY......................................................................................................................................................... 6
THE COMPANY’S MISSION........................................................................................................................................ 6
PRODUCTS AND SERVICES........................................................................................................................................ 6
MARKETING AND SALES TECHNIQUES....................................................................................................................... 6
THE COMPETITION................................................................................................................................................... 7
TARGET MARKET..................................................................................................................................................... 7
OPERATIONS............................................................................................................................................................ 8
MANAGEMENT......................................................................................................................................................... 8
FINANCIALS............................................................................................................................................................. 8
Northwind Traders Sample Business Plan 6
FUNDING.................................................................................................................................................................. 9
President Heather Mitchell and Vice President of Sales and Marketing Jim Kim currently hold the
company’s stock. Prior to starting the Northwind Traders travel agency, Ms. Mitchell cofounded,
co-owned, and operated the Northwind Traders clothing store. She has selected a small team with
extensive travel, sales, and computer skills, all of whom will be invaluable to the new venture. Her
coworkers bring a combined total of 35 years of travel industry experience to the agency.
President Heather Mitchell and Vice President of Sales and Marketing Jim Kim currently hold the
company’s stock.
In addition to targeting adventure travelers and working as the appointed agents for established
travel tour firms, Northwind Traders plans to leverage its relationship with its sister business,
Northwind Traders outdoor clothing shop, by offering discount services to shop customers.
The Competition
From desk and field market research carried out on 300 clients, it is clear
that there is considerable potential in the adventure travel business.
Research indicates that Northwind Traders’ target market finds it difficult
to obtain reliable and authoritative advice on destinations and activities.
Research also suggests that the customers in this market are unlikely to
purchase their vacations again from the firm who provided their last
vacation due to a lack of informative sales personnel. Northwind Traders
will cater to these needs and develop a strong return-customer base.
Because they are currently the only travel agency focused on European adventure vacations that
is located in the SeattleRedmond area, Northwind Traders has a substantial opportunity to
dominate the region. In order to maintain and improve their current position in the region, they will
need to invest in a Web site, as well as database software and systems, and in refurbishing the
shop premises. Northwind Traders maintains the following advantages over existing competition:
Target Market
From desk and field market research carried out on 300 clients, it is clear that there is
considerable potential in the adventure travel business. Research indicates that Northwind
Traders’ target market finds it difficult to obtain reliable and authoritative advice on destinations
and activities. Research also suggests that the customers in this market are unlikely to purchase
their vacations again from the firm who provided their last vacation due to a lack of informative
sales personnel. Northwind Traders will cater to these needs and develop a strong return-
customer base.
Operations
The Northwind Traders travel agency business will operate from a self-contained facility within the
existing clothing shop, with its own shop window and entrance from the main street. The business
will benefit both from its accessible location in the heart of SeattleRedmond’s downtown shopping
district, as well as from the clientele it will gain through its proximity to the already established
Northwind Traders clothing store.
Management
Prior to starting the Northwind Traders travel agency, Ms. Mitchell cofounded, co-owned, and
operated the Northwind Traders clothing store. She has selected a small team with extensive
travel, sales, and computer skills, all of whom will be invaluable to the new venture. Her coworkers
bring a combined total of 35 years of travel industry experience to the agency.
Financial Forecasts
Northwind Traders expects that by concentrating full-time on selling adventure vacations, clients
will increase from the present level of 200 (achieved over a six-month period with only a part-time
effort), to at least 660 in the first year, 1400 in the second, and 2100 in the third. To help achieve
this growth, Ms. Mitchell has identified three other tour operators she wishes to represent and has
begun negotiations with them.
Selling between two and three vacations a day will allow the business to reach cash flow break-
even in Year One, while makeing a modest profit in Year One. By the Year Two posttax profits
should be $3040,0600, and will increase to nearly $496501,000 by Year Three.
Alternatively, Ms. Mitchell is considering loan finance made up of a $41,750 two-year loan and a
credit line of $58,450. In total, about $125,250 will be needed to fund the business during the
initial months.
Northwind Traders, Inc. provides travel-planning services to individuals and businesses in the
Ggreater SeattleRedmond area. The business is located at 1234 Franklin Street,
SeattleRedmond, Washington.
Our emphasis will be on providing a complete specialized service based on having a detailed
knowledge of the vacation destination and adventure activities being offered. Market research
indicates that the major criticism our type of client has of existing travel agencies is that their
agents “know nothing about their products, they just open the catalogue and read,” to quote one of
many disappointed travelers.
By capitalizing on our experience in the Northwind Traders clothing shop, we will be able to both
advise and direct our clients to the type of travel equipment they will need to get the very best out
of their vacation.
Jim Kim, Vice President Sales and Marketing. Prior to joining Northwind Traders, Mr. Kim worked
for the marketing department of a major airline. His current responsibilities include the company’s
direct marketing campaign and all sales-related issues.
Richard Bready, Office Manager. Twenty years as a travel agent has given Mr. Bready the ideal
background for Northwind Traders. A knowledgeable salesperson, Mr. Bready’s expertise in the
area of European travel enables him to entice the adventure traveler.
Amy Egert, Sales Assistant. After completing her undergraduate degree at the Institute of Art, Ms.
Egert spent a year traveling abroad and joined the staff at Northwind Traders recently as a sales
assistant.
Jae Pak, Business Consultant. With over 20 years of consulting experience in industries ranging
from aerospace to technology to retail, Mr. Pak’s knowledge and guidance will be instrumental to
the success of Northwind Traders.
The volunteer members of the Board of Directors provide guidance to the management and staff
of Northwind Traders. The board meets twice yearly to discuss policy changes, review the mission
statement, and update the business plan if needed.
Members include
We intend to be appointed agents by three other major adventure travel tour firms with whom we
are currently in negotiation:
Enchantment Lakes Corporation. Offers rafting, sea kayaking, and yachting trips around remote
European rivers and coastline areas, covering such areas as the Adriatic, the Black Sea, and
Turkey.
West Coast Sales. Offers adventure vacation packages to corporate clients to use as incentives
and rewards, and as part of management development programs. They are particularly strong in
France, Italy, and Germany.
Exploration Air. Specializes in adventure vacations in Eastern Europe and former Soviet countries,
covering Bulgaria, Romania, Poland, and Latvia.
These are three relatively new and small tour operators, but they have acquired a reputation for
innovation and reliability–and they are currently underrepresented.
Company History
Five years ago Heather Mitchell cofounded Northwind Traders, an outdoor clothing shop in
SeattleRedmond, Washington. Over the years, Northwind Traders has extended its product range
to include everything the adventurous traveler could want, from tents and sleeping bags to maps,
guidebooks, and insurance. The clothing shop has sales of $1,420,000 per year (see Table 1),
makes a gross profit of $202,400, and employs seven people, either full- or part-time. A mail-order
service is now provided by catalogue and via a new Web site.
Table 1. Northwind Traders Clothing Shop Performance Over Past Five Years
Increasingly, shop customers have asked for advice on adventurous places to go on vacation.
Last year Northwind Traders acquired an agency from Margie’s Travel, one of the largest and
most respected tour operators in this market, and began to promote and sell their products.
In the six months that we have been selling travel agency products, some 200 vacation packages,
at an average cost of $3340, have been sold. Northwind Traders’ commission on the sales has
been $66,800 (10 percent commission). In addition, 35 insurance policies have been sold at an
average price of $167, yielding $1754 (30 percent commission).
Heather Mitchell, one of Northwind Traders’s founding partners, intends to sell her shares in the
store and to concentrate on setting up the new travel business, Northwind Traders.
Northwind Traders Sample Business Plan 10
Guarantees and Warranties
Our clients will be protected financially against either our own or our tour operator’s failure, by
virtue of the ARC bonding held by our principals. We will only use vacation providers who can
provide 24-hour emergency support services for clients while on vacation.
In the next few weeks, the business will be set up as an operation independent from the clothing
store. This structure will clearly separate the travel business from the clothing shop and make it
possible to attract the risk capital that will be required when the business starts to grow.
At a later stage the business may wish to sell and issue airline tickets and to create its own charter
vacations. This will require membership in the ARC (Airline Reporting Corporation) and IATAN
(International Airlines Travel Agency Network). These organizations regulate the collection of
money and distribution to the appropriate airlines. However, in the period covered by this
Business Plan we intend to operate only as the appointed agents for a number of tour operators.
As such we can “shelter” under their licenses and bonds.
During the current period of strong economic growth, Northwind Traders can capitalize on the
many significant opportunities in the travel industry.
The general economic climate in the city of SeattleRedmond is very strong. An influx of new
businesses has added to the area’s prosperity, and the already large population of young
professionals is growing. Nearby, tThe city of Seattle is the center for business in King County,
with over 400,000 people employed in industries such as aerospace, transportation equipment,
health services, tourism, computer software, and biotechnology.
Competitive Environment
Currently, tThe qualitylevel of service and the number of providers in the travel industry constantly
fluctuatebroadly uneven, and providers enter and leave the field rapidly. Our competitive edge will
be in attracting and retaining our customers with the most highly trained and well-informed
individuals we can recruit. With our expertise in European adventure vacations, we will be able to
provide the most accurate, up-to-date information possible.
Long-Term Opportunities
Tourism in general is on the rise (Appendix 1), Europe looks like it will continue to be the major
destination, and the Internet will be an important channel into this market. The state of the
economy will be the most influential factor in how many people travel. Other driving forces for
travel will include the cost of tickets, fuel prices, the threat of terrorism, and currency rates.
RedmondSeattle
Bellevue
Tacoma
King
Snohomish
Pierce
Target Customers
Seattle/King County's labor force is highly educated, skilled, productive, and stable. It consists of
individuals who are deeply attached to the area and have tended to stay and wait out past periods
of economic downturn. The vital economy, the Northwest lifestyle, and its unique environmental
From within this population, our target customers are individuals who are professionals with
incomes of $40,000+,, ages 25 to 35, with incomes of $40,000+, single or married, without
children, and college educated.
Market Definition
The world travel market is forecast to expand at a 4.1 percent average annual growth rate until
2010. This is faster than the general economic growth rate, which is expected to be around 2.4
percent per year.
The European market, while not the fastest growing, will be the most important destination,
accounting for over 50 percent of all international arrivals (see Appendix 1). Within Europe,
France, Italy, and Spain are the most popular destinations. This is why we have selected tour
operators with appropriate products in these areas as our initial partners.
Figures for the size and projected growth of adventure vacations are sketchy, but the figures from
one recent study (World Adventure Travel Data Corp.) are in Table 2.
Table 2. Adventure Travel Vacations - World forecast (Million Arrivals): 1990 - 2010
Market Opportunities
We believe that by concentrating on the European travel market, offering a limited but extensive
range of vacation packages, and targeting our service at affluent professionals, we can meet the
needs of our clients. Our specialized knowledge of Europe and adventure travel will allow us both
to satisfy our customers and to surpass the services offered by our competitors.
Our market study (see Appendix 1) has shown that theis group composed of affluent professionals
has specific needs that are not currently being met, as 65 percent of those planning vacations
would not purchase them from the same source again! Specifically, they want their travel agent to
have comprehensive knowledge of the destination (87 percent); to have an efficient administration
system in which they can have confidence (84 percent); to go on vacation with similar professional
people (81 percent); and to be offered useful advice and ancillary services such as insurance (79
percent).
In addition, our market study confirms that Europe is likely to be the largest destination market for
adventure vacations. Our study shows only 30 percent of adventure travelers to be under 24
years of age, while the World Adventure Travel Data study claims 61 percent is under 24. We feel
the difference is because our survey sample is confined to relatively affluent people who had spent
at least $350 on adventure clothing (see Appendix 1).
One further emerging market segment for adventure vacations is that of corporate clients. Our
research suggests that up to one in five adventure vacations is at this top price end of the market.
Independent Travelers
These travelers comprise about 15 percent of those going on adventure vacations, of whom 65
percent would travel that way again. We need to persuade this group that our superior product
knowledge and service is worth their consideration.
Internet Providers
These providers sell only 5 percent of adventure travel vacations; however, 70 percent of
adventure travelers would buy their next vacation via the Internet. There is plenty of scope to
offer a superior Web site. We believe that by having daily face-to-face contact with clients, we
will be better able to manage a fresh, vital, and relevant Web site aimed at the specific needs
of our market segment.
These findings are some of the most powerful results of our research. While general travel agents
may be the most likely resource for those travelers taking an adventure vacation, they are in fact
the least likely place those clients will return to. And tAlthough specialist adventure travel agents,
such as the business we are setting up, account for only 15 percent of the market, 65 percent of
clients would use them again. We aim to increase this percentage through our superior service.
Competitive Advantages
Some 65 percent of those clients using specialist adventure vacation travel agents would use
them again—many more than would use either a direct tour operator direct or a general travel
agent.
However, these agents were criticized for having such a wide range of activities and destinations
that their sales agents knew little about them. Our research shows that while 41 percent of clients
take adventure vacations in Europe, only 23 percent of the 5000 adventure tours offered are for
European destinations.
We feel that by concentrating on European destinations, which is the largest market for both
vacations in general and adventure vacations in particular, we will be able to have superior
product knowledge. We will need to know only perhaps 100 destinations and activities well, rather
than have only a passing knowledge of the 5000 adventure vacations available.
Our market research has also shown that many adventure travel agents are catering to the
backpacker market, consisting mostly of individuals who are under 24 years of age and are
generally very cost conscious. This can lead to very different types of clients ending up at the
same destination, with some consequent dissatisfaction. It is also noteworthy that t The
backpacker market requires a much lower level of service and information than does the market
for the more affluent 25- to 35-year-old professional. 25–35 year old market.
Northwind Traders Sample Business Plan 17
Competitors’ Positions
The two major competitors of Northwind Traders are Lakes & Sons and Ferguson and Bardell, and
Lakes & Sons. Ferguson and Bardell is the strongest competitor of Northwind Traders, due to its
strong client base and experienced owner. However, itstheir press releases are of a very low
quality, and itstheir location is undesirable, with difficult parking and limited customer service
space. In addition, Ferguson and Bardell lacks the knowledge and expertise in the field of
European adventure travel that is valued so highly by the clientele of Northwind Traders.
Lakes & Sons will be a formidable competitor for Northwind Traders because of itstheir prime
location, well-established business, and extensive training program.
With Northwind Traders’ expertise in European adventure travel, we can create customized travel
itineraries for our clients and provide the most thorough, informative adventure travel service
available. By offering superior customer service, Northwind Traders can distinguish itself from its
competitors.
General press advertising seems to be fairly ineffective in this sector, and event specialist press
advertising only brings in one out of seven clients. (See Appendix 1, Summary of Findings from
Market Research.)
Public relations. We will put considerable effort into preparing and disseminating a regular flow of
press releases. These will be based on stories about our destinations, activities, corporate clients,
and our staff. We will employuse a freelance public relations adviser to help us write copy and
locate publications editors.
Shop front. We plan to have an exciting, informative, and actively managed display window.
There will be a video display showing adventure vacations in progress. Different destinations can
be selected from outside the window via a control panel;, otherwise, the scenes will rotate on a
random basis.
Internet Web site. This is fast becoming a major promotional channel, and we believe it will
increase in importance over time. Also, it is the most convenient way for us to have a global
presence at the outset. (See Appendix 1, Internet Growth and the Sale of Travel Services.)
Customer relations. We will keep records of every sales contact. Data such as source of inquiry,
client needs, previous vacation, job, and income will be included. By having superior information
on our clients and prospects, we intend to offer a truly personalized service. Our database will
contain full details on all our clients, including the vacations they have taken and their postvacation
Press advertising. We will undertake a small amount of specialist press advertising in order to
enhance our public relations activity. There is considerable research to support the argument that
the more often a potential client hears about you, the more likely they are to approach you when
they have a need for your type of service.
Northwind Traders association. We will write to all past shop clients announcing the establishment
of the travel business and offer them a special introductory adventure vacation package.
We will also be using a “contact management” system that will allow us to monitor the
effectiveness of different promotional strategies and of different marketing messages.
The key to our strategic advantage lies in having superior data on prospects and clients.
Commission
The normal commission paid to travel agents for this type of vacation is in the 10 percent to 15
percent range. While Margie’s Travel, the first agency we have been appointed to, pays us at the
lower end of the scale, they are a prestigious firm to represent. Having them in our portfolio will
enable us to negotiate much higher commissions from our new principals. Accordingly, we are
planning on an average travel agency commission of 11 percent, rising to 13 percent by the end of
Year Three. Commission on insurance and other services will be 30 percent, throughout.
Premises
It is vital that the travel business has both a storefront facing onto the main street and a visible
separate entrance. The goal is for clothing shop clients to be able to move between the premises
without going outside. We will be renting 2000 square meters of fully serviced space at a cost of
$30,060 per year fully serviced. We will need to spend $25,050 on internal refurbishing. We plan
to do some of this work ourselves. An additional $4175 will be needed for desks, chairs, and other
office furnishings.
We believe that since our clients will mostly be busy professional people, off-peak- hours access
to our services is also a key way in which we can differentiate ourselves from other travel
agencies.
Equipment
We will be renting an integrated telephone/data-base system from the outset. This will allow up to
ten sales staff to answer calls and have full on-screen data on clients and products.
Staffing
From the outset all staff will have job descriptions, a career and training history file, and a record of
employee reviews.
New staff will take the travel agency Psychometric Aptitude Test, and then spend time with each
member of the Northwind Traders team.
All staff will undergo full product training, and will spend at least four weeks a year on-site at key
travel destinations.
Our dress code will require us to look as though we are on our way to one of our adventure
vacations. We plan to start with a staff of three full-time employees, including the founder, and
one part-timer. We plan to be operating with a staff of thirteen during the fifth year of business.
With this system we can review our sales and marketing activities on a
regular basis. Thus we will be ableQuality Control
We will be developing outline scripts to help the sales staff manage inquiries.
This will ensure that all incoming phone calls are dealt with in the same way
and meet a high standard.
Capacity
Our offices can accommodate five sales desks. Each sales desk has a
capacity to handle four clients per hour, which means over the year we could
handle up to 40,000 inquiries. With our average sales rate of one in five, we
could service 9600 clients from our present facilities. This is well above the
numbers we are anticipating in the business plan.
In addition to Ms. Mitchell, team members Jim Kim and Richard Bready will be moving into the new
venture on a full-time basis, and Amy Egert has been recently recruited to cover Saturdays and
vacations. Freelance business consultant Jae Pak will be advising during the business’s
changeover from clothing shop to adventure travel agency.
Jim Kim, Vice President Sales and Marketing . Prior to joining Northwind Traders, Mr. Kim worked
for the marketing department of a major airline. His current responsibilities include the company’s
direct marketing campaign and all sales related issues.
Richard Bready, Office Manager. Twenty years as a travel agent has given Mr. Bready the ideal
background for Northwind Traders. A knowledgeable salesperson, Mr. Bready’s expertise in the
area of European travel enables him to entice the adventure traveler.
Amy Egert, Sales Assistant. After completing her undergraduate degree at the Institute of Art, Ms.
Egert spent a year traveling abroad and joined the staff at Northwind Traders recently as a sales
assistant.
Jae Pak, Business Consultant. With over twenty years of consulting experience
in industries ranging from aerospace to technology to retail, Mr. Pak’s
knowledge and guidance will be instrumental to the success of Northwind
Traders.
Board of Directors
The volunteer members of the Board of Directors provide guidance to the management and staff
of Northwind Traders. The board meets twice yearly to discuss policy changes, review the mission
statement, and update the business plan if needed.
Members include:
Lisa Jacobson, retail store owner
Holly Barrett, CPA
Jo Brown, former travel agent
William Hollands, Lawyer
Lisa Garmaise, retail store owner
Tony Chor, human resource manager
Prasanna Samarawickrama, caterer
The second priority will be to increase the staff. The individuals recruited will
go through an extensive training program to ensure that they will be able to
provide superior product knowledge in the field of European adventure travel.
The present staff is passionate about adventure vacations, and we intend to
The third priority is to install a library of reference works in the shop. These
materials will be available for clients to browse through while in the shop, or to
“check out” and peruse at home. An agent will be on hand at all times to
answer any questions.
Position
While at present we are offering only other company’s adventure vacations, we
have protected our position in a number of ways.
First, we have a two-year agency agreement with Margie’s Travel, which gives
us access to all their existing vacation products as well as any new ones. This
contract is dependent on Northwind Traders achieving sales of at least 250
vacation packages a year. We intend to negotiate similar agreements with
future suppliers, although sales targets with them will be lower to reflect their
relative market position.
The risks facing the expansion of Northwind Traders can be summed up in one
word: competition. In order to sustain our position in the area as the premiere
European adventure travel business, Northwind Traders needs to outshine our
competition. By maintaining our focus on superior product knowledge and
outstanding customer service, we will be able to uphold our position in the
industry, thereby retaining current clients and attracting new clients.
FORECASTING
Sales Forecast
Our ratio of sales to inquiries ofn the adventure travel vacations sold to date, while operating within
the outdoor clothing shop, has been one in three. For the purposes of our sales forecast, we are
assuming that only one in five inquiries will actually result in an adventure vacation being booked.
This is a very conservative estimate.
We expect there to be a steady buildup of clients coming from the clothing shop to talk to us about
vacations (see Table 3 below). However, the number of new inquiries generated by our
promotional activity will also build up during the year, gradually overtaking inquiries from the
clothinges shop. This is a trend we expect to continue. Based on the projection below, we are
forecasting to sell 660 adventure travel vacations next year at an average price of $3549. Once
insurance and other service sales are added in, we expect to generate a gross profitn income of
$268,783 over the first 12 months.
In Year Two we are forecasting a gross profitcommissions of $624,318, and in Year Three we plan
to reach $986,846.
In our Cash Flow projection, we have assumed the whole $83,500 additional financing has come
from a bank loan. We have allowed for interest on the full amount for the whole period. In
practice we would hope to finance part of this at least by a line of credit equal to the money
actually required. In this way we believe we have made a prudent, conservative provision.
Balance Sheet
The Balance Sheet at the end of Year One (see Appendix 2) shows a healthy surplus of current
assets over current liabilities. We have shown a conservative funding position, which does not
include any of the additional capital that we hope to secure.
Performance Ratios
We plan to move our gross profit up from 11 percent in Year One, to 13 percent in Year Three.
These figures look quite low, but it should be remembered that our gross profitincome is really the
sales commission we earn, not the full price of an adventure vacation. Our net income before
taxes is a more accurate measure of performance. This we expect to move from 2 percent at the
outset, up to 8 percent by Year Three. Commission generated and profit per employee will be
among the highest in the industry.
Gross profit % 11 12 13
Net income before 2 7 8
taxes %
Commission $76,795 $138,737 $164,473
generated per
employee
Profit per employee $12,584 $69,257 $106,858
Break-Even
To break even we will need to sell between 2 and 3 vacations per day. This compares with our
present sales of 1.3 vacations per day, based on our part-time effort out of the clothing shop. We
feel confident that the break-even point can be attained within a reasonable period of time.
The Web site is vital if we are to reach this wide and disparate global market. The group of
potential clients we have chosen as our target market—, affluent, professional 25- to 35- year
olds—, are prime users of the Internet. Even those people in our locality will expect to be able
to research our offers on the Internet before coming to the shop. (See Appendix 1, Internet
Growth and the Sale of Travel Services )
Both these investments need to be made at the outset to ensure that the business creates the
right impression from the start. We get only one chance to make a first impression.
We have decided to lease our telephone and computer systems, sinceas this is a rapidly changing
area and we need to have access to the very latest technology. Financing packages from
equipment suppliers are currently very attractive.
Funding Options
The owner plans to invest $41,750 of her own money (the proceeds of the sale of her share of the
clothing shop business). The cash flow projections show that the business will require $83,500 of
working capital during the early months of the first year’s operations. We think we should provide
an additional $10,020 for unforeseen eventualities. We are considering In the event that
additional funds prove necessary, we have identified two options for raising further fundsthis
$93,520:
Option 1: The sale of equity, perhaps to the original shop partners, could raise between $41,750
and $167,000. This would provide some capital to allow for growth. Any shortfall could be funded
either by a line of credit or a bank loan.
Option 2: Approach our bank with a view to raising a medium- term loan of $41,750 and a line of
credit of $58,450. Heather Mitchell could, with family help, provide any lender with security for part,
if not all, of this facility.
Financial
We will be using a computer-based financial management system. This will allow us to analyze
the profitability of sales of different vacations through each tour operator.
In this way we can review our sales and marketing activities on a regular basis. It will also allow us
to reward staff on the basis of profit achieved rather than just on sales.
Northwind Traders Sample Business Plan 32
BUSINESS CONTROLS
Accounting System
We will be using a computer-based financial management system. With this system we can review
our sales and marketing activities on a regular basis. This will allow us to analyze the profitability of
sales of different vacations through each tour operator. Thus we will be able to reward staff on the
basis of profit achieved rather than just on sales.
Quality Control
We will be developing outline scripts to help the sales staff manage inquiries. This will ensure that
all incoming phone calls are dealt with in the same way and meet a high standard.
We will encourage people inquiring about vacations to give us feedback on our service:
Capacity
Our offices can accommodate five sales desks. Each sales desk has a capacity to handle four
clients per hour, which means over the course of a year, we could handle up to 40,000 inquiries.
With our average sales rate of one in five, we could service 9600 clients from our present facilities.
This is well above the numbers we are anticipating in the business plan.
Long-Term Goals
Northwind Traders plans to grow steadily over the next five years, becoming the premier provider
of European adventure vacations in the Greater Seattle area. OurThe financial objectives of
The first step to achieving our goals is to hire a competent public relations agency. This will be the
key to producing state-of-the art publicity materials and determining where these materials should
be placed for optimum visibility.
The second step will be to increase the staff. The individuals recruited will go through an extensive
training program to ensure that they will be able to provide superior product knowledge in the field
of European adventure travel. The present staff is passionate about adventure vacations, and we
intend to maintain their enthusiasm through constant product development and skill training. We
will only recruit those individuals who share our vision. We also want the business to have an
enjoyable atmosphere.
The third step is to install a library of reference works in the shop. These materials will be available
for clients to browse through while in the shop or to “check out” and peruse at home. An agent will
be on hand at all times to answer any questions.
Position
While at present we are offering only other company’s adventure vacations, we have protected our
position in a number of ways.
Second, we intend to maintain a high service element to our business, extending our range of
value-added services such as vacation insurance, individualized prevacation booklets,
postvacation follow-up, and continually updating our client database. In this way, we will seek to
build up a high level of repeat business. Customer loyalty is vital to our profitable growth.
The risks facing the expansion of Northwind Traders can be summed up in one word: competition.
In order to sustain our position in the area as the premier agency for European adventure travel,
Northwind Traders needs to outshine its competition. By maintaining our focus on superior product
knowledge and outstanding customer service, we will be able to uphold our position in the
industry, thereby retaining current clients and attracting new clients.
Information About 150 Respondents Who Took At Least One travel Vacation Per Year
Gender: Male 65% Female 35%
Status: Married 21% Single 79%
Forty-five percent of respondents taking adventure vacations spend in excess of $3340 per person
per vacation. Twenty percent of the respondents, who tend to be professionals in the 25- to 35-
year age range, typically spend over $5010 per person. Those respondents spending under $3340
are both in the lower income and lower age groups and represent 10 percent of the respondents.
By contrast, the percentages of the market adventure travelers devoted purchasing vacation
packages to each of these regions destinations is are as follows:
Europe - 41% of adventure travelers purchase vacation packages for destinations in Europe
North America - 30% of adventure travelers purchase vacation packages for destinations in
North America
India - 10% of adventure travelers purchase vacation packages for destinations in India
Africa 7% of adventure travelers purchase vacation packages for destinations in Africa
Far East - 7% of adventure travelers purchase vacation packages for destinations in the Far
East
Our research shows that Europe is the most popular destination for adventure vacation
travelersakers. However, only 1200 of the 5000 adventure tours on the market are for European
destinations. Africa, which only attracts 7 percent of the market, has 16 percent of the tours aimed
at it. It follows that the European market has scope for expansion and that if we concentrate on
that market, we only need to have detailed knowledge of upmarket European tours, rather than all
5000. In that way we can have the advantage of superior knowledge in our chosen market.
Percentage by Source from which Traveler Heard About Last Adventure Vacation
Our research reveals the following about the source from which adventure travelers originally
found out about the last adventure vacation they purchased:
publicity activity - 30% heard about their vacation package through publicity activity
travel agent - 25% heard about their vacation package through a travel agent
friend - 18% heard about their vacation package through a friend
adventure press - 15% heard about their vacation package through adventure press
press advertising - 8% heard about their vacation package through press advertising
Internet - 4% heard about their vacation package through the Internet
These findings demonstrate the power of publicity. The next most effective way to reach potential
clients is via the travel agent’s shop window. Both the press in general and the adventure travel
press do not appear to have much effect on buyers in this market.
Occupation: Self:...................................................................
Partner:.............................................................
2. How many adventure vacations have you taken in the past three years?
None - never considered taking one
Considered, but not yet taken a vacation
Taken one adventure vacation
Taken two adventure vacations
Take at least one adventure vacation every year
3. If you take adventure vacations, how much do you spend per head per vacation?
Under $1670
$1671-$3340
$3341-$5010
Over $5010
5. How did you hear about the last adventure vacation that you took?
From a friend/colleague/relative
Via an advertisement in general press
Via the Internet
Saw it in the travel agent’s window
Via an advertisement in specialist adventure travel press
Editorial in press/TV/radio
6. What impressed you most about the people you bought your last adventure
vacation from?
Ranking for level Ranking for
of impression importance of factor
(1 = excellent, (1 = very high,
4 = useless) 4 = quite
unimportant)
Knowledge of activity
Knowledge of destination
Range of helpful advice
Additional services, such
as insurance
7. What did you dislike most about the last adventure travel vacation that you took?
The other people on the vacation were not compatible (e.g. much
Northwind Traders Sample Business Plan 44
older, /younger, or had very different competence levels)
Too expensive
The travel agent/tour operator did not properly explain the true
nature of the vacation
N. America Other
Africa India
9. If you have never taken an adventure vacation would you consider taking one from
a reputable travel agent with proven expertise in this market?
Yes No
10. Have you ever been on an adventure vacation organized by your employer?
Yes No
Thank you for your help with our research. We hope thisit will help Northwind Traders to
bring you more exciting adventure vacations.
It is also evident that the European users of the Internet are growing rapidly. The United Kingdom
is the second largest Internet user market after Germany, followed in decreasing order by the
Netherlands, France, Finland, Italy, and Spain.
The average percentage of European Internet users who have shopped online in 1998 is 41
percent.
Month: Pre-Start 1 2 3 4 5 6 7 8
Receipts
Collections from Credit Sales 251 418 501 501 585 752
Other
Total Receipts 0 16,700 10,020 11,106 21,293 14,696 16,366 27,305 22,462
Payments
Salaries and Wages 6,304 5,120 2,620 2,058 3,728 2,620 2,336 2,336
Employee Benefits 3,152 2,560 1,310 1,029 1,864 1,310 1,168 1,168
Payroll Taxes 1,051 853 437 343 621 437 389 389
Repairs and Maintenance 584 474 243 191 345 243 216 216
Office Supplies 949 770 394 310 561 394 352 352
Marketing and Advertising 6,938 5,635 2,883 2,265 4,103 2,883 2,571 2,571
Professional Fees 5,439 4,418 2,261 1,776 3,217 2,261 2,016 2,016
Training and Development 1,751 1,422 728 572 1,036 728 649 649
Bank Charges 26 21 11 9 16 11 10 10
Miscellaneous 0 0 0 0 0 0 0 0
Owner's Drawings 0 0 0 0 0 0 0 0
Loan Repayments 0 0 0 0 0 0 0 0
Tax Payments 0 0 0 0 0 0 0 0
Total Payments 0 62,864 30,716 19,891 22,346 22,366 15,716 24,016 14,016
Cashflow Surplus/Deficit (-) 0 (46,164) (20,696) (8,785) (1,053) (7,670) 650 3,289 8,446
Opening Cash Balance 0 0 (46,164) (66,860) (75,645) (76,698) (84,368) (83,718) (80,429)
Closing Cash Balance 0 (46,164) (66,860) (75,645) (76,698) (84,368) (83,718) (80,429) (71,983)
Sales
Other
Total Sales 2,364,83 5,202,64 7,591,13 0 0 0 0 0 0 0 0
9 5 2
Materials
Labor
Overhead
Other 2,096,056 4,578,327 6,604,286
Operating Expenses
Salaries and Wages 36,072 40,581 58,116
Employee Benefits 18,036 20,291 29,058
Payroll Taxes 6,012 6,764 9,686
Rent 30,060 30,060 40,080
Utilities 5,845 5,845 6,680
Repairs and Maintenance 3,340 3,340 3,340
Insurance 5,845 9,185 16,700
Travel 7,097 17,535 30,895
Telephone 5,970 7,933 10,855
Postage 2,505 4,175 8,350
Office Supplies 5,428 8,350 12,525
Advertising (delete row)
Cumulative Net Income 34,901 339,631 835,036 835,036 835,036 835,036 835,036 835,036 835,036 835,036 835,036
(Loss)
Year 1 Year 2
ASSETS
Current Assets
Cash 19,935
Marketable Securities 0
Accounts Receivable, Net 45,818
Inventory 0
Prepaid Expenses 835
Other 0
Total Current Assets 66,588 0 0 0 0 0 0
Long-Term Assets
Property, Plant, and Equipment 29,225
Less Accumulated Depreciation 9,185
Net Property, Plant, and Equipment 20,040 0 0 0 0 0 0
Other Long-Term Assets 0
Total Long-Term Assets 20,040 0 0 0 0 0 0
Current Liabilities
Short-Term Debt 0
Current Maturities of Long-Term Debt 0
Accounts Payable 835
Income Taxes Payable 9,142
Accrued Liabilities 0
Other 0
Total Current Liabilities 9,977 0 0 0 0 0 0
Shareholders' Equity
Common Stock 41,750
Additional Paid-In Capital 0
Retained Earnings 34,901
Other 0
Total Shareholders' Equity 76,651 0 0 0 0 0 0
SOURCES OF FUNDS
Equity Financing:
Preferred Stock:
Common Stock:
Debt Financing:
Mortgage Loans:
Other Long-Term Loans:
Short-Term Loans:
Convertible Debt:
USE OF FUNDS
Capital Expenditures:
Purchase of Property:
Leasehold Improvements:
Purchase of Equipment/Furniture: $29,225
Other:
Debt Retirement:
Cash Reserve:
SOURCES OF FUNDS
Equity Financing:
Preferred Stock:
Common Stock:
Debt Financing:
Mortgage Loans:
Other Long-Term Loans:
Short-Term Loans:
Convertible Debt:
USE OF FUNDS
Capital Expenditures:
Purchase of Property:
Leasehold Improvements:
Purchase of Equipment/Furniture: $29,225
Other:
Debt Retirement:
Cash Reserve:
Balance Sheet, One Year (Quarterly)
Balance Sheet - One Year (Quarterly)
Year 1
Qtr 1 Qtr 2 Qtr 3 Qtr 4
ASSETS
Current Assets
Cash 7855 210 20,768 19,935
Marketable securities 0 0 0 0
Accounts receivable, net 5600 16,800 35,890 45,818
Inventory 0 0 0 0
Prepaid expenses 400 535 835 835
Other 0 0 0 0
Total Current Assets 13,855 17,545 57,493 66,588
Long-Term Assets
Property, plant, and equipment 29,225 29,225 29,225 29,225
Less accumulated depreciation (2296) (4592) (6888) (9185)
Net property, plant, and equipment 26,929 24,633 22,337 20,040
Other long-term assets 0 0 0 0
Total Long-Term Assets 26,929 24,633 22,337 20,040
Total Assets 40,784 42,178 79,830 86,628
Long-Term Liabilities
Long-term debt less current maturities 0 0 0 0
Deferred income taxes 0 0 0 0
Shareholders' Equity
Common stock 41,750 41,750 41,750 41,750
Additional paid-in capital 0 0 0 0
Retained earnings (1,491) (212) 33,830 34,901
Other 0 0
Total Shareholders' Equity 40,259 41,538 75,580 76,651
Total Liabilities and Shareholders' Equity 40,784 42,178 79,830 86,628
Payments
Cash purchases 401 326 166 131 237 166 149 149 166 113 113 167 2,284
Payments to creditors 1203 978 499 392 713 499 446 446 499 339 339 503 6,856
Salaries and wages 6304 5120 2620 2058 3728 2620 2336 2336 2620 1780 1780 2631 35,933
Employee benefits 3152 2560 1310 1029 1864 1310 1168 1168 1310 890 890 1315 17,966
Payroll taxes 1051 853 437 343 621 437 389 389 437 297 297 438 5989
Rent 5253 4267 2183 1715 3107 2183 1947 1947 2183 1483 1483 2192 29,943
Utilities 1021 830 425 333 604 425 379 379 425 288 288 426 5823
Repairs and maintenance 584 474 243 191 345 243 216 216 243 165 165 244 3329
Insurance 1021 830 425 333 604 425 379 379 425 288 288 426 5823
Travel 1240 1007 515 405 734 515 460 460 515 350 350 518 7069
Telephone 1043 847 434 341 617 434 387 387 434 295 295 435 5949
Postage 438 358 182 143 259 182 162 162 182 124 124 183 2499
Office supplies 949 770 394 310 561 394 352 352 394 268 268 396 5408
Marketing and advertising 6938 5635 2883 2265 4103 2883 2571 2571 2883 1959 1959 2895 39,545
Professional fees 5439 4418 2261 1776 3217 2261 2016 2016 2261 1536 1536 2270 31,007
Training and development 1751 1422 728 572 1036 728 649 649 728 494 494 731 9982
Bank charges 26 21 11 9 16 11 10 10 11 7 7 11 150
Miscellaneous 0 0 0 0 0 0 0 0 0 0 0 0 0
Owner's drawings 0 0 0 0 0 0 0 0 0 0 0 0 0
Loan repayments 0 0 0 0 0 0 0 0 0 0 0 0 0
Tax payments 0 0 0 0 0 0 0 0 0 0 0 0 0
Capital purchases 25,050 0 4175 0 0 0 0 0 0 0 0 0 29,225
Other - database and Web 0 0 0 10,000 0 0 10,000 0 0 21,325 0 0 41,325
Total
site Payments 0 62,864 30,716 19,891 22,346 22,366 15,716 24,016 14,016 15,716 32,001 10,676 15,781 286,105
Cashflow Surplus/Deficit 0 (46,164) (20,696) (8,785) (1,053) (7,670) 650 3,289 8,446 9,251 3,757 19,134 18,451 (21,390)
Opening Cash Balance 0 0 (46,164) (66,860) (75,645) (76,698) (84,368) (83,718) (80,429) (71,983) (62,732) (58,975) (39,841)
Closing Cash Balance 0 (46,164) (66,860) (75,645) (76,698) (84,368) (83,718) (80,429) (71,983) (62,732) (58,975) (39,841) (21,390)
Operating Expenses
Salaries and wages 36,072 40,581 58,116 134,769
Employee benefits 18,036 20,291 29,058 67,385
Payroll taxes 6012 6764 9686 22,462
Rent 30,060 30,060 40,080 100,200
Utilities 5845 5845 6680 18,370
Repairs and maintenance 3340 3340 3340 10,020
Insurance 5845 9185 16,700 31,730
Travel 7,097 17,535 30,895 55,527
Telephone 5970 7933 10,855 24,758
Postage 2505 4175 8350 15,030
Office supplies 5428 8350 12,525 26,303
Marketing and advertising 39,700 38,410 50,100 128,210
Professional fees 31,125 16,550 16,500 64,175
Training and development 10,020 16,700 35,070 61,790
Bank charges 150 150 200 500
Depreciation 9185 9185 9185 27,555
Miscellaneous 0
Other 0
Total Operating Expenses 216,390 235,054 337,340 788,784
SOURCES OF FUNDS
Equity Financing:
Preferred Stock:
Common Stock:
Debt Financing:
Mortgage Loans:
Other Long-Term Loans:
Short-Term Loans:
Convertible Debt:
USE OF FUNDS
Capital Expenditures:
Purchase of Property:
Leasehold Improvements:
Purchase of Equipment/Furniture: $29,225
Other:
Working Capital:
Purchase of Inventory:
Staff Expansion: $20,000
New Product Line Introduction:
Additional Marketing Activities: $34,700
Other Business Expansion Activities:
Other: Database and Web site $41,325
Debt Retirement:
Cash Reserve: