City Track Bus Service Business Plan

0
183
City Track Bus Service Business Plan

Contents

  • 1.0 Executive summary
    • 1.1 Vision
    • 1.2 Mission
    • 1.3 Keys to Success
  • 2.0 The company
    • 2.1 Company ownership
    • 2.2 History of the company
    • 2.3 Startup summary
  • 3.0 Product/services
  • 4.0 Market analysis and summary
    • 4.1 Market
    • 4.3 SWOT analysis
    • 4.4 Marketing
    • 4.5 Competition
    • 4.6 Sales strategy
  • 5.0 Strategy and implementation summary
    • 5.1 Sales forecast
    • 5.2 Summary of website development
  • 6.0 Management
    • 6.1 Team
    • 6.2 Management summary
  • 7.0 Financial plan
    • 7.1 Break even analysis
    • 7.2 Projected Cash Flow
    • 7.3 Projected Balance Sheet
    • 7.4 Business ratios
  • Appendix

1.0 Executive Summary

For​​ several​​ years, there has​​ been​​ congestion​​ in​​ the​​ public​​ transport​​ within​​ the​​ city.​​ This​​ has​​ been​​ caused​​ by​​ few​​ public​​ transports.​​ People​​ have​​ moved​​ away​​ from​​ the​​ public​​ transport​​ and​​ invest​​ on​​ private​​ vehicles.​​ However,​​ most​​ of​​ the​​ people​​ live​​ within​​ the​​ poverty​​ level,​​ and​​ they​​ cannot​​ afford​​ private​​ vehicles.​​ This​​ has​​ called​​ high​​ demand​​ for​​ expansion​​ of​​ the​​ industry​​ to​​ meet​​ the​​ rising​​ demands.​​ The​​ city​​ track​​ bus​​ service​​ plans​​ to​​ offer​​ transport​​ services​​ to​​ passengers​​ within​​ and​​ outside​​ the​​ city.​​ However, since there is​​ high​​ demand​​ of​​ people​​ residing​​ outside​​ the​​ city,​​ the​​ bus​​ track​​ service​​ will​​ major​​ on​​ people​​ outside​​ the​​ side​​ the​​ city.​​ This​​ will be on peak​​ hours​​ of​​ the​​ day,​​ that​​ is,​​ mornings​​ and​​ evenings​​ from Monday to Saturday. During​​ the​​ day​​ time,​​ the​​ buses​​ will​​ ferry​​ passengers​​ within​​ the​​ city.​​ Buses are going to offer as​​ many​​ runs as they can.​​ The​​ operation​​ starts​​ from 5.00 am to 11.00pm.​​ This​​ is​​ because​​ many​​ city​​ residents​​ work​​ at​​ extreme​​ times​​ of​​ the​​ day​​ and​​ all​​ should be​​ accommodated.​​ This​​ will​​ assure​​ the​​ company​​ stable​​ market​​ all​​ the​​ time.​​ It​​ is approximated​​ that​​ 18,000​​ people​​ accessing​​ the​​ town​​ every​​ day.​​ Some​​ of them​​ use​​ personal​​ cars, others​​ buses​​ and​​ taxis​​ while​​ the​​ majority​​ on​​ foot.​​ The​​ available​​ transport​​ vehicles​​ have​​ taken​​ the​​ opportunity​​ of​​ scarcity​​ and​​ escalated​​ the​​ fares​​ making​​ the​​ ordinary​​ citizens​​ walk​​ to​​ and​​ fro​​ the​​ city​​ daily.​​ Nevertheless, their​​ condition​​ is​​ pathetic.

In​​ order​​ to​​ reach​​ many​​ customers,​​ the​​ city​​ track​​ bus​​ service​​ will​​ prepare​​ business​​ cards​​ and​​ brochures​​ showing​​ the​​ services​​ offered​​ and​​ the​​ location​​ of​​ the​​ company. To​​ reach​​ many​​ customers,​​ the​​ company​​ will​​ introduce​​ online​​ services.​​ This​​ include​​ creation​​ of​​ the​​ company​​ website,​​ use​​ of Facebook​​ and​​ twitter​​ and​​ even​​ internet.​​ This​​ will​​ enable​​ other​​ customers,​​ especially​​ those​​ who​​ want​​ to​​ hire​​ for​​ private​​ use​​ or​​ other​​ functions, to​​ access​​ the​​ services. There will be a​​ central​​ office​​ where​​ the​​ company​​ manages​​ its​​ operations.​​ The​​ long​​ distant​​ travelers​​ will​​ book​​ for​​ their​​ tickets​​ to​​ facilitate​​ effective​​ service.​​ The​​ company​​ will​​ fix​​ bus​​ stations​​ on​​ all​​ routes.​​ The​​ passengers​​ gather​​ at​​ the​​ bus​​ stops​​ for​​ easy​​ service​​ delivery.​​ As​​ the​​ company​​ grows,​​ the​​ buses​​ will be​​ fixed​​ with​​ modern​​ flat-screen TV​​ sets.​​ This​​ will​​ entertain​​ the​​ passengers​​ as​​ the​​ travel.​​ Apart​​ from​​ this,​​ music​​ systems​​ shall be amalgamated.​​ This​​ strategy​​ has not​​ been​​ employed​​ by​​ the​​ existing​​ companies.

The​​ city​​ track​​ company​​ will​​ have​​ centralized​​ management​​ system​​ with​​ the​​ manager​​ having​​ full​​ control​​ over them.​​ The​​ central​​ office​​ located​​ within​​ the​​ town​​ will​​ include​​ the​​ company​​ management​​ and​​ service​​ delivery.​​ The​​ general​​ manager​​ will be​​ the​​ owner​​ and​​ will​​ employ​​ other​​ management​​ staff.​​ He​​ is a​​ potential, opportunistic​​ and​​ ambitious​​ businessman.​​ The​​ company​​ expects​​ to maximize​​ profits​​ within​​ the​​ first​​ three​​ years​​ of​​ inception.

Summary of the Sales forecast

1.1 Vision

To be​​ the​​ best​​ transporter​​ for​​ customer​​ choices​​ and​​ raise​​ the​​ customer​​ expectations above​​ the​​ ordinary​​ levels.

1.2 Mission

The​​ mission​​ of​​ the​​ city​​ track​​ bus​​ company​​ is to​​ offer​​ safe, quality​​ and​​ convenient​​ transport​​ service​​ to​​ all​​ esteemed​​ customers.

1.3 Keys to Success

City​​ track​​ chauffeurs​​ are​​ professional,​​ experienced, commercially certified​​ drivers​​ and​​ conductors.

The​​ management​​ staff​​ is​​ professional,​​ friendly​​ and​​ loyal​​ to all​​ the​​ customers.

City​​ track​​ bus​​ Service Company​​ cares​​ and​​ strives​​ to​​ offer​​ its​​ time​​ and​​ resources​​ to​​ local​​ schools,​​ the​​ poor​​ and​​ other​​ organizations.

2.0 The​​ Company

The​​ city​​ track​​ company​​ is one of​​ the​​ transport​​ companies​​ that​​ offers​​ transportation​​ to​​ passengers​​ within​​ and​​ outside​​ the​​ city.​​ It​​ offers​​ public​​ transport,​​ service​​ delivery​​ and​​ hire​​ both​​ for​​ private​​ and​​ commercial​​ functions​​ with a​​ vast​​ range​​ of​​ competitive​​ prices.​​ As​​ the​​ city​​ is​​ the​​ most​​ populous​​ town​​ in​​ the​​ country,​​ several​​ people​​ need​​ mobility​​ from one​​ point​​ to​​ another.​​ The​​ company​​ seeks​​ to​​ fill​​ the​​ gaps​​ that​​ have​​ been​​ left​​ open​​ by​​ the​​ existing​​ companies.​​ This​​ will​​ help​​ the​​ customers​​ to​​ move​​ with​​ ease​​ and​​ reduce​​ congestion​​ of​​ people​​ in​​ the​​ streets.​​ As​​ a​​ matter​​ of​​ fact,​​ many​​ people​​ have​​ relocated to​​ the​​ outskirts of​​ the​​ city​​ and​​ need​​ constant​​ transportation.

2.1 Company Ownership

The Company is owned by Mark​​ Henry. Although he is the owner, he will partner with other companies, which have already shown interest in the same industry. The other partners will be passive most managerial functions thus taking a quarter of the shares of the company.

2.2 History of the Company

In December 2013, twelve​​ bus​​ operators​​ within​​ the​​ city​​ withdrew​​ their​​ vehicles​​ from​​ the​​ road.​​ The​​ total​​ number​​ of​​ the​​ buses​​ operating​​ reduced​​ by​​ almost​​ half​​ at​​ that​​ time.​​ This​​ was​​ because​​ of​​ poor​​ management​​ and​​ strict​​ traffic​​ rules.​​ The​​ managers​​ opted to​​ hold​​ their​​ vehicles​​ till accommodative​​ policies​​ were​​ put​​ in​​ place. In January 2014, within​​ the​​ same​​ city,​​ most​​ of​​ the​​ fourteen-passenger​​ vans​​ were​​ converted​​ to eleven-passenger.​​ Prior​​ to​​ conversion,​​ the​​ 14​​ passenger​​ vans​​ were​​ very​​ flexible​​ to​​ carry​​ big​​ luggage, which​​ the​​ 11-passenger​​ vehicle​​ could not.​​ Therefore,​​ the​​ conversion​​ had​​ worsened​​ the​​ situation​​ by​​ disregarding​​ passengers​​ with​​ big​​ luggage.​​ It​​ was​​ then​​ that​​ the​​ owner​​ if​​ the​​ city​​ track​​ company​​ concealed​​ the​​ idea​​ and​​ opportunity​​ to​​ start​​ a​​ company​​ to​​ curb​​ on​​ this.​​ The​​ city​​ track​​ intends​​ to​​ travel​​ up to 500 kilometers per​​ day​​ per​​ vehicle​​ ferrying​​ up to 6000​​ passengers.

To​​ accommodate​​ the​​ needs​​ of​​ this​​ large​​ population,​​ the​​ company​​ plans​​ to​​ buy​​ four​​ new​​ 40-passenger​​ buses.​​ These​​ buses​​ will all be​​ fixed​​ with​​ safety​​ belts​​ as​​ well​​ as​​ the​​ back​​ reclinable​​ seats​​ purposely​​ for​​ safety​​ and​​ comfort.

2.3 Startup Summary

City​​ Track Company will​​ begin​​ its​​ operation​​ with a​​ set​​ of​​ machinery​​ and​​ expenses​​ which may be​​ called​​ fixed​​ assets.​​ The​​ list​​ is​​ shown​​ below.

  • Office furniture

  • Computers

  • Cash receipt books

  • Tool and first aid kits

  • Fire security installation

  • Insurance covers

The​​ owner​​ will​​ begin​​ with two​​ buses​​ as​​ he​​ settles​​ down​​ other​​ expenses.

Past Performance

 

2015

2016

2017

Sales

$0

$0

$0

Gross Margin

$0

$0

$0

Gross Margin %

0.00%

0.00%

0.00%

Operating Expenses

$750,000

$900,000

$1,200,000

Balance Sheet

 

 

 

Current Assets

 

 

 

Cash

$200,000

$300,000

$500,000

Other Current Assets

$0

$0

$0

Total Current Assets

$200,000

$300,000

$500,000

Long-term Assets

Long-term Assets

$600,000

$600,000

$1,300,000

Accumulated Depreciation

$80,000

$160,000

$240,000

Total Long-term Assets

$520,000

$440,000

$1,060,000

Total Assets

$720,000

$740,000

$1,560,000

Current​​ Liabilities

Accounts Payable

$100,000

$140,000

$160,000

Current Borrowing

$0

$0

$0

Other Current Liabilities (interest free)

$0

$0

$0

Total Current Liabilities

$100,000

$140,000

$160,000

Long-term Liabilities

$200,000

$100,000

$80,000

Total​​ Liabilities

$300,000

$240,000

$960,000

Paid-in Capital

$0

$0

$0

Retained Earnings

$330,000

$384,000

$455,000

Earnings

$90,000

$116,000

$145,000

Total Capital

$420,000

$500,000

$600,000

Total Capital and Liabilities

$520,000

$640,000

$760,000

Other Inputs

0

0

0

Payment Days

0

0

0

Other basic requirements at startup are as follows

Prediction of Profit and loss

Year 1

Expenditure

 

Overheads (electricity, water, communication, other bills and fuel)

$26,000.00

Salaries

$496,000.00

Legal

$4,000.00

Insurance

$3,000.00

Maintenance and repairs

$8,000.00

Other transport products and products

 

Broadband and landline

$10,000.00

Website development and management

$9,000.00

Marketing and other expenses

$17,000.00

Non-current assets in​​ form of cash and money in bank

$730,000.00

Total requirements

$1,303,000.00

3.0 Product/Services

City​​ track​​ Bus Company will​​ offer​​ a​​ variety​​ of​​ services​​ to​​ the​​ customers​​ ranging​​ from​​ transportation​​ to​​ service​​ delivery.​​ Service​​ delivery​​ will​​ include​​ and​​ not​​ limited​​ to​​ transportation​​ of​​ customers’​​ parcels​​ to their​​ destinations.​​ However, door-to-door​​ delivery​​ may not be​​ provided​​ unless on​​ special​​ appeal.​​ The​​ buses, which​​ ferry​​ passengers​​ far​​ away​​ from​​ the​​ city, will​​ have​​ to​​ book​​ for​​ their​​ tickets​​ online​​ if​​ they​​ cannot​​ access​​ the​​ office. On​​ the​​ other​​ hand,​​ the​​ company​​ will​​ offer​​ telephone​​ numbers​​ so​​ that​​ it​​ is​​ convenient​​ to all​​ the​​ people.​​ Customers​​ making​​ online booking​​ or​​ making​​ phone​​ calls​​ for​​ any​​ service​​ will be​​ required​​ to​​ provide​​ full​​ credentials to​​ reduce​​ burglary​​ and​​ mischief.​​ However,​​ only​​ limited​​ buses​​ will​​ operate​​ on​​ long​​ distance​​ while​​ more​​ on within-the-city​​ service.​​ Frequent​​ users of​​ the​​ buses​​ will be​​ issued​​ with​​ loyalty​​ cards​​ so​​ that​​ at​​ the​​ end​​ of​​ the​​ month,​​ they​​ redeem​​ their​​ loyalty​​ points.​​ These​​ passengers​​ will be​​ ferried​​ at a subsidized​​ price.​​ However,​​ the​​ company​​ will​​ assure​​ its​​ customers​​ full​​ safety​​ and​​ integrity​​ in​​ service.​​ Other​​ services​​ the​​ company​​ provides​​ are:​​ providing​​ subsidized​​ transport​​ cost​​ on​​ public​​ holidays,​​ offering​​ free​​ transport​​ to​​ disabled,​​ young​​ and​​ the​​ aged.​​ This​​ will​​ ensure​​ fairness​​ to​​ all​​ travelers. Issuing counterfoil​​ receipts​​ will​​ facilitate​​ accountability​​ for​​ all​​ the​​ buses.

The​​ table​​ below​​ show​​ the​​ bus​​ charges​​ ($) between​​ various​​ bus​​ stations​​ and​​ city.

Uplands

12

Fig Towers

 

 

13

10

Twin Estate

 

14

13

9

Park yard

16

14

11

City Centre

7

Children, aged and the disabled are absolutely free!

4.0 Market​​ Analysis​​ and​​ Summary

Several​​ factors​​ are​​ anticipated​​ to​​ affect​​ the​​ day-to-day​​ operation​​ of​​ buses.​​ Some​​ of​​ these​​ factors​​ increase​​ the​​ demand​​ of​​ the​​ city​​ bus​​ track​​ services​​ within​​ and​​ outside​​ the​​ town.

The​​ city​​ has​​ several​​ bus​​ stops​​ for​​ dropping​​ and​​ collecting​​ passengers.​​ It​​ is​​ also​​ concentrated​​ with​​ various​​ offices​​ and​​ industries​​ with​​ several​​ employees.​​ Even​​ though​​ other​​ buses​​ are in operational,​​ most​​ of them are​​ inefficient​​ during their​​ service​​ delivery.

For the area has​​ been​​ steadily​​ rising​​ for​​ the​​ last​​ three​​ years.​​ Most​​ People​​ have​​ migrated​​ to​​ the​​ city​​ for​​ employment​​ and​​ business​​ deals. Interestingly,​​ the​​ city​​ market​​ has​​ grown​​ to be an​​ international​​ market​​ attracting​​ several​​ investors.

Parking​​ fee​​ within​​ the​​ town​​ has of​​ late​​ reduced​​ by​​ half​​ within​​ the​​ central​​ business​​ district.​​ This​​ is​​ very​​ favorable​​ for​​ city​​ Track Company.

4.1 Market

The​​ target​​ market​​ for​​ city​​ Track Company may be​​ divided​​ into​​ local​​ passengers,​​ who​​ are​​ the​​ daily​​ travelers​​ and​​ the​​ long​​ distance​​ travelers.​​ Daily​​ travelers​​ form​​ the​​ largest​​ part​​ of​​ the​​ market​​ share​​ of​​ the​​ company​​ as​​ they​​ need​​ the​​ services​​ daily. Since​​ they​​ form​​ a​​ larger​​ part​​ of​​ the​​ market,​​ the​​ company​​ will​​ adopt​​ solid​​ strategies​​ to​​ penetrate​​ and​​ remain​​ competitive​​ in​​ the​​ market.

4.2 Market Segmentation

City​​ Track Company will​​ focus​​ on two​​ main​​ customer​​ groups.​​ These​​ are:

  • Employees,​​ business​​ people​​ and​​ ordinary​​ citizens

  • Hire​​ groups

The​​ pie​​ chart​​ below​​ shows​​ the​​ market​​ segmentation​​ for​​ the​​ two​​ groups.

 

 

 

Market Analysis

 

 

2015

2016

2017

2018

2019

 

Potential Customers

Growth

CAGR

Employees, business​​ people​​ and ordinary citizens

15%

180,000

207,000

238,050

273,760

314,820

15.00%

Hire groups

10%

100,000

110,000

121,000

133,100

146,410

10.00%

Total

13.29%

280,000

317,000

359,050

406,860

461,230

13.29%

4.3 SWOT Analysis

Strengths

Weaknesses

  • Very​​ Low bus fares

New in the market and faces stiff competition

  • New buses

Few buses at its time of inception

  • Professional management team

Integrity of the drivers and turn-boys may be compromised

  • Flexible for both long and short distant journeys

 

  • Offer discount fares to special groups

Special groups may be opportunistic to the offer

  • Delivery of parcels

 

Opportunities

Threats

  • Growing market in the city

Substituting competitors

  • Growing technology services awareness and loyalty

Rigidity of the​​ customers to use the buses

  • Many employees without personal vehicles

Jealousy of the competitors

  • Withdrawal of other companies from the operation

Congestion as the city grows

4.4 Marketing

The city track company will target all the city​​ residents and other travelers who wish to hire the buses. In order to reach at these potential customers, the company will make use of the local newspapers, journals and advertisement over the radio and television. However, travelers will be issued with business card at the bus stops. This will be done to minimize the production costs. However, these are not enough: buses will be fixed with stickers on the sides as a way of marketing the company services.

Above all, a company website will be designed to attract the internet users. It has been realized that most of the city dwellers have internet mobile phones where they can access internet services any time. Facebook and​​ twitter accounts shall be fully utilized. In fact, most people have these accounts, and​​ they access almost daily. Company profile will be created there with all the services enlisted. The company will upload pictures and movies to these sites for customers to witness the company’s services.

4.5 Competition

Stiff​​ competition​​ will be​​ expected​​ from​​ the​​ current​​ City Hooper​​ bus​​ company​​ which is currently one of​​ the​​ dominant​​ companies​​ within​​ the​​ city.​​ However,​​ this​​ is not​​ the​​ only​​ company. There are​​ other​​ small​​ companies.​​ These​​ are:

Best​​ Ways​​ Safaris-​​ this​​ is one of​​ the​​ companies​​ that has​​ been​​ in​​ operation​​ for​​ several​​ years.​​ They​​ operate​​ within​​ the​​ city​​ only.​​ It​​ has a​​ fleet​​ of​​ vehicles,​​ but​​ most​​ have​​ been​​ grounded​​ due​​ to​​ poor​​ management​​ and​​ maintenance.​​ They​​ charge​​ very​​ high​​ prices​​ with​​ poor​​ services​​ in​​ turn.

City​​ Hopper-​​ this​​ is one of​​ the​​ companies​​ that​​ serve​​ most​​ of​​ customers​​ in​​ the​​ city.​​ It​​ has​​ put​​ in​​ place​​ bus​​ stations​​ at​​ strategic​​ places​​ within​​ the​​ outskirts of​​ the​​ town.​​ However,​​ the​​ number​​ of​​ buses​​ operating​​ are​​ very​​ few. In​​ most​​ cases,​​ it​​ takes​​ the​​ opportunity​​ by​​ escalating​​ the​​ fares​​ especially​​ at​​ rush​​ hours​​ and​​ rainy​​ season.​​ This​​ company​​ would​​ have​​ done​​ so​​ well​​ if​​ it​​ had​​ reasonable​​ prices​​ at peak​​ time. Financially​​ stable​​ people​​ end​​ up​​ using​​ them​​ alone​​ leaving​​ the​​ others.

Modern Bus-​​ this​​ in one of​​ the​​ companies​​ also​​ that​​ offers​​ competitive​​ services​​ to its​​ customers.​​ It​​ has​​ embraced​​ all​​ the​​ modern​​ facilities​​ with​​ fully​​ integrated​​ internet​​ systems​​ fixed​​ on them.​​ It​​ is​​ mainly​​ a​​ classical​​ bus​​ that​​ ferries​​ only​​ a​​ class​​ of​​ people.​​ Most​​ ordinary​​ people​​ cannot​​ afford​​ these​​ buses​​ due​​ to​​ notoriously​​ high​​ prices.

4.6 Sales Strategy

For​​ the​​ company​​ to​​ maintain​​ high​​ integrity​​ and​​ with its​​ customers,​​ it​​ will​​ provide​​ competitive​​ prices​​ to its​​ customers.​​ This​​ includes​​ slightly​​ reducing​​ the​​ bus​​ fares​​ as​​ compared​​ with​​ its​​ competitors.​​ This​​ will​​ attract​​ many​​ customers​​ to​​ use​​ the​​ buses.​​ This​​ will​​ give​​ the​​ company​​ upper​​ hand​​ upon​​ other​​ companies.​​ Offering​​ the​​ hire​​ services​​ for​​ the​​ company​​ vehicles​​ will​​ also​​ boost​​ the​​ sales. At​​ the​​ moment, none of​​ the​​ companies​​ allow​​ their​​ buses​​ for​​ hire​​ for​​ unknown​​ reasons. In​​ rare​​ cases​​ do​​ you​​ see​​ city​​ buses​​ being​​ hired​​ for​​ transportation​​ outside​​ the​​ town.

5.0 Strategy​​ and​​ Implementation​​ Summary

The​​ company​​ has​​ put​​ in​​ place​​ a​​ stable​​ customer​​ support​​ both​​ within​​ the​​ city​​ and​​ bus​​ stations.​​ Some​​ office​​ sites​​ have​​ been​​ identified​​ in​​ key​​ areas​​ like​​ uplands, Fig Towers​​ and​​ park​​ yard.​​ This​​ is in​​ response​​ with​​ the​​ high​​ demand​​ of​​ the​​ transport​​ service​​ in​​ the​​ city​​ and​​ the​​ need​​ for​​ extra​​ buses​​ to​​ meet​​ the​​ customer​​ needs. To​​ facilitate​​ high​​ company​​ sales,​​ the​​ buses​​ will​​ pick​​ and​​ deliver​​ passengers​​ at​​ the​​ bus​​ stops​​ in​​ all​​ the​​ stations​​ within​​ the​​ city.​​ For​​ best​​ services,​​ customers​​ will be​​ assured​​ full​​ safety​​ especially​​ those​​ operating​​ late​​ hours.

5.1 Sales Forecast

The figure below is city​​ Track Company’s sales forecast for three years.

Sales Forecast

 

2015

2016

2017

Sales

 

 

 

Bus Tickets

$5,500,000

$5,950,000

$6,500,000

Other

$0

$0

$0

Total Sales

$5,500,000

$5,950,000

$6,500,000

Direct Cost of Sales

2015

2016

2017

Bus Tickets

$670,000

$730,000

$780,000

Other

$0

$0

$0

Subtotal Direct Cost of Sales

$670,000

$730,000

$780,000

5.2 Summary of Website Development

Website is one of​​ the​​ best​​ sources​​ of​​ advertisement​​ and​​ information​​ of​​ product​​ and​​ services.​​ It​​ provides​​ all​​ the​​ details​​ of​​ the​​ company,​​ products​​ and​​ services​​ as​​ well​​ as​​ the​​ management​​ level.​​ The​​ city​​ track​​ bus​​ company​​ will​​ design​​ a website that​​ provides​​ all​​ this information.​​ The​​ company​​ website will be​​ designed​​ by E-World Design Company, which is​​ the​​ best​​ web​​ designer​​ in​​ town.​​ This​​ design​​ company​​ has​​ experienced​​ professionals​​ who​​ make​​ very​​ nice​​ designs​​ at affordable​​ prices.

6.0 Management

The​​ general​​ manager​​ of City Track Company is an​​ experienced,​​ ambitious​​ young​​ man​​ who​​ has​​ managed​​ fleet​​ of​​ vehicles​​ for​​ his​​ family.​​ These managerial skills​​ have​​ enabled​​ him to​​ enrich​​ his​​ knowledge​​ on​​ how​​ to​​ start​​ and​​ maintain​​ business.​​ He​​ has​​ been​​ exposed​​ directly​​ to​​ big​​ organization​​ that​​ hold​​ key​​ positions​​ in​​ the​​ city.​​ He​​ holds​​ a​​ bachelor​​ degree​​ in​​ business​​ management​​ from Michigan University.​​ He​​ also​​ holds​​ a​​ master’s​​ degree​​ in​​ strategic​​ management​​ from​​ the​​ same​​ university. During his​​ studies​​ at​​ the​​ university,​​ he​​ encountered​​ several​​ challenges​​ especially​​ when​​ he​​ attended​​ his​​ classes.​​ He​​ rarely​​ got​​ a​​ vehicle​​ to​​ ferry​​ him to​​ the​​ campus.​​ If​​ he​​ got​​ during​​ the​​ day,​​ he​​ had​​ to​​ pay​​ dearly.​​ It​​ was​​ even​​ worst​​ when​​ he​​ returned​​ late​​ in​​ the​​ evening.​​ It​​ was​​ then​​ the​​ he​​ approached​​ his​​ father​​ to​​ start​​ a​​ bus​​ company​​ where​​ he​​ was​​ given​​ capital.​​ He​​ partnered with​​ other​​ people​​ who​​ were​​ likeminded.​​ Therefore,​​ he​​ becomes​​ the​​ general​​ manager​​ of​​ the​​ company. To​​ facilitate​​ effective​​ management​​ of​​ the​​ company,​​ city​​ track​​ will​​ have​​ other​​ staff​​ members.​​ These​​ are​​ the​​ assistant​​ manager,​​ drivers,​​ mechanics, cashier/accountant,​​ secretary​​ and​​ the​​ turn​​ boys/conductors.​​ All​​ employees​​ are under​​ the​​ general​​ manager.​​ This​​ hierarchy​​ is​​ shown​​ below.

City track organization structure. The different fill colours show the level of responsibility.

6.1 Team

The bus company will commence with the following employees:

  • An assistant manager

  • 4 drivers

  • 4 turn boys

  • A mechanic

  • A secretary

  • An accountant

Training of employees will be done on work ethics and responsibilities including the use of company facilities and resources. This will ensure that the company​​ operates at commendable standards. Further on-job training will be conducted in accordance to the law. This will ensure the company meets the international standards. The table below shows the remuneration for the personnel for one year.

List of personnel​​ and their salaries in the year 1

Personnel

Quantity

Monthly salaries

No. of months

Total

Assistant Manager

1

$900.00

11

$9,900.00

Drivers

1

$6,500.00

11

$71,500.00

Turn boys

1

$400.00

6

$2,400.00

Mechanic

1

$500.00

12

$6,000.00

Secretary

1

$300.00

12

$3,600.00

Accountant

1

$450.00

12

$5,400.00

Total payroll

 

$9,050.00

 

$98,800.00

Personnel and salaries for the first 3 years

Personnel

Year one

Year Two

Year Three

Assistant manager

$9,900.00

$10,900.00

$12,900.00

Drivers

$71,500.00

$74,500.00

$79,000.00

Turn boys

$2,400.00

$2,700.00

$3,400.00

Mechanic

$6,000.00

$7,000.00

$8,000.00

Secretary

$3,600.00

$4,600.00

$5,600.00

Accountant

$5,400.00

$5,900.00

$6,400.00

Total Personnel

12

15

18

Total payroll

$98,800.00

$105,600.00

$115,300.00

6.2 Management Summary

Assistant manager will assist the manager in the operations. He will foresee the operations in absence of the manager. He will also work on delegated responsibilities. Above all, he will​​ ensure smooth operation of the other workers. In some occasions, he will assign duties to the other workers. Drivers and the touts will be in charge of the buses while the​​ accountant will issue and receive receipts and money collected from the bus operations. The mechanic will ensure the maintenance and service of the company vehicles. The secretary will maintain company records.

7.0 Financial plan

The following financial plan belongs to city track Bus Company

7.1 Break Even Analysis

The table and​​ chart below show the breakeven analysis for city Track Company

Break-even Analysis

Annual Revenue Break-even

$4,939,320

Assumptions:

 

Average Percent Variable Cost

15%

Estimated Annual Fixed Cost

$433,764

Pro Forma Profit and Loss

 

2015

2016

2017

Sales

$5,500,000

$5,950,000

$6,500,000

Direct Cost of Sales

$670,000

$730,000

$780,000

Other Production Expenses

$0

$0

$0

Total Cost of Sales

$670,000

$730,000

$780,000

Gross Margin

$4,830,000

$5,220,000

$5,720,000

Gross Margin %

87.82%

87.73%

88.00%

Expenses

 

 

 

Payroll

$98,800.00

$105,600.00

$115,300.00

Sales and Marketing and Other Expenses

$240,000

$270,000

$300,000

Depreciation

$185,640

$185,640

$185,640

Leased Equipment

$0

$0

$0

Utilities

$0

$0

$0

Insurance

$120,000

$120,000

$120,000

Rent

$480,000

$480,000

$480,000

Payroll Taxes

$432,000

$453,000

$477,000

Other

$0

$0

$0

Total Operating Expenses

$1,556,440

$1,614,240

$1,677,940

Profit Before Interest and Taxes

$3,273,560

$3,605,760

$4,042,060

EBITDA

$67,800

$87,700

$116,300

Interest Expense

$70,900

$66,800

$74,000

Taxes Incurred

$126,440

$187,370

$271,010

Net Profit

$3,076,220

$3,351,590

$3,697,050

Net Profit/Sales

55.93%

56.33%

56.88%

7.2 Projected Cash Flow

The estimated cash flow for​​ three years is given in the following map and table.

Pro Forma Cash Flow

2015

2016

2017

Cash Received

 

 

 

Cash from Operations

 

 

 

Cash Sales

$5,500,000

$5,950,000

$6,500,000

Subtotal Cash from Operations

$5,500,000

$5,950,000

$6,500,000

Additional Cash Received

 

 

 

Sales Tax, VAT, HST/GST Received

$0

$0

$0

New Current Borrowing

$0

$0

$0

New Other Liabilities (interest-free)

$240,000

$240,000

$240,000

New Long-term Liabilities

$0

$24,000

$24,000

Sales of Other Current Assets

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

New Investment Received

$0

$0

$0

Subtotal Cash Received

$5,740,000

$6,190,000

$6,740,000

Expenditures

2015

2016

2017

Expenditures from Operations

 

 

 

Cash Spending

$2,880,000

$3,020,000

$3,180,000

Bill​​ Payments

$2,112,530

$2,304,340

$2,485,990

Subtotal Spent on Operations

$4,992,530

$5,324,340

$5,665,990

Additional Cash Spent

 

 

 

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

Other Liabilities​​ Principal Repayment

$0

$0

$0

Long-term Liabilities Principal Repayment

$16,800

$16,800

$16,800

Purchase Other Current Assets

$24,000

$24,000

$24,000

Purchase Long-term Assets

$240,000

$240,000

$240,000

Dividends

$0

$0

$0

Subtotal Cash Spent

$5,273,330

$5,605,140

$5,946,790

Net Cash Flow

$226,670

$344,860

$553,210

Cash Balance

$599,470

$1,057,120

$1,723,130

7.3 Projected Balance Sheet

The table below shows the company’s projected balance sheet for three years.

Pro Forma Balance Sheet

 

2015

2016

2017

Assets

Current Assets

 

 

 

Cash

$599,470

$1,057,120

$1,723,130

Other Current Assets

$240,000

$480,000

$720,000

Total Current Assets

$839,470

$1,537,120

$2,443,130

Long-term Assets

 

 

 

Long-term Assets

$1,540,000

$1,780,000

$2,020,000

Accumulated Depreciation

$425,640

$611,280

$796,920

Total Long-term Assets

$1,114,360

$1,168,720

$1,223,080

Total Assets

$1,953,830

$2,705,840

$3,666,210

Liabilities and Capital

2015

2016

2017

Current Liabilities

 

 

 

Accounts Payable

$186,800

$189,630

$205,640

Current Borrowing

$0

$0

$0

Other Current Liabilities

$240,000

$480,000

$720,000

Subtotal Current Liabilities

$426,800

$669,630

$925,640

Long-term Liabilities

$63,200

$70,400

$77,600

Total Liabilities

$490,000

$740,030

$1,003,240

Paid-in Capital

$0

$0

$0

Retained Earnings

$600,000

$895,020

$1,332,210

Earnings

$295,020

$437,190

$632,350

Total Capital

$895,020

$1,332,210

$1,964,560

Total Liabilities and Capital

$1,953,830

$2,705,840

$3,666,210

Net Worth

$895,020

$1,332,210

$1,964,560

7.4 Business Ratios

Below are the business ratios for subsequent years. These ratios will be based on the Local Passenger Transportation and Standard Industrial Classification.

Ratio Analysis

 

 

 

 

 

2015

2016

2017

Industry Profile

Sales Growth

87.66%

8.28%

9.44%

4.70%

Percent of Total Assets

 

 

 

 

Other Current Assets

11.29%

15.75%

19.84%

47.00%

Total Current Assets

42.97%

56.81%

66.64%

64.90%

Long-term Assets

58.03%

44.19%

35.34%

37.10%

Total Assets

100.00%

100.00%

100.00%

100.00%

Current Liabilities

22.84%

25.75%

24.25%

30.00%

Long-term Liabilities

34.35%

25.02%

22.17%

27.20%

Total Liabilities

55.19%

51.77%

44.41%

55.20%

Net Worth

46.81%

50.23%

54.59%

44.80%

Percent of Sales

 

 

 

 

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

87.72%

87.63%

88.00%

79.20%

Selling, General & Administrative Expenses

83.45%

80.48%

79.27%

56.40%

Advertising Expenses

1.19%

1.74%

1.04%

0.80%

Profit Before Interest and Taxes

8.35%

13.62%

16.04%

2.80%

Main Ratios

 

 

 

 

Current

1.87

2.4

2.69

1.92

Quick

1.95

2.4

2.68

1.71

Total Debt to Total Assets

58.19%

53.77%

47.41%

57.20%

Pre-tax Return on Net Worth

47.09%

45.80%

46.88%

3.65%

Pre-tax Return on Assets

22.55%

24.18%

25.04%

8.90%

Additional​​ Ratios

2015

2016

2017

 

Net Profit Margin

5.56%

7.15%

9.83%

0

Return on Equity

32.96%

32.82%

32.19%

0

Activity Ratios

 

 

 

0

Accounts Payable Turnover

11.65

12.27

12.07

0

Payment Days

28

29

30

0

Total Asset Turnover

2.82

2.12

1.67

0

Debt Ratios

 

 

 

0

Debt to Net Worth

1.08

1.13

0.97

0

Current Liabilities to Liabilities

0.4

0.5

0.57

0

Liquidity Ratios

 

 

 

0

Net Working Capital

$4,126,600

$8,674,900

$15,174,900

0

Interest Coverage

6.84

11.35

14.21

0

Additional Ratios

 

 

 

0

Assets to Sales

0.46

0.55

0.66

0

Current Debt/Total Assets

23%

27%

21%

0

Acid Test

1.87

2.4

2.62

0

Sales/Net Worth

6.25

4.57

3.61

0

Dividend Payout

0

0

0

0

Appendix

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Bus tickets

$400,000

$400,000

$450,000

$450,000

$500,000

$500,000

$500,000

$400,000

$500,000

$400,000

$500,000

$500,000

Other

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Sales

$400,000

$400,000

$450,000

$450,000

$500,000

$500,000

$500,000

$400,000

$500,000

$400,000

$500,000

$500,000

 

Direct Cost of Sales

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Bus tickets

$0

$500,000

$600,000

$600,000

$700,000

$700,000

$700,000

$600,000

$600,000

$500,000

$600,000

$600,000

Other

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal​​ Direct Cost of Sales

$0

$500,000

$600,000

$600,000

$700,000

$700,000

$700,000

$600,000

$600,000

$500,000

$600,000

$600,000

 

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Assistant Manager

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

$3,500

Accountant & Secretary

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Drivers and Touts

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

$16,000

Mechanics

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

Total People

12

12

12

12

12

12

12

12

12

12

12

12

Total Payroll

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

 

General Assumptions

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Plan Month

1

2

3

4

5

6

7

8

9

10

11

12

Current Interest Rate

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

Long-term Interest Rate

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

12.00%

Tax Rate

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

Other

0

0

0

0

0

0

0

0

0

0

0

0

 

Pro Forma​​ Profit and Loss

 

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Sales

 

$400,000

$400,000

$450,000

$450,000

$500,000

$500,000

$500,000

$400,000

$500,000

$400,000

$500,000

$500,000

Direct Cost of Sales

 

$0

$50,000

$60,000

$60,000

$70,000

$70,000

$70,000

$60,000

$60,000

$50,000

$60,000

$60,000

Other Production Expenses

 

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Cost of Sales

 

$0

$50,000

$60,000

$60,000

$70,000

$70,000

$70,000

$60,000

$60,000

$50,000

$60,000

$60,000

Gross Margin

 

$400,000

$350,000

$390,000

$390,000

$430,000

$430,000

$430,000

$340,000

$440,000

$350,000

$440,000

$440,000

Gross Margin %

 

100.00%

87.50%

86.67%

86.67%

86.00%

86.00%

86.00%

85.00%

88.00%

87.50%

88.00%

88.00%

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll

 

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

$98,000

Sales and Marketing and Other Expenses

 

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

Depreciation

 

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

$15,470

Leased Equipment

 

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Utilities

 

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Insurance

 

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

Rent

 

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

Payroll Taxes

15%

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

$14,700

Other

 

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Operating Expenses

 

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

$162,170

Profit Before Interest and Taxes

 

$237,830

$237,830

$287,830

$287,830

$337,830

$337,830

$337,830

$237,830

$337,830

$237,830

$337,830

$337,830

EBITDA

 

$5,400

$4,000

$4,400

$4,400

$8,400

$8,400

$8,400

$8,900

$9,400

$400

$9,400

$9,400

Interest Expense

 

$6,550

$6,430

$6,320

$6,200

$6,080

$5,970

$5,850

$5,730

$5,620

$5,500

$538

$5,270

Taxes Incurred

 

$9,590

$5,357

$6,660

$6,700

$18,730

$18,770

$18,800

$8,160

$21,870

$5,020

$9,940

$8,980

Net Profit

 

$221,690

$226,043

$274,850

$274,930

$313,020

$313,090

$313,180

$223,940

$310,340

$227,310

$327,352

$323,580

Net Profit/Sales

 

55.42%

56.51%

61.08%

61.10%

62.60%

62.62%

62.64%

55.99%

62.07%

56.83%

65.47%

64.72%

 

Pro Forma Balance Sheet

 

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Assets

Starting​​ Balances

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$50,000

$46,193

$46,462

$48,283

$47,985

$52,622

$55,141

$57,667

$50,325

$56,468

$49,843

$56,679

$59,947

Other Current Assets

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

Total Current Assets

$500,000

$481,930

$504,620

$542,830

$559,850

$626,220

$671,410

$716,670

$663,250

$744,680

$698,430

$786,790

$839,470

Long-term Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term Assets

$1,300,000

$1,320,000

$1,340,000

$1,360,000

$1,380,000

$1,400,000

$1,420,000

$1,440,000

$1,460,000

$1,480,000

$1,500,000

$1,520,000

$1,540,000

Accumulated Depreciation

$240,000

$255,470

$270,940

$286,410

$301,880

$317,350

$332,820

$348,290

$363,760

$379,230

$394,700

$410,170

$425,640

Total Long-term Assets

$1,060,000

$1,064,530

$1,069,060

$1,073,590

$1,078,120

$1,082,650

$1,087,180

$1,091,710

$1,096,240

$1,100,770

$1,105,300

$1,109,830

$1,114,360

Total Assets

$1,560,000

$1,546,460

$1,573,680

$1,616,420

$1,637,970

$1,708,870

$1,758,590

$1,808,380

$1,759,490

$1,845,450

$1,803,730

$1,896,620

$195,383

Liabilities and Capital

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

$160,000

$118,070

$151,830

$173,010

$172,940

$194,120

$194,040

$193,970

$158,120

$187,040

$151,200

$186,880

$186,800

Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Current Liabilities

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

Subtotal Current Liabilities

$160,000

$120,070

$155,830

$179,010

$180,940

$204,120

$206,040

$207,970

$174,120

$205,040

$171,200

$208,880

$210,800

Long-term Liabilities

$800,000

$786,000

$772,000

$758,000

$744,000

$730,000

$716,000

$702,000

$688,000

$674,000

$660,000

$646,000

$632,000

Total Liabilities

$960,000

$906,070

$927,830

$937,010

$924,940

$934,120

$922,040

$909,970

$862,120

$879,040

$831,200

$854,880

$842,800

Paid-in Capital

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Retained Earnings

$455,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$600,000

$60,000

Earnings

$145,000

$123,900

$98,500

$154,000

$110,300

$847,500

$128,540

$172,420

$153,370

$174,410

$192,530

$243,740

$29,502

Total Capital

$600,000

$723,900

$698,500

$754,000

$710,300

$1,447,500

$728,540

$772,420

$753,370

$774,410

$792,530

$843,740

$89,502

Total Liabilities and Capital

$1,506,070

$1,651,730

$1,635,510

$1,678,940

$1,644,420

$2,369,540

$1,638,510

$1,634,540

$1,632,410

$1,605,610

$1,647,410

$1,686,540

$89,502

Net Worth

$600,000

$723,900

$698,500

$754,000

$710,300

$1,447,500

$728,540

$772,420

$753,370

$774,410

$792,530

$843,740

$89,502

References:
  • Abrams, R. & Abrams, R. M., 2003.​​ The Successful Business Plan: Secrets &​​ Strategies.​​ revised ed. London: The Planning Shop.