RPM Motorsports Business Plan
Georgio Picola
RPM Motorsports Business Plan
Prepared for Georgio Picola
Prepared by Chris Schira
December 5, 2011
Chris Schira
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RPM Motorsports Business Plan
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Table of Contents
1.0 Executive Summary
1.1 Industry Overview
1.2 Introduction
1.3 Mission Statement
1.4 Goals and Objectives
2.0 Operations Plan
2.1 Location
2.2 Inventory
2.3 Current Motorcycle Model Lineup
2.4 Organizational Tasks
3.0 Human Resources Plan
3.1 Job Descriptions
3.2 Training Programs
3.3 Wages and Benefits
3.4 Human Resources Strategy
4.0 Marketing Plan
4.1 Segmentation
4.2 Target Market
4.3 Positioning
4.4 Products and Services
4.5 Pricing
4.6 Promotion
4.7 Place
4.8 Competitive Analysis
4.9 Marketing Expenses
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5.0 Financial Plan
5.1 Projected Financial Statements
5.2 Operating Expenses
5.3 Capital Budget
5.4 Cash Flow Analysis
5.5 Risk Analysis
5.6 Sensitivity Analysis
5.7 Financing Plans
5.8 Taxes
5.9 Net Present Value
5.10 Internal Rate of Return
5.11 Dividend Policy
6.0 References
7.0 List of Appendices
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1.0 Executive Summary
RPM Motorsports will be driven towards providing well engineered, high performance off-road and
sporty street legal bikes. The main focus of this venture is off-road/on-road recreation riding and
racing. Our product line will span the following categories: street, dual purpose, competition, and
off-road recreation. RPM Motorsports will cater to the extreme motor sports crowd, specializing in
high performance motorcycles, parts, accessories, and apparel. RPM will offer these major brands
and their products; which are Ducati, KTM, and Husaberg. RPM will offer performance upgrades
and customizing of all makes of motorcycles (street or off-road), ATVs, and side by side utility
vehicles.
1.1 Industry Overview
There is a growing trend for people buying motorcycles for recreational pursuits. In these times,
people are very busy and need a way to unwind after a long work day or week. North Americans
are making use of their leisure time by partaking in pursuits such as motorsports as well as
enjoying the outdoors whenever possible. Another key factor for the rise in motorcycle riding is
the constantly rising price of fuel, in turn more people are choosing to ride motorcycles on a dayto-day basis to save money. This is evident by the number of people seen commuting to work or
school on the backs of motorcycles on the streets of Saskatoon.
In Canada, in 2010 the motorcycle business was approximately $772,651,000 at retail. New
motorcycles represent 80.02% of the total value of sales and Parts and Accessories represent
19.98% of the total. Over 113,000 new units of motorcycles, scooters and ATVs were sold during
2010 at an estimated retail value of $1,417,850,000. ATVs accounted for 49.8% of total new units
sold while motorcycles and scooters made up the remaining 50.2%. By dollar value, new
motorcycle sales accounted for 54.5% of the total retail value of sales and new ATV sales accounted
for 45.5% of the total retail value of sales. In 2010, 70.93% of new motorcycle and scooter retail
sales occurred in the spring and summer from April to September inclusive, and 29.07% in the fall
and winter combined. New retail sales for ATVs in 2010 were 22.64%, 32.29%, 25.03%, and 20.04%
for winter, spring, summer and fall respectively. There were approximately 831 authorized
motorcycle dealers and 1,046 authorized all-terrain vehicle dealers across Canada in 2010.
In 2010, 56,975 new motorcycles were sold in Canada. Of these, 2073 were sold in Saskatchewan.
Motorcycle sales in Canada by season: (in % of new unit sales)
Season
2005
2006
2007
2008
Dec - Feb 8.30
9.34
8.07
10.12
Mar - May 47.98
45.40
44.11
44.34
Jun - Aug 30.96
33.04
34.75
32.61
Sep - Nov 12.76
12.21
13.07
12.93
Total
100
100
100
100
2009
8.46
45.74
33.63
12.17
100
2010
9.03
44.34
33.94
12.69
100
Retail motorcycle sales in Canada by season: (2005 - 2010 average)
Summer 33.16%
Fall 12.64%
Winter 8.89%
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Spring 45.32%
In 2010, 56,517 new ATVs were sold in Canada. Of these, 3998 new ATVs were sold in
Saskatchewan.
Retail ATV sales in Canada by season: (in % of new unit sales)
Season
2005
2006
2007
2008
Sep - Nov
23.90
24.30
23.62
24.85
Dec - Feb
16.31
16.55
19.63
15.70
Mar - May 34.73
34.26
33.60
34.83
Jun - Aug
25.06
24.89
23.16
24.63
Total
100
100
100
100
2009
23.88
16.10
33.35
26.66
100
2010
23.79
16.81
34.75
24.64
100
Retail ATV sales in Canada by season: (2005 - 2010 average)
Summer 24.64%
Fall 23.79%
Winter 16.81%
Spring 34.75%
Motorcycle retail sales by national categories:
Category
2006
2007
Street
44,863
47,980
Dual Purpose
3,386
4,451
Competition
12,005
11,428
Off-Road Recreation
9,200
8,070
Mini Bike
2,642
1,730
Scooter
9,976
8,823
Total
82,022
82,482
2008
52,605
4,640
10,549
7,731
3,314
10,551
89,390
2009
39,007
3,746
8,276
5,466
1,431
6,161
64,087
2010
34,342
3,240
7,602
4,733
946
6,112
56,975
1.2 Introduction
Saskatoon is a growing city of approximately 240,000 souls. Saskatoon may have a short
motorcycle riding season, but the city has a strong motorcycle culture. There is a strong presence
of dedicated asphalt track and off-road track racers. Located South of Saskatoon, there is an offroad track which hosts regular racing events. Just East of the City of Martensville there is a road
track which also hosts regularly scheduled racing events. There is a very popular pleasure riding
area within an hour drive North of Saskatoon. These trails are located in Nisbet Forest, which is
also just a short 30 minute drive South from Prince Albert. There are many kilometers of varying
terrain in this trail system. Many riders go there on a regular basis, and they tell their friends how
great the riding is. This in turn, expands the sport and lifestyle to others with this first-hand
experience and word-of-mouth to other current riders or people who have been thinking about
buying themselves a motorcycle.
1.3 Mission Statement
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Our focus is to provide competitively priced quality products and excellent customer service to our
valued clients.
1.4 Goals and Objectives
We aim to exceed the demands of even the most fanatical of motorcycle enthusiasts. We aim to be
the best motorcycle dealer in Saskatoon and surrounding area. We will strive to be the most
recommended motorcycle sales and service shop in Saskatoon and surrounding area. We feel that
referrals from customers will be a key factor to our success and we will be passionate about
making those referrals happen.
2.0 Operations Plan
We will be open Tuesday through Saturday from 9:00 am to 6:00 pm. We will be closed Sundays
and Mondays, these will be our days to ride.
We will create and maintain a very informative, user-friendly website. This website will be available
24 hours, 7 days a week. This is important to us due to the fact that our target market is very
technology savvy. We know that this portal will be very useful for our venture in various ways.
Our website will have the following:
- view available in stock motorcycles for sale
- links to the manufacturers to view available models in Canada
- links to useful websites
- OEM promotions
- website only promotions
- in-store promotions
- browseable parts catalogs
- parts finder tools
- hours of operation
- dealer information
- contact information
We will promote accredited motorcycle safety courses in the store. We feel it is important that the
necessary riding skills are learned for new riders.
All sales items will be purchased from reputable manufacturers and distributors. Current and
potential suppliers will be analyzed on a monthly basis to determine the best suppliers based on
price, service, volume discounts, and delivery.
2.1 Location
We are gong to be leasing an end unit of a busy strip mall. This strip mall is situated at a high traffic
location on 51st Street East in Saskatoon, Saskatchewan. The building space that we will lease is
listed as 4000 square feet. This rental space was previously used for a small motor mechanic and
lawn mower/snow blower/leaf blower type sales outlet. This previous use of the space is quite
similar to the set up that we want. Therefore, the leasehold improvements to be completed will be
minimal and we estimate that the costs for this will remain low due to this fact. There is a 400
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square foot fenced outdoor space included in the lease. The fence is strong, made of chainlink,
gated, and is eight feet high on all sides. This gate can and will be secured by a quality lock. In the
building, there is security system in place from the previous tenant. We will be utilizing this alarm
system for security of the premises. The system will be monitored by SaskTel SecurTek.
2.2 Inventory
We will have some motorcycles from each our three manufacturers on display in our showroom.
We will keep the remainder of the motorcycle inventory in crates located behind the building.
There will be a small fenced secure area for this storage purpose.
Any parts that we keep in stock will be stored in a small warehouse space located between the
showroom/store and the shop service area. Any parts that we do not keep onsite can be ordered
from our suppliers and typically delivered within 3-5 business days.
We will keep the remaining showroom are stocked with retail items such as:
- helmets
- jackets
- pants
- gloves/goggles
- accessories
- popular parts
- trendy aftermarket parts
- fluids/oils/waxes/polishes etc.
Any remaining accessories/apparel inventory will be stored in the small warehouse space located
between the showroom/store and the shop service area.
Parts/Accessories/Apparel Suppliers:
- KTM factory OEM parts
- Ducati factory OEM parts
- Husaberg factory OEM parts
- Erlandson Performance Inc. (EPI)
- Motovan
- Parts Canada
2.3 Current Motorcycle Model Lineup
Ducati Current Model Lineup:
- Diavel
- Hypermotard
- Monster
- Multistrada
- SportClassic
- Streetfighter
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- Superbike
KTM Current Model Off-Road Lineup:
- Motocross
- Cross-Country
- Enduro
- Super Enduro
- Supermoto
- Dual-sport
Husaberg Current Model Off-Road Lineup:
- Enduro
- Supermoto
If we do not stock a particular model, our customers will be able to order it in. We will build strong
relationships with other Canadian dealers. If possible we will trade a model that our customer is
requesting for one that we stock that their customer is looking for.
2.4 Organizational Tasks
Average Day
The Manager will open the store, this will involve unlocking doors and disarming the security
system. The Manager will do a walkabout throughout the property to ensure everything is in order.
The Manager will respond to email enquiries or forward them to their respective department. The
Parts/Warranty person will be responsible for un-forwarding the phones from voicemail. Any
existing voice mails involving parts enquiries will be replied to by the Parts/Warranty person. Any
other voice mails will be forwarded to the proper are of the business (Sales, Service, or the
Manager). The Parts/Warranty person will receive stock from transportation companies. The
Parts/Warranty person will be required to restock warehouse shelves and maintain a clean working
area. The Manager will be responsible for performing the daily cash-outs and making bank
deposits. The Parts/Warranty person will be responsible for forwarding the phones to voicemail.
Any information technology problems that arise will be remedied by the Manager. The Manager
will perform the store closing duties, which will include locking doors and arming the security
system.
Average week
Every Tuesday, the Manager will assess the previous week sales. Inventory levels will be and submit
orders to the suppliers to restock inventory. Orders to different suppliers will be done on different
days of the week. This will help to ease this work or ordering and inventory counts and to spread
out of the receiving of goods. The Manager will meet with the Sales/Finance to discuss any current
issues. The Manager will meet with the Parts/Warranty to discuss any pertinent issues. The
company website will be updated weekly by the Manager.
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Average Month
The Manager will have to produce and analyze the monthly financial and sales statements. This
data will be used to assess the business and adjust the marketing focus and inventory as needed.
Payroll will be done every two weeks and will also be the responsibility of the Manager. RPM
Motorsports’ sales is targeted to seasonal markets, and therefore inventory needs will have to
change to accommodate the change in seasons. Due to the short riding season in Saskatchewan, in
the Fall and Winter, the focus on pre-sales for the upcoming season will be a priority. The
marketing focus will also be affected during this time period to advertise to the target group of
people looking to get their vehicle modified/customized in the non-riding season
Average Year
Year-end financial statements will need to be produced by the Manager once a year. A full analysis
of the company should be completed to investigate the marketing, sales, HR troubles, bright spots
of the company from the previous year, and a summary of the environmental analysis. This
analysis should lead to a change in the company’s goals and objectives and marketing strategy if
needed. It will also show sales items that don’t move or don’t make enough money and should
maybe be remarketed or removed from the inventory. It might also bring to light other items that
could be added to the company’s inventory.
3.0 Human Resources Plan
The Manager position is a key role in this business venture. All staff members will have some
experience in the industry. The staff will have a strong passion for motorsports, will be dedicated to
the lifestyle, and some will be heavily involved in the racing side.
3.1 Job Descriptions
Manager
Fred Fender will be the general manager of RPM Motorsports Inc.
Mr. Fender’s duties would include:
- Hiring/firing of employees
-
co-ordinate the scheduling of employees
-
order inventory weekly to maintain proper inventory levels
-
marketing, advertising, and promotion
-
Accounts Payable, Accounts Receivable, payroll
-
Website maintenance
-
IT support
-
assisting on the sales floor when required
-
working with manufacturers and customers for warranty claims
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Sales/Finance Person
- sales of motorcycles, parts, accessories, and apparel
-
doing the necessary paperwork to assist customers with their application for in-house
manufacturer financing
-
maintaining an appealing showroom floor while maximizing space, restocking display
shelves as necessary
-
operating a point-of-sale terminal
Parts/Warranty Person
- ordering parts, accessories, and apparel
-
sales of parts, accessories, and apparel
-
operating a point-of-sale terminal
-
shipping and receiving
-
maintaining inventory levels in order to keep sufficient stock on hand
-
restocking warehouse shelves
-
scheduling regular service and warranty service work orders with customers
-
informing service technicians of upcoming work orders
-
assisting the Manager with working with manufacturers and customers for warranty claims
Service Technician
- performing service work, maintenance, and warranty service to the makes of
motorcycles/ATVs that we carry: KTM, Ducati, and Husaberg
-
Performing repairs and maintenance to all makes of motorcycles, ATVs, side by sides, and
snowmobiles
-
Installing upgrades and customizing of all makes of motorcycles, ATVs, side by sides, and
snowmobiles
3.2 Training Programs
We believe that one formula for success is to continuously learn your trade. Our customers
determine whether we stay in business by their continued loyalty.
Motorcycle sales involves developing a relationship with your customer and approaching each
situation in a unique manner that adds value to your customer. To make this work, you must
believe in the product you are selling with all your heart, mind and soul. Trust, honesty and
integrity are essential parts of selling, without these qualities you cannot build successful
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relationships or add value. In order to be successful in motorcycle sales, you must give to yourself
in the form of education and training in order to give to your customer. The most important trait of
the motorcycle sales person is their ability and willingness to learn. They open their minds and are
constantly discovering and learning. This leads to self-development, which leads to greater value to
our customers.
Ongoing training for all staff members is important for the success of this venture. Each of the staff
members will have a different set of skills to maintain:
Manager
- leadership and front line supervisor training, strategic management, soft skills such as: crucial
conversations, emotional intelligence, customer service excellence
Sales/Finance Person
- soft skills such as: crucial conversations, emotional intelligence, customer service excellence
Parts/Warranty Person
- soft skills such as: crucial conversations, emotional intelligence, customer service excellence
Service Technician
- advancements in the industry, industry certifications, manufacturer specific training
Many of these courses will be available on the Internet free of charge. Some of the courses that
will benefit the entire staff will be held after regular business hours and to the entire group. In this
way, it will be cost-effective by booking everyone in for the training sessions at the same time.
3.3 Wages and Benefits
In the opening year of business we will pay our Manager, Georgio Picola a fair and reasonable
annual salary of $50,000. The two Service Technician positions will be compensated at an industry
competitive hourly rate of $27. The Sales/Finance and Parts/Warranty positions will be paid at an
hourly rate of $15 that we feel is fair and will allow us to attract and keep excellent employees.
Going forward we will give annual pay increases to help combat inflation /cost of living increases.
3.4 Human Resources Strategy
We promote teamwork and communication. The Manager and staff will consistently work together
to create a healthy, respectful work environment for all, including any and all stakeholders such as
customers and suppliers.
We will implement a staff discount for the purchase of motorcycles and ATVs that we carry. This
will be very beneficial so that the staff members will be better able to share their experiences with
our products to our customers. This first-hand knowledge and experience will be invaluable.
We regularly measure service quality by asking the customer directly how their experience was.
This will be accomplished by the Manager discussing experiences with customers, mail-out
surveys, and the customer feedback area on the website.
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4.0 Marketing Plan
The marketing strategy for RPM Motorsports is fairly simplistic: let consumers know that we have
what they want in-stock or can get it in a reasonable time. The other part of this ii we will offer
very competitive prices. In order to achieve this, one of RPM Motorsport's strategies will be to
have a presence at every major race in the area as well as any national events in the area. We will
have a booth set up and be there to promote our business through face to face contact. This will
allow us to answer questions from both current and potential customers. We feel that putting a
face to our business name is crucial.
We will set up a customer referral program. We will let our customers know that we have a referral
program by sending out an email message that explains how much we value their business and
that our continued quality depends on their referrals. We know that we will get a better response
if we include an incentive such as a discount on their next order or a gift for every referral sent our
way. Word-of-mouth and referrals will be crucial to the success of RPM, we will strive to offer our
customers the best customer experience possible, there will be an emphasis from all members of
the organization to make the customer feel like they are number one.
We will go out of our way to choose smart partners. We will forge alliances with businesses that
target the same customers as us, in this way we will create a word-of-mouth customer network
that refers business. One example would be to connect with a motorcycle washing/detailing
operation. We will not forget our suppliers and vendors. We will ask them to recommend us to
their customers. We will remind them that by referring sales leads or business to us, you're helping
to build their business, too. To make it work, we must of course return the favour. Experts say that
customer referrals and word-of-mouth are about ten times more effective than other marketing
strategies.
We will prompt our customers for written testimonials about our products and services. Our
customers will be free to share their experiences at their convenience on our testimonials section
on our website.
4.1 Segmentation
Saskatoon and area is growing rapidly. The mining industry for example, with potash and uranium
sites in the near vicinity of Saskatoon is bringing about change in the retail marketplace. There are
more jobs present creating high disposable incomes for typically male employees at these mine
sites.
4.2 Target Market
Our consumer area is the entire country, due to the expansive reach of our website. However, our
main concentration of customers will be anyone within a 6 hour drive of Saskatoon. Our target
market will be middle to upper income earners with high disposable incomes. We will be going
after motorcycle enthusiasts both male and female.
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4.3 Positioning
We will provide our clients with high performance/quality motorcycles, clothing, parts, and
accessories. From the second a customer walks through the door they will experience a totally new
kind of dealership, customers will be encouraged to sit on the motorcycles and try them out for
size. We will strive to consistently maintain a welcoming, friendly atmosphere.
4.4 Products and Services
We will promote our manufacturer financing available in the store, on our website, and on our
online advertisements.
4.5 Pricing
Our products are all high quality and well engineered. We will price our products competitively in
the marketplace, making sure to allow us to achieve reasonable profit margins. Our services will be
competitively priced for the current marketplace.
4.6 Promotion
In the week leading up to the day that we open our doors for business, we will do an advertising
blitz. This will include radio spots. We will utilize print ads in the StarPhoenix (major City of
Saskatoon newspaper) as well as other Saskatoon news and current events publications such as
The Saskatoon Sun, Saskatoon Express, Planet S.
Here is a list of some of the different vehicles we will be utilizing in our promotion strategy:
- Grand Opening
- website
- online advertising: Kijiji Daily Ad, Google Adwords, etc.
- advertising on motorcycle websites: www.sasksportbike.com, www.saskatv.com,
www.sportbikes.ca, www.cyclecanada.com, www.canadianbiker.com, www.riderswestmag.com,
www.canadianmotorcyclerider.ca, etc.
- social media: we will create and maintain a Facebook page, here we will post current news and
events as well as any current promotions
- magazine print ads: Cycle Canada etc.
- leisure and trade shows
- sponsoring racing events
- sponsoring racing team(s)
- customer appreciation days
- demo ride days
- customer referrals
- signage on the storefront
- SaskTel City of Saskatoon phone book yellow page ad
- men’s washroom wall ads in sports lounges and nightclubs/bars
- business cards
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4.7 Place
Our location will be a key component to our success. We will be located at an easily accessible,
high traffic location on 51st Street East in Saskatoon, Saskatchewan. Saskatoon is the largest city in
Saskatchewan. Saskatoon is a growing city of around 240,000. The surrounding area with all the
growing bedroom communities within a short drive to Saskatoon add another estimated 8,000
persons. These communities within a short distance to Saskatoon include:
Aberdeen
Asquith
Blackstrap Lake: Shields Townsite, Thode Townsite, and new development areas
Clavet
Dalmeny
Delisle
Dundurn
Langham
Martensville
Pike Lake
Vanscoy
Warman
There also many persons living on farms and acreages situated in the Saskatoon area.
4.8 Competitive Analysis
Competition:
There are numerous authorized dealers of motorcycles in Saskatoon and surrounding area offering
the following brands:
- BMW
- BUELL
- Harley-Davidson
- Honda
- Kawasaki
- KTM
- Suzuki
- TM
- Triumph
- Victory
- Yamaha
The authorized motorcycle dealers in Saskatoon and surrounding area include:
- Custom Cycle and Marine, Saskatoon - BMW, Kawasaki, Suzuki, Triumph
- Guertin Equipment, Saskatoon - Victory
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- Meidl Honda Powerhouse, Saskatoon - Honda
- Proline Motorsports & Marine, Saskatoon - Yamaha
- Redline Harley-Davidson, Saskatoon - BUELL, Harley-Davidson
- REV Motorsports, Martensville - TM, KTM
These dealers are all established and have been around for ten plus years. Custom Cycle and
Marine is a serious contender due to their manufacturer lineup and their longevity in the
marketplace. Guertin Equipment has just recently started selling the Victory motorcycle lineup.
Before this, they were strictly a Polaris dealer as far as their recreational products. Meidl Honda
Powerhouse is the exclusive dealer for Honda in Saskatoon. Honda is the only brand that they
carry, I don’t feel that they are much of a threat. Proline Motorsports & Marine only carries
Yamaha motorcycles, the Yamaha model lineup does have some similar bikes to what we will carry.
Redline Harley-Davidson caters to a different demographic. They typically sell all Harley-Davidson
cruiser style motorcycles and very few BUELL bikes. REV Motorsports is a small shop, the
inconvenience and price of gas will likely deter many people from driving out from Saskatoon to
Martensville for their motorcycle shop needs.
There is competition from motorsports parts/accessories/apparel brick and mortar retailers in
Saskatoon.
There is competition from companies in Canada, the United States, and from elsewhere around the
globe utilizing websites to offer new or used motorcycles for sale.
There is competition from online retailers in Canada, the United States, and from elsewhere
around the globe offering motorsports parts, accessories, and apparel for sale via their websites.
RPM has some competitors that offer similar products and services in Saskatoon and area. As we
build name recognition and status in the community, we expect to gain a larger percentage of the
market share and increase our customer base, and consequently see an increase in revenue.
Competitive Advantage
We have the first mover advantage of being the only Husaberg dealer in Saskatchewan. We will be
the only Ducati dealer in Saskatoon and surrounding area. We will be the only KTM dealer in
Saskatoon.
4.9 Marketing Expenses
There will be some costs associated with our marketing strategy. We estimate $7000 per year for
our marketing costs.
The advertising venues that will cost us some cash:
- online advertising
- motorcycle website ads
- magazine print ads
- SaskTel City of Saskatoon phone book yellow page ad
- men’s washroom wall ads in sports lounges and nightclubs/bars
- leisure and trade shows
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- sponsoring racing events
- sponsoring racing team(s)
- customer appreciation days
- demo ride days
5.0 Financial Plan
5.1 Projected Financial Statements
For the year ended 2012
Sales
1,021,050
Cost of goods sold
610,335
Gross Profit
410,715
Gross Profit Margin
41%
Income Statement
2013
2014
1,140,858
1,262,296
754,578
834,898
386,281
427,398
34%
34%
2015
1,415,340
936,123
479,217
34%
2016
1,620,113
1,071,563
548,551
34%
Appendix A details the 5 year financial projections of the balance sheet, cash flow statements, and
other projections.
5.2 Operating Expenses
Year One Operating Expenses:
Rent
Utilities
Insurance
Website
Telephone, Internet, and Security System Monitoring
Advertising and Marketing
Accounting and Legal Fees
Janitorial Services
Salary and Wages
Employee Benefits
Repairs and Maintenance
Variable Costs
Capital Cost Allowance
Debt Interest
Total
$30,000
$12,500
$6,100
$1,900
$2,300
$7,000
$4,200
$2,400
$224,089
$34,084
$2,000
$5,000
$13,020
$14,000
$358,593
Credit card retailer fees will be part of variable costs.
5.3 Capital Budget
Leasehold Improvements
Furniture and Fixtures
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$10,000
$6,000
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Computer Hardware and Software
Electronic communications equipment
Shop Equipment
Shop tools and supplies
Signage
Grand Opening
Total
Georgio Picola
$4,000
$2,000
$4,000
$2,000
$3,000
$5,000
$36,000
5.4 Cash Flow Analysis
The required ROI in our base case is 20%.
The net cash flow is:
2012 $56,800
2013 $26,810
2014 $53,675
2015 $88,747
2016 $137,264
5.5 Risk Analysis
In our base case, we are estimating the number of motorcycle/ATV units sold. Our break-even
point is based on the number of motorcycle/ATV units sold.
Year
Base case
Break-even point
Number of motorcycle/ATV units sold
2012 2013 2014 2015 2016
60
66
73
81
94
37
60
57
54
50
There is a fairly safe cushion between the base case numbers and the break-even point from our
analysis.
Please see Appendix A for further information.
5.6 Sensitivity Analysis
From our sensitivity analysis, we have deduced that our 5 year net income and 5 year net payback
are greatly affected by the number of motorcycle/ATV units sold.
Please see Appendix A for further information.
5.7 Financing Plans
George Dumas will provide $100,000 in equity financing. The balance of $200,000 will be financed
through a bank loan at a rate of 7%.
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Georgio Picola
5.8 Taxes
Tax rates have been built into our formulas and financial model amounts have included tax savings
from CCA and interest expenses. Federal corporate taxes are at a rate of 15% representing the
amount available to an incorporated business eligible for the small business deduction. The federal
small business tax rate is 27%. The small business tax credit is 16%. The federal small business limit
is set at $500,000. The Saskatchewan small business rate is 2%. The Saskatchewan M & P rate is
10%. The Saskatchewan corporate rate is 12%. The Saskatchewan small business limit is set at
$500,000.
5.9 Net Present Value
The net present value on the base case where there is $100,000 of equity investment is $94,975.
5.10 Internal Rate of Return
In the base case analysis the Internal Rate of Return on $100,000 equity invested is a respectable
50.7%.
5.11 Dividend Policy
There is no current plan to pay out any dividends. If in the future, there is excess cash on hand,
dividends may be paid out to Mr. Picola or any future investors accordingly.
6.0 References
Venture Management; Building Your Business with a Business Plan; Painter, M.; 2011; Wilson
Centre for Entrepreneurial Excellence
2010 Motorcycle, Scooter & All-Terrain Vehicle Annual Industry Statistics Report; For the Model
Year January 1, 2010 to December 31, 2010;
http://www.mmic.ca/images/content/PDF/Annual%20Industry%20Report%20MMIC%20&%20COH
V%20-%202010%20-%20summary.pdf; Motorcycle & Moped Industry Council; Canadian Off
Highway Vehicle Distributors Council
City of Saskatoon Consensus and Neighborhood Profile; 10th Edition Neighborhood Profiles;
http://www.saskatoon.ca/DEPARTMENTS/Community%20Services/PlanningDevelopment/Docume
nts/Research/Neighbourhood_profiles/2010/City_of_Saskatoon.pdf; City of Saskatoon
City of Saskatoon Neighborhood Profiles; 10th Edition; November 2010;
http://www.saskatoon.ca/DEPARTMENTS/Community%20Services/PlanningDevelopment/Docume
nts/Research/Neighbourhood_profiles/2010/ALL_Profiles_2010_WEB.pdf; City of Saskatoon
Community Services Department; Planning and Development Branch; Future, Growth, Mapping &
Research Section
The City of Saskatoon & The Saskatoon Health Region Population Projections (2006 – 2026); June
2010;
http://www.saskatoon.ca/DEPARTMENTS/Community%20Services/PlanningDevelopment/Docume
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RPM Motorsports Business Plan
Georgio Picola
nts/Research/Miscellaneous/2006-2026_Pop_Projection_Final_Report.pdf; Crosby Hanna &
Associates; Landscape Architecture and Planning; Saskatoon
7.0 List of Appendices
7.1 Appendix A
Financial Model for 5 Year Projections (Microsoft Excel document)
Chris Schira
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