Business Plan
Michael Hubbard
12/5/2014
The Quickest Way to Point A from Point B.
TABLE OF CONTENTS
EXECUTIVE SUMMARY ........................................................................................................................................... 2
INTRODUCTION ..................................................................................................................................................... 3
OPERATIONS PLAN ................................................................................................................................................ 3
HUMAN RESOURCES .............................................................................................................................................. 5
CAPITAL BUDGET ................................................................................................................................................... 5
MARKETING PLAN.................................................................................................................................................. 6
FINANCIAL PLAN .................................................................................................................................................... 8
SUMMARY ........................................................................................................................................................... 10
APPENDIX A – FINANCIAL MODEL ........................................................................................................................ 11
APPENDIX B – ORGANIZATION STRUCTURE ......................................................................................................... 11
APPENDIX C – SITE PLAN ...................................................................................................................................... 11
APPENDIX D – CAPITAL BUDGET .......................................................................................................................... 12
APPENDIX E – OPERATING EXPENSES ................................................................................................................... 12
Executive Summary
B-Line Trucking (B-Line) is a mid-size trucking company hauling wood products for mills in the Meadow
Lake area. Three mills in the Meadow Lake area include: Meadow Lake Mechanical Pulp Mill, NorSask
Forest Products and Meadow Lake OSB. Previously there was a short-line railway that ran between
Meadow Lake and North Battleford however about 5 years ago this line was shut down. These days the
only way the three mills can get their product to mill is by truck.
Operational Overview
B-Line will earn revenue through completing hauling contracts for the mill. Truck drivers will be
scheduled to arrive for pick-up at designated times through the day. After being loaded at the
respective mill they will drive to North Battleford where the product will be loaded onto trains and
shipped to market. We will expect our drivers to make three runs a day.
B-Line will operate via contracting arrangements between itself and truck owner-operators. The
decision to outsource all trucking aspects of the company is to limit risk. Given the nature of the
business being dependent on landing hauling contracts (no contract, no business) we needed to identify
strategies to mitigate this risk. By outsourcing our trucking operations, we can greatly cut down on our
fixed expenses.
Marketing Overview
B-Line’s target customer will be Meadow Lake Mechanical Pulp Mill (MLMP). We feel MLMP to be a
good target customer of the three mills as MLMP tends to have the most consistent output (therefore
consistent hauling needs), generates the most consistent profits and has a strong track record of local
sourcing.
The strategy to obtain the hauling contract will consist of direct marketing. The aim will be to set-up
multiple meetings with logistic managers at the mill, using this time to get to know their needs and
prove to them what B-Line can offer. Once we feel we have a good idea of what the mill needs and
believe we can deliver on this, a proposal to haul for the mill will be submitted.
B-Line faces stiff competition from Edge Transportation (Edge), the company currently hauling wood
products for Meadow Lake Mechanical Pulp Mill. Edge operates out of Saskatoon and has the benefit of
being owned by Siemens Transport; due to its size Edge will likely have cost benefits over B-Line.
Financial Snapshot
As noted earlier, B-Line comes with inherently high risk simply due the make-or-break nature of landing
the hauling contract. With this high risk however comes the opportunity for high reward. If we can land
the contract for hauling the mills output which we intend (25% ouput years 1-2, 50% output year 3-4,
100% output by year 5), we’re looking at an IRR over the 5 years of approximately 42.9% and an NPV of
$57,215.
Introduction
B-Line Trucking (B-Line) is a mid-sized trucking company based in Meadow Lake, SK. B-Line will generate
revenue through the completion of hauling contracts for three mills in the Meadow Lake area. B-Line
will not own any trucks nor have any truck drivers on its payroll, rather the company will operate via
contracting arrangements between B-Line, the mills and independent truck owner-operators. B-Line’s
focus will be on the marketing side of the arrangement, landing contracts with the mills and bidding out
the hauling itself to independent truck owners.
Target market for the enterprise includes three major mills: Meadow Lake Mechanical Pulp Mill
producing 360,000 tonnes of pulp per year, NorSask Forest Products (saw mill) producing 160 million
cubic feet of lumber per year and Meadow Lake OSB producing 700 million square feet of OSB per year
(City of Meadow Lake, 2008).
Previously, wood products created by these mills were shipped to market via train on a short line track
to North Battleford and then to Saskatoon. In 2008 however, the American rail company OmniTRAX
that owns the line between Meadow Lake and North Battleford announced they would discontinue its
operation (Canada.com, 2008). Multiple attempts have been made by groups in the area to purchase
the rail line from OmniTRAX, who still owns the line, but there has been no success in completing the
purchase, much less getting it back to working order.
Since the line was shut down, the three mills can only get their product to market by truck. This has
resulted in an increased demand for trucking in the area. Further increasing this demand is the fact that
the Meadow Lake Pulp Mill has plans to increase output from 360,000 to 500,000 tonnes of pulp per
year (City of Meadow Lake, 2008). Based on these facts we see a high demand for trucking in the area
for many years to come.
The decision to outsource almost all the operational aspects of the company is to limit risk. Because the
success of the business is dependent on landing long-term hauling contracts with the mills, B-Line’s
success comes with an inherently high degree of
risk. Outsourcing the hauling operation will
substantially reduce our risk because it eliminates
an enormous amount of fixed costs.
Operations Plan
Ownership Structure
B-Line will be set-up as a corporation. The main
reason for incorporating will be to limit the
liability of shareholders. It’s also the belief of the
company that it will be more attractive to future
investors if the company is incorporated as
opposed to a partnership or sole proprietorship.
B-Line will be governed by a board of directors comprised of three people: Michael Hubbard, Dallas
Bear, and Dr. Robert Hubbard. We will also offer a spot on our board to representatives from any mill
we land hauling contracts from. Michael Hubbard will be responsible for the business end of the
organization; key responsibilities will include fostering and maintaing relationships with potential
customers and overseeing all financial matters. The other two board members, Mr. Bear and Dr.
Hubbard will act as semi-silent partners, not participating in the day to day operations but still
encouraged to attend monthly board meetings to offer advice and share any insights or thoughts on the
organizations strategic direction. See Appendix B for Detailed Org. Chart
Location and Site Plan
B-Line Trucking will be located just off Highway 4 in Meadow Lake, SK. The leased space will be
approximately 1,000 sq. ft. This will act as general office space for management and administrative
employees to carry-out dispatch and quality control duties. (See Appendix C). In order to increase the
credibility of the organization, we plan to renovate our office space to give it a mondern and
professional look. The hope here is that it will improve how the mill views us as a potential business
partner, improving our ability to land that all-important hauling contract.
Process Plan
B-Line will generate revenue through hauling MLMP’s wood pulp by truck to North Battleford. On a
daily basis, trucks will arrive at the mill at their specified loading time. MLMP will be responsible for
loading the trucks. Once loaded and secure, the pulp will go by truck to North Battleford. Once in North
Battleford, the pulp will be loaded on to train cars for shipment to markets around the world. On a
regular day, the goal will be for our drivers to make 3 hauls per day, which works out to be an 11-12
hour day, depending on a number of factors from line-ups at loading and offloading locations to road
conditions.
Payment collection will be anticipated at once per month, offering MLMP 30 days to pay. Based on the
size of MLMP, we don’t consider payment collection to be an issue.
5-Year Development Plan
Assuming we’re able to successfully land a hauling contract with MLMP, the plan will be to haul 25% of
the mill’s output in year one and two, increasing to 50% in year three and four, and then finally hauling
100% of the mill’s output by year five. Based on this plan, we will have to grow our work force and
office space.
Year
Year 1
Year 2
Plan
Secure hauling contract at 12 Hauls per Day (HpD).
Assess successes and challenges from past year, improving where necessary. Secure
long-term hauling contract for additional hauls per day.
Year 3
Year 4
Year 5
Begin hauling 19 HpD. Increase workforce to accommodate one additional part-time
worker.
Assess effectiveness at 19 HpD, ask “do we have capacity to increase to 38 HpD?”
If yes to above question, will need to obtain bigger office space and add three more
full-time employees
Human Resources
B-Line will employ 3 full-time employees. This includes one manager (me) and two additional
employees responsible for dispatch, reception and quality control duties.
B-Line’s full-time employees will mainly be responsible for monitoring pick-ups and deliveries, ensuring
all the loads we’re responsible for get where they need to go. For example, if one of our drivers has
mechanical difficulty, these employees will be responsible for determining the quickest way to get that
driver’s load moving. This could mean calling a service truck to go meet the trucker to make the repairs
or it could mean calling the next driver on our list, requesting them make the run and offering them a
premium to do so. If we run into difficulties on our end, we need to be able to fix these problems if we
want to keep the mills business.
See Organization Chart in Appendix.
Can We Get Enough Drivers?
Obviously a big question regarding this venture is whether we can get enough drivers. Currently,
MLMP’s hauling is carried out by Edge Transportation a large Saskatoon based trucking company which
has access to a large pool of drivers. We believe we’ll be able to get the required contract drivers for
variety of reasons, the most important being the incentive to local truck drivers from the Meadow Lake
area. Meadow Lake has an abundance of people with their 1A license, B-Line Trucking can offer these
individuals the opportunity to drive truck and be home every night, an opportunity that doesn’t come
often in the trucking industry. Furthermore we believe our pay rates are very competitive, offering
drivers 80% of our hauling revenue.
Capital Budget
B-Line Trucking benefits from having a relatively low capital budget, only requiring around $60,000 to
finance its capital requirements. Over the 5-year projection period, B-Line plans to expand in year five in
order to grow at our intended rate. This expansion in year 5 will be financed by internally generated
cash flows and therefore requires no external financing (Refer to appendix D).
Working Capital
The company’s working capital outlook appears favorable (appendix D); net working capital is projected
at about $75,421. Although receivables take slightly longer to collect compared to payables, remaining
portions of start-up cash will be able to finance any gaps between receiving payment from customers
and making distributions to drivers and suppliers. B-Line doesn’t anticipate cash flow difficulties as its
cash conversion cycle is estimated around 7 days. (See appendix D)
Marketing Plan
Market Overview
The three mills in the Meadow Lake area create a strong market for hauling wood products. MLMP
alone requires 13,640 hauls per year to get its product to market while NorSask Forest Products and
Meadow Lake OSB require approximately 24,000 and 15,000 truckloads per year, respectively. This,
aside from hauling logs to the mills and all other trucking in the area, highlights the sheer size of the
trucking industry in Meadow Lake, SK.
Primary Target
B-line’s primary target customer will be MLMP, for a couple reasons. One reason we chose MLMP is
that it has the most consistent output of the mills as well as consistent profits. Further justification for
targeting MLMP is its track record of locally sourcing as much of its inputs as possible. Despite the fact
MLMP has less hauling requirements we view them as a more stable company with consistent output
and therefore consistent hauling needs.
Customer Needs
From a trucking standpoint, customers want a few key things: low cost hauling, efficient pick-ups, and
trust that the trucks will be where they need to be. Our job here is to communicate to MLMP that we
can deliver on all three.
Strategy
B-Line’s marketing strategy will be direct marketing.
Leverage Local Networks
Being born and raised in Meadow Lake, I’m optimistic I’ll be able to leverage family and friends to get a
meeting with the right people from the mill. This will come with two benefits, one being that it will offer
me a better chance at getting the meeting in the first place and number two, potentially these
personnel from the mill will know myself or my family, adding credibility and trust to my name. Trust
will be the key in signing a long-term hauling contract.
Face-to-Face Meetings
After getting in touch with the necessary personnel from MLMP, the next step will be to land a meeting.
This meeting will be what our success hinges on. Here the objective will be to find out exactly what the
customer needs, to the finest detail, then be able to prove to them that B-Line can deliver on these
needs. I’m confident we can be as efficient as the mill needs us to be and I’m confident we can get
enough drivers that the mill can trust us to be there every time they need us. That said, the only thing
we won’t have control over is whether we can offer a price low enough for the mill to accept.
During these meetings the strategy will simply be to reiterate the fact that B-Line can offer efficiency
and reliability. Our trucks will be in and out as quick as you can load them and you can bet that we will
always have a truck where and when you need it. The hope will be that increased interaction and giving
the managers a chance to get to know the “jockey” behind the company will help establish the trust
required to sign a long-term hauling contract.
Competition
B-Line faces direct competition from Edge Transportation (Edge), the company currently hauling for
MLMP. Edge Transportation has a competitive advantage over B-Line just based on its sheer size.
Owned by Siemens Transportation, Edge will have improved economies of scale compared to B-Line so it
may have the ability to undercut our price, but that is yet to be known.
Pricing Strategy
B-Line’s pricing strategy will be competitive. To be blunt, in the trucking industry, if you can’t offer a
price equal to or lower than the competition, you won’t be hauling much. Our initial price offer to
MLMP will be $0.57/km, per haul that equates to $199.50 (350km). Although we currently don’t have
access to Edge Transportations prices being charged, we’re optimistic they won’t differ by a whole lot
from what we offer. It should also be noted that we have wiggle room in the above price. For example,
currently our break-even Hauls-per-Day (HpD) is 12 at a price of $0.57/km. If we drop this to $0.50 per
KM, we simply need 2 additional HpD, or 14 HpD to break-even in year one, which we consider to be
feasible.
The above pricing strategy will also incorporate a 5% discount with each increase in hauling by B-Line.
Currently the intention is to propose hauling 25% of MLMP’s output, increasing to 50% in year three and
100% by year 5.
Contingency Plan
Inherent in in B-Line’s business model is a high degree of risk based on the type of contracts that are
being sought; the business is dependent on its ability to land long-term hauling contracts. B-Line will
mitigate this risk through contingency plans in the event that the MLMP contract isn’t obtained.
Plan B– Other two mills
If initial efforts to obtain a long-term hauling contract with MLMP are unsuccessful, B-Line still has two
other mills to approach. The aim will be to approach NorSask Forest Products (saw mill) in the same
manner we approached MLMP, a direct approach of sitting down with the necessary personnel from the
mill to find out what they want and how B-Line can give it to them. Ideally, we will have learned from
any mistakes or oversight made in our attempts with MLMP.
If efforts fail again, we will go for Meadow Lake OSB with the same strategy, learning from our previous
experiences.
Plan C– Alternate Hauling
Lastly, if all of the above fails and we have an adequate number of truck owner-operators that want to
drive for B-Line, we will explore other opportunities in the trucking industry. Meadow Lake is a growing
city, considered to be the “gateway to the north”. Trucking opportunities in the area are numerous and
varied; what industry we settle on will just depend where there happens to be excess demand for
hauling at the time.
These opportunities include transporting supplies and goods to Northern communities, hauling mining
equipment, or even grain hauling. The point here is that if we get the commitments from a number of
drivers, we have opportunity beyond the three mills to establish a successful hauling enterprise.
Financial Plan
Capital structure
B-Line is targeting a financing budget of $140,000: $100,000 of equity and $40,000 debt. After investing
in capital assets, the remaining money will enable B-Line to maintain adequate cash flows in case the
business runs into unforeseen circumstances such as not hitting sales targets or increased costs. The
extra cushion will enable B-Line to persevere through any potential rainy days.
See financial model for specific allocations.
Hauling Forecast
In coming up with revenue projections, we assumed that MLMP would offer us a sort of ‘trial period’,
approximately 1-2 years where B-Line will haul approximately 25% of output, then increasing to 50% of
output by year 3 and 100% of MLMP output by year 5. Note that each increase in output is
accompanied by a 5% discount in hauling price (discounts in year 3 and 5), coupled with anticipated
inflation of 2% per year.
Hauls per Day (HpD)
Est. Hauling Days per Year
Revenue per KM
Revenue per Haul (350 KM)
Estimated Annual Revenue
Allocation to Truck Drivers (80%)
Gross Profit
Operating Expenses (Appendix D)
Net Income (Loss)
2015
12
360
0.5700
$199.50
$861,840
($689,472)
$172,368
($174,229)
($1,861)
Source: See Financial Model for further detail
2016
12
360
0.5814
$203.49
$879,077
($703,261)
$175,815
($175,048)
$768
2017
19
360
0.5648
$197.68
$1,352,104
($1,081,683)
$270,421
($192,920)
$67,568
2018
19
360
0.5761
$201.63
$1,379,146
($1,103,317)
$275,829
($196,136)
$69,333
2019
39
360
0.5596
$195.87
$2,749,996
($2,199,997)
$549,999
($339,941)
$182,751
Although B-Line is expected to show a net loss in year one, this isn’t concerning to us for a couple
reasons. For one, the loss is relatively small and considered immaterial, secondly B-Line will still have a
healthy cash balance at the start of year two based on this scenario.
Critical Risk Factor and Break-even
When considering risks to B-Line Trucking, the critical risk factor of the company is Hauls per Day.
Plainly put, if the company can’t get enough Hauls per Day, this plan isn’t feasible. Based on our current
scenario, break-even Hauls per Day will be 12 in years one and two, increasing to 14 in year three and 28
by year 5. These increases in break-even are due to planned expansion the organization will undertake
if it can obtain planned increases in hauling.
Net Income Breakeven
Number of Hauls per Day
45
40
35
39
Red Line – Break-Even
Blue Line – Intended Scenerio
30
25
19
20
15
10
12
24
12
12
12
1
2
5
19
14
14
3
Year
4
0
5
The critical risk factor for B-Line will be for it to hit 19 Hauls per Day by year three. If we hit this target,
the business can earn a healthy and sustainable profit, anything beyond will be just a bonus. On the
other side, anything less than 19 hauls per day in year three and this is no longer feasible. While we can
make a profit on anything beyond 12 hauls per day, we don’t consider the profits to be adequate based
on the risk profile of this business unless we can hit 19 HpD by year three. In fact, if we see HpD to 19 by
year three and hold it constant, we get an NPV of $43.96, proving that 19 HpD by year three is where we
draw the line.
Key Metrics
IRR
Dividends paid Over 5 Year Projection
Net Pay Back
NPV (25% Required Return)
42.9%
$86,248
$267,900
$57,215
Summary
B-Line Trucking aims to provide locally sourced hauling services for Meaow Lake Mechancial Pulp Mill.
Based on the above scenario, the company plans to operate via contracting arrangements between with
independent truck owner-operators. B-Line will work to secure long-term contracts with MLMP via
direct marketing to their logistics managers. The hope is that given the opportunity to sit down with
these key individuals, B-Line will be able to convince MLMP that it has the capacity and ability to
complete hauling contracts for the mill in a timely and efficient manner. If a contract can be
established, we will aim to haul 25% of the mills output in year one and two, 50% of output in year three
and four, and finally 100% of its output by year five.
If this plan can be accomplished, B-Line stands to benefit from strong cash flows and consistent demand
for its services. On the other hand, B-Line’s ability to continue as a going concern is highly questionable
if it cannot land a long-term contract with MLMP. That said, B-Line can mitigate this risk by having a
plan in place to approach the other two mills with the same offer as with MLMP and also having a plan
to try hauling different goods if still unsuccessful.
Based on the above factors we can see that despite having alternate opportunities beyond hauling for
MLMP B-Line has a high degree of risk. If successful, B-Line stands to make healthy profits for many
years to come, if unsuccessful B-Line will be lucky to be around as long as it took to make this business
plan.
Appendix A – Financial Model
See Financial Model
Appendix B – Organization Structure
Board of
Directors
Manager
Dispatch /
Quality Control
Appendix C – Site Plan
Dispatch /
Quality Control
Appendix D – Capital Budget
Item
Leasehold Improvements
- Upgrading entire office
space for a modern
look
Furniture and Fixtures
Computer Equipment
Total
Year 1
$30,000
Year 5
$20,000
Source
Various experienced
friends/family
$20,000
$10,000
$60,000
$15,000
$6,500
$41,500
Staples, Costco
Best Buy
Net Working Capital
Avg Days In Receivables
Avg Days in Payables
Accounts Receivable
Accounts Payable
Cash
Net Working Capital
30 days
23 days
$71,820
($43,355)
$46,956
$75,421
Appendix E – Operating Expenses
Operating Expenses
Accounting and Legal
Advertizing (Marketing)
General Supplies
Insurance
Telephone
Utilities
Lease Expense
Repair and Maintenance
Wages
Employee Benefits
Capital Cost Allowance
Debt Interest
Total Operating Expenses
2015
900
10,000
1,000
400
1,200
3,000
15,000
500
118,400
16,529
4,100
3,200
174,229
2016
918
5,000
1,020
408
1,224
3,060
15,300
510
120,768
16,859
7,326
2,655
175,048
2017
936
5,100
1,040
416
1,248
3,121
15,606
520
137,831
19,241
5,794
2,065
192,920
2018
955
5,202
1,061
424
1,273
3,184
15,918
531
141,735
19,786
4,637
1,429
196,136
2019
974
5,306
1,082
433
1,299
3,247
16,236
541
266,274
37,172
6,633
742
339,941