BREAKFREE EVENTS INC - BUSINESS PLAN PRESENTED TO: MARV PAINTER FRIDAY, JULY 3, 2009 CARMEN BROWN ROBYN EVANS CHRISTIE THOMSON BARKS BRITTANY WALTER
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BreakFree
Events Inc.
Business Plan
Presented To: Marv Painter
Friday, July 3, 2009
Carmen Brown
Robyn Evans
Christie Thomson‐Barks
Brittany WalterContents
1.0 Executive Summary
2.0 Introduction
2.1 Vision
2.2 Mission Statement
2.3 Objectives
2.4 Opportunity/Value Proposition
3.0 Marketing Plan
3.1 Competitive Analysis
3.2 Products & Services
3.3 Pricing
3.4 Promotion & Advertising
3.5 Place
3.6 Segmentation, Targeting & Positioning
3.7 Marketing Plan Budget
4.0 Operations Plan
4.1 Organizational Structure
4.2 Building Plan
4.3 Average Business Day
4.4 Planned Capital Budget
4.5 Operating Costs
4.6 Working Capital
25.0 Human Resources Plan
5.1 Organization Chart
5.2 Management Team
5.3 Support Staff
5.4 Human Resources Strategy
6.0 Financial Plan
6.1 Financial Model
6.2 Business Valuation
6.3 Financial Statement Projections
31.0 Executive Summary
Introduction
BreakFree Events Inc. (BreakFree) is an event management, transportation and tour
operator/travel company that focuses on catering to University Students in Saskatoon.
Our vision is “to be the provider of premiere party and travel experiences for Saskatoon’s
University students. We will inspire memories to last a lifetime”. There is currently no
direct competitor in Saskatoon that specifically caters to University students and offers
tailored products to meet their needs.
Marketing Plan
BreakFree will offer four product/service segments: organized pubcrawls, private
parties, local trips, and an international group trip each year. These are the tangible
services provided, but the real product will be the experience itself – each of these will
be specifically tailored to what University students want out of those experiences. As
such, the pricing policy will be to attach a premium to prices of the most similar
experience currently available in Saskatoon. There will be an office location, but sales
and marketing will be primarily done on Campus and through the website. Promotions
will focus on direct marketing on campus, giving away promotional event packages and
merchandise, advertising through the University dayplanners and newspapers, and
electronic media such as facebook and myspace. The focus of these efforts will be
directed at ‘opinion leaders’ and students with some discretionary income, with the goal
being to create word of mouth about events and establish a strong brand image.
Operations Plan
BreakFree will be incorporated in Saskatchewan. It will lease a physical office space,
with business hours from Wednesday to Saturday, 10AM to 7PM, in line with University
students’ purchasing tendencies. The primary capital costs will be the purchase and
renovations of Coach and School Busses, which will be the methods of transportation
for all events with the exception of the international trip. Primary operating costs will be
rent, salaries and insurance.
Human Resources Plan
The HR team for BreakFree will consist of the four owner/managers, as well as support
staff in the form of bus drivers and hosts/captains. As the business grows, the number
of these support staff will increase proportionately.
Financial Plan
BreakFree’s business plan will incorporate both debt and equity financing, with an initial
ratio of 1.25 that will decline over time. Total initial investment of $700K would be
required, with $300K of these being sourced from equity. Based on financial projections,
BreakFree will achieve positive net income in 2010 with steady increases thereafter, and
will maintain positive cash flow on a yearly basis. With a growth rate of 5% and required
return on investment to equity investors of 25%, the business generates a positive NPV.
42.0 Introduction
2.1 Vision
BreakFree’s vision is to be the provider of premiere party and travel experiences for
Saskatoon’s University students. We will inspire memories to last a lifetime.
2.2 Mission Statement
Breakfree’s mission is to offer an array of party and travel experiences that are not
currently available in Saskatoon, and to build a strong brand image through continuous
marketing and promotional activities.
2.3 Objectives
Primary objectives of BreakFree are:
¾ To dominate the Saskatoon University Student market for party
transportation and tours
¾ To see positive net income starting in 2010, with steady growth thereafter
¾ To maintain constant positive cash flow
¾ To maintain a debt‐to‐equity ratio of 1.25 or lower
2.4 Opportunity/Value Proposition
Key aspects of the market opportunity are that there is currently no transportation
provider or tour operator in Saskatoon that specifically caters to the University student
age group and offers tailored products to meet their needs.
BreakFree intends to fill this market gap using a four‐product approach, and to grow by
building a recognized brand and stimulating excitement for each of its events through
carefully deployed marketing strategies.
53.0 Marketing Plan
3.1 Competitive Analysis
There are currently no direct competitors to BreakFree in Saskatoon. Indirect
competitors consist primarily of local bars and pubs that offer pubcrawls based around
their own establishments and other bars in the city. Businesses that currently make up
this sector of competition include The Sutherland Bar, The Pat and Ryly’s; these
businesses currently comprise 100% of the pubcrawl market in Saskatoon. They
compete for the market based on price and convenience, and the average consumer
sees only minor differences between a pubcrawl at one bar or another. A customer can
simply call up a bar, book a pubcrawl, pay the ~$125 fee per bus and collect money from
participants.
Other indirect competitors include travel agencies that offer group rates for
international travel bookings. These competitors also compete based on price, by
appealing to groups that want to travel together and obtain a better price. They will
help a group locate a specific type of trip, but offer no specific advantage over booking
with other travel agencies.
With respect to these competitors, BreakFree will offer an entirely new product. It will
compete based on a differentiated product in the experience it offers, rather than based
on pricing and convenience. However, these factors will still be considered as they will
need to be competitive enough not to detract the customer from the product.
3.2 Products and Services
The products that BreakFree will offer include four segments:
1. Organized Pubcrawls
a. New Years Eve (January)
b. Superflirt ‐ Singles Valentines Day (February)
6c. St. Paddy’s Day (March)
d. Drink a Small Town Dry (End of School Year ‐ April)
e. Canada Day (July)
f. Summer Ender Bender (Back to School Party – September)
g. Halloween Howler (October)
h. 12 Bars of Christmas (December)
2. Private Parties
a. Stags & Stagettes
b. Private Pubcrawls
c. Birthday Parties
3. Local Trips
a. Roughriders Games – all weekend games; single day trips
b. Stampede – first two weekends in July
c. Ski/Snowboard Trips – 3 trips per season
4. International Group Vacations
a. Reading Break in Mexico
Organized Pubcrawls
Organized pubcrawls will provide pre‐planned transportation around various pubs and
bars in Saskatoon for approximately one major event each month during the school
year. Events will be centered around renowned party seasons such as New Years Eve
and Halloween. These events will be open to anyone, and will be marketed to all
University students as the premiere sought‐after party for that occasion. Events will be
affordable (~$15~$20 per person per event) and convenient – students simply show up
at the starting bar and transportation is provided throughout the night. In the first year
of operations, each time an organized crawl is run there will be one or two busses, with
each one having a ‘bus captain’ (employed by BreakFree) to start cheers, rally
enthusiasm, make sure everyone is having a good time, as well as be the communicator
of any bus transportation rules and regulations. Busses will be converted to trendy
7looking party busses complete with stereo and speaker systems, reconfigured seating,
custom lighting and dancing poles.
Private Parties
Private parties will be booked on either the shuttle bus or the small school bus
(converted party busses, as described above), and will have a maximum capacity of 28
people. These will be available for stags and stagettes, birthday parties, private
pubcrawls, or any other occasion for which students want private party transportation.
The shuttle bus will offer a more upscale experience, with the availability of champagne
during the ride and limo‐style décor. The school bus offers a cheaper alternative, with
pubcrawl‐style décor and simple transportation. Parties can be booked either by the
hour (maximum of two hours) or for the full night.
Local Trips
Local trips are also pre‐organized and available to anyone. Roughriders games in Regina
will be day trips, and will be done on a Coach bus for the day. The cost will include
transportation to and from the game, game tickets as well as a ‘tailgate party’ before
leaving Saskatoon and upon arrival in Regina. Premiums will be charged for Labor Day
and playoff games, which are in higher demand. The Stampede trips will be weekend
trips to Calgary during the first two weekends in July. These will be coordinated with
affordable hotels in Calgary, months in advance to ensure availability. Trips will depart
Saskatoon on Friday and return on Sunday, and will include transportation to and from
Calgary, accommodation, one day’s admission to Stampede grounds, and one night’s
event tickets (to a local bar such as Cowboys or Roadhouse). Ski/Snowboard trips will be
similar in structure to Stampede trips, running to ski resorts in Banff three times per
season (post‐Christmas, reading break and a spring trip). They will include
accommodation, transportation and the option of a premium to include discounted lift
tickets. Trips will be marketed to primarily the ‘leaders’ in University markets, such as
executive members of student organizations and captains of sports teams, who are then
8expected to create a ‘buzz’ around the trip and encourage other students (friends,
teammates, club members, etc.) to participate.
International Group Vacations
Finally, there will be one international group vacation per year. This will take place over
University “Reading Break” (typically the second or third week in February), when
students have no classes. The destination is Puerta Vallarta, Mexico, which is known to
be a travel hot spot for University students, especially during Spring Break. Students will
get group discounts for booking in groups of 10 or more, but any size group is welcome
to join the trip. Booking with BreakFree will include airfare, hotel (all inclusive, to be
organized with the hotel in advance), and tickets and transportation to an event each
night while in Mexico. The trip will be accompanied by two ‘captains’ from BreakFree,
who are responsible for organizing and coordinating nightly events as well as informal
events during the day to create a fun atmosphere unique party experience all week
long. Students will return to Saskatoon at the end of the week, exhausted but happy!
Booking with BreakFree will be attractive over other group bookings due to the
organized events and the assurance that the trip will be populated by other young
partiers with similar travel desires.
3.3 Pricing Policy
BreakFree’s pricing policy is to charge a premium as compared to the most similar
product available (pubcrawls and group travel, as described in Competitive Analysis) due
to the uniquely tailored nature of our products. Please see contribution margin analysis
(Appendix B, Tab 7) for each of the following events. This includes all prices, costs and
margins based on different levels of attendance for each event.
Organized pub crawls
There will be a minimum of eight pubcrawls organized by BreakFree each year, as
described above. As special events such as the World Junior Hockey come to Saskatoon,
9we can host additional pubcrawls. It is expected that by 2014 we will be able to host a
minimum of 10 pubcrawls.
These pubcrawls will use all three of our available capacity, thus being able to have
approximately 150 people for each event. We are charging initially $20 per person. This
is at a premium compared to many other pubcrawls that can be found in the city, but
this is due to our premium buses and party hosts that will be at each event.
Our costs of goods sold for these events will include:
o The maintenance of the vehicles (gas etc) – this is done on a per km basis at
$0.50 per km
o The cost of the bus driver – $12 and hour
o The cost of the party host ‐ $15 per hour
Personalized Pub Crawls
The large busses and shuttle bus will start at a cost of $500 per night. This is at a
premium to the other pub crawl services offered in the city ($150 per bus), but is
appropriate as people will be purchasing our services because of premium busses. Our
competition traditionally offers pub crawls to students as a way to raise funds for
charity, etc. as opposed to BreakFree, which is focused on a great entertainment for the
evening. BreakFree offers a host as well as personalized choice of bars and choice of
pick‐up and drop off locations.
Our shuttle busses offer a liquor service, for which we will charge a nominal amount
above cost.
Our costs of goods sold for these events will include same as our organized events:
o The maintenance of the vehicles (gas etc) – this is done on a per km basis at
$0.50 per km
10o The cost of the bus driver – $12 and hour
o The cost of the party host ‐ $15 per hour
We assume that our Personalized pubcrawls will grow at approximately 15% each year.
Rider Trips
There are two different price points for this trip. Regular season games will sell for $110
each game. Again this includes a ride to and from the game and a ticket to the game.
Playoff games and the labour day classic game will be sold at a premium price of $150 as
ticket prices for these games increases.
Our cost of goods sold includes the following costs
o The maintenance of the vehicles (gas etc) – this is done on a per km basis at
$0.50 per km
o The cost of the bus driver – $12 and hour
o The cost of the party host ‐ $15 per hour
o Cost of each ticket ‐ $38 per regular season, and $51 per playoff and labour day
classic.
We expect to have trips to all 8 regular season games, and to the labour day classic. We
also have assumed that the Riders will make it to at least one home playoff game per
season.
Stampede Trip
Stampede runs over the span of two weekends. We are charging $400 for each person
on the trip. This will include transportation to and from Calgary, two nights’
accommodation and passes to the stampede park and one night out at a local bar.
11As this service is not currently offered by anyone else we based this on the amount we
feel students would be willing to pay for a weekend in Calgary in which they did not
have to plan anything.
The first year we expect to run one buss of 58 people on each weekend, and then by
2011 have 3 trips planned over the course of the 10 days of stampede.
Our cost of goods sold will include the following
o The maintenance of the vehicles (gas etc) – this is done on a per km basis at
$0.50 per km
o The cost of the bus driver – $12 and hour (Drive there and back, and in the city of
Calgary approximately 8 hours a day for 3 days)
o The cost of the party host ‐ $15 per hour (8 hours a day for three days)
o Stampede passes ‐ $10 per person
o VIP at a bar ‐ $10 per person
o Hotel costs ‐ $50 per person
International Trip
Annually we will be taking students on a trip to Mexico in which we have done all the
planning. Because the students have to very little we feel we can charge a premium for
this service. Rates will fluctuate yearly based on flight and hotel costs. We feel an
average price of $1,350 per person is a reasonable price.
Trips can be adjusted to accommodate the group’s needs including additional activities
such as scuba diving, zip lining, or additional nights out at the bar. All of these will come
at an additional cost.
This trip will increase at an annual rate of approximately 15% each year, as our name
becomes more popular.
12Our cost of goods sold will include
o The cost of the party host ‐ $15 per hour (8 hours a day for 7 days)
o Events in Mexico ‐ $100 per person
o Travel to and from Mexico ‐ $950
Ski Trips to Banff
We will be charging $400 per person for this trip. This will include all the costs of travel
and accommodation to Banff. Lift tickets will be charged at an additional rate based on
how many days the student wants to ski.
We are planning on running one trip in 2009 that will fill one bus, and then 3 trips
annually at two buses each.
Our cost of goods sold will include the following
o Bus driver at $12 an hour
o Host at $15 an hour
o Bus maintenance and gas at $0.50 a km
o Hotel accommodation $50 a person per night.
3.4 Promotion and Advertising
The advertising and promotional strategy will be primarily centered around the
following:
¾ Direct marketing through sales representatives & word of mouth
o Young, energetic sales representatives will be periodically sent out to the
University and focus on populated student areas to create word of
mouth, give away flyers, promote events, etc.
Focus on this during welcome‐back to University in September,
hosts will be located in lower place riel for the busy time of day
1311am until 2pm, and then will frequent the different colleges
reading rooms, study halls, lounges, and the campus book store as
well as be in the U of S beer gardens.
Busses will be parked on or around campus so that students will
be able to see the differences in our product
o Busses driving around the city for pubcrawls and events will be
advertisements in themselves, with logos, colorful bodywork and the
company name painted on the sides
¾ Promotional Events
o Promotional transportation will be offered for welcome‐back events
throughout the first two months of the school year at no cost via VIP
prizes and packages in order to create word of mouth and a positive
image of the company and stimulate enthusiasm for future events. These
events include:
Commerce students society, Little Buddy Big Buddy BBQ
Agriculture student society, Ag Bag Drag
Engineering student society, Hell Dance
CoCo Loco
o Similar packages will be periodically donated at no cost as prizes for radio
and TV stations to give away as prizes, in exchange for continuous
advertising via these channels
¾ Electronic media (website, facebook, myspace)
o There will be a website professionally created with photos, stories,
testimonials, event and ticket sales information and the website address
being promoted in all paper advertisements and flyers
o We will also create facebook and myspace pages with information similar
to the website, and begin adding ‘friends’ and creating events in order to
stimulate word of mouth
¾ Paper media advertisements (student dayplanners, The Sheaf student newspaper)
14o Student dayplanners are created every school year, in which we would
place advertisements as well as a coupon for a discount on a first
pubcrawl purchase
o We will also contact the student newspaper, and attempt to have a story
run about BreakFree and the events it will be offering throughout the
year. We will also periodically advertise throughout the year for various
events.
¾ Promotional merchandise or “swag” (shot glass with company name and website
address, lanyards, etc.)
o Given away by sales representatives on campus. If kept, shot glass can be
exchanged for discount on either the next personal pub crawl booked
with us, or a free ticket to an organized BreakFree pubcrawl
3.5 Place
There will be a physical office location (as described in the Operations plan) that houses
offices and the call center as well as a reception area and store front for those
customers that want to consult with event planners or book events in person. However
marketing will take place primarily on campus, and sales will be primarily made through
the website and over the phone.
3.6 Segmentation, Targeting & Positioning
Segmentation
Spending on pubcrawls, private parties and group travel is affected largely by age,
discretionary income and behavioral tendencies. Pubcrawls tend to be purchased
almost solely by the age group that comprises the majority of University students (ages
18‐25), while private parties and group travel are purchased often by both this age
groups and extending into the late twenties and thirties. Students who live at home
during school and/or are assisted by parents in paying for tuition tend to spend more on
discretionary products and services such as the ones being offered. Pubcrawls, private
15parties and group travel tend to be purchased by people that frequent bars and clubs
and spend discretionary income on alcohol, events and parties.
Target Market
The University of Saskatchewan currently has approximately 30,000 students enrolled,
the majority of which are between the ages of 19 and 25. This is the size of BreakFree’s
potential market. The target market for BreakFree is students, both male and female, at
the University. These students will be in an income bracket that offers some
discretionary income (either they live at home, parents help pay for school, etc.) and
whose behavioral tendencies indicate that they like to party, like to have fun, and are
opinion leaders in their peer groups.
Our services will be purchased by University students who are looking for an experience.
They will likely be the students in University who are the leaders, the organizers, the
extroverts and the partiers. These will be the people who purchase the product, and
engage those around them to participate.
Buyers are anticipated to purchase on average 2‐3 events per year. One to two of these
will likely be the organized pubcrawls, or smaller expenditures. One to two are expected
to be trips, whether international or local (see below for detailed description of the
products available).
Given the nature of the market (young and technologically savvy), they will likely
purchase primarily online; however approximately 20% are expected to purchase via
telephone or in person, directly from the office. The decision to buy will be sparked by
the hype and word of mouth created through carefully deployed advertising campaigns,
and influenced by peers.
16The buyers being targeted are looking for a fun experience and something that they can
remember for a lifetime; something that will make their university experience unique
and live up to its full potential. They would prefer to pay the smallest amount possible
but are willing to attach a premium to a specifically unique experience. BreakFree will
meet these needs by offering pubcrawls, trips and vacations that are young (only
marketed to university students), fun (events and atmosphere created by
captains/hosts), unique (exclusive transportation, themes and size) and easy (fully
organized by us).
Positioning
The goal of BreakFree is to dominate the University student party transportation and
tour operator market. Our services have advantages which no competitor currently
offers, in the solely young and fun‐focused market we are catering to, the uniquely
tailored vehicles on which events are run, and the atmosphere created by BreakFree
hosts. The intention is to create a strong brand and reputation such that it would be
difficult for future competitors to steal market share.
BreakFree will be marketing and selling the experience; and the experience will come in
the form of events and tour operator/transportation services that provide an
extraordinarily fun atmosphere, are convenient and easy to participate in and cannot be
easily replicated due to brand awareness. Atmosphere will be created by centering
events around renowned party seasons and marketing BreakFree’s event as THE events
to attend, by marketing to young students who are looking for a unique and fun event
to attend, and by having BreakFree hosts create the atmosphere. The events are
convenient because they require only that events be booked or tickets easily purchased.
Brand awareness will be the primary focus for the first several months of operations and
will capture a segment of the market that is not yet catered to.
17BreakFree’s competitive strategy is differentiation. It will offer services that are not
currently available in the Saskatoon market.
3.7 Marketing Plan Budget
Website
Our website will be crucial to the success of our company. University students need
information as fast and as easy as possible. Our website will host information about
where our office is located, upcoming trips and events. It will also host a regularly
updated schedule that will show when we are available to host private pub‐crawls and
events.
Students will be able to buy tickets on‐line. We will be outsourcing this service to either
“pay pal” or “pic a tick” to minimize our initial costs.
Our initial investment f $3,000 will cover the costs of getting the website up and running
by September 2009. The maintenance costs will be covered in our office administration
expenses.
Host Promotion
These costs include the two hosts that will be on the U of S campus during our critical
promotion month of September, as well as during the year driving around the city in our
buses, and attending other events in the city. They will be paid an hourly wage of $15
and expected to put in 8 weeks of full time work in 2009, then approximately 40 hours a
month every year thereafter.
Promotional Merchandise
This includes all the merchandise that our hosts will hand out on campus as well as at
our VIP events. This will include items such as shot glasses with our name on it, lanyards,
key chains, etc.
184.0 Operations Plan
4.1 Organizational Structure
BreakFree will function as a corporation and will be incorporated in the Province of
Saskatchewan. Due to the nature of the business and the need for capital, the use of a
corporate structure is appropriate since it provides greater access to capital. This access
will come from the ability to have equity investors through the issuance of shares in the
company. The Board of Directors will consist of each of the founders, who will be
majority shareholders as well as an accountant and lawyer.
4.2 Building Plan
To run the operations of BreakFree an office building of approximately 980 square feet
will be leased. This office building be located at 8th Street East and McKinnon Ave in
Saskatoon, Saskatchewan and will have the following features:
Store front access to allow for additional marketing opportunities
Four office spaces to be used by the owner managers as well as for purposes of
meeting with potential clients to plan events
Four cubicles to be used by future employees, logistics supervisor as well as to
serve as the call center. These cubicles will not be constructed until BreakFree has
the necessary growth to support these additional staff members
The leasing of this office building will provide the opportunity for BreakFree to keep its
capital costs lower for the first couple of years allowing for the purchase of the capital
needed to operate for the next 5 years. Please see Appendix A for building floor plan,
and the location of the building.
4.3 Average Business Day
Customers can contact BreakFree either by calling the call center or stopping by the
office location. The call center and office location will operate from 10:00 to 7:00
Wednesday through Saturday. During this time event planners and other administrators
19will be available to answer any questions that potential clients may have about our
services.
4.4 Planned Capital Budget – Appendix B, Tab 1
During the first year of operations the most significant up front capital costs will be the
purchase of the necessary busses to provide the various services as described in the
marketing plan. BreakFree services can be subdivided into three categories where the
necessary capital expenditure differs.
Road Trips
For trips where the required travel is more than 1 hour from Saskatoon, a Coach bus
complete with a lavatory facility will be used to provide our customers will a
comfortable and enjoyable travel experience. These busses will be used for the
organized summer and winter trips: Roughriders, Stampede and Snowboard trips. Based
on the forecasted trips in the marketing plan, estimated capacity for the Rider Trips will
be approximately 58 people for all regular season games and 116 people for the Labor
Day and playoff games. For the Calgary Stampede the estimated capacity for the first
weekend is 58 people and 116 people for the second weekend. For the three winter
trips estimated capacity is 116 people. To meet these capacity needs, BreakFree will be
purchasing 2 used coach busses with estimated capacity of 58 adults per bus. Having a
second bus available during the summer months will also allow BreakFree to send a
second bus to each of the Rider games provided that there is the necessary demand.
Organized Pub‐crawl’s
For organized pubcrawls, BreakFree will be utilizing school busses to transport
participants around the city for the evening. It is expected that BreakFree will reach
maximum capacity of 150 people per pub‐crawl by our second year of operation;
therefore, BreakFree will have to purchase three school busses in its first year of
20operations to meet these capacity needs. The breakdown of these busses and their
capacity needs are as follows:
two large school busses with capacity of approximately 46 people (not
considering standing room)
one medium size school bus with capacity of approximately 28 people (not
considering standing room)
To meet the increased capacity needs of 200 pub‐crawl participants in year three
BreakFree will be required to purchase an additional large school bus during this year.
The inside of these busses will be updated and modified by replacing the seats with
benches and other alternative seating. These modifications will also enable BreakFree to
increase the capacity for these pubcrawls if the demand is present. These busses can
also be used for private parties if requested.
Private Parties
For the estimated 20 private parties per year BreakFree will have available to its
customers a trendy shuttle bus equipped to seat approximately 24 people. To meet the
capacity needs and the estimated number of private parties in a year BreakFree will
purchase one shuttle bus to modify for use by these customers. If this bus is being used
then the customers also have the option to use one of the trendy school busses when
not used for pub‐crawls.
Leasehold Improvements for Office Building
For the office building in the first year 4 offices will have to be built to provide space for
each of the owner managers. Once business picks up and more employees are needed
BreakFree will have to invest more in leasehold improvements to house these new
employees. This additional investment is not expected to occur until after 5‐6 years of
operations.
21Capital Expenses
Year 1 ‐ Total Year 3 ‐ Total
Type of Capital Expense Quantity Capital Cost Capital Cost
Leasehold Improvements ‐ building ‐ 30,000.00 ‐
Coach Bus ‐ 58 passenger capacity (Used) ‐ Restroom 2.00 302,000.00 ‐
School Bus ‐ 46 Passenger capacity (Used) 2.00 64,000.00 32,800.00
School Bus ‐ 28 Passenger Capacity (Used) 1.00 9,500.00 ‐
Shuttle Bus ‐ 24 Passenger Capacity (Used) 1.00 31,000.00 ‐
Bus Modifications:
Coach Buses 50,000.00 ‐
School Buses 75,000.00 25,000.00
Shuttle Bus 75,000.00 ‐
Total 636,500.00 57,800.00
Please see Appendix B, Tab 1 for further breakdown of the costs associated with these
capital purchases.
4.5 Operating Costs
Rent ‐ Location
The rent for the office location described above is $1350 per month, which includes
most common costs (heat and water) but does not include electricity.
Salary
The salary expense includes the costs paid out to the management team, and further
described in the Human Resources Plan. The projected costs assume that the four
owner managers will work on a part time basis, due to the fluctuations and seasonality
that are inherent to our business structure. As the number of events and general
revenue sources increase with the growth of the business, the salary expense has
accounted for a 15% in salary expense year by year in order account for the additional
labor that will be needed.
Insurance
BreakFree will require both general liability insurance as well as vehicle insurance in
order to protect the assets of our business. For the purposes of financial projections, it
has been assumed that the insurance expense will be approximately $800 per month
leading to an overall insurance expense of $12,800 per fiscal year.
224.6 Working Capital
Due to the nature of the business and the services provided, BreakFree will operate
primarily as a cash‐based business; therefore, it is imperative that BreakFree manages
its cash. To ensure that the company is able to generate positive cash flows in the future
a budgeted cash flow statement was prepared in Appendix B, Tab 3. Per this analysis it is
estimated BreakFree will generate positive cash flows by its first year of full operation.
235.0 Human Resources Plan
5.1 Organizational Chart
Board of Directors
6 directors
4 internal, 2 External
Owner Manager Owner Manager Owner Manager Owner Manager
Carmen Brown Robyn Evans Christie Brittany Walter
Thomson-Barks
5.2 The Management Team
For at least the first 5 years of operations each of the 4 owner managers will run the
business and perform the duties of event planner, logistics supervisor, answering
inquiries and administration. Of the owner managers, two will be in charge of planning
the events and logistics while the other two will be in charge of the other two duties.
These positions will be on a part‐time basis. As a team, the owner managers have
extensive experience in event planning and logistics such as Roughriders trips,
pubcrawls, house boating trips, ski trips, Reading Break vacations, etc. through formal
settings such as student executive positions as well as informal settings such as events
among friends.
5.3 Support Staff
The goal of the support staff will to ensure that the customers are satisfied with the
service they have obtained as well as to assist BreakFree in its marketing campaign.
The positions will include:
Hosts:
Duties will be to attend all BreakFree events and roads trips to ensure that
everything goes according to plan as well as to answer any questions or concerns
that customers may have
24 They will also help BreakFree carry out the marketing campaign as described in
the marketing plan.
These positions will part time in nature requiring the staff to primarily work on
Friday and Saturday nights. For road trips these employees will be required to
attend the trip and work the length of the trip which usually lasts between 3‐4
days. For the Mexican trips the host will again be required to work the length of
the trip which will typically last between 7‐10 days.
Bus Driver:
As all the busses will be transporting over 24 passengers for each bus event
BreakFree will hire, on a contractual basis, drivers that have a class 2 driver’s
license in the Province of Saskatchewan.
5.4 Human Resource Strategy
To motivate those employees that are not considered owner managers BreakFree will
provide them with an opportunity to buy onto any of the offered trips or organized pub‐
crawl’s that they are not working at a reduced rate.
256.0 Financial Plan
6.1 Financial Model
As an incorporated business, we have included both equity and debt financing in our
business model. This financial plan has been established to take advantage of having a
leveraged financial position while ensuring that the equity investors will have security
over their investment.
To finance our initial capital expenses, we determined that we would require initial cash
investments, from both our debt and equity sources, of $700K. This capital structure
results in a debt to equity ratio of 1.25 as at the initial investment, however this will
decrease as the bank loan is paid off.
Equity Investors
Under the projected financial model, we will require equity investment of $300,000.
This amount will be earned from both family and friends of the founders of BreakFree.
Based on our projected forecasts, we will begin to payout dividends in 2012 which is the
forth full year of operations.
The dividend payout policy will be done on a discretional manor, based on annual
meetings with the board of directors. The dividends will be paid out such to provide
reasonable compensation to the shareholders, while still allowing room for the future
growth of the company.
26Debt Financing
Our financial plan also involves debt financing, under the following terms and
assumptions:
Initial Loan $400,000
Subsequent Loan, 2011 $50,000
Term 10 years
Interest Rate 12% per year
The initial loan will be taken out in September 2009, in order to finance the purchase of
all of the capital investments.
The subsequent loan in 2011 is required to finance the purchase of an additional coach
bus, in order to complement the growth of the overall business operations and provide
more opportunities to generate additional revenue in the future.
We have assumed the terms of the bank loan will remain constant between the 2 loans,
and thus the initial loan will be paid off in full in 2019 and the subsequent loan in 2021.
6.2 Business Valuation
As outlined and demonstrated in Appendix B, ‘Valuation’ tab, based on the projections
BreakFree would show a positive net present value (NPV) both based on the 6 year
forecasted values and on a go forward basis. The NPV analysis was done based on
projected nominal growth of 5% and a required discount rate to investors of 25%.
These estimated values have been assessed based on the overall risk profile of the
company as well as considering the saturation that would occur in the market, hence
the conservative growth rate.
27Earnings Based Valuation Projections - Discounted Cash Flow Method
Equity Only
BreakFree
2009 2010 2011 2012 2013 2014
Net Income, before Tax (51,448) 4,573 14,317 65,858 71,185 95,726
Adjustments:
Accounting Depreciation 15,478 46,433 50,286 50,286 50,286 50,286
Adjusted Net Income, before tax (35,970) 51,006 64,603 116,144 121,471 146,012
Income Taxes - 8,161 10,336 18,583 19,435 23,362
Adjusted Future Cash Flows -
(excluding investment) (35,970) 42,845 54,266 97,561 102,035 122,650 ##
Equity Investment 300,000
Projected Future Cash Flows -
(including investment) (335,970) 42,845 54,266 97,561 102,035 122,650 ##
Growth Rate: 5%
Required Return: 25%
Discount Rate: 19% (4)
Tax Rate 16% - Assume Small Business Rate
CCA Rate: 20% - Class 8
Initial Investment: 636,500 - Refer to Capital Budget
PV, future Cash Flows 327,272 (2)
PV, CCA Tax Shield 47,989 (1)
NPV 75,261 (3)
IRR 28%
6.3 Financial Statement Projections
To effectively assess the financial viability of the company, projected financial figures
have been calculated for the first six year ends (first five year of full operations) in order
to ensure that BreakFree possessed both financial viability, as expressed in the Cash
Flow Projections, as well as financial profitability, as expressed in the Income Statement
Projections
Refer to Appendix B for further cost breakdown and analysis performed.
Assumption: Due to the nature of the business operations, the financial projections have
assumed that the business’ accrual basis of accounting will be equal to the cash basis.
As a result, the financial projections do not include any balances payable or receivable ay
year end.
28Projected Balance Sheet:
Six Year Balance Sheet Projection
BreakFree
2009 2010 2011 2012 2013 2014
Assets
Cash $ 15,530 $ 17,804 $ 18,316 $ 44,923 $ 51,004 $ 52,700
Capital Assets $ 636,500 $ 636,500 $ 694,300 $ 694,300 $ 694,300 $ 694,300
Accumulated Amortization $ (15,478) $ (61,911) $ (112,197) $ (162,483) $ (212,769) $ (263,055)
Total Assets $ 636,552 $ 592,393 $ 600,419 $ 576,740 $ 532,535 $ 483,945
Liabilities
Bank Loan 388,000 340,000 336,000 282,000 228,000 174,000
Total Liabilities $ 388,000 $ 340,000 $ 336,000 $ 282,000 $ 228,000 $ 174,000
Equity
Common Shares $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
Retained Earnings $ (51,448) $ (47,607) $ (35,581) $ (5,260) $ 4,535 $ 9,945
Total Liability and Equity $ 636,552 $ 592,393 $ 600,419 $ 576,740 $ 532,535 $ 483,945
29Projected Cash Flow Statement:
Six Year Cash Flow
BreakFree
Fiscal Year Begins: Sep-09
Pre-
Startup
EST 2009 2010 2011 2012 2013 2014
Cash on Hand (begin year) 63,500 15,530 17,804 18,316 44,923 51,004
CASH RECEIPTS
Cash Sales 30,700 341,750 384,675 468,434 509,449 560,394
Equity Investment 300,000
Bank Loan 400,000 50,000
TOTAL CASH RECEIPTS 700,000 30,700 341,750 434,675 468,434 509,449 560,394
Total Cash Available 700,000 94,200 357,280 452,479 486,750 554,372 611,398
CASH PAID OUT
COGS 10,630 115,544 134,763 161,353 189,678 208,646
Salary expenses 15,000 60,000 69,000 79,350 91,253 104,940
Rent 4,050 16,200 16,200 16,200 16,200 16,200
Office Expenses 250 1,000 1,150 1,323 1,521 1,749
Insurance 3,200 12,800 12,800 12,800 12,800 12,800
Marketing 21,900 44,400 45,840 47,424 49,166 49,166
Interest Expense 11,640 40,800 40,320 33,840 27,360 20,880
Income Tax 0 0 732 2,291 10,537 11,390 15,316
SUBTOTAL 0 -66,670 -291,476 -322,363 -362,827 -399,368 -429,698
Loan principal payment -12,000 -48,000 -54,000 -54,000 -54,000 -54,000
Capital Purchases -636,500 -57,800
Other startup costs
Dividends 0 0 0 -25,000 -50,000 -75,000
TOTAL CASH PAID OUT 636,500 78,670 339,476 434,163 441,827 503,368 558,698
Change in Cash 63,500 -47,970 2,274 512 26,607 6,081 1,696
Cash at End of year 63,500 15,530 17,804 18,316 44,923 51,004 52,700
30Projected Income Statement:
Six Year Profit and Retained Earnings Projection 10%
BreakFree
2009 2010 2011 2012 2013 2014
Revenue
Organized pub crawls $ 6,000 $ 21,000 $ 24,000 $ 27,000 $ 30,000 $ 33,000
Personal pub crawl $ 1,500 $ 21,500 $ 24,725 $ 28,434 $ 32,699 $ 35,969
Rider Trip $ - $ 73,150 $ 73,150 $ 67,100 $ 67,100 $ 73,810
Stampede Trip $ - $ 46,400 $ 69,600 $ 92,800 $ 92,800 $ 102,080
Ski Trips $ 23,200 $ 139,200 $ 139,200 $ 185,600 $ 185,600 $ 204,160
Mexico $ - $ 40,500 $ 54,000 $ 67,500 $ 101,250 $ 111,375
Revenue $ 30,700 $ 341,750 $ 384,675 $ 468,434 $ 509,449 $ 560,394
Cost of Services Sold
Organized pub crawls 1,044 3,654 4,176 4,698 5,220 $ 5,742
Personal pub crawl 522 7,830 9,005 10,355 11,908 $ 13,099
Rider Trip - 30,484 30,484 27,776 27,776 $ 30,554
Stampede Trip - 14,044 21,066 28,088 28,088 $ 30,897
Ski Trips 9,064 27,192 27,192 36,256 36,256 $ 39,882
Mexico - 32,340 42,840 54,180 80,430 $ 88,473
Gross Profit $ 20,070 $ 226,206 $ 249,913 $ 307,081 $ 319,770 $ 351,747
Operating Expenses
Salary expenses $ 15,000 $ 60,000 $ 69,000 $ 79,350 $ 91,253 $ 104,940
Rent $ 4,050 $ 16,200 $ 16,200 $ 16,200 $ 16,200 $ 16,200
Insurance $ 3,200 $ 12,800 $ 12,800 $ 12,800 $ 12,800 $ 12,800
Depreciation $ 15,478 $ 46,433 $ 50,286 $ 50,286 $ 50,286 $ 50,286
Marketing $ 21,900 $ 44,400 $ 45,840 $ 47,424 $ 49,166 $ 49,166
Interest Expense $ 11,640 $ 40,800 $ 40,320 $ 33,840 $ 27,360 $ 20,880
Office Expenses $ 250 $ 1,000 $ 1,150 $ 1,323 $ 1,521 $ 1,749
Total Expenses $ 71,518 $ 221,633 $ 235,596 $ 241,223 $ 248,586 $ 256,022
Net Profit Before Tax (51,448) 4,573 14,317 65,858 71,185 95,726
Income Taxes - 732 2,291 10,537 11,390 15,316
Net Profit After Tax (51,448) 3,841 12,026 55,321 59,795 80,410
Retained Earnings
Opening - (51,448) (47,607) (35,581) (5,260) 4,535
Net Income (51,448) 3,841 12,026 55,321 59,795 80,410
Dividends - - - (25,000) (50,000) (75,000)
Retained Earnings, end (51,448) (47,607) (35,581) (5,260) 4,535 9,945
Note ‐ Refer to Section 4.3 for further information regarding Revenue and Cost of
Services Sold projections.
31Appendix A ‐ Building Floor Plan
Business Floor Plan:
Business Location:
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