REVIVAL Auto Centre - Edwards School of Business
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REVIVAL Auto Centre
Business Plan
Prepared For:
Prof. Marvin Painter
Comm 447
Entrepreneurship and Sm Business Mgmt
December 2nd 2011
P r e p a r e d b y :
A a r o n M o f f a t t
N i c o l e B a t t y
Auto Restoration Centre – Business Plan
Table of Contents
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Auto Restoration Centre – Business Plan
List of Figures List of Tables
Figure 4.1 – Work Plan
Table 6.2 – Marketing Budget
Figure 6.3 – Sales Projections
Figure 4.2 - Site Plan
Figure 4.3 -2011 Floor Plan
Figure 4.4 – 2016 Floor Plan
Figure 5.1 – 2011 Organizational Chart
Figure 5.2 –2016 Organizational Chart
Figure 6.1 – Positioning Map
Figure 6.2 Marketing Timelines
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Table 4.1 – Suppliers
Table 4.2 – Operating Expenses
Table 4.3 – Capital Budget
Table 4.4 – Shareholder List
Table 5.1 – Supervisor Tasks
Table 5.2 – Mechanic Tasks
Table 5.3 – Hunter Tasks
Table 5.4 –Labour Costs
Table 6.1 – Competitors
Table 7.1- Contract Clauses
Table 7.2 – Financial Analysis
Table 7.3 – Investment Analysis
Table 7.4 – Liquidity Ratios
Table 7.5 – Investment Utilization Ratios
Table 7.6 – Solvency Ratios
Table 7.7 - Profitability Ratios
Table 7.8 – Sensitivity Analysis
Table 7.9 – Break Even Analysis
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Auto Restoration Centre – Business Plan
1.0 Executive Summary
Revival Auto Restoration is a private corporation that will repair and refurbish classic cars for residents of Saskatchewan. This auto centre will be the only one of its kind in the Saskatoon area serving a large, ever increasing target market.
The services at Revival will be solely based on customer specifications. Beginning with a customer inquiry, the mechanics, sales personnel and body technicians will restore, repair and acquire parts for cars in a variety of conditions. A process plan that utilizes separate bays for each type of mechanical work will improve efficiency and avoid bottle necks.
Specialists in the automotive industry will represent Revival’s biggest expense and the most profitable competitive advantage. Revival will hire employees with knowledge and experience to fill its flat hierarchy by utilizing local, low-cost recruitment methods.
Revival will be promoted based on these employees’ expertise. By positioning itself as an expert on car culture and a quality service Revival will attract car enthusiasts living within
Saskatchewan and its neighbouring provinces. Emphasis will be placed on forming close relationships with established car clubs and societies.
The financing of this business will be done through a combination of debt and equity.
Profitability is achievable within the first two years of business with a minimum amount of associated risk.
The following plan provides more details on the proposed start-up of an auto restoration centre in Saskatoon.
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Auto Restoration Centre – Business Plan
2.0 Business Overview
2.1 Introduction
Revival is an auto centre that offers restoration services and mechanical repairs, and acts as a link between consumers and parts manufacturers. The main feature of Revival will be the restoration of classic automobiles based on customer orders and specifications. With an emphasis on expertise and service Revival plans on becoming the only auto centre in Saskatoon that specializes in working on classic automobiles and outfitting them with specialized performance parts.
2.2 Mission Statement
The specialists at Revival will strive to provide premium automotive vehicles, repairs, and parts to detail-specific consumers. The focus of the company is the quality restoration of Americanmade automobiles in the muscle and sports categories.
2.3 Goals and Objectives
Long-term goals have been identified along with a series of more immediate short-term objectives that assist with making the major goals more attainable.
To promote the classic car culture in Saskatoon
• Attend functions of all substantial Saskatchewan car clubs and societies
• Become a partner with Rawlco for Saskatoon’s next annual show and shine
• Establish a presence at the local SIR racetrack
Establish an image and name synonymous with quality
• Treat every potential client with courtesy and respect
• Review every detail of finished automobiles before their given to customers
• Conduct post-purchase satisfaction inquires
To become a profitable and sustainable organization
• Break-even within two years
• Generate a large enough customer base to warrant expansion within 5 years
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Auto Restoration Centre – Business Plan
3.0 Industry Overview
The automotive industry has suffered many setbacks in the last few years due to bankruptcy and economic instability. The classic car market however has been spared these misfortunes.
In fact the value of classic automobiles has risen over the last 30 years (Burton, 2011). This is due to the nature of the classic car industry. Overtime these cars experience extreme appreciation due to their rarity, brand equity and nostalgic value. In fact the sales of classic cars have generated returns starting at 12% (Burton, 2011). Looking at these facts it is safe to say that the classic car industry has escaped any major negative effects of the current economic climate. It is predicted that this will continue to be true as the economy remains unstable people are turning to investments in the form of tangible assets such as “art, wine and classic cars” (Burton, 2011). This does not mean the market is immune to any negative consequences.
It is true that the sales at major auctions have increased 11% this year but this is only on certain makes and models (Reyburn, 2011). The market has become segmented. Some cars are experiencing substantial increases in value while others are decreasing. Thus the classic automotive industry has remained strong throughout troubled-years but it will remain a safe haven only for the vehicles that still posses high brand equity.
4.0 The Operations Plan
4.1 Work Plan
The main component of the Revival business is restoring automobiles based on customer specifications. The following diagram illustrates how the process begins with a customer inquiry which is relayed to the hunter. The hunter then searches his database for an appropriate selection of vehicles for the customer to choose from. After making a selection the customer can then purchase the vehicle from Revival as is or enter it into the garage for restoration. The restoration process will differ based on each customer’s specifications but the general process will remain consistent. A vehicle will move from bay to bay depending on the work being done on it for the sake of convenience and organization. After completion the vehicle will be stored in one of the three extra bays until the customer takes possession. Other aspects of the business include doing mechanical and auto body repairs as well as ordering parts for customers. Each of these aspects follows the same work plan without step 3, going through the hunter’s database. Figure 4.1 assists in explaining this process.
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Customer
Order
Auto Restoration Centre – Business Plan
Restoration
Supervisor
Hunter
Autobody
Interior
Electrical
Transmission
Engine
Storage
Customer
Figure 4.1 – Work Plan
4.2 Site Plan
The ideal site for Revival has been located within a commercial area of Saskatoon known as
Idylwyld drive. It was selected because of the consistent stream of traffic that drives by and for the current building erected on the site. This location was listed on a commercial real estate site as 7700 square feet with a 3300 square foot existing structure. (ICR, 2011). The current structure on this property was operated by a Kal-Tire chain so minimal building improvements would have to be done for Revival to take over. These improvements include painting the exterior and replacing the current business signs.
Revival will operate out of one building that serves as a shop and office space. The lot will adequately suit Revival’s needs during the initial stages of operation but Figure 4.2 includes the current site plan along with a plan to accommodate future expansion. Revival’s intentions are to purchase another commercial lot across the back alley to serve as the primary paint and storage center. These expansions are planned to occur within five to ten years.
2011 2016
Figure 4.2 – Site Plan
4.3 Floor Plan
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Auto Restoration Centre – Business Plan
The plan for Revival’s facility is to keep much of the existing floor plan currently used by Kal-
Tire; its design will provide a smooth flow of work. Out of the eight car bays four will be operational, each one dedicated to a specific area of automotive repair and maintenance. Three of the other four bays will be used to store vehicles whenever needful. The final bay will be used as space for the operation of the necessary machinery.
Revival’s expansion plan includes making three car bays used as storage operational and converting the paint booth into another auto body terminal. This would give Revival eight functional car bays and double their capacity limits. This will be possible by procuring an adjacent lot that will be converted into an upgraded paint booth and an area of outside storage.
Figure 4.3 – 2011 Floor Plan
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Auto Restoration Centre – Business Plan
Figure 4.4 – 2016 Floor Plan
4.4 Average Business Operations
Revival will be open six days a week but will close operations on Sundays and statutory holidays. Business hours will be:
Monday – Saturday 8:00 AM – 5:00 PM
4.5 Supply Analysis
Revival will form a relationship with approximately five separate suppliers located in the United
States. These suppliers were selected because they specialize in parts that are necessary for the restoration process. Each of these suppliers offers a 30 day period for payables that will allow Revival to collect their receivables from customers before paying for supplies. Year One
Inc will be the primary supplier that Revival deals with. Due to their size and inventory they offer the most convenience when ordering car parts. This means that the supply chain for
Revival has minimal amounts of risk associated with it. Any parts that cannot be provided by
Year One Inc will be acquired from other large manufacturers all of which have a return policy
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Auto Restoration Centre – Business Plan and a guarantee on their products. If none of the following suppliers have a product the industry has many other options Revival can pursue.
Supplier
Year One Inc.
Electric Limited Inc.
Legendary Auto Interiors Ltd.
Mr. G’s Enterprises
ABS Competition Enterprises
Table 4.1 – Suppliers
Parts Offered
GM, Ford and Chrysler parts
Electrical supplies
Interiors
Small parts
Specialty Engines
4.6 Service Providers
Revival will require a few basic services to be provided. SaskEnergy will provide natural gas while the City of Saskatoon will supply the power, water and sewage. Phone and Internet will be provided from a company such as Sasktel.
A few additional services that require expertise outside of Revival’s purview will also be outsourced. Legal counselling will be provided by Benesh Bitz & Company based out of
Saskatoon and accounting services will be from Hergott Duval Stack also located in the city.
Insurance will be purchased though the closest SGI accredited branch. Employee benefits will be guaranteed from the Co-operators due to the customizable features they offer.
Occasional repairs will have to be outsourced for the larger pieces of machinery. These services will be provided by the companies that Revival purchased the product from, such as
Snap-on or Mac Tools. This is to ensure the work is done correctly and the warranty is not voided.
4.7 Operating Expenses
The following table includes the annual cost of operating for Revival. As Table 4.2 indicates salaries and wages are the highest expense for the organization. Appendix B provides a detailed explanation of all expenses.
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Auto Restoration Centre – Business Plan
Operating Budget
2012
13,000
2014
13,658 Property Taxes
Utilities
Wages
Employee Benefits
Repair and Maintenance
6,412
304,042
46,245
24,000
6,737
386,060
58,720
25,215
Other Variable Costs % Sales 31,500
Accounting 600
Legal 2,400
Insurance
Marketing
General Supplies
600
12,221
200
License
Fees
Equipment
Travel
Stationery
Capital Cost Allowance
Debt Interest
Total operating Expenses
95
355
10,000
15,032
70
24,060
11,117
501,949
36,486
630
2,522
630
9,510
210
72
266
10,506
15,793
74
38,684
9,451
615,224
662
15,996
221
75
268
11,038
32,376
77
37,383
33,712
820,001
2016
14,350
7,078
508,867
77,399
26,492
50,696
662
2,649
Table 4.2 – Operating Expenses
4.8 Capital Budget
This budget is compromised of the necessary start-up costs for Revival. Appendix B provides a detailed summary of all costs.
Budget Summary
2012 2014
Land
Buildings
Furniture and Fixtures
Equipment
Total
150,000
457,050
5,441
143,753
756,244
-
-
-
-
-
2016
80,000
270,000
200
23,622
378,822
Table 4.3 – Capital Budget
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Auto Restoration Centre – Business Plan
4.9 Working Capital Plan
4.9.1 Inventories
Due to the nature of Revival’s restoration centre, very little inventory will be kept on hand. The service offered will be unique to each and every customer specification. The needs of each customer will be assessed and the necessary parts will be ordered when needed. Revival plans to keep a small amount ($10,000) of generic inventory on hand that will be necessary for most jobs; items such as nuts and bolts. This generic inventory will be fairly small items that will be easy and cheap to store. Revival will also have very little need to hold finished goods in inventory since projects will be picked up almost immediately upon completion.
Average days for generic unfinished inventory: 30
4.9.2 Accounts receivable
Although Revival offers a relatively high cost service it may not be beneficial to offer financing or credit to customers. The target market and consumer profiles suggest customers will be able to afford Revival’s services without financial assistance. This approach will save the business from many potential problems associated with giving people credit, such as invoicing, collection policies and people refusing or being unable to pay. This is feasible because the customer will receive monthly bills which must be paid before they can take the finished project.
Average days for our accounts payable: 0
4.9.3 Operating line of credit
Since Revival is keeping a very low inventory, a line of credit will be used to purchase the majority of the supplies and parts required for each job. A $100,000 line of credit that is secured against the building at a rate of prime plus .7 will be more than adequate.
4.9.4 Accounts Payable
Revival’s suppliers offer credit terms of 2/10 net 30 so it is beneficial to take the 2% discount within the 10 days offered based on the following:
Cost of not taking discount = (2%/98%) x (365 days / 20 days) = 36.5%
This means the cost of financing a part through the supplier would be an additional 36.5% whereas the line of credit can finance the part for a mere 3.5%.
Average days for our accounts payable: 10
4.9.5 Cash conversion cycle (CCC):
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Auto Restoration Centre – Business Plan
CCC = Average days inventory + Average collection period – Average Days Payables
CCC = 30 + 0 – 10
CCC = 20
4.10 Business Structure
Revival will be a private corporation due to the following advantages:
• Limited liability
• Access to Capital
• Continuity of business
• Income tax deferment
These advantages outweigh the minor inconveniences of paying an annual fee or disclosing financial information. Revival will state a fiscal year end of December 31 st for the sake of convenience. The primary shareholders will also form the board of directors and hold various officer positions. This is to take advantage of their various skills and knowledge. After the issuance of 1,000 shares primary ownership will belong to the President/Director with the remaining shares divided among the other five directors. All of these will be Class A preferred shares so each shareholder receives voting rights along with security against bankruptcy and a claim on assets.
Personal
Information
Position
Aaron Moffatt CEO/Director 200
Nicole Batty President/Director 300
Bruce Batty Vice
President/Director
Rob
Greensides
125
Secretary/Director 125
Number of
Shares
Chuck Rust
Curtis Nelson
Treasurer/Director 125
Director 125
Ownership
20%
30%
12.5%
12.5%
12.5%
12.5%
Skills and
Knowledge
Concept creator
Concept creator
Entrepreneur and car enthusiast
Industry
Knowledge of car sales
Entrepreneur and knowledge of auto body industry
Entrepreneur and knowledge of car dealership/garage industry
Table 4.4 – Shareholder List
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4.11 Considerations
Other aspects of business operations have been considered to ensure that Revival encounters no unforeseen issues.
4.11.1 Capacity Limits
Due to the limited amount of car bays and staff members Revival will only be able to accommodate three automobiles at a time. The number of vehicles per year is limited only to the amount that can be annually put through these three bays. The circumstantial nature of each vehicle makes predicting the annual number of vehicles difficult.
4.11.2 Cost of Sales
As previously mentioned the circumstantial nature of this business makes estimations difficult.
Revival will maximize the return on service with a 100% margin on labour. The gross profit margin for parts however will be on the low average of industry at 30% in order to attract customers. Schedule 3 in Appendix A explains how these margins will be achieved.
4.11.3 Quality Control
The services provided by Revival will need a limited system of quality control. To ensure that the mechanical staff correctly perform the necessary procedures the vehicle will be evaluated before being given to the customer. These evaluations include:
• Performance Measurements such as dynamometers
• Standardized 100-point inspection
• Comparison to Costumer Specifications
To further ensure a level of quality, Revival will offer a limited-warranty for 12 months with the single stipulation that it does not apply to any performance parts. This is an industry norm due to the nature of these parts.
5.0 The Human Resources Plan
5.1 Organizational Structure
The initial organizational structure for Revival will be relatively flat. As Figure 5.1 indicates below the Board of Directors and Officers there are only two levels of employees. The managerial position will initially be held by one individual but in the expansion plan the managerial responsibilities will be divided between two positions. Figure 5.2 shows that the reasoning for this is an increased staff and a more functional organizational structure split into
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Auto Restoration Centre – Business Plan the sales and restoration departments. There will also be an increase in the restoration crew and an additional hunter to accommodate the increase in business.
CEO
Restoration
Supervisor
"Hunter"
Engine
Mechanic
Figure 5.1 – 2011 Organizational Chart
Transmission
Specialist
Autobody
Technician
CEO
Restoration
Supervisor
Sales
Supervisor
Engine
Mechanic
Transmission
Specialist
Autobody
Technician
"Hunter" "Hunter"
Engine
Mechanic
Transmission
Specialist
Figure 5.2 – 2016 Organizational Chart
Autobody
Technician
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5.2 Job Descriptions
All Employees will work 8:00 – 5:00 daily and receive 1 hour unpaid lunch break as well as thirty minutes of paid breaks throughout the day. Described below are the responsibilities and duties of each organizational level.
Restoration Supervisor
Daily Tasks
Meeting with Shop Team to review their schedules for the day
Contact Suppliers and order parts/tools as needed
Receive and store any parts shipped
Assist Shop Team when necessary
Weekly Responsibilities
Plan facilitation and scheduling of new orders
Review Shop Team productivity to ensure on schedule
Check shop cleanliness
Ensure stock and cleanliness in offices and reception area
Monthly Responsibilities
Join Shop Team on coffee breaks
Oversee Reception Area
(greet customers, answer phones, etc.)
Take Car Orders
Deal with incoming or out-going vehicles
Compile payables from suppliers and deliver to CEP
Compile receivables and send bills to costumers
Update customers on progress Draft contracts with customers
Contact Hunters to determine whereabouts/tasks
Table 5.1 – Supervisor Tasks
Shop Team
Daily Tasks
Receive instructions from supervisor
Weekly Responsibilities
Clean Hoist Area
Work on assigned project for necessary time Meet with supervisor to review feasibility of next week schedule
Take two 15 minute coffee breaks in staff room
When completed project move on to next
If no new projects available assist shop-mate of do necessary work at shop ie- organize storage, machinery maintenance, etc
Table 5.2 – Mechanic Tasks
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Hunter
Daily Tasks
Research possible vehicle locations
Travel to inspect/retrieve vehicles
Weekly Responsibilities
Update vehicle database
Meet with supervisor
Table 5.3 – Hunter Tasks
5.3 Recruitment Plans
The workforce at Revival requires a high level of skills and knowledge, thus it is vital to acquire people with a certain degree of education and experience. The restoration supervisor must be someone with previous managerial experience and certified as a journeyman mechanic specializing in any area. The shop staff will all be required to have their journeyman certification or an equivalent amount of work experience in their expert areas. To recruit these people, job descriptions and wanted ads will be included on the following:
• Workopolis.com
• SaskJobs.ca
• SaskatoonJobShop.ca
• Kijiji
• The Star Phoenix
• Siast Job Postings
These mediums were selected because of their ability to reach potential employees. However, if these methods fail to yield applicants with the necessary skills, a more active recruitment method of personally contacting current mechanics will be utilized. Enticements such as task variety, enrichment and job autonomy will be used to attract applicants. Revival also plans to attract and retain employees by offering competitive wages. Emphasis is put on building a team that customers can trust and form relationships with.
5.4 Training Programs
There will be no extensive training programs at Revival. Upon arriving at the organization, all new employees will be given a tour of the facility and an explanation of duties, expectations and safety procedures. These individuals will be professionals that know how to perform their tasks, rendering a formal training program unnecessary at this point.
After expansion, Revival will consider hiring trainees who will be provided with on-the-job mentorship and training. These trainees will also be offered the chance to have their apprenticeship costs subsidized upon an agreement of further employment.
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Auto Restoration Centre – Business Plan
5.5 Strategy
Revival will promote a family culture with an emphasis on car enthusiasm. This will be done by treating the employees as individuals and always focusing on the value they bring to the organization. The strategies for this plan are as follows:
Constant acknowledgment of achievements in the form of written or verbal recognition and commemorative images displayed in the reception area
Personalized rewards after completion of goals or for special occasions
Sponsor employee attendance at any local car events
Encourage employee use of equipment after hours
Annual employee trips or events
This will foster employee commitment and provide meaning to their work. The purpose of this strategy is to make the staff feel valued, as well as to create an environment where they feel empowered and able to do their jobs well. Revival will strive to provide its staff with a job they enjoy doing every day.
5.6 Labour Break-down
Table 5.3 explains all the components that make up the labour expenses for Revival. It includes all the extrinsic rewards and benefits that will be provided by management. As mentioned before, an expansion is planned after five years of successful operations which explains the increase in labour costs for 2016. The high expenses of this table reflect the emphasis Revival will place on recruiting an educated and satisfied team of employees.
Labour
2011 2014 2016
296,039 374,706 493,095 Full-Time
Part-Time
Benefits
8,003 11,351 15,772
46,244 58,719 67,314
Rewards/Gifts 1,500 1,500 3,000
Total 351,786 446,276 579,181
Table 5.4 – Labour Costs
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Auto Restoration Centre – Business Plan
6.0 The Marketing Plan
6.1 Competitors
Saskatoon was selected for the first Revival retail location because it is an untapped market.
There are currently no direct competitors operating anywhere in the greater Saskatchewan area. Table 6.1 includes all the near and far competitors that Revival will encounter in Canada.
There are only two near competitors, Cars by Nibet in Alberta and Boot Hill in Ontario. The other competitors are basic dealerships located within the Saskatoon area. They are included as competitors because some of the more standardized parts that consumers will need for their classic cars could be ordered through these dealerships. However it is projected that they will take a minimal share of Revival’s potential market.
Near Competitors
Cars by Nibet
Boot Hill
Far Competitors
Auto-Clearing Chrysler Dodge Jeep
Cars R Us
Dodge City Auto
Bridge City Auto Sports
Jubilee Ford Sales
Merlin Ford Lincoln
Saskatoon Motor Products Ltd
Sherwood Chevrolet Oldsmobile
Village Super Centre
Wheaton Pontiac Buick Cadillac GMC Ltd
Table 6.1 - Competitors
Location
Cochrane, Alberta
Erin, Ontario
Location
331 Circle Dr W, Saskatoon
400 43 rd St E, Saskatoon
220 8 th St E, Saskatoon
2100A Millar Ave, Saskatoon
1111 Louise Ave, Saskatoon
715 Melville St, Saskatoon
715 Circle Dr E, Saskatoon
550 Brand Rd, Saskatoon
429 20 th St W, Saskatoon
2102 Millar Ave, Saskatoon
The two near competitors have been furthered analyzed. They are also not a major concern for
Revival mainly due to their locations. None of these auto centers are close enough to be competing directly for the same customers. They also have very different marketing mixes.
Cars by Nibet is a small operation based on an acreage in Alberta with very limited advertising that appears to only be done locally. Boot Hill is a large organization, but most of their advertising appears to be through social media techniques with their website being heavily utilized. The positioning of these organizations also differ from Revival’s. Cars by Nibet concentrates on primarily classic imports, while Boot Hill focuses on Hot Rods. To better illustrate this, a positioning map has been prepared. The axis on this map compare the year of automobiles the organization specializes in and the emphasis they put on having either original components or performance parts. After placing Revival and its main competitors on the map it
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Auto Restoration Centre – Business Plan became clear that competition will not be a major issue for the organization. Revival will have a first-mover advantage in Saskatchewan.
Performance
1920s 2011
Original
Figure 6.1 – Positioning Map
6.2 Positioning
After analyzing Revival’s direct competitors, a positioning plan has been developed. The desired position for Revival is to be seen as experts on muscle cars that offer quality service. To communicate this desired position to the staff and consumers, the following positioning statement was created: “For the expert and novice car enthusiast Revival is an authority on the restoration and preservation of classic American-made automobiles.” This positioning will be achieved through the following marketing mix.
6.3 Marketing Mix
6.3.1 Product
Revival will offer three different types of services: repairs, parts shipment and complete restoration projects. A few main features of the business will be the atmosphere and the quality of service. These intangible features will need to be promoted along with the actual services in order to achieve the desired positioning. Customers will purchase these offerings because the consumers in the target market are already car enthusiasts, and Revival offers a service to improve the condition and performance of their valuable automobiles. These customers want show-worthy vehicles with maximum performance and Revival has the knowledge and expertise to assist them.
6.3.2 Price
The pricing for Revival is based on a competitive strategy. It was developing using a marketbased approach. The price for labor will be based on billable hours, for every hour a mechanic works on a project the customer will be billed $100. Revival will also charge for parts with a mark-up starting at 30%. This mark-up will be determined by the type of the part, and will be a percentage between 30% and 100%. These prices were chosen for multiple reasons. The industry average for this type of mechanical work is between $65 to $135 (Mechanic Finder,
2011). Revival chose to select a price-point that would allow them to be positioned as quality experts and perceived as a premium location without over charging customers. Another reason
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Auto Restoration Centre – Business Plan for this pricing strategy is because it allows Revival to become profitable within 2 to 3 years. It also allows Revival to operate at less than maximum capacity during the initial, awarenessbuilding years.
6.3.3 Place
Revival will sell directly to consumers. It will have two distribution channels to provide offerings to consumers. The first one is when the vehicle bodies need to be initially picked up or dropped off after completion. This will be done using the Hunter’s truck and trailer at no expense to the customer. The second distribution channel is when individual parts are ordered from the manufacturers. If the parts are being utilized by the Revival mechanics during restoration, the products will be shipped using the manufacturer’s preferred method to the
Revival Auto Centre. If the part is order by a customer for their own restoration process, then the part will go from the manufacturer directly to the customer without arriving at Revival using a priority shipping method such as Fedex. These channels were selected because they ensure that the finished product is treated with due care and that the parts are delivered to the costumer in a timely manner. Even though priority shipping may incur more costs, a timely delivery is valued by the consumers in this industry, and will present Revival with an advantage over slower competitors.
6.3.4 Promotions
The promotions for Revival will have the sole purpose of creating brand awareness. At this point the goal will be to increase the number of people that know about the company. In order to do this every consumer touch-point will be integrated. This includes every aspect of the business that a consumer will encounter such as the promotional items, the store front and the reception area. These touch-points were selected because it is important for Revival to have promotions with a high frequency rather than a large reach at this point. They will all be designed to move Revival closer to their desired position by utilizing a consistent red and black color scheme and featuring the campaign slogan: “No Replac ement for Displacement”.
This slogan was developed because it conveys the appropriate message to consumers, that Revival is an authority on classic cars, while also utilizing a common expression that will be familiar among the target market. Each touch-point and the desired timeline for utilizing them is include in Figure 6.3 below. Examples of the main promotional items are included in Appendix
C.
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Auto Restoration Centre – Business Plan
Time Lines
Store
Magazine Ads
Pamphlets
Gifts
2011 2014 2016 2018
Car Shows
Website
Commercial
Burnout
Competition
Figure 6.2 – Marketing Time-lines
6.4 Target Market
Revival chose to segment the market based on four factors. The gender will be males between the age of 25 to 65 making an income of $50,000 or more annually, and residing in the Prairie
Provinces.
This market is currently unsought by any competitors. It also presents a viable source of customers. According to Stats Canada there are 2, 164, 400 males in the segmented age group living in these provinces, with 355,000 of them residing directly in Saskatchewan. A large portion of these males are car enthusiasts. Auto Events is a website that compiles a list of all automotive events in the Canadian prairies and neighboring states. Its list includes over 100 car shows this year alone. Many of these car shows in Saskatchewan receive considerable attendance records; an annual event in Saskatoon attracts over 900 cars and automobiles
(Tourism Saskatoon, 2012). Another source of potential customers are the members of local automobile clubs. There are approximately 70 of these clubs in the prairies (Auto Clubs, 2011).
It is not foreseen that any environmental, technological or social trends will have an impact on the availability of this target market. Regardless of advances in the automotive industries or social trends, these car enthusiasts are loyal to their favored muscle cars.
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Auto Restoration Centre – Business Plan
Based on the demographics explained above, it is predicted that the business will attract two distinct sets of consumers, so to better understand their needs the following profiles have been developed:
Rob - Rob is a farmer with mechanical experience. He has been working with his hands his whole life and is familiar with an engine. While he is able to do much of the work himself, he does not have the education or technical expertise to do it all.
Todd – Todd is a retired businessman. Ever since boyhood he has wanted a classic muscle car, but without the mechanical-inclination or funds he was unable to get one until now.
6.5 Marketing Expenses
Table 6.5 includes the costs of all advertising and promotional materials projected for the next 7 years of operations. A detailed explanation of each expense is included in Appendix
B.
Item
Advertising
Magazine Advertising
Pamphlets
Commercial
Total Advertising
Marketing Budget
2011 2014 2016 2018
5,260 5,260
2,138 2,138
- -
6,160
4,276
-
31,160
4,276
10,000
7,398 7,398 10,436 45,436
Promotion
Gifts
Car Shows
Event
Website
Total Promotion
Table 6.2 – Marketing Budget
6.6 Projections
-
1,599 -
1,222
-
800
2,000 1,080
4,823 1,880
-
2,359 -
1,200
2,000
5,560
1,200
530
1,080
2,810
Sales and profit projections for a five year period have been developed. These projections are estimates for the billable hours that will be worked and the mark-up that will be gained from the sale of parts. Figure 6.6 illustrates the sales that Revival has developed after reviewing marketing expenses and market place demographics. A more detailed description of these projections can be found in schedule 2 of appendix A.
Aaron Moffatt & Nicole Batty 23
Auto Restoration Centre – Business Plan
Figure 6.3 – Sale Projections
6.7 Objectives
Two initial objectives have been set for Revival. After completion of each objective, another will be added so Revival becomes an organization continually working towards growth and innovation.
To achieve market share of 20% within year 1
• To achieve financial stability by year 3
7.0 The Financial Plan
7.1 Financial Structure
To finance the $756,244 required in initial capital costs, Revival will use a combination of debt and equity financing. A loan of $158,811 will be obtained from the Conexus Credit Union, the land and equipment purchased by Revival will be used as collateral for this loan. The remaining
$597,433 will be financed through the selling of common shares. There are other sources for financing that will be explored. Specifically there are two grant programs provided by the federal government. Program W02-B offers $150,000 for women entrepreneurs, and program
C04-B offers up to $45,000 for young entrepreneurs (Centre for Small Business Financing,
2011). These programs will be used as additional financing to supplement the debt and equity; they have not been included in the financial statements because there is no guarantee of procuring these grants due to the number of people competing for them. An expansion is planned for 2016 which will require an additional $373,822. This will be financed through
Aaron Moffatt & Nicole Batty 24
Auto Restoration Centre – Business Plan additional bank debt secured once again from the Conexus Credit Union under the same contract clauses. Any necessary asset replacement has been accounted for in the operation expenses each year and will be financed by profits reinvested in the company.
7.1.1 Debt Clauses
Revival will sign a debt contract with Conexus Credit Union to receive the necessary $158,811.
A summary of the most important clauses in this contracts are included in Table 7.1. Other clauses will be negotiated prior to receiving the loan.
Clause
Acceleration Clause
Missed Payment Clause
Fist Mortgage Clause
Dividend Clause
Meaning
The full amount of the debt will be called in immediately if one of the clauses is not fulfilled
If a payment is missed a time an allowance time will be set after which the bank will take action in the form of foreclosure or receivership
If the business declares bankruptcy the bank will take possession of all major assets
Dividends will not be permitted if payments are in arrears or if an adequate cash balance is not maintained
Table 7.1 – Contract Clauses
7.1.2 Depreciation
The assets purchased through these financing sources will be depreciated through a declining balance approach based on the federal CCA rate, as seen in schedule 8 of Appendix A. Revival has three different classes of debt amortization. The first class is buildings.It will be depreciated by a rate of 4% , which assumes a lifetime of approximately 30 years. The other two classes are furniture and equipment, which are both depreciated at a rate of 4%, with a lifetime of 5 years.
7.2 Dividend Policy
For the five years of operation, Revival will re-invest any profits to assist the company in the next year’s performance. If Revival continues to see future success, $150,000 will continue to be reinvested in the operation of the business. Any excess profits that are generated will be paid out in the form of dividends to common shareholders.
7.3 Financial Analysis
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Auto Restoration Centre – Business Plan
The projected profits and cashflows indicate both long and short term feasibility. The income is large enough to make investing worthwhile and enough cashflow will be generated to satisfy investors.
Indicator
Net Income
2012
144,633
Cash Flow
136,846
Table 7.2 – Financial Analysis
Net Payback 1,089,770
NPV
IRR
26, 291
31.6%
Table 7.3 – Investment Analysis
2013
124,223
155,110
2014
150,703
174,520
2015
213,225
228,512
2016
238,820
228,972
7.4 Ratio Analyses
The management information system will include the following financial ratios calculated monthly. For the purpose of decision making and monitoring, these ratios will be kept above the provided targets.
7.4.1 Liquidity Ratios
Ratio
Current Ratio
2012 Results Minimum Target
15.1
Table 7.4 – Liquidity Ratios
1.5
7.4.2 Investment Utilization Ratios
Ratio
Inventory Turnover
2012 Results Minimum Target
10 3.3
Average Days Inventory 36.5
Total Asset Turnover .99
110.6
.65
Table 7.5 – Investment Utilization Ratios
7.4.3 Solvency Ratios
Ratio
Debt Ratio
2012 Results
.18
Debt to Equity Ratio .21
Minimum Target
.31
.45
Table 7.6 – Solvency Ratios
Aaron Moffatt & Nicole Batty 26
Auto Restoration Centre – Business Plan
7.4.4 Profitability Ratios
Ratio 2012 Results Minimum Target
Gross Profit Margin .65
Net Profit Margin .16
.50
.09
Return on Assets
Return on Equity
.16
.19
.09
.15
Table 7.7 – Profitability Ratios
7.5 Sensitivity Analysis
To identify which variables are critical for Revival, several values were changed to observe their affect on NPV and IRR. As the following table indicates, the only variable that had a significant effect was billable hours.
Wages ($)
NPV
$239,280
$26,291
$280,114 $198,447
$-175,650 $228, 232
IRR
Billable Hours (hr)
NPV
IRR
Debt (years)
NPV
31.6%
15
$26,291
31.6%
10
$26,291
IRR 31.6%
Table 7.8 – Sensitivity Analysis
7.6 Break-Even Analysis
18% 43%
9 21
$-479,595 $531, 180
-13.4% 58.3%
4 15
$-123,376 $58, 195
21.5% 33.5%
Revival’s break-even level was calculated using the critical value, billable hours, it can be seen that the company needs a considerable number of hours in order to break-even.
Aaron Moffatt & Nicole Batty 27
Auto Restoration Centre – Business Plan
25
20
15
10
5
0
Base Case
Break-Even
1
15
8
2
16
10
3
17
9
4
19
11
5
22
11
Table 7.9 – Break-Even Analysis
7.7 Contingency Plan
If Revival makes less than seven sales a day it will run out of money in five years. If this happens Revival has prepared an exit plan to sell all assets in order to pay back debt collectors.
If any additional money is made from the sale of assets Revival will distribute it among common shareholders and equity investors.
If Revival experiences unprecedented increases in sales, two strategies will be used to accommodate this extensive growth. The first one will be to schedule projects considerably in advance to accommodate as many customers as possible. The second strategy is to expand the business before initially planned if sales have grown enough to warrant the additional costs.
This will double Revival’s capacity limits.
8.0 Conclusion
The province of Saskatchewan currently has no large scale business promoting the restoration of classic automobiles. Revival plans to serve the middle-aged men of this province who do not have the technical expertise or necessary space to do these restorations themselves. A competitive advantage will be built around the expertise of the employed mechanics and the quality of their work. The low amount of debt and risk associated with this business makes it feasible. However, even though there are limited competitors in Saskatchewan, a market analysis suggests that there are not enough potential clients to achieve Revival’s relatively large break-even point. Thus it is recommended that Revival research alternative locations in more heavily populated areas.
Aaron Moffatt & Nicole Batty 28
Auto Restoration Centre – Business Plan
9.0 References
Auto Clubs. (2011). Car Club Listings. Retrieved October 17, 2011, from http://autoclubs.ca/clubs.html
Auto Events. (2011, October 12). 2011 Auto Events Calenday. Retrieved October 17, 2011, from Auto
Events: http://www.autoevents.ca/
Burton, L. (2011, September 16). Classic Cars Rev Up Their Investment Credentials. Retrieved September
28, 2011, from BBC News: http://www.bbc.co.uk/news/business-114956377
Centre for Small Business Financing. (2011). Canadian Small Business Grants and Loans can be the Key to
Success. Retrieved November 15, 2011, from Small Business Financing: http://www.grantsloans.org/small-business-grants.php
ICR. (2011, September 30). Retrieved September 17, 2011, from Commercial Real Estate: http://icrcommercial.com/all-listings-brandon-ha?view=property&id=115
Mechanic Finder. (2011). Online Mechanic - Labor Cost. Retrieved October 13th, 2011, from Mechanic
Finder: http://www.mechanicfinders.com/mechanic-onlineanswers.aspx?questID=301&questName=labor%20cost
Reyburn, S. (2011, August 30). Classic Car Market Split: between big money and less desirables.
Retrieved September 28, 2011, from Sympatico: http://autos.sympatico.ca/auto-news/9582/classic-carmarket-split-between-big-money-and-less desirables
Statistics Canada. (2011, September 9). Population by sex and age, by province and territory. Retrieved
October 17, 2011, from Statistics: http://www40.statcan.gc.ca/l01/cst01/demo31b-eng.htm
Tourism Saskatoon. (2012, August 26). Rock 102 Cruise Weekend. Retrieved October 17, 2011, from
Tourism Saskatoon Official Site: http://www.tourismsaskatoon.com/festivals/Festivals/Rock_102_Cruise_Weekend/
Aaron Moffatt & Nicole Batty 29
Auto Restoration Centre – Business Plan
10.0 Appendices
Appendix A
–
Financial Statements
Aaron Moffatt & Nicole Batty 30
Auto Restoration Centre – Business Plan
Revival Auto
Income Statement
For the year ended
Revenues
Labour Sales
Parts Sales
COGS Parts
Gross Profit Parts
2012 2013 2014 2015 2016
450,000 484,313 521,241 614,413 724,240
450,000
315,000
135,000
30%
484,313
339,019
145,294
30%
521,241
364,869
156,372
30%
614,413
430,089
184,324
30%
724,240
506,968
217,272
30%
585,000 629,606 677,614 798,737 941,511 Total Gross Profit
Operating Expenses
Property Taxes
Utilities
Wages
Employee Benefits
Repair and Maintenance
Other Variable Costs % Sales
Accounting
Legal
Insurance
Marketing
General Supplies
License
Fees
Equipment
Travel
Stationery
Capital Cost Allowance
Debt Interest
Total operating Expenses
Taxable Income
Income Taxes
Net Income
Retained Earnings Account
Beg RE
Net Income
Dividends
End RE
-
13,000
6,412
239,280
36,395
24,000
18,000
600
2,400
600
12,221
200
95
355
10,000
15,032
70
24,060
11,117
413,837
13,325
6,572
281,578
42,828
24,600
19,373
615
2,460
615
9,278
205
70
265
10,250
15,408
72
44,771
10,312
482,597
13,658
6,737
298,984
45,475
25,215
20,850
630
2,522
630
9,510
210
72
266
10,506
15,793
74
38,684
9,451
499,266
14,000
6,905
339,928
51,703
25,845
24,577
646
2,585
646
9,748
215
74
267
10,769
16,188
75
33,699
8,530
546,399
14,350
7,078
387,879
58,996
26,492
28,970
662
2,649
662
15,996
221
75
268
11,038
32,376
77
37,383
33,712
658,884
171,163
26,530
144,633
147,009
22,786
124,223
178,347
27,644
150,703
252,338
39,112
213,225
282,627
43,807
238,820
144,633
0
-
144,633
144,633
124,223
-
268,856
268,856
150,703
-
419,559
419,559
213,225
-
632,785
632,785
238,820
-
871,605
Aaron Moffatt & Nicole Batty 31
Auto Restoration Centre – Business Plan
Balance Sheet
Year
Current Assets
Cash
Accounts Receivable
Inventories
Total Current Assets
2012 2013 2014 2015 2016
136,846
-
31,500
168,346
291,956
-
33,902
325,858
466,476
-
36,487
502,963
694,989
-
43,009
737,998
923,961
-
50,697
974,658
Non-Current Assets
Land
Buildings
Furniture and Fixtures
Equipment
Accumulated CCA
Total Non-Current Assets
Total Assets
Liabilities
Accounts Payable
Long Term Debt
Total Liabilities
Common Shares
Retained Earnings
Total Equity
Total Liab & Equity
150,000
457,050
143,753
(24,060)
5,441
732,184
900,530
11,147
147,317
158,464
597,433
144,633
742,066
900,530
150,000
457,050
5,441
143,753
(68,832)
687,412
1,013,270
11,964
135,018
146,982
597,433
268,856
866,288
1,013,270
150,000
457,050
5,441
143,753
(107,515)
648,729
1,151,692
12,842
121,858
134,700
597,433
419,559
1,016,992
1,151,692
150,000
457,050
5,441
143,753
(141,214)
615,030
1,353,027
597,433
632,785
15,033
107,777
122,810
1,230,217
1,353,027
230,000
727,050
(178,597)
167,375
951,469
1,926,126
5,641
597,433
871,605
17,613
439,476
457,089
1,469,037
1,926,126
Aaron Moffatt & Nicole Batty 32
Auto Restoration Centre – Business Plan
Cash Flow Statement
For the year ended
Net Income
CCA
Operating Cash Flow
Changes in Working Capital
Accounts Receivable
Inventories
Accounts Payable
Total
2012 2013 2014 2015 2016
144,633
24,060
168,693
124,223
44,771
168,994
150,703
38,684
189,387
213,225
33,699
246,924
238,820
37,383
276,203
-
(31,500)
11,147
(20,353)
-
(2,402)
817
(1,585)
-
(2,585)
878
(1,707)
-
(6,522)
2,191
(4,331)
-
(7,688)
2,580
(5,108)
Investment Activities
Land
Buildings
Furniture and Fixtures
Equipment
Total
Financing Activities
Long Term debt
Common Shares
Dividends
Total
Net Cash Flow
Cash Bal Beg of Year
Cash Bal End of Year
(150,000)
(457,050)
(143,753)
(756,244)
(5,441)
147,317
597,433
-
-
744,750
136,846
136,846
-
-
-
-
-
(12,299)
-
-
(12,299)
155,110
136,846
291,956
-
-
-
-
-
(13,160)
-
-
(13,160)
174,520
291,956
466,476
-
-
-
-
-
(14,081)
-
-
(14,081)
228,512
466,476
694,989
(270,000)
(80,000)
(200)
(23,622)
(373,822)
331,699
-
-
331,699
228,972
694,989
923,961
Aaron Moffatt & Nicole Batty 33
Auto Restoration Centre – Business Plan
Schedule 1: Economic Variables
Debt Interest Rate
Inflation
Inflation Factor
Schedule 2: Revenues
Billable Hours/day
Number of Days/year
Price Charged/hour
Labour Sales
Parts sales/billable hour
Parts Sales
Total Sales
Growth Rate Billable Hours
Revenues
Labour
Parts
Total Revenues
Schedule 3: Cost of Goods Sold
Gross Profit Margin
Labour
Parts
Cost of goods Sold
Labour
Parts
Total Cost of Goods Sold
2012
7.0%
2.5%
1.025
2012
2013
7.0%
2.5%
1.025
2013
2014
7.0%
2.5%
1.025
2014
2015
7.0%
2.5%
1.025
2015
2016
7.0%
2.5%
1.025
2016
15
300
$ 100.00
450,000
$ 100.00
450,000
900,000
16
300
$ 102.50
484,313
$ 102.50
484,313
968,625
17
300
$ 105.06
521,241
$ 105.06
521,241
1,042,483
19
300
$ 107.69
614,413
$ 107.69
614,413
1,228,826
22
300
$ 110.38
724,240
$ 110.38
724,240
1,448,479
0% 5% 5% 15% 15%
450,000
450,000
900,000
484,313
484,313
968,625
521,241
521,241
1,042,483
614,413
614,413
1,228,826
724,240
724,240
1,448,479
2012 2013 2014 2015 2016
100%
30%
100%
30%
100%
30%
100%
30%
100%
30%
-
315,000
315,000
-
339,019
339,019
-
364,869
364,869
-
430,089
430,089
-
506,968
506,968
Aaron Moffatt & Nicole Batty 34
Auto Restoration Centre – Business Plan
Schedule 4: Operating Expenses
Property Taxes
Utilities
Wages
Employee Benefits
Repair and Maintenance
Other Variable Costs % Sales
Accounting
Legal
Insurance
Marketing
General Supplies
License
Fees
Equipment
Travel
Stationery
Capital Cost Allowance
Debt Interest
Total operating Expenses
2012 2013 2014 2015 2016
15.21%
2%
13,000
6,412
239,280
36,395
24,000
18,000
600
2,400
600
12,221
200
95
355
10,000
15,032
70
24,060
11,117
413,837
13,325
6,572
281,578
42,828
24,600
19,373
615
2,460
615
9,278
205
70
265
10,250
15,408
72
44,771
10,312
482,597
13,658
6,737
298,984
45,475
25,215
20,850
630
2,522
630
9,510
210
72
266
10,506
15,793
74
38,684
9,451
499,266
14,000
6,905
339,928
51,703
25,845
24,577
646
2,585
646
9,748
215
74
267
10,769
16,188
75
33,699
8,530
546,399
14,350
7,078
387,879
58,996
26,492
28,970
662
2,649
662
15,996
221
75
268
11,038
32,376
77
37,383
33,712
658,884
Salary and Wage Expense
Number of Employees:
Manager (full time)
Mechanics
Technician
Hunter
Salaries/Wages
Manager Salary
Mechanic (wage rate/hr)
Technician (wage rate/hr)
Hunter (wage rate/hr)
Salary and Wage Costs
Manager
Mechanic staff
Technician staff
Hunter staff
Total Salaries and Wages
$
$
$
1
2.1
0.9
0.21
77,376
27.00
25.00
14.00
77,376
110,250
45,938
5,717
239,280
$
$
$
1
2.7
1.0
0.27
79,310
27.68
25.63
14.35
79,310
145,294
49,440
7,534
281,578
$
$
$
1
2.8
1.0
0.28
81,293
28.37
26.27
14.71
81,293
156,372
53,210
8,108
298,984
$
$
$
1
3.2
1.2
0.32
83,325
29.08
26.92
15.08
83,325
184,324
62,721
9,558
339,928
Aaron Moffatt & Nicole Batty 35
$
$
$
1
3.7
1.4
0.37
85,409
29.80
27.60
15.45
85,409
217,272
73,933
11,266
387,879
Auto Restoration Centre – Business Plan
Schedule 5: Capital Budget
Land
Buildings
Furniture and Fixtures
Equipment
Total
2012 2013 2014 2015 2016
150,000
457,050
5,441
143,753
756,244 -
80,000
270,000
200
23,622
373,822
Working Capital
Inventory
Acc Pay
31,500
11,147
33,902
11,964
36,487
12,842
43,009
15,033
50,697
17,613
Number of Days
Inventory
Acc Pay
Schedule 6: Financing Budget
Bank debt
Equity
Total
Schedule 7: Debt Ammortization
Beg Balance
Addition
Payment
Interest
Principal Reduction
End Balance
30
10
30
10
30
10
30
10
30
10
21%
2012
158,811
597,433
756,244
2013
-
2014 2015 2016
373,822
373,822
10
2012
-
158,811
22,611
11,117
11,494
147,317
2013
147,317
-
22,611
10,312
12,299
135,018
2014
135,018
-
22,611
9,451
13,160
121,858
2015
121,858
-
22,611
8,530
14,081
107,777
2016
107,777
373,822
75,835
33,712
42,123
439,476
Aaron Moffatt & Nicole Batty 36
Auto Restoration Centre – Business Plan
Schedule 8: CCA
Class: Buildings
Beg Balance
Addition
CCA Expense
End Balance
2012 2013 2014 2015 2016
4% -
457,050
9,141
447,909
447,909
-
17,916
429,993
429,993
-
17,200
412,793
412,793
-
16,512
396,281
396,281
270,000
21,251
645,030
Class: Furniture and Fixtures
Beg Balance
Addition
CCA Expense
End Balance
Class: Equipment
Beg Balance
Addition
CCA Expense
End Balance
Total CCA Expense
20%
20%
-
5,441
544
4,897
-
143,753
14,375
129,378
24,060
4,897
-
979
3,918
129,378
-
25,876
103,502
44,771
3,918
-
784
3,134
103,502
-
20,700
82,802
38,684
-
627
2,507
3,134
82,802
-
16,560
66,241
33,699
200
521
2,186
2,507
66,241
23,622
15,610
74,253
37,383
Aaron Moffatt & Nicole Batty 37
Auto Restoration Centre – Business Plan
Schedule 9: Income Taxes
Input Corporate Tax Rates
Federal Small Business
Small Business Tax Credit
Federal Small Business Limit
Federal Corporate Rate
2012 2013 2014
27.0% Saskatchewan Small Business Rate
16.0% Saskatchewan M & P Rate
500,000 Saskatchewan Corporate Rate
Saskatchewan Small Business Limit
1 2
18.0% 16.5%
3
15.0%
Income Before Taxes
Accumulated Loss Carryforward
Loss Carryforward Used
Taxable Income
2015 2016
4.5%
10.0%
12.0%
500,000
5
15.0%
4
15.0%
171,163
-
-
171,163
147,009
-
-
147,009
178,347
-
-
178,347
252,338
-
-
252,338
282,627
-
-
282,627
Federal Tax
Small Bus Tax Credit
Provincial Tax
Total Taxes
Schedule 10: Investment Analysis
46,214
(27,386)
7,702
26,530
39,693
(23,521)
6,615
22,786
48,154
(28,536)
8,026
27,644
68,131
(40,374)
11,355
39,112
76,309
(45,220)
12,718
43,807
15.5%
1 2 3 4 5
30.0% Required ROI
Net Cash Flow
Dividends
Terminal Value
Total Cash Flow to Equity Investors
136,846
-
136,846 155,110 174,520 228,512
597,433
155,110
-
174,520
-
228,512
-
228,972
-
763,241
992,214
3.3
Equity Investment
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Auto Restoration Centre – Business Plan
Payback
Net Present Value
Equity Value
IRR
Non-Leveraged IRR
ERR
External Cash Flow
Dividends
Terminal Value
Total External cash flow
Gross
Net
1,687,203
1,089,770
26,291
623,724
31.6%
26.9%
1
-
2
(597,433) -
-
3
-
4
-
-
5
-
763,241
763,241
5.0%
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Auto Restoration Centre – Business Plan
10.0 Appendices
Appendix B
–
Expenses
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Auto Restoration Centre – Business Plan
Building Budget
Item Price Source
Commercial Lot 600,000 ICR
Improvements:
Siding
Sign
5,000 BFC Paint
2,050 Outdoor Signs
Total
Cost Explanation:
607,050
This table illustrates the necessary expenses for procuring a retail location. The land and existing structures were quoted at $600,000 for an outright purchase. The only improvements that will be need are a few changes to the exterior appearance and the inclusion of Revival’s business signs. These improvements will costs around $7,000.
Aaron Moffatt & Nicole Batty 41
Auto Restoration Centre – Business Plan
Operating Budget
Property Taxes
Utilities
2012 2014 2016
Other Variable Costs %
Sales
Accounting
Legal
13,000 13,658 14,350 City of Saskatoon
6,412 6,737 7,078 City of Saskatoon, SaskEnergy,
Sastel
304,042 386,060 508,867 Pay Scale Wages
Employee Benefits 46,245 58,720 77,399 calculated
Repair and Maintenance 24,000 25,215 26,492 Kal-Tire
31,500 36,486 50,696 calculated
600
2,400
630
2,522
662
2,649
Benesh
Consumer Info
Insurance
Marketing
General Supplies
License
600
200
95
630
12,221 9,510 15,996 Assorted Sources
210
72
662 Kal-Tire
221
75
(estimated)
City of Saskatoon
Fees
Equipment
Travel
Stationery
Capital Cost Allowance
Debt Interest
355
10,000
15,032
70
24,060
11,117
266
10,506
15,793
74
38,684
9,451
268
11,038 (estimated)
32,376 Fuel Economy, Holiday Inn
77
Corporation Centre
VistaPrint
37,383 calculated
33,712 calculated
Total operating Expenses 501,949 615,224 820,001
Cost Explanation:
Utilities are made of three components. Heat will be provided by Sask Energey at $126 monthly. Power and water will come from the City of Saskatoon at $408 monthly. The final utility provider is Sasktel. The
2012 expense includes a $35 installation fee, $34.95 for internet and $21.54 for a phone line. This expense also includes a Blackberry plan for the Hunter costing $25; the 2016 expense has an additional cellphone for the 2 nd Hunter. The $10,000 cost of equipment is for any necessary additions to the shop’s tools and machinery. The cost of the stationery includes personalized envelopes, letterhead and notepads that will all include Revival’s logo and address. The travel expense is compromised of an annual estimation for fuel costs and a $120 living allowance to cover food and accommodation. The annual total comes to $3512 for fuel and $11,520 for living allowance based on the Hunter being gone for 2 days a week. This cost is doubled in 2016 to account for the additional Hunter.
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Auto Restoration Centre – Business Plan
Item
4 Hoists
Tire Changer
Wheel Balancer
Brake lathe
Wheel aligners
Engine Analyser
Dynamometer
Metal Lathe
Engine Calibration Kit
Injector cleaner
Hose reel
Bench Grinder
Compressor
Grease Kit
Oil drainage pump
Oil extractors
2 Jacks
4 Jack Stands
Transmission jack
Under hoist drainers
Parts washer
Pedestal drill
Pressure washer
Engine crane
Engine stand
Vacuum cleaner
Welding equipment
Wheel dolly
Angle grinder
Creepers
Bench Vises
Pipe bender
Body Straightener
Spray Gun
Paint Booth
Curing Light
Body repair kit
Sand blasting cabinet
Hydraulic gear puller
Goggle Supply
Ear protection Supply
First aid kit
Fire extinguishers
Face shield
Gloves
Company Truck
Car Trailer
Work Benches
Total
Equipment Budget
Snap-on
Mac tools
Snap-on
Snap-on
Autobody Tool Mart
Snap-on
Snap-on
Snap-on
Babco Equipment
Autobody Tool Mart
Snap-on
Autobody Tool Mart
Autobody Tool Mart
Snap-on
Snap-on
Snap-on
Snap-on
Snap-on
In-first-aid kit
Flame Busters
Snap-on
Snap-on
Kijiji
Kramer Trailers
Snap-on
Source
Babco equipment
Babco equipment
Babco Equipment
Babco Equipment
Babco Equipment
E-tool cart
Land & Sea Chassis
Mac Tools
Snap-on
Snap-on
Snap-on
Mac Tools
Babco Equipment
Snap-on
Snap-on
Harbor Freight Tools
Snap-on
Snap-on
Snap-on
Mac Tools
Snap-on
Just Tools
Snap-on
549.75
136.99
1,113.85
1,495
399.99
299.99
134.75
318
6,645
1,269.99
142.65
19,699
1,759.99
445.25
1,574.25
1,851.95
144
106.4
175
800
52.85
143.8
18,995
5,950
1,595
143,753
Price
20,000
1,565
1660
5,160
11,910
58
14,950
8,239.99
137.3
299.99
509
274.99
5,895
30.2
496.3
150
749.9
389
839.95
149.99
2,999
353.64
1,137.75
Aaron Moffatt & Nicole Batty 43
Auto Restoration Centre – Business Plan
Marketing Budget
Item
Advertising
Magazine Advertising
Pamphlets
Commercial
Total Advertising
Promotion
Gifts
Car Shows
Event
Website
Total Promotion
2011 2014 2016 2018 Source
5,260 5,260 6,160 31,160 Auto-trader, Starpheonix
2,138 2,138 4,276 4,276 AdGraphics
- - - 10,000 Gaebler
7,398 7,398 10,436 45,436
1,599 - 2,359 - All Bar Stools, Blue Water Graphic
1,222 800 1,200 1,200 Spider, Blue Water Graphic, Uline, Ebay
- - - 530 City of Saskatoon
2,000 1,080 2,000 1,080 Webpage FX
4,823 1,880 5,560 2,810
Cost Explanation:
Under the advertising section the cost of the magazine advertisements are taken from two sources. The
Autotrader costs $200 for a full-page advertisement ran for six weeks with the potential to reach 14 million viewers each month. The Starpheonix will be utilized for two different advertisements. The first is an online ad featured on their website, with currently over 4 million views, for $60. A print ad will be ran it the Starpehonix for $5,000 annually. This paper reaches 71% of the local target market and will continue to be heavily utilized. In 2016 the magazine advertising costs includes ads in popular car magazines for $5,000 per month; this includes magazines like Chevy Performance. A radio ad on Rock
102 costing $90 has also been included in this cost. The pamphlets will be from Ad Graphics costing
$2,138 for 50,000 items. The commercial will run on the Speed Tv cable channel with the potential to reach 80,000 people for approximately $10,000.In the section gifts for local car clubs is the first cost. In
2012 this gifts will be car stools, costing $75.99 each, embroidered with the Revival logo for a total of
$80. Initially these stools will be given to the approximately 30 car clubs in Saskatchewan resulting in an annual cost of $2,359. In 2016 the bar stools will be given to car clubs in the neighbouring provinces of
Manitoba and Alberta to expand the customer base. An important part of promotions is the attendance at local car shows, there is no fee associated with setting up a booth at these events. In 2012 supplies will be purchased. A canopy embroidered with the Revival logo will cost a total of $267.94. A folding table and chairs will be purchased for $155 for Uline and a price will be raffled off at every event for approximately $40 each. An estimated 20 events will be attended in 2012 so the raffle prizes will total
$800 which will also be the only cost associated with car shows for 2014. In 2016 the amount of car shows attended will be increased to 30 raising the cost of prizes to $1,200. A website will be created and maintained by the company Webpage FX for an initial $2,000 and a fee of $1,080 for a redesign and update every two years. This website will be basic yet attractive with basic e-commerce functions and limited multimedia capabilities. The final cost in promotions is the annual event that will begin in 2016.
Appropriate outdoor locations in Saskatoon can be booked for no fee so the only costs associated with this event are the trophies or prizes awarded to the winners of the car show or burnout competition depending on the nature of the event. These trophies have been estimated to cost $53 each.
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Auto Restoration Centre – Business Plan
10.0 Appendices
Appendix C
–
Marketing Samples
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Auto Restoration Centre – Business Plan
1) Magazine Advertisement Sample
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Auto Restoration Centre – Business Plan
2) Gift Sample
3) Car Show Booth
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Auto Restoration Centre – Business Plan
4) Pamphlet Sample
Aaron Moffatt & Nicole Batty 48
