Travel Specialists
Incorporated
Instructor:
Marvin Painter
Date:
July 13, 2011
Students:
Hafeez Shariff, Robin Sandhawalia, Kristi Ronald, Ryan Sutherland, Lesley Mickla
Table of Contents
1.0 Executive Summary
2.0 Industry Analysis
3.0 Marketing Plan
4.0 Human Resource Plan
5.0 Operational Plan
6.0 Financial Plan
Appendices
1.0 Executive Summary
Travel Specialists is a customized vacation provider, planning and booking tailored vacations for
clientele requiring a specialized getaway. The company will consist of a team of travel agents,
each specializing in a niche travelling experience.
The key success factors for Travel Specialists are:



The ability to locate a niche market of wealthy individuals who desire
customized vacations but do not have the time, nor the expertise to plan
their own vacation
The continuation of commissions paid from airlines, hotels and vacation
package dealerships
Word-of-mouth referrals between individuals with high disposable
income
Marketing Plan
In order to market Travel Specialists services, we are expecting word-of-mouth advertising to be
the most prevalent source of information for our target market. The main travel agents
employed will bring with them a strong clientele base from years of work in the travel industry.
Once the clientele experience our exceptional service, we expect they will tell their friends and
family about our services. Our target market is a niche of wealthy individuals, ranging from 5070 years of age with high disposable income who have the desire to take travel regularly.
Operations Plan
Travel Specialists have a small leased office located in an affluent downtown location. However,
the travel agents themselves have the freedom to work and meet their clients at their own
convenience. As a service provider, Travel Specialists expect their fixed and overhead costs to
be relatively low. All agents will use the Travel Specialist operating software and attend training
sessions to ensure quality control is high and firm policies and procedures are enforced;
however, given the level of experience and responsibility of the agents, a high degree of
freedom in operations is expected.
HR Strategy
Agents will be compensated solely through commissions. Since this is risky for the agents, it is
imperative that those hired are well-established and have a strong customer base so they are
able to earn a substantial income. We expect that the agents we hire will want to work on a
commission basis because they expect they will earn a substantial amount. Travel Specialists
takes 30% of the commissions earned on each trip booked, leaving the agent with 70%
commission on each sale. This is substantially higher than the industry average, and is our
strategy to attract and retain preeminent agents.
Financial Plan
We expect the initial start-up costs to be about $21,000. We expect losses in the first year of
operations in the magnitude of about $10,000 with the break-even point coming shortly after
our second year in operation. We have predicted 10% growth in years 2 and 3, with a levelling
off in growth to about 3% per year.
We are expecting a rate of return to be 34%, making Travel Specialists a lucrative and promising
investment.
1.1 Introduction to Travel Specialists Inc.
Travel Specialists is a customized vacation provider, planning and booking tailored vacations for
clientele requiring a specialized getaway.
Vision Statement - To become the leading niche travel agency in Vancouver by providing
specialized vacations to meet all clientele needs.
Mission Statement - Our mission is to become the leading specialized travel company by
planning customized vacations that create exceptional value for our customers.
Value Proposition
Customized vacations planned by specialists who have extensive and unique knowledge
about a specific travel niche.
Target Market
In general, our target market will be individuals in or nearing retirement, with high
disposable income and specific vacation requirements they would like to be met in a
customized package. Our target customers do not have the time or the expertise to plan
their own vacation and instead would like the service specially performed for them. Our
target market does not require the most inexpensive vacation, but would rather have a
vacation that provides excellent value for the cost. Our ideal customer has the funds
and desire to take several vacations each year.
Competition
The major source of competition is the internet, and the fact that customers can book
their own vacation relatively easily through web-based sites. Our job is to provide a
valuable service that exceeds what a customer could plan and book on their own.
Competitive Advantage
Travel Specialists will employ agents with specific knowledge in one area; instead of a
group of travel agents with broad knowledge about many vacations, our agents will
have extensive knowledge and experience in a main area. This will provide exceptional
value to a niche of customers looking for a customized vacation.
The agents themselves will be compensated solely on commissions at a higher level than
the average travel agency; this will provide incentive for the agents to excel and become
an industry expert in their specialized knowledge area.
Risk
The risk in this start-up business is relatively low; if the business is not successful, the
start-up costs are minor. The major risk factor is the ability to bring together the right
group of travel specialists who bring a wealth of experience and a network of clients to
earn commissions for the company.
2.0 Industry Overview
As Canada edged out of the recession in 2009, Canadians started to regain interest in
travelling. As a result, during 2010 and 2011, the Canadian travel and tourism industry
started to thrive again. The trend for domestic and outbound travel by Canadians was
positive, and the number of travelers and tourism revenues regained the ground lost
during the recession. This, accompanied with the strong Canadian dollar has made the
travel industry one of the hottest industries in Canada for 2011.
With over three in four Canadian adults taking annual vacations, pleasure travel has
become a large and important industry. Canadians spend tens of billions of dollars
within Canada itself and billions more in other countries. According to the latest
statistics released by Tourism Canada, Canada received a total of $74.7 billion from
tourism in 2008. Out of this $74.7 billion, $59.1 billioni was spent by Canadians on
domestic travel. This number is expected to grow at an annual rate of 2% in the
upcoming years.
In Statistics Canada’s General Social Survey of 2005, between the periods of 1992 to
2005, Canadians were noted as being more active on an overall basis. Further to this
study, it found that the highest participation rate of active leisure participants were
within the British Columbia region – 28%. This is the highest participation region rate
within Canada. This helps illustrate that British Columbian’s enjoy living and an
adventurous lifestyle compared to other areas of Canada and are constantly looking for
ways to increase their activity levels including travel. Therefore, this region provides
Travel Specialists with a great potential for business success.
Operating a non-traditional Travel Agency in West Vancouver, BC is a promising
endeavor as there is a growing population of affluent individuals and families residing in
the area. A census completed by statistics Canada in 2006 shows that the median
household income in the West Vancouver area was $76,893, while the median
household income across Canada was $53,634. This makes West Vancouver an ideal
location for Travel Specialists as Travel Specialists is targeting the middle to upper
income earners in the work force who are willing to spend a little extra on a trip in order
to have the experience that they want.
The graphic below shows a map of the Metro Vancouver area highlighting the median
household income in each city. The West Vancouver district has a median income of
between $70,000-99,000.
The “do-it-yourself” or independent traveler is becoming more prevalent in the Internet
age and is a threat to Travel Specialists. Potential travelers can take greater control over
their travel plans if they are online. Not only is the Internet a useful tool for information
gathering, it also allows people to compare prices and options to locate the best deals
available. However, a recent Google survey showed that whilst many travelers will
research their travel arrangements online, 65% of travel is booked with a travel agentii.
This presents a large opportunity for Travel Specialists to obtain and retain clients with
our specialized services, and shows there is a lucrative market available.1
ihttp://www.ic.gc.ca/eic/site/dsib-tour.nsf/vwapj/Sept-2009-Tourism-Highlights-
EN.pdf/$file/Sept-2009-Tourism-Highlights-EN.pdf
ii http://www.travelindustrycareers.org/industry-sector/travel-agent
3.0 Marketing Analysis
3.1 Our Specialized Services
Every customer wants a different experience from their vacation. Some want to golf on
the world’s nicest courses, others want to relax on the hottest and whitest beaches.
Travel Specialists will employ agents who are experts in different areas. When a client
comes to our company we will be able to provide an agent who has been all over the
word and experienced the best of that particular travel area. Through agents
recommendations and additional research where necessary, the trip will be organized
and booked by the agent to meet any customer need. At inception our agent expertise
will include:



The world’s top golf courses
The top locations for weddings
Bachelor Party weekend getaways
Over time as our agent base grows we will expand the different types of expertise that
we offer. As we expand this knowledge of the expertise, we will be able to grow our
service lines that Travel Specialists offer. We plan to look for industry experts in the
following potential areas in the future:




The world’s best beaches
Top historic sites and world churches
Sporting events (Soccer, Football, Tennis)
Business Trips and Convention destinations
3.2 Pricing
Overall the pricing strategy that we use is a value pricing strategy compared to other
travel agencies. In order to be competitive we need to charge similar prices. However,
since we provide additional services customized to the needs of the client, we will
charge a slight premium over other travel agencies. The more time spent by an agent
planning and customizing a trip, the greater the premium charged.
3.3 Promotion
The promotion plan for our business involves minimal advertising. Instead Travel
Solutions will rely on word of mouth referrals, as well as the agents to bring their own
established clientele base with them when they switch to our company.
Retaining existing clientele
The travel industry is similar to other service industries, such as hair salons, where if it is
convenient for the customer, clients tend to stay with the service provider if they switch
companies. Clients are for the most part loyal to the person performing the service in
these types of businesses, especially if they are satisfied with the service being provided.
We are providing the agents the ability to be flexible and cater to their clients, which
will allow the customers to easily follow the agent to Travel Specialists.
Word of mouth
Word of mouth is another method we are planning on using to get our name into the
market. As experts in a particular type of travel niche, we will work with the customer to
provide the ultimate experience in the best locations around the world. Once one
customer has a positive experience, using golf as an example, they will tell all their golf
friends about it. These friends of our current customer will then come to us and use our
expertise to plan the trip they desire.
Advertisement
A final method of marketing that Travel Specialists will pursue is running advertisements
in local news papers and at locations specific to our expertise. For example, we will run
ads at local golf courses or within local bridal magazines and dress shops.
3.4 Target market
The market that Travel Solutions is targeting is the middle to upper income earners
($70,000 plus) in the work force who are willing to spend a little extra on a trip in order
to have the experience that they want. The age of these individuals is not limited to but
will be targeted towards the baby boomer age demographic (45-70 years). The
individuals in this demographic are the people who will be entering retirement or are
2newly retired and are looking to experience the world in a way that they haven’t in the
past.
Our target market has enormous potential because during the next decade more and
more baby boomers are going to be entering the early years of retirement.
According to Stats Canada over the next decade one in five people will be aged 55 to 64
in Canada offering a huge potential market to be tapped iii. It is also anticipated that
iii
http://www.cbc.ca/news/canada/story/2007/07/17/census-canada.html
many baby boomers want to continue working past retirement age. Doing so will further
add to their disposable income providing wealth in excess of current pension plans that
will allow people to take trips and do things they wanted to but struggled to afford in
the past.
Getting service to our clients
Our agents will have flexibility in where they meet clients. Agents can set up meetings at
either our local office or at a location convenient for the client. We know that the
customers we are targeting have busy schedules and or would rather not have the
hassle of coming into our office. To cater to these needs we offer flexibility which will
ensure the client is comfortable and relaxed during the process of planning their
vacation.
We feel that by offering this flexibility we can offer our agents the option to work from
home as well. This provides the agent flexibility to set up meetings and work at their
own leisure. Both these factors will result in a better travel package presented to the
client and in turn better word of mouth promotion for the service we offer.
4.0 Human Resources
Organizational Structure
CEO
Lesley Mickla
Travel Specialist:
Travel Specialist:
Travel Specialist:
Kristi Ronald
Hafeez Shariff
Robin Sandhawalia
Destination Weddings
Golf Getaways
Bachelor Parties
Management Team
The management team will consist of the CEO and sole shareholder Lesley Mickla. The
CEO will perform a management role, overseeing three to four travel specialists upon
inception of the business.
4.1 CEO: Job Description
The CEO’s major role in the first year of operation will be to oversee the day-to-day
operations of the company. The CEO will perform the following job duties:




Recruit and retain skilled travel specialists
Network and engage in actively seeking customers
Establish and execute training programs
Perform administrative, day-to-day duties at the Travel Specialist office
The CEO has over 20 years experience in the travel industry, and is well versed in
planning and preparing customized vacation trips for large groups of customers.
Training of agents to sell the Travel Specialist way is crucial to the company’s success.
Training sessions will be run for agents by Lesley. She has over 25 years experience in
the travel industry. She knows what it takes to be successful providing quality service to
customers.
4.2 Travel Specialist: Job Description
Travel Specialists will be looking for agents with at least 15 years experience in the
travel agency industry.
Each travel agent will have a specialized knowledge about a particular travel niche. For
example, one travel agent is a specialist in planning destination weddings; she is
knowledgeable about the trendiest wedding destinations, particular hotels that will best
meet the wedding needs of their clients, knowledge of wedding activities and services
provided at different hotels and countries. Similarly, another specialist will focus on golf
getaways; he has extensive knowledge of the most beautiful and challenging courses in
the world. He is well versed in golf himself, having played a majority of the worlds’
courses. Based on their expert knowledge, the travel agents will be able to plan an
entire customized vacation including flights, hotels, planned activities and other
transportation needs to satisfy the customer.
4.3 HR Strategy
Attracting Employees
All employees will come to Travel Specialists with their own existing client base. The
employees will be motivated to work for Travel Specialists for the following reasons:




High commissions available to the specialists
Increased flexibility in work schedule
Greater focus on the niche market they specialize in
Greater access to high income individuals and potential clientele through
word of mouth referrals and overall company reputation
Commission
Current industry practice is for entering travel agents to work on a fixed salary. While
this provides the most reliable source of income, there is no potential upside for the
agent to book an entire wedding party or extravagant group vacation.
As the travel agent gains experience, the some agents will begin working on a
commission. The commissions are typically as follows:
o
o
o
o
Cruise Bookings: 10-18% of cost
Flight Bookings: Approximately $50 per booking
Vacation Bookings (Including Flight and Hotel): 10% of cost
Supplier Incentives: Flat fee based on contract; agreement to push
particular product
Many agencies take at least 50% of the commission earned, leaving 50% or less for the
agent themselves. Of the commission earned, Travel Specialists will take a 30% cut,
leaving the travel agent with 70% as income. This is higher than the industry average,
and one of the major advantages to the travel agent to work for Travel Specialists.
Increased Flexibility in Work Schedule
The high caliber of travel agents that will be working at Travel Specialists means that
they will have strong clientele base and excellent industry knowledge. Travel Specialists
will not require the agents to come into an office daily. The travel agent will have the
freedom to work from home or via email with their clients Travel Specialists will provide
a small office in which the travel agents can book space to meet with clients on an asneeded basis. However, day-to-day, the travel agents will typically meet their clientele
where it is most convenient for the client, or simply through an email or phone
conversation. This allows the agent to work their own flexible hours, booking vacations
and meeting with clients as required by the customer.
Focus on Niche Market and Access to new Clientele
Many travel agents in the industry have specialized knowledge. Working at Travel
Specialists will allow the agents to focus most of their time booking trips and vacations
for clientele in areas they are most knowledgeable about. This will benefit both the
client, and the agent, who through continued research and analysis will become an
industry leading expert. Additionally, as the company begins to grow, Travel Specialists
will build a niche customer base of individuals with a high amount of residual income
and desire to travel. The customers will likely use other agents within the company as
their desires for vacations change, providing the agents with access to a wider customer
base.
Motivation
The travel agents’ entire earnings are based on their commission; therefore, they will be
highly motivated to plan and book as many large vacations as possible. The agent will
constantly be motivated to increase their clientele base, and network their own services
to book for large groups and extravagant trips.
Travel Specialists will also be looking to expand their specialized travel agents.
Therefore, a small bonus will be paid to any agent who recommends a travel agent to
Travel Specialists which results in the hiring of a new agent.
Expected Earnings
The average annual earnings for a travel agent in Canada with 10-19 years experience is
$19,000-$43,000, while the average annual earnings for a travel agent with greater than
20 years experience is $22,000-45,000. Commissions make up a smaller portion of the
compensation, with average annual commissions less than $15,000 per year.3
Labour and Management Costs
The Travel Specialist office will be open Monday-Friday from 9am-5pm. The CEO will
earn a base salary of $36,000 per year, before considering her own travel commissions,
dividends or bonuses. All travel specialists will work on an entirely commissions basis.
Travel Specialists will provide the agents with full benefit packages.
Training
Training travel specialists is an important service Travel Specialists will provide agents. It
ensures that all the travel agents associated with the business continue to be qualified
well-informed individuals who value continued education and professional
development.
All travel specialists will receive a training session prior to their start date to establish
the code of conduct, policies and job expectations at Travel Specialists. Training sessions
will also highlight annual industry trends, hotspots and developments in consumer
preferences. Training will become more important as the business begins to grow and
additional agents become affiliated with Travel Specialists. At least one training session
is required to be attended each year by each agent. Most training will be performed by
Lesley Mickla, CEO, unless an expert is brought in for a special presentation.
3
http://www.payscale.com/research/CA/Job=Travel_Agent/Salary
5.0 Operation Plan
5.1 Organizational Structure
Travel Specialists is currently 100% owned by Lesley Mickla. We are currently looking to
bring on a private investor. Lesley is willing to use personal funding along with potential
investor funding to constitute the start up capital. All travel agents (“employees”) will be
paid by commission and brought on board to the team by Lesley. New agents will be
entered into the training program for certification prior to beginning as Travel
Specialists.
5.2 Operations Plan: Quality Control Program
Travel specialists will utilize the expertise of the owner/manager as well as build on their
own extensive experience in the industry. Agents are able to work from home, at the
office, or anywhere they feel fit, and have the ability to book a meeting at the
prestigious location of Travel Specialists Incorporated when necessary.
The agents will be given weekly tips and quarterly performance evaluations by expert
and CEO, Lesley Mickla. However, much of the quality control will be in hiring the
correct staff that are independent, self motivated and responsible to plan and book trips
that satisfy their customers. It is in the best financial interest for the agents to network
and bring in additional clients, in addition to serving their current customer base.
The agents will have access to the base Travel Specialists operating system with all the
conveniences at their fingertips at no fee. This will include a prestigious office space to
meet with new and existing clients. They will have complete access to Galileo, which is a
specialized travel agent operating system available in the marketplace, which Travel
Specialists plans to purchase and utilize.
5.3 Supply Analysis
Travel packages are available based on rates and discounts offered by companies such
as WestJet, Air Canada, etc. The lines of integration are already in place to offer deals to
agents. Additionally, long standing relations are in place with owner/manager and the
extension of these available deals and terms will be passed along to the Travel
Specialists. This will allow the Travel Specialist agents the ability to plan and book trips
according to their client needs.
5.4 Service
Exceptional service is the key to attracting repeat business and exceeding our client’s
expectations, and as such is our main focus. We are able to book any trip our clients can
dream, including flights, hotels, condos, getaway homes, courses, excursions, cruises,
cars and boats. Our niche areas of expertise will be imperative to offer the best possible
service for our clients, exceed the expectations of our clients and provide more value
than our competitors.
5.5 Niche Markets
Upon entering into the Travel Specialists training program, distributors will announce an
area of expertise and expand the ever-growing list of specialized agents. They will base
their practices on this area and refer clients to other specialists within niche needs. Each
niche specialist will become attuned to their focus-area. The main purpose is to
establish our reputation, become a recognized brand and to have respected niche
leaders in each travel area.
5.6 Day-to-Day Operations
Travel specialists will operate on their own time according to their own clients needs.
Each agent will be required to have smart phones and be able and expected to answer
their clients’ needs (phone calls and emails) within a 12 hour time frame. They will be
able to work from home, their clients meeting places i.e. coffee shops, their offices or
utilize the space of the base office
The base office will be open Monday to Friday 10AM until 5PM and after hours by
appointment only. The base office will be closed weekends and holidays.
Clients can phone the base office as well to have their questioned answers and be giving
travel advice, or for general inquiry needs.
5.7 Location and Floor Plan
Travel Specialists has leased an office in a well-known building in West Vancouver just
off Marine Drive.
This location was chosen for the following reasons:
 West Vancouver is known as a prestigious place to be, housing neighbourhoods
such as the British Properties, Park Royal, Dundarave, and Cypress areas.
 Many prominent businesses are located in the area such as The Ocean Club,
which will ensure easy access for our target market.
The leased space is located at #6-636 Clyde Avenue West Vancouver, BC V7T 1E1
Features of the base office space will include:
 The office space will be renovated extensively, and although the appearance will
be beyond grand, it does not need to be large
 Most travel specialists will work from home and utilize the office space only to
meet with clients or come in for training, performance evaluations, and advice
from the owner
 Premier signage
 Marketing opportunities within office building
 Neighbouring wealthy residences nearby that will see the premise
 Parking
 Personal office spaces (5) to be booked by travel specialists for meetings
 Owner/manager office
 Training program ‘Core’ space for evening tutorials
 Nearby specialty coffee shops for meetings
The 2 year operating lease locks in a low rent fee ($850 base plus utilities) to ease the
pressure of capital expenditures and initial start up costs, giving Travel Specialists the
maximum cash flow to commence the initialization process
5.8 Future Growth
Currently, we will maintain 5 desk spaces, but will be planning for expansion in the
future. Expansion will occur once Travel Specialists begins to have stable operations and
if the supply for a new travel expert with a niche travel knowledge base is present.
However, we do not plan to lease additional office space in the short-term, as the
offices will be booked by the agents to meet with clientele, but will not be used every
day by the same agent. We encourage the agents to meet their clients where it is
convenient for the customer, meeting at the Travel Specialists office only if the client
works or lives in the area and wishes to meet there.
5.9 Operations Plan: Capital Budget
The first year of operations requires the most significant start-up capital. We have
signed the lease and secured the space:
Leasehold Improvements
We will be extensively renovating the premises. The owner of the building has agreed to
match the cost of the renovations 50/50 up to $5,000. We expect that the total of the
renovations for new granite flooring and installation, crown moulding and trim, paint,
front area space extension, and new windows and coverings, bathroom and break area
upgrade will cost $15,000, therefore $10,000 our cost ($15,000 - $5,000 rebate)
Three Travel Specialist office spaces and one owner-manager desk will be created with
the capacity for five to operate (2 in one office)
Office equipment
We require the purchase of office supplies, desks, chairs, printers, computers, and
phones. The computers will be laptops and will be the property of the company but the
specialists will be given the laptops to use during their contract periods. Any repairs and
maintenance and upkeep will be at the discretion of the travel specialist
Initial cost involved will be $11,000
Total Initial Capital Outlay; $21,000 ($10,000 + $11,000)
Type
Leasehold improvements
Leasehold improvement rebate
Dell laptops
Desks
Printer
Chairs
Front-end waiting chairs
Front-end waiting table
Lamps
Total capital outlay
Quantity Cost
Amount
$ 15,000 $ 15,000
(5,000)
(5,000)
5
1,000
5,000
5
500
2,500
1
500
500
5
300
1,500
2
300
600
1
400
400
5
100
500
$ 21,000
Future Costs
Due to the current nature of the specialists business and time actually in the office, the
need for space will not be extensive in the near future.
There may be a requirement in the long-term future for expansion to a new space which
may require leasehold improvements, desks, computers, etc. The following is an
example of potential long-term expansion when a significant number of agents operate
through Travel Specialists Inc.
5.10 Operating Costs
Monthly operating costs will be fixed costs; minimum expenses will be maintained to
ensure cash flow ability. The following are unavoidable costs of operating the premises:
Salary
The salary includes a minimum salary of $3,000 per month for the owner-manager to
take to pay personal bills in the initial operations. This remuneration will be held at
minimum to continue increased cash flows, at least for the years following inception.
The owner will also be selling travel experiences and will receive the 70% commission on
all sales just as the regular travel specialists. Potential dividend remuneration will be
announced upon continued long-term growth and success.
Rent, Utilities, Telephone and Internet
The 2 year lease agreement locks us in to a low-rent fee of $850 per month plus utilities
of approximately $200 per month (heat, power, and water).
Telephone and internet cost is $50 per month with the new customer business plan with
Novus.
Dues and subscriptions
Two software packages will be utilized:
Galileo Software
The operating system for Travel Specialists at a cost of $200 per month access fee for up
to 10 users.
Travel Accountants Software
The 3rd party outsourced commission based sales tracking system and payroll system at
a cost of $300 per month. This fee includes the fee for service as well as the discount
fees paid to the Bank, Visa, MasterCard, and American Express.
Advertising
The marketing plan is to continue to more extensive long-term and referral based
programs.
Office Supplies
Includes paper, postage, etc.
Meals and Entertainment
Coffee and lunch dates with respected clients and owner-manager.
Insurance
We require both general liability insurance and premise insurance at a cost of $150 per
month.
Example Monthly Operating Expenses:
Account
5000
5100
5200
5300
5400
5400
5500
5600
Expense
Salaries and Wages
Rent
Utilities
Internet and phone
Dues and subscriptions
Dues and subscriptions
Advertising
Office supplies
Meals and
5700
entertainment
5800
Insurance
Total monthly operating costs
Description
Owner's salary
2 year lease agreement
Heat/power/water
Novus package
Galileo software
Travel Accountant (3rd party
outsource)
Public relations
Paper, postage, etc.
Amount
$
3,000
850
200
60
200
300
100
50
Client meetings
Liability and premises
$
100
150
5,010
5.12 Working Capital
Working capital will arise from the sales of travel packages. The majority of clients pay
by way of Visa or MasterCard, as many customers do not wish to pay for a trip in cash.
Negotiated discount rates will be a must with the Bank, Visa, MasterCard, and American
Express to pay reduced fees on transactions.
It will be imperative that cash inflow and outflow is managed properly to generate
positive cash flows both short term and long term. Please see the budgeted cash flow
statement in the Appendix. Travel Specialists Incorporated is expected to generate
positive cash flows within its first year of operations based on our conservative analysis.
6.0 Financial Plan
6.1 Start-Up Capital
The start-up capital required for Travel Specialists is as follows:
Office Equipment
$11,000
Renovations
$10,000
Total Start-up Costs
$21,000
6.2 Financial Projection
Travel Specialists will generate revenue through 4 revenue streams:
Revenue Stream
Revenue Generated
Airline Tickets
$50 per ticket
Cruise Packages
10-18% of dollar value of sale
Vacation Packages
10% of Package
Suppliers
Flat Fees to push product
Based on the above revenue streams, Appendix 1 shows a monthly forecast for the first
year of operations. In Year 1 of operations, Travel Specialists will generate a net loss of
$9,197.
However, Travel Specialists is projected to generate a positive net income as quickly as
in Year 2 of operations. Appendix 2 shows a 5 Year Financial Projection for Travel
Specialists. The projection assumes that we will experience growth of 25% in years 2
and 3. We believe Years 2 and 3 will be our strongest growth years as we will be more
established in the industry. As well, we believe that delivering quality service to our
customers will generate positive word of mouth advertising, thus generating new
clientele. The projection then assumes that growth rates will decrease to a more
sustainable level of growth at 3% thereon.
The forecast projects that Travel Specialists will generate a net income of $2,423 in Year
2. Net income will gradually increase each year reaching $25,986 by Year 5.
It should be noted that these numbers are extremely conservative. A conservative
approach was used to factor in the difficulties of attracting and retaining new clientele
as well as factor in any other uncontrollable circumstances that may occur in the future
that will impact revenue.
6.3 Valuation of Travel Specialists
Appendix 4 shows a valuation of Travel Specialists based on the Net Cash Flows to
Equity. The valuation assumes a required rate of return of 20%. The required rate of
return on a small business often ranges between 20 – 40%. However, as the financial
projections in Appendices 1 and 2 extremely conservative, these projections are
believed to be less risky, thus requiring a lower discount rate. The valuation can be
summarized with the following:
Start-Up Capital
(21,000)
Total PV of Cash Flows
33,822
PV of Tax Shield
11,340
Terminal Value
48,577
NPV
72,740
IRR
34%
6.4 Required Cash Injection
A cash flow projection for the first 5 years of operations was calculated in Appendix 5.
Travel specialists will require cash in order to fund the initial capital outlay for office
supplies and renovation, and sufficient cash to survive the net loss in Year 1 of
operations.
Travel Specialists will require an initial cash injection of $30,000.
6.5 Break Even Cash Flow Projection
A break even analysis for cash flows is shown in Appendix 5 and can be seen below.
60,000
40,000
20,000
Series1
0
1
2
3
4
5
(20,000)
(40,000)
The above graph shows that Travel Specialists will be in a positive cash position during
the midpoint of Year 2. By Year 5, Travel Specialists will have a positive cash balance of
greater than $50,000. With a cash injection of $30,000, Travel Specialists will have
sufficient cash to survive the initial years of operations.
6.6 Sensitivity Analysis
A sensitivity analysis was performed in Appendix 6. The sensitivity analysis assumed
weaker growth in Years 2 and 3 at only 10% (as opposed to 25%). The results of the
analysis show a net loss in Years 1 and 2; however a positive net income will be
generated in Years 3 through 5.
Although the weak growth scenario would not affect the initial cash requirement due to
such low overhead costs, it would affect the cash flow breakeven point. Appendix 7
shows the breakeven analysis for this scenario. The results of this analysis can be seen
in the graph below.
15,000
10,000
5,000
0
(5,000)
1
2
3
4
5
Series1
(10,000)
(15,000)
(20,000)
(25,000)
(30,000)
In a weak growth scenario, the company will break even in between Years 4 and 5, and
from thereon be in a positive cash position. This is promising considering that even a
poor scenario, the company will still breakeven within 5 years.
6.7 Financing Options
Option 1
Travel Specialists is willing to offer 40% of the business for $30,000.
Equity Financing cash Flow
Cash Balance atEnd of Year
90,000
80,000
70,000
60,000
50,000
Series1
40,000
30,000
20,000
10,000
1
2
3
4
5
6
Option 2
Travel Specialists is requesting $40,000 of debt financing at an interest rate of 20%
annually, repayable in 5 years.
Based on the cash flow analysis performed in Appendix 8, Travel Specialists will have
sufficient cash to repay the debt amount in Year 5. Travel specialists will also have
sufficient cash to run operations and service the interest payments.
Debt Financing Cash Flow
Cash Balance at End of Year
35,000
30,000
25,000
20,000
Series1
15,000
10,000
5,000
0
1
2
3
4
5
Appendix I
SWOT Analysis
The following SWOT analysis captures the key strengths and weaknesses within
the company, and describes the opportunities and threats facing Travel Specialists.
Strengths






Low employee to customer ratio – leading to low overhead costs
Commissions sole remuneration for travel specialists reduces risk of company
losses
Excellent agents who are highly specialized and very customer focused
High customer loyalty among repeat customers
A truly unique, high end, service offering
A training program that educates agents to ensure exceptional service
Weaknesses


Challenging to find travel agents who possess the specialized skills and customercentric attitude
Ability to continuously offer new and exciting trips while maintaining the level of
quality that is established over time from repetitive trip offerings
Opportunities





Growing number of retiring baby boomers with expendable income, with market
research supporting strong preferences for customized trips
A unique specialization focused agency does not currently exist and will gain
customer loyalty by being first-to-market
Can offer higher percentage of commission to specialized agents based on low
overhead
The ability to spread fixed management overhead costs over an increasing
number of agents and vacations
Having specialized agents in each type of vacation gives Travel Specialists a
competitive advantage against other travel agent competitors
Threats




The travel industry is highly dependent on the economy
Online bargain travel sites offer the lowest prices and make shopping around
easier
Increasing fuel prices could make travel very expensive thus reducing margins
Other travel agencies could imitate the specialized agents approach