4/9/2015
Canadian Flag
447 Business Plan
Jace Anderson
UNIVERSITY OF SASKATCHEWAN
Table of Contents
1.0 Introduction ..................................................................................................................................... 1
2.0 Operations Plan .............................................................................................................................. 1
2.1.1 Travel Planning – In Person ............................................................................................................... 1
2.1.2 Travel Planning – Online ..................................................................................................................... 2
2.1.3 Alternative Ideas .................................................................................................................................... 3
2.1.4 Crisis Management ................................................................................................................................ 4
2.1.5 Travel Booklet ......................................................................................................................................... 4
2.2.1 Location Planning and Layout ........................................................................................................... 5
2.3.1 Day to Day Business Operations ....................................................................................................... 6
2.3.2 Monthly and Yearly Business Operations ..................................................................................... 7
2.4.1 Capital Expenses ..................................................................................................................................... 7
3.0 Human Resources Plan ................................................................................................................ 8
3.1.1 Organization Layout.............................................................................................................................. 8
3.2.1 Owner/Manager ..................................................................................................................................... 8
3.2.2 Partner/Travel Representative ........................................................................................................ 9
3.3.1 Compensation....................................................................................................................................... 10
3.4.1 Additional Employees........................................................................................................................ 10
4.0 Marketing Plan .............................................................................................................................. 10
4.1 Positioning Statement ........................................................................................................................... 10
4.2 Target Market .......................................................................................................................................... 11
4.2.1 Primary - University Students .................................................................................................................... 11
4.2.2 Secondary – Baby Boomers ......................................................................................................................... 11
4.2.3 Target Audience Profile................................................................................................................................. 11
4.3 Product and People ................................................................................................................................ 12
4.4 Physical Evidence ................................................................................................................................... 13
4.5 Price............................................................................................................................................................. 13
4.6 Promotion ................................................................................................................................................. 13
4.6.1 Marketing Objectives ...................................................................................................................................... 14
4.6.2 Media Channels ................................................................................................................................................. 14
4.6.3 Creative Strategy .............................................................................................................................................. 15
4.7 Implementation....................................................................................................................................... 15
4.7 Competition .............................................................................................................................................. 16
4.7.1 Direct Competition .......................................................................................................................................... 16
4.7.2 Indirect Competition ...................................................................................................................................... 16
4.7.3 Other Competition Considerations ........................................................................................................... 16
4.8.1 Revenue Projections .......................................................................................................................... 17
5.0 Financial Plan ................................................................................................................................ 17
5.1 Financing Budget .................................................................................................................................... 17
5.2 Capital Cost Allowance.......................................................................................................................... 18
5.3 Income Taxes ........................................................................................................................................... 19
5.5 Income Statement................................................................................................................................... 20
5.5 Balance Sheet ........................................................................................................................................... 22
5.6 Cash Flow Statement ............................................................................................................................. 24
5.7 Investment Analysis .............................................................................................................................. 25
6.0 Feasibility ....................................................................................................................................... 26
Works Cited ........................................................................................................................................... 27
Appendix ....................................................................................................................................................i
a. Economic Variables ...................................................................................................................................... i
b. Revenues .......................................................................................................................................................... i
c. Cost of Goods Sold .......................................................................................................................................... i
d. Operating Expenses ..................................................................................................................................... ii
e. Captial Budget...............................................................................................................................................iii
f. Financing Budget .......................................................................................................................................... iv
g. Debt Amortization ....................................................................................................................................... iv
h. Capital Cost Allowance .............................................................................................................................. iv
i. Income Tax Schedule.................................................................................................................................... v
j. Investment Analysis .................................................................................................................................... vi
k. Average Owners’ Compensation ............................................................................................................ vi
l. Income Statement......................................................................................................................................... vi
m. Balance Sheet ........................................................................................................................................... viii
n. Cash Flow Statement .................................................................................................................................. ix
o. Facebook Advertisement ........................................................................................................................... x
p. University Television Advertisement .................................................................................................. xi
q. Website Mock-Up .......................................................................................................................................xii
1.0 Introduction
Canadian Flag (CF) is a twenty-four hour, full service travel agency and consultancy firm
targeted towards backpack travellers. Canadian Flag operations will be centered out of a
main office located in Saskatoon that will work in conjunction will the online interactive
webpage. The Canadian Flag travel agency will file for incorporation prior to applying for a
Saskatchewan business license. The mission of Canadian Flag is to instill customers with
confidence that their spontaneous and exciting backpacking adventures turns out exactly
how they plan. CF backpacking consultants will work closely with customers to carefully
plan an excursion to the specific needs of the customer. Backpack Buddy will differentiate
from the competition by focusing on managing and accommodating the customers
requests, prior to and during their excursion.
2.0 Operations Plan
The main components of the business will be broken down into three main areas: travel
planning, alternative ideas, and crisis management. The majority of Canadian Flag
resources will be allocated to travel planning, as it will see the highest usage and thus
resulting in the most time expended in that area of the business. This will heavily urged to
be a primarily in-person process yet still be available online and over the phone via a tollfree number. Alternative ideas and crisis management will work in unison with one
another, as they are support processes available to the client/customer once they have
begun their adventure. Communication between the CF travel representatives is
fundamental in creating a unique service that will differentiate CF from the competition. To
ensure the two-way, constant communication between representative and backpackers,
preparative instruction will be instituted prior to each backpacking excursion.
2.1.1 Travel Planning – In Person
Due to the nature and duration of the meetings, appointments will be necessity and
customers will be directed towards the CF website or phone number in advertisements to
book an appointment.
The unique Canadian Flag experience will begin for customers at initial in person travel
planning meeting. Travel planning will be a one on one discussion process between a
Canadian Flag Travel Representative and the customer. Through this thorough process, a
number of things will be determined, from destinations to lodgings and meals. The
customer will determine the scope and detail of each aspect of the excursion. This will be
the differentiating factor for Canadian Flag, as every decision that the customer wants to
make, the travel representative will accommodate. The travel representative will in turn,
provide recommendations and advice, providing the customer with enough knowledge to
ensure the customer is confident with their decision. The process will start with a budget,
as set by customer, similar to other travel plans. The representative along with the client
will then move on to select destinations, one at a time, in a logical order that the client and
the representative find suitable and within budgetary restraints. After the initial
determination of destinations, Backpack Buddy will use online technology to book initial
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flights to the first foreign destination from Saskatoon and back to Saskatoon from the last
foreign destination. This will be the first stage where the customer has the option of opting
out of Canadian Flag services if the customer wants to fully experience backpacking alone.
If the client desires a more structured trip, they can continue planning with the travel
representative to establish food, travel and lodging details. Determining travel is the
second step in the travel planning process where Canadian Flag consulting can be
contracted. As many forms of transportation are scheduled through the night, it leads to
travel becoming the next logical step in the planning process. As there are many options of
transportation available between destinations, advice from a travel consultant has the
potential to add value by saving money, stress and time for the customer. Achievement of
this goal would require discussion between the customer on CF Travel Representative to
determine modes of transportation between destinations, along with optimal travel dates
and times to fit in the set budget. During this process, the travel representative will make
recommendations and use prior knowledge to book transportation. The modes and
methods of transportation that cannot be booked over the phone or online by the travel
representative will be composed into a document outlining the details of travel.
The CF Travel Representative will then assist and advise the customer in booking or
planning lodging at each stop on the trip. This process will once again be strategically laid
out with the budget in mind and follow a process similar to the planning of transportation.
Two way dialogue between travel representative and customer will ensure all aspects of
lodging are covered for the duration of the trip. For the locations where advance booking is
offered, the travel consultant will reserve dates for the customer. Composition of a
comprehensive agenda of lodging locations, that do not accept advance bookings, will be
supplied to the client to ease the process finding overnight lodging in destinations that do
not accept advance bookings. In addition to advising and booking rooming
accommodations for the customer, at this stage, the travel representative will continue
monitoring travel destinations and transportation routes between them in an attempt to
further save the customer money, adding to the value proposition. If requested at this
point, the travel representative can assist in meal planning for the backpacking trip. While
this aspect of planning would be the most variable, counsel from an experienced traveller
would be highly valued.
The information and advice provided by the Canadian Flag Travel Representative will be
accumulated and collated from previous personal travel experience, extensive online
secondary research and the cumulative knowledge of colleagues.
2.1.2 Travel Planning – Online
Online travel planning will be an interactive preparation tool to assist webpage visitors in
selecting backpacking destinations and other useful features. It is vital to have a webpage
easy to navigate and designed exclusively for Canadian Flag. The design must be inviting
and easy to use, facilitating the speed, and satisfaction of users. This interactive webpage
will allow users to plan the destinations of their trip, from beginning to return home. The
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webpage travel planning will have little to no interaction with Canadian Flag travel
representatives. In turn, this will cut costs and maintain the “customer’s decisions,
customer’s adventure” theme that shapes Canadian Flag’s competitive advantage.
The destination selection page will allow for users to choose their departure location and
first foreign destination. The next step for the user will be to determine and input their next
chosen stops along their planned route. Once the user chooses the next destination on the
interactive world map, it will appear on a list located on the side of the page, allowing for
the consumer to track their previous selections. After the selections are locked into the
tracking list, sponsored lodging options will be offered as advance booking options. The
services the webpage provides will end at this step, as the primary goal of the webpage is
to draw consumers to in-person or by phone personal consultation. See Appendix Q for
pictures.
The Canadian Flag webpage will play a fundamental role in the “over the phone”
consultation process. Upon booking a phone appointment, the customer will receive a login
username and code, to access the full range of consulting tools. Prior to the appointment,
the customer will be required to login where they will be directed into beginning the
consulting process. The primary function of this restricted webpage is as a viewing screen
to the Canadian Flag travel consultant’s screen. Similar to the basic online travel planning
process, the customer will discuss, with the advice of a consultant, the logical order of
destination stops on their excursion. Once the locations are selected and consent is given,
the travel consultant will then book the initial flights, to and from the first foreign and last
foreign cities respectively. If further consultation is required, it will follow a similar process
as the in-person appointments with the only differences being over the phone and having
the customer view their options over the Internet. To view pictures, see Appendix Q.
As with many websites, the majority of revenues will come by way of selling advertising on
the site. The financial plan will assess in detail the advertising revenues and webpage
design and maintenance costs.
2.1.3 Alternative Ideas
Alternative Ideas is a key differentiating feature of Canadian Flag. Alternative Ideas (AI)
consists of many features, from extended stays and distance travel planning to
entertainment options and early returns. The employee on AI/Crisis Management (to be
discussed next) call will be alert for any call or email that comes to the Backpack Buddy
company cell phone. The role of the employee is then to accommodate any and all the
requests of the client in a foreign destination. Every client that uses Canadian Flag’s travel
planning service will be given a travel booklet (to be discussed in 1.1.5) containing the BB
company cell phone number. Travelers will be able to call this number 24/7 to inquire
about any information. With the help of the travel representative, the traveler will be able
to change their plans on the go. If they want to alter their route, and would like to know the
best way to do it, the travel representative on call will use the Canadian Flag system to
change the route and book all necessary lodging and transportation. Once again, the travel
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representative will do the booking of accommodations and transportation with the details
then being emailed to the foreign traveler.
2.1.4 Crisis Management
Crisis management begins after the initial destination selection. Crisis management is an
obligation to prepare the traveler for a safe excursion as well as managing unexpected
crises that arise during the vacation. Pre-trip preparations will be discussed and addressed
by the travel representative and customer in their initial booking appointment. Included in
this discussion is what vaccinations are required to visit the destination(s) selected. There
are often numerous vaccinations required to visit select tropical or foreign locations. If a
travel has not received all the necessary vaccinations, they can be restricted from traveling
to that location; therefore vaccinations are a vital part of any trip. Preparation crisis
management will also encompass assisting travelers applying for work visas in foreign
companies. The work visa application varies from country to country, each requiring
different documentation and requirements. Therefore, it would be valuable for travelers to
ensure they get the application process correct the first time with the help of a travel
representative from Canadian Flag. The representative would have the responsibility of
knowing, and having access to all information relevant to foreign work visas in the
countries they are “specialists” in.
Crisis management will continue to play a role when the customer is on their excursion. In
association with the Alternative Ideas on call role, that employee will also be on call for
unexpected crises that arise. Typical crises that may arise could range from insufficient
funds, injury or even a lost passport. If any of the situations mention should occur, the
traveler would have access to a Canadian Flag around the clock. As mention in the
Alternative Ideas section, the phone number supplied in the travel booklet will have a
Backpack Buddy representative at the end of the line 24 hours a day, 7 days a week, 365
days a year. The travel representatives will use their experience, knowledge, and training
to calm the traveler and find solutions for the situation. With the documents on file from
the pre-trip meeting, the representative should have enough information to assist the
foreign traveler solve any issue that may develop.
2.1.5 Travel Booklet
Each traveler who uses Canadian Flag’s travel planning services will be given a
comprehensive information booklet on all this covered and discussed in the client/travel
representative meeting. The booklet will summarize the set trip destinations planned by
the traveler and CF agent. For every destination there will be a map of the city on one page,
with main points of interest identified. On the opposite page, the discussed
accommodations will be listed, along with their address corresponding to a point of
interest on the map. In association with the accommodations, discussed transportation
routes, dates, and times will also be placed in text on the page, with their terminals
appearing as points of interest on the map. The booklet will be designed as a template on
the Canadian Flag computer system to speed up the design process. The travel booklet
template will assist the travel representative in tracking the decisions clients make
throughout the discussion process.
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The travel booklet will also include proprietary general information relating to each city
and country visited. This would include population, language, major tourist attractions, and
capital city. As will be discussed in the crisis management planning, it will also give the
location of the nearest Canadian embassy and other popular Canadian stops. As mentioned
previously, a 24/7/365 contact number will also be provided in the booklet in case of
emergency or “alternative travel ideas”. Ultimately, the travel booklet is a paper guide for
the traveler that carries all the information and knowledge that the Backpack Buddy travel
representative supplied. The goal of the travel agenda is to keep a strong tie back to
Backpack Buddy and be the 2nd most important thing to a traveler besides their passport.
The travel booklet will be printed, laminated and bound in the copy room by the Canadian
Flag representative. This is a very simple process and not time consuming for the employee
given the right equipment. It will then be delivered to the client by a representative of the
company to their home, prior their departure.
2.2.1 Location Planning and Layout
Canadian Flag will located on the northern block of Broadway Avenue in Saskatoon,
Saskatchewan. Located on the block between 11th Street and 12th Street, Canadian Flag will
rent land lot in the area that is currently “Oliv”, a natural olive oil store with the
measurements of 25’ by 60’. The building is already wired for electricity, fitted for
plumbing and heated by natural gas. The location will be explained further in the
marketing plan detailing the specific, strategic location identified.
The layout of the Canadian Flag office, as seen below, is strategically designed to facilitate
two-way conversation between travel representative and customer. The marketing plan
will further explain the layout of the office in a way that aligns with the marketing
objectives.
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2.3.1 Day to Day Business Operations
The typical business day will begin at 10 o’clock from Monday to Friday. The responsibility
of opening the store daily will fall to the owner/manager. This will require the
owner/manager to arrive early to ensure the storefront opens on time, every scheduled
workday. Weekend appointments will be an option available to travelers, as it is vital
Canadian Flag understands students busy weekday schedule and weekends may be the
only time they can meet. Initially, it will be the sole responsibility of the owner/manager to
handle and represent Canadian Flag at all scheduled weekend meeting. As mentioned in
Section 1.1.3 and 1.1.4, there will be a company employee on call 24 hours a day, 7 days a
week. The scheduling of the on-call employee will be further discussed in the Human
Resources section.
The business day will be broken up into eight, one-hour increments per each travel
representative. Six of the eight hours a day are reserved for travel planning appointments,
whether by phone or in person. The first three hours will be specifically reserved for travel
planning appointments with clients. At maximum capacity, travel representatives will be
seeing three clients, from 10:00 a.m. from 1:00 p.m. in this first block of meetings. The
travel representatives will then be given one hour for lunch from 1:00 p.m. to 2:00 p.m. Due
to the location, employees will be urged to support local business and eat from the various
options on Broadway. Three of the next four hours after lunch will once again be divided
into time slots for travel planning appointments. The last hour for both employees will be
reserved for finishing the background activities related to travel planning. These activities
will consist of binding and delivering travel booklets, along with cleaning the building.
While in the first two years of business, it is unlikely that Backpack Buddy will be able to
justify spending capital on a receptionist. Therefore, when an employee or manager does
not have a travel appointment, they will be required to sit and work at the reception desk.
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While this will pose an inconvenience to employees and customers, the computer will be
installed with the same services as the office computer allowing for work and the ability to
serve customers as the walk in. When both employees are in appointments, they will be
noticed of customer entrance by a bell on the door. The one employee (designated by day)
will then momentarily leave their meeting to direct the walk-in customer to the travel
brochures and couches in the reception area of the building.
The Human Resources section will further define the roles, responsibilities and daily
routine of employees and managers.
2.3.2 Monthly and Yearly Business Operations
The majority of monthly business operations will be the responsibility of the
manager/owner. As a commerce graduate with a basic understanding of all facets of
business, the owner will have a basic understanding of accounting and monthly financial
practices. These practices will include gathering the monthly financials and accounting
details into a summary for the month. These financials will include gathering receipts and
spending for the month along with tracking the accounts receivable and payable due at that
time. The owner/manager will be tasked with paying the monthly bills from the various
services we utilize. Internet, television, utilities, rent, paper and binding inventories,
insurance, office supplies and website hosting are all monthly services that will demand
monthly attention. Compensating employees at the end of the month will also be included
in the manager’s end of month operations.
The manager/owner will administer all year-end obligations. The first step is to get all
financial data summarized and sent off to an accountant. Finding, hiring and booking an
accountant will be an additional step prior to summarizing the financial information. The
second step for management is to access the previous year by analyzing the results
generated from the financial analyzes. The documents used for analyzes will include the
yearly balance sheet, income statement, cash flow statement and statement of retained
earnings. At this stage it will be vital to adjust tax strategies from the previous year and
evaluate the success of the previous year’s goals. The final stage of the year end obligations
will be to plan for the upcoming year by setting goals, preparing action plans, and
beginning implementation of those action plans.
2.4.1 Capital Expenses
The capital costs are broken down into direct building improvements, website
development and office furniture and fixtures. Website Development was considered a
capital cost because it is a one-time cost for the business but with the high rate of
innovation, it will depreciate very rapidly. The Office Furniture and Computers were
grouped together as they depreciate at a similar value. The computers are replaced in the
fourth year of business due to that rapid depreciation. Depreciation of the capital assets is
assessed and calculated in the financial model under the CCA expense. Leaseholder
Improvements are categorized in Class 8 and the Website Development along with
Furniture and Fixtures are both categorized in Class 20.
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Table 1.
Schedule 5: Capital Budget
2015
2016
2017
2018
2019
6,938
8,460
729
5,500
1,252
475
2,330
22,000
12,600
3,600
-
-
3,600
-
63,884
-
-
3,600
-
Leaseholder Improvements
Walls & Countruction
Windows & Doors
Bathroom & Plumbing
Lighting & Electrician
Flooring
Painting
Building Signage
Website Development
Office Furniture
Office Computers
Total
3.0 Human Resources Plan
3.1.1 Organization Layout
The Backpack Buddy travel agency will have a very flat, compact organizational structure.
The owner and partner will be the first two employees of the business until it has
recovered from the initial capital expenses and returns to profitability. While Backpack
Buddy will be registered as a corporation, the ownership will be split 50/50 between the
two primary founding partners. The flat organizational structure and partner approach will
allow for Backpack Buddy to adjust quickly to changes in the industry environment while
enhancing the benefits provided by incorporation. The partnership breakdown behind the
corporate structure will take the form of 2000 common shares, with each partner receiving
1000 shares each. By filing for incorporation, Backpack Buddy will be considered a
separate identity in conjunction with the limited liability advantage incorporation brings.
The additional employee section discussed later will look further into the impact of adding
employees will on the organizational structure.
Jace Anderson
Business Partner
Tyler Rice
Travel Partner
3.2.1 Owner/Manager
The managing partner and shared owner of Backpack Buddy will be Jace Anderson. Jace
Anderson is university educated, receiving a Bachelor of Commerce degree from the
University of Saskatchewan. As a graduate from an established business college, he will
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have the managerial acumen to run the daily operations of a small business from daily sales
to monthly accounting practices.
A small business setting means the roles and responsibilities of the managing partner vary
widely. In the managerial capacity, it will be Jace Anderson’s role to ensure proper training
and education of the typical business activities to Tyler Rice, the other partner and only
other staff member. On that note, Jace Anderson must be up to date and well educated on
all the relevant travel trends and regulations. Developing dynamic and responsive business
strategies that demand careful controls and policies will be another responsibility of the
owner. With the business education from the University of Saskatchewan, Jace Anderson
will have the ability and responsibility to facilitate the preparation and analysis of financial,
sales and progress reports. As a manager and travel representative of the business, the
roles of a travel planner will also apply to the manager yet will be discussed in the next
section.
3.2.2 Partner/Travel Representative
The second partner and shared owner of Backpack Buddy will be Tyler Rice. Tyler Rice is a
college educated individual, holding a diploma in business administration from SIAST in
Saskatoon, Saskatchewan. Tyler Rice has extensive travel experience around Europe and
the Mediterranean Sea. Additionally, Tyler has spent extensive time in and around
Australia, Indonesia and Eastern Asia. His expertise and first-hand experience will provide
additional, hands on insight on backpacking tips, experiences, and trends.
As one of the two members of the business, the role and responsibilities of a “travel
representative” are wide and varied, depending on the time of day and year. The primary
role Tyler Rice will play is that of the travel representative and instructor on all things
travel. The role of the travel representative will be to manage clients and provide them
with the services Backpack Buddy is primed to supply. These responsibilities include
scheduling in person and online meetings with clients where they walk through the
backpack travel process. The tasks associated with the walk through travel planning
include, but are not limited too, budgeting, destination selection, visa applications, booking
flights, and sightseeing destinations. In addition to the services mentioned previously, the
travel representative will also be responsible for educating the client on how to use all the
services provided to them, namely the online planning website. Aside from the travel
planning services, Tyler Rice will be tasked with continually updating his knowledge of all
things travel and ensure the knowledge is shared between both managing partners.
As the business will be in its infancy, there will be a lot of down time for one or both
partners. This excess time will be used for the upkeep and maintenance of the office area,
time to research travel trends and changing travel tendencies. This will demand the
employee, not engaged with an employee, to work from the reception desk, as a
receptionist will not be a viable option till the business has time to grow.
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3.3.1 Compensation
The two partners in the business will each be compensated on a per year, salary basis.
Although equal partners in Backpack Buddy, Jace Anderson and Tyler Rice will not be
compensated the same. Jace Anderson, as the manager and travel representative will earn
$45,000 annually, where Tyler Rice, the travel expert, will earn $40,000 annually. Salaries
will be paid out biweekly for both parties. In addition to the yearly salaries, each employee
will get the required three weeks of paid vacation.
Dividends will be paid out to the two partners equally for every dollar made in net profit
over $50,000. This will be to continually put capital into back into the businesses marketing
activities in hopes of expanding the business. The money going back into the business will
also be put towards hiring a receptionist in 5 years if it remains a feasible option and the
demand is present.
3.4.1 Additional Employees
In the future, an additional role may be added to the organization. It is important to look
ahead and forecast the additional costs associated with adding another role in the
organization. It should be noted that the role would be a part time position to be utilized
during periods of heavy travel seasons. This position will be paid on a per hour basis at a
rate of $16.00 per hour. The receptionist position will require a person will excellent
communication skills and willing to work in a seasonal capacity. It is estimated that this
position will be necessary before the 5th year the businesses operations. Jace Anderson will
be responsible for searching, interviewing, and hiring a candidate that fits the ideal
receptionist description.
4.0 Marketing Plan
4.1 Positioning Statement
“A boutique travel companion who’s assuring presence is with you on every adventure!”
The positioning statement for Canadian Flag is carefully crafted word by word, to express
the value and benefits travelling through Canadian Flag entails. “Boutique” is used right of
the start to instantly differentiate Canadian Flag as a unique, slightly more expensive store,
as many the word boutique is often understood as “a store having specialized or wealthier
clientele. Another differentiating phrase used is the “travel companion” conjunction. The
goal with that phrase is for consumers and potential clientele to understand is as Backpack
Buddy’s continuous services after the cabin door shuts. “Assuring presence” is used to
express the wide variety of services Backpack Buddy offers and the quality that one can be
confident in the plans they made with our representative. It also incorporates the 24-hour
on-call service we offer and the travel booklet that outlines their journey. Leading into the
end portion of the statement saying, “with you on every adventure”, where the travel
booklet and on-call features are services that you can access from anywhere in the world,
literally available on every step of the vacation.
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When comparing Backpack Buddy on the positioning t-chart, the higher price and
additional services offered, places the company in the upper right corner. Although it is
typically seen for new businesses to place themselves in this quadrant, Backpack Buddy
earns the spot as the differentiating factors, step by step planning, travel booklet, 24 hour
on-call service, and demands a higher price. This leads to placing the boutique label in the
positioning statement, which instantly translates to the customers of its unique position.
4.2 Target Market
4.2.1 Primary - University Students
University students from the four major schools in western Canada are the primary target
market for Backpack Buddy. These students, both male and female are between the ages of
18-24. While understood to not have a lot of disposable income, wealthier parents finance
many. The target students come are from both rural towns and urban centers, leading them
to purchase for different reasons. University opened the rural students up to a world of
new adventures, leading them to pursue that taste for new and exciting experiences.
Students who grew up in the urban centers and are now attending university will purchase
to escape the city and the structure that surrounds them 24 hours a day. The target
students educational focus does not play a part into the targeting as there are student of all
disciplines, commerce, agriculture, arts, engineering, health sciences, which have the desire
to travel. Backpacking is a growing trend among university students, as diversity and
individuality are becoming traits that peers often admire. This target audience is seeking a
distinctive adventure that separates them from their peers by undergoing a one of kind,
wild adventure but one that still has a small amount of structure. What they hope to gain
from the experience is a prestige factor and respect that they could go out on a backpack
adventure, living by the “seat of their pants”.
4.2.2 Secondary – Baby Boomers
Baby boomers nearing retirement potentially creates a huge target market which Backpack
Buddy can explore. These baby boomers are typically married, with children that have let
the nest and are now pursuing their own adventures. This target segment has a large
amount of disposable income with an ever-increasing amount of time their hands. The
metropolitan baby boomer generation generally lives in suburban areas around the large
metropolitan centers of where they work. In the workforce, this demographic was known
to be extremely work-centric, meaning very hardworking and motivated. The baby
boomers, both male and female, are confident, independent and self-reliant, leading to a
very goal orientated work ethic. This market segment has significant size in all the
metropolitan centers. In Saskatoon alone, there are 14.9% of the population in the urban
and suburban areas. Calgary and Edmonton areas contain an estimated 11.1% and 12.7%
baby boomers respectively. In addition, Vancouver has an anticipated 15.7% baby boomers
in its urban and suburban neighborhoods.
4.2.3 Target Audience Profile
Trish is a 5th year Pharmacy student attending the University of Saskatchewan. Trish is
mere months away from graduating with her degree in Pharmacy. Posed for a successful
career, Trish has concerns she hasn’t seen enough of the world yet before settling down.
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Trish has worked at Moxie’s in
addition to attending classes’ full
time. She has saved up a
considerable sum of money but
due to her busy schedule doesn’t
have the time to spend it. She lives
with 3 roommates in Sutherland
and takes the bus to school
everyday. Occasionally Trish stops
in Place Riel to buy the fresh
produce sold there before jumping
on her bus at the end of the day.
Originally from Lanigan,
Saskatchewan, Trish hasn’t had
the opportunity to travel very
much besides the occasional trip to Mexico with her family. Though she has never been
traveling on her own, Trish want so try backpacking around Indonesia and has managed to
convince her friend to come along. With all the travel sites around, Trish and her friend are
confused as to what will provide them with the best experience. Although they want the
adventure of backpacking, they still desire a little structure and planning for their trip.
4.3 Product and People
As previously mentioned in the operations plan, Canadian Flag offers travel planning
services to consumers, both online and in person. Travel planning in person will create a
competitive advantage as the travel representatives will be trained to facilitate
conversation and offer real advice from knowledge gained by personal experience. In
addition to the travel planning services, flash alternative ideas, crisis management and
travel booklets will all be part of the Canadian Flag Package. These services will be
available around the clock as part of Canadian Flag’s competitive advantage of 24-hour
service. For more detail on the products, refer back to section 2.1.
The personal factor of Canadian Flag will create a unique competitive advantage and an
area where Canadian Flag differentiates from the other travel agencies. The education and
experience the travel representatives are required to have will allow them to plan
vacations with confidence as they have experienced the same situation. The two business
partners/travel representatives are young, personable and know how to stimulate
conversation with people of all backgrounds and interests.
12 | P a g e
4.4 Physical Evidence
The storefront and interior will be a continuation of the marketing strategy as they can
translate information about Canadian Flag. The physical evidence starts with the building
signage. As quoted in the financial section, the $2,330 sign will get metal lettering spelling
out the Canadian Flag name. The building is currently brick, which will help set the tone of
the interior. The interior of the Canadian Flag store will take a modernistic adaptation of a
cabin environment. Soft colours will be used in variety, with plenty of browns, tans, and
greys, while the front windows will let a lot of natural light in. This type of interior design
was chosen to accommodate conversation and relax customers that come into the store.
Additionally, it will potentially instill trust in the travel representatives as Canadian Flag
tries to be as authentic as possible. An example of what the interior could look like is shown
below.
4.5 Price
Canadian Flag will be priced slightly higher than competitors to cover the addition costs
that come with offering the differentiating services. While other travel agencies typically
tack on an addition 10%-13% for customers, Canadian Flag will be taking a 16% fee for
their services. We are confident consumers are willing to pay the additional fees for the
services and peace of mind booking with Canadian Flag brings.
4.6 Promotion
The promotion for Canadian Flag is taking a two-prong approach to effectively reach both
the primary and secondary target audiences.
13 | P a g e
4.6.1 Marketing Objectives
1. To brand Canadian Flag travel agency as the go to, reliable travel service for
students and recent graduates alike.
2. To increase awareness on the four identified university campuses by 25% in the
next fiscal year.
3. To effectively communicate the differentiating services Canadian Flag to the
primary and secondary target audiences.
4.6.2 Media Channels
University Television Advertisements
University television advertisements are available in all the student buildings across the
four campuses. The plasma screen advertising in these buildings reaches the specified
primary target audience outline above. Students in the target audience walk by these
plasma screens an estimated five times a week creating a projected 11,700 impressions per
week in Saskatoon alone. To put that number in perspective, the target audience segment
size at each university is as follows: 21,044 at the University of Saskatchewan, 39,312 at the
University of Alberta, 30,201 at the University of Calgary and 49,896 at the University of
British Columbia. The digital display allows for the advertisement to be highly
customizable with frequency, message, and timing all variable depending on budget and
client request. Two thousand dollars will be allocated to advertising at each school, which
is enough capital to efficiently reach the target audience. With $2000 dollars allocated to
each campus, the Canadian Flag advertisements will effectively reach the specified target
audience with little waste.
The frequency and timing of the advertisements will be important in creating lasting
impressions. The digital ads will air two times a day, four days a week (Monday –
Thursday). The ads will be running between 3:00 p.m. and 4:00 p.m. on those days to reach
those students leaving the university campuses. It will be vital to advertise in the months
before school breaks, namely October, December, February and April. If $500 is allocated to
each month at each school, the advertisements should be able to create large number of
impressions in the target audience, when they are most likely to be in the contemplation
stage of purchasing or considering a vacation. With this implementation schedule, the
effectiveness of the Canadian Flag digital billboard advertisements will increase
significantly. See the Implementation Schedule for the full breakdown.
Paid Online - Facebook
Paid online advertising is a very useful to effectively reach a target audience on a limited
budget. This media channel will be used to reach the secondary target audience solely in
Saskatoon. The primary message goal of paid Facebook advertising is to direct the
secondary target audience to the physical storefront where they can then learn more.
83,440 residents in Saskatoon fit into the secondary target audience characteristics,
creating a sizable audience to reach. According to a recent Pew Research Centre study, an
estimated 65% of the baby boomers use Facebook, therefore narrowing the target
14 | P a g e
audience size to an estimated 54,000 in the metropolitan Saskatoon area. With $1500 of
marketing budget allocated to the paid online advertising as sizable percent of the 54,000
targets will be reached.
The frequency and timing of paid Facebook advertising is highly customizable for the right
amount of money. Due to the limited budget, only the target audience details will be
customized and the frequency and timing details will be decided by Facebook. The
implementation schedule is set by the client and therefore it will be key to schedule the
advertisements at time when they will be most effective. The months when this audience is
typically looking for vacation destination will be the most effective times for the Canadian
Flag ads. These months have been identified as January, October and November, therefore
that’s when the paid Facebook advertisements will be implemented. The one bonus to
Facebook advertising is how little waste there is. The target audience profile can get very
specific, from age range and occupation to interests and habits, therefore resulting in
detailed targeting of customer segments. At an estimated price of 10 cents per impression,
15,000 impressions should be made on the target audience.
4.6.3 Creative Strategy
In order for the media channels to be truly effective, the creative strategy must align with
the marketing objectives while remaining true to the company. Each creative mock-up
below is made with the objectives in mind and strategies to maximize effectiveness to
distinguish them amongst all the others.
University Television Advertisements
It will be vital for the university television advertisements to stand out among the other
advertisements in the university student centers. Therefore, bright colours will be used,
namely yellows and red because yellow is the colour human eyes notice and pick up the
quickest. Due to the relatively small presentation area, pictures and shapes will have to be
used as metaphors to assist in translating the Canadian Flag key messages. In this case,
stairs are used to indicate the step-by-step process Canadian Flag takes you through when
planning with our travel representatives. See Appendix.
Paid Facebook Advertising
As the primary goal of the paid Facebook advertising is to draw people to visit the
storefront, the advertising will have to carefully translate that message without being too
aggressive. Therefore, it is key to use pictures to translate the benefits of Canadian Flag
while using the text to direct the potential customers. See Appendix.
4.7 Implementation
A successful marketing plan includes careful implementation of marketing materials as
timing is as crucial to success as message and method. The timing of the paid Facebook
advertisements will be tailored to the months where empty nesters begin looking for
vacation destinations therefore, January, October and November. The University Television
advertising will occur over the months of October, December, February, and April.
15 | P a g e
Table. 2
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Paid Facebook
University Advertising
4.7 Competition
Assessing the competition is vital in creating a successful business, specifically for the
highly competitive industry of travel planning. There is a large volume of travel agencies
across Canada and online, increasing the pressure on Canadian Flag to differentiate and
effectively transmit those differences. Therefore, direct, indirect and alternative forms of
competition are addressed and assessed below.
4.7.1 Direct Competition
Saskatoon is packed with competition for Canadian Flag in terms of travel agencies. In
Saskatoon alone, there are 23 different travel agencies all offering similar travel planning
services to Saskatoon residents. Many of the agencies have numerous offices scattered
throughout the city creating many options for consumers. While there are no travel
agencies located on Broadway Avenue, Merit Travel in Place Riel at the University of
Saskatchewan will posed the be the biggest competitor. Merit Travel has been identified as
the biggest competitor because they will be targeting the same university student market,
as Canadian Flag will be. Merit Travel has an obvious location advantage, being located in
Place Riel but that created a negative stigma around the brand as being a university brand.
4.7.2 Indirect Competition
The indirect competition will be the biggest factor to the success of Canadian Flag. The
recent growth and boom of internet travel companies and group travel has created a
significant competitor to all face-to-face travel services. There are limitless options when
searching for travel sites online. Many of these travel sites offer similar walk through travel
planning but not with the same detail that Canadian Flag will have. Online, there is Expedia,
RedTag and countless others that offer travel planning services directly competing with
Canadian Flag services. In terms of group travel, Life After Work and Free & Easy Traveler
are the biggest online competition to Canadian Flag.
4.7.3 Other Competition Considerations
There are numerous other competitive forces to consider when assessing a competitive
environment for a company. There are many companies and avenues that battle for a
customer’s disposable income and travel is only one industry out of many. From traveling
home for the holidays to spending money on alcohol and other forms of entertainment, all
are battling for consumers’ disposable income.
16 | P a g e
4.8.1 Revenue Projections
Revenue projections were based on a couple of variables in the Canadian Flag, the purchase
per customer and customers per day. As seen in the table below, the expected growth rate
of customers is 15% in the first 2 years and levels out in the next 3. The customer’s per day
estimation was derived from primary research at other travel agencies. The purchase per
customer number was derived from taking the mean price of a trip to Europe, Mexico and
Indonesia.
Table 3.
Schedule 2: Revenues
Number of Customers/day
Number of Days/year
Average Purchase/customer
Total Sales
2015
2016
2017
2018
2019
1.00
365
$2,530
923,450
1.15
365
$2,593
1,088,517
1.32
365
$2,658
1,283,089
1.45
365
$2,725
1,446,683
1.60
365
$2,793
1,631,135
15%
15%
10%
10%
Growth Rate Number of Customers
The above estimations resulted in the following revenue projections if Canadian Flag takes
their 16% cut.
Table 4.
Revenues
Travel Revenues
Total Revenues
100%
923,450
923,450
1,088,517
1,088,517
1,283,089
1,283,089
1,446,683
1,446,683
1,631,135
1,631,135
5.0 Financial Plan
5.1 Financing Budget
Canadian Flag is renting a space on Broadway and therefore does not require heavy sunk
capital investments to start the business. That will result in the start-up financing for
Canadian Flag to be 63% financed by debt and the remaining 37% coming from personal
equity put forward by the two business owners. A loan of $50,000 will be obtained from the
Business Development Bank of Canada (BDC) at a rate of 7%. The loan will be backed by an
estimated $115,000 in personal assets between the two business partners.
Table 5.
Schedule 6: Financing
Budget
Bank debt
2015
2016
2017
2018
2019
63%
50,000
Equity
30,000
17 | P a g e
Total
80,000
-
-
-
-
As previously mentioned, the loan will have an interest rate of 7% and be paid out over the
next 10 years. This results in a $7,119 payment every year for 10 years, effectively reducing
the loan to $0.
Table 6.
Schedule 7: Debt Amortization
Beg Balance
2015
2016
2017
2018
2019
-
46,381
42,509
38,366
33,932
50,000
-
-
-
-
7,119
7,119
7,119
7,119
7,119
3,500
3,247
2,976
2,686
2,375
3,619
3,872
4,143
4,433
4,744
46,381
42,509
38,366
33,932
29,189
10 years
Addition
Payment
Interest
Principal Reduction
End Balance
5.2 Capital Cost Allowance
Depreciation of capital assets is an important factor to consider when renting a space as
leaseholder improvements depreciate at an accelerated rate. The leaseholder
improvements are classified as a Class 1 asset, resulting in an 8% depreciation rate. The
Furniture and Fixtures, which includes the office furniture and office computers are
grouped together and put into Class 8 resulting in a 20% rate of depreciation. The Webpage
was classified as a capital asset and depreciated as so because websites go out of style and
become outdated very quickly, therefore arranged into Class 9 and depreciated at a 25%
rate.
Table 7.
Schedule 8: CCA
Class: Leaseholder Impr. (Class 1)
Beg Balance
8%
2015
2016
2017
2018
2019
-
24,657
22,684
20,869
19,200
25,684
-
-
-
-
1,027
1,973
1,815
1,670
1,536
24,657
22,684
20,869
19,200
17,664
Addition
CCA Expense
End Balance
18 | P a g e
Class: Furniture and Fixtures (Class
8)
Beg Balance
20%
-
14,580
11,664
9,331
10,705
16,200
-
-
3,600
-
1,620
2,916
2,333
2,226
2,141
14,580
11,664
9,331
10,705
8,564
-
19,800
15,840
12,672
10,138
22,000
-
-
-
-
2,200
3,960
3,168
2,534
2,028
19,800
15,840
12,672
10,138
8,110
4,847
8,849
7,316
6,430
5,704
Addition
CCA Expense
End Balance
Class: Webpage (Class 9)
Beg Balance
25%
Addition
CCA Expense
End Balance
Total CCA Expense
5.3 Income Taxes
As an incorporated small business, Canadian Flag is able to apply for a few tax breaks
through the federal and provincial governments. As a federal small business, Canadian Flag
would get taxed at 28% but due to the Small Business Tax Credit, the 28% is reduced by
17% to an 11% tax rate. The Government of Saskatchewan then add a 2% Small Business
Rate, resulting in a total of 13% income tax rate for Canadian Flag. Canadian Flag runs a net
lost in the first year, meaning they avoid paying taxes the in the first year and the loss is
additionally carried into year 2. This carryover results in only an income tax rate of 6.1%
being paid out in year 2, totaling only $955 on $7,346 of taxable income. In year 3 and
beyond, Canadian Flag runs a net profit, effectively ending the carryover period resulting in
paying the full 13% income tax rate.
Table 8.
Schedule 9: Income Taxes
Input Corporate Tax
Rates
Federal Small Business
Small Business Tax Credit
Federal Small Business
Limit
2015
28.0%
17.0%
500,000
2016
2017
Saskatchewan Small Business Rate
Saskatchewan M & P
Rate
Saskatchewan Corporate Rate
2018
2019
2.0%
10.0%
12.0%
19 | P a g e
Federal Corporate Rate
15.0%
Saskatchewan Small Business Limit
1
2
3
500,000
4
5
(8,429)
15,775
46,845
71,612
97,109
(8,429)
(8,429)
-
-
-
-
(8,429)
-
-
-
-
7,346
46,845
71,612
97,109
-
2,057
13,117
20,051
27,190
-
(1,249)
(7,964)
(12,174)
(16,508)
-
147
937
1,432
1,942
Income Before Taxes
Accumulated Loss Carryforward
Loss Carryforward Used
Taxable Income
Federal Tax
Small Bus Tax Credit
Provincial Tax
Total Taxes
-
955
0.0%
6.1%
6,090
9,310
12,624
13.0%
13.0%
13.0%
5.5 Income Statement
The Income Statement says a lot about the potential of any business. The sales are an
estimation based on customers per day and purchase per customer that was previously
explained in the Marketing Plan. The cost of goods sold is technically the cost of services
sold but for accounting purposes, it is left as the cost of goods sold, at 16% less than the
sales as the Canadian Flag cut is 16% of sales. The leasing expense was determined after
talking to a business owner on the same block of Broadway Avenue as Canadian Flag is
scheduled to open, giving a good estimate to the actual leasing cost. The heat, electricity,
business license, water and sewer are all quotes from the City of Saskatoon, adding to their
validity and accuracy. The accounting expense is set at $3,000 after an estimation from an
accountant and Ernst & Young examined the business. The majority of the other costs were
quotes from various office supply websites, the RBC business banking webpage and
furniture stores in Saskatoon. Due to the detail of expenses estimated, the miscellaneous
variable costs % of sales was set at just .1% as it should be enough to cover any unexpected
costs that may arise. The wages, capital cost allowance, and debt interest were all discussed
previously. The culmination of the expenses and the cost of goods sold results in a net loss
of $10,429 in the first year but significantly improves in the second year and beyond, as
seen below.
20 | P a g e
Table 9.
Income Statement
For the year ended
2015
2016
2017
2018
2019
923,450
1,088,51
7
1,283,08
9
1,446,68
3
1,631,135
775,698
914,354
1,077,79
5
1,215,21
4
1,370,153
Sales
COGS
Gross Profit
147,752
174,163
205,294
231,469
260,982
16%
16%
16%
16%
16%
Lease
39,300
40,283
41,290
42,322
43,380
750
769
750
750
750
3,630
3,721
3,814
3,909
4,007
225
231
236
242
248
500
513
525
538
552
125
128
131
135
138
200
205
210
215
221
3,000
3,075
3,152
3,231
3,311
10,000
6,000
1,000
1,000
1,000
240
246
252
258
265
3,000
3,075
3,152
3,231
3,311
960
984
1,009
1,034
1,060
3,000
3,075
3,152
3,231
3,311
Heat - Natural Gas
Electricity
Water & Sewer
BBID Fees
Business License
Trademark License
Accounting
Advertising
Financial Charges
Insurance
Internet & Phone
Website Hosting
21 | P a g e
Office Security
480
492
504
517
530
800
820
841
862
883
1,150
-
1,179
-
1,179
600
615
630
646
662
200
205
210
215
221
200
205
210
215
221
550
564
578
592
607
80,000
82,000
84,050
86,151
88,305
923
1,089
1,283
1,447
1,631
4,847
8,849
7,316
6,430
5,704
3,500
3,247
2,976
2,686
2,375
158,181
160,388
158,449
159,857
163,873
(10,429)
13,775
46,845
71,612
97,109
-
-
-
-
12,624
(10,429)
13,775
46,845
71,612
84,484
Office Supplies
Office Greenery
Rugs
Stationairy
Coil Supplies
Cleaning Supplies
Wages
Misc Variable Costs %
Sales
Capital Cost
Allowance
Debt Interest
Total Operating
Expenses
Income before Taxes
Income Tax
Net Income
5.5 Balance Sheet
The balance sheet of a business speaks to the capital assets and liabilities of a business. As a
service business and renting a space, Canadian Flag as a result does not have a large
amount of assets or liabilities. With 30,000 shares issued to the two partners, the total
assets in year 1 total $65,952 and grow exponentially over the next 5 years. The cash on
hand will be used to cover short-term expenses and for educational opportunities for the
two business partners.
22 | P a g e
Table 10.
Balance Sheet
Year
Current Assets
Cash
2015
2016
2017
2018
2019
6,916
25,667
75,684
124,081
175,042
6,916
25,667
75,684
124,081
175,042
25,684
25,684
25,684
25,684
25,684
22,000
22,000
22,000
22,000
22,000
16,200
16,200
16,200
19,800
19,800
(4,847)
(13,696)
(21,011) (27,442)
(33,146)
59,037
50,188
42,873
40,042
34,338
65,952
75,855
118,557
164,124
209,380
-
-
-
-
-
46,381
42,509
38,366
33,932
29,189
46,381
42,509
38,366
33,932
29,189
30,000
30,000
30,000
30,000
30,000
(10,429)
3,346
50,191
100,191
150,191
19,571
33,346
80,191
130,191
180,191
Total Current Assets
Non-Current Assets
Leaseholder
Improvements
Website
Furniture and Fixtures
Accumulated CCA
Total Non-Current
Assets
Total Assets
Liabilities
Accounts Payable
Long Term Debt
Total Liabilities
Common Shares
Retained Earnings
Total Equity
23 | P a g e
Total Liab & Equity
65,952
75,855
118,557
164,124
209,380
5.6 Cash Flow Statement
As a service business, the cash flow statement for Canadian Flag is quite bare. As shown
here and previously in the retained earnings table, dividends don’t get paid out till year 4
and 5, after the profits exceed the $50,000 dollar threshold.
Table 11.
Cash Flow Statement
For the year ended
2015
2016
2017
2018
2019
(10,429)
13,775
46,845
71,612
84,484
4,847
8,849
7,316
6,430
5,704
(5,581)
22,623
54,161
78,042
90,189
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25,684)
-
-
-
-
(22,000)
-
-
-
-
(16,200)
-
-
(3,600)
-
(63,884)
-
-
(3,600)
-
46,381
(3,872)
(4,143)
(4,433)
(4,744)
Net Income
CCA
Operating Cash Flow
Changes in Working
Capital
Inventories
Accounts Payable
Total
Investment Activities
Leaseholder
Improvements
Website
Furniture and Fixtures
Total
Financing Activities
Long Term debt
24 | P a g e
Common Shares
30,000
-
-
-
-
-
-
-
(21,612)
(34,484)
76,381
(3,872)
(4,143)
(26,045)
(39,228)
6,916
18,751
50,017
48,397
50,961
-
6,916
25,667
75,684
124,081
6,916
25,667
75,684
124,081
175,042
Dividends
Total
Net Cash Flow
Cash Bal Beg of Year
Cash Bal End of Year
5.7 Investment Analysis
With travel agency being a high-risk business, the required return of investment must
reflect the feeling, resulting in a 20% ROI. The terminal value is 3x the net cash flow plus
the dividends paid out in year 5. With those calculations above, the terminal value total
$254,336 leading to a total cash flow to equity investors in year 5 of $341,781.
Table 12.
Schedule 10: Investment Analysis
Required ROI
20.0%
Net Cash Flow
1
2
3
4
5
6,916
18,751
50,017
48,397
50,961
-
-
-
21,612
34,484
Dividends
Terminal Value
256,336
Total Cash Flow to Equity
Investors
6,916
18,751
50,017
70,009
341,781
In addition to the total cash flow in equity investors being analyzed, the net payback,
internal rate of return, value of the equity, and net present value were all calculated.
Table 13.
Payback
Gross
Net
487,475
457,475
Value of the Equity
$218,846
Net Present Value
188,846
25 | P a g e
IRR
98.9%
Due to the small initial equity investment, the aforementioned variable may not be the best
indicators of a successful business venture; therefore average owners’ compensation was
assessed as well.
Table 14.
Average Owners' Compensation
Owner Salary
42,000
43,050
44,126
45,229
46,360
-
-
-
10,806
17,242
42,000
43,050
44,126
56,035
63,602
Dividends
total Owners' Compensation
To further evaluate the business, a breakeven analysis was done assessing the number of
customers per day needed to break even over the next five years. While the first year base
case is significantly below the breakeven calculation, the expected growth will push
Canadian Flag above the breakeven line at the end of year 2.
Number of Customers per
day
Net Income Breakeven
1.80
1.60
1.60
1.40
1.27
1.25
1.32
1.45
1.20
1.00
0.80
1.00
1.15
1.22
1.20
1.20
3
Year
4
5
0.60
0.40
0.20
0.00
1
2
6.0 Feasibility
In conclusion, after assessing the variables discussed in the marketing, operations, human
resources, and financial plans, in terms of economic feasibility pursuing creation of
Canadian Flag would not be a good option for the proposed business partners.
There are a number of reasons this conclusion was reached. First and foremost, the
owners’ compensation is not enough for a business school graduate when compared
against other potential entry-level jobs. The competitive environment in the travel agency
26 | P a g e
business is another key factor that has led to the decision of not starting Canadian Flag.
With more and more people turning to technology and becoming more independent in
their travel booking, the travel agency business is too risky to start a business in.
Works Cited
Government of Canada. (2012). Canadian Census Information. Retrieved from Statistics
Canada: http://www12.statcan.gc.ca/census-recensement/index-eng.cfm
Government of Saskatchewan. (2014). Business License. Retrieved from Government of
Saskatchewan: http://www.gov.sk.ca/
Home Depot. (2014). Home Depot. Retrieved from Home Depot:
http://www.homedepot.ca/
Staples Canada. (n.d.). Office Depot. Retrieved from Office Depot: http://www.staples.ca/
University of Alberta. (2011). Summary of Statistics. Edmonton: University of Alberta.
University of British Columbia. (2015). UBC Facts and Figures. Retrieved from University of
British Columbia: http://news.ubc.ca/media-resources/ubc-facts-and-figures/
University of Calgary. (2013). University of Calgary Statistics. Retrieved from University of
Calgary: http://www.ucalgary.ca/wao/stats
University of Saskatchewan. (2015). Student Headcount and Demographics. Retrieved from
University of Saskatchewan:
http://www.usask.ca/isa/statistics/students/headcount-demographics.php
27 | P a g e
Appendix
a. Economic Variables
Schedule 1: Economic Variables
Debt Interest Rate
Inflation
Inflation Factor
2015
7.0%
2.5%
1.025
2016
7.0%
2.5%
1.025
2017
7.0%
2.5%
1.025
2018
7.0%
2.5%
1.025
2019
7.0%
2.5%
1.025
b. Revenues
Schedule 2: Revenues
2015
2016
2017
2018
2019
Number of
Customers/day
Number of Days/year
Average
Purchase/customer
1.00
365
$
2,530
1.15
365
$
2,593
1.32
365
$
2,658
1.45
365
$
2,725
1.60
365
$
2,793
923,450
1,088,517
1,283,089
1,446,683
1,631,135
15%
15%
10%
Total Sales
Growth Rate Number of
Customers
10%
Revenues
Travel Revenues
Total Revenues
100
% 923,450
1,088,517
1,283,089
1,446,683
1,631,135
923,450
1,088,517
1,283,089
1,446,683
1,631,135
c. Cost of Goods Sold
Schedule 3: Cost of Goods
Sold
2015
Gross Profit Margin
Travel Profit Margin
2016
16%
16%
2017
16%
2018
16%
2019
16%
Cost of goods Sold
Travel COGS
775,698
914,354
1,077,795
1,215,214
1,370,153
Total Cost of Goods Sold
775,698
914,354
1,077,795
1,215,214
1,370,153
i|Page
d. Operating Expenses
Schedule 4: Operating
Expenses
2015
2016
2017
2018
2019
Lease
39,300
40,283
41,290
42,322
43,380
Heat - Natural Gas
750
769
750
750
750
Electriity
3,630
3,721
3,814
3,909
4,007
Water & Sewer
225
231
236
242
248
BBID Fees
500
513
525
538
552
Business License
125
128
131
135
138
Trademark License
200
205
210
215
221
Accounting
3,000
3,075
3,152
3,231
3,311
Advertising
10,000
6,000
1,000
1,000
1,000
Financial Charges
240
246
252
258
265
Insurance
3,000
3,075
3,152
3,231
3,311
Internet & Phone
960
984
1,009
1,034
1,060
Website Hosting
3,000
3,075
3,152
3,231
3,311
Office Security
480
492
504
517
530
Office Supplies
800
820
841
862
883
Office Greenery
1,150
-
1,179
-
1,179
Rugs
600
615
630
646
662
Stationary
200
205
210
215
221
Coil Supplies
200
205
210
215
221
Cleaning Supplies
550
564
578
592
607
Wages
80,000
82,000
84,050
86,151
88,305
ii | P a g e
Misc Variable Costs %
Sales
Capital Cost
Allowance
0.1
% 923
1,089
1,283
1,447
1,631
4,847
8,849
7,316
6,430
5,704
3,500
3,247
2,976
2,686
2,375
158,181
160,388
158,449
159,857
163,873
2
2
2
2
2
Partner 1 Salary
42,000
43,050
44,126
45,229
46,360
Partner 2 Salary
Total Salaries and
Wages
38,000
38,950
39,924
40,922
41,945
80,000
82,000
84,050
86,151
88,305
2015
2016
2017
2018
Debt Interest
Total Operating
Expenses
Salary and Wage
Expense
Number of
Employees:
Partners (full-time)
Salaries/Wages
e. Captial Budget
Schedule 5: Capital
Budget
2019
Leaseholder
Improvements
Walls & Countruction
6,938
-
-
-
-
Windows & Doors
8,460
-
-
-
-
Bathroom & Plumbing
729
-
-
-
-
Lighting & Electrician
5,500
-
-
-
-
Flooring
1,252
-
-
-
-
Painting
475
-
-
-
-
Building Signage
2,330
-
-
-
-
Website Development
22,000
-
-
-
-
iii | P a g e
Office Furniture
12,600
-
-
-
-
Office Computers
3,600
-
-
3,600
-
Total
63,884
-
-
3,600
-
f. Financing Budget
Schedule 6: Financing
Budget
2015
2016
2017
2018
2019
63
% 50,000
Bank debt
Equity
30,000
Total
80,000
-
-
-
2016
2017
-
g. Debt Amortization
Schedule 7: Debt
Ammortization
Beg Balance
Addition
2015
10
years 50,000
2018
2019
46,381
42,509
38,366
33,932
-
-
-
-
Payment
7,119
7,119
7,119
7,119
7,119
Interest
Principal
Reduction
3,500
3,247
2,976
2,686
2,375
3,619
3,872
4,143
4,433
4,744
End Balance
46,381
42,509
38,366
33,932
29,189
h. Capital Cost Allowance
Schedule 8: CCA
Class: Leaseholder Impr.
(Class 1)
Beg Balance
2015
8% -
2016
2017
2018
2019
24,657
22,684
20,869
19,200
Addition
25,684
-
-
-
-
CCA Expense
1,027
1,973
1,815
1,670
1,536
End Balance
24,657
22,684
20,869
19,200
17,664
iv | P a g e
Class: Furniture and Fixtures
(Class 8)
Beg Balance
20% -
14,580
11,664
9,331
10,705
Addition
16,200
-
-
3,600
-
CCA Expense
1,620
2,916
2,333
2,226
2,141
End Balance
14,580
11,664
9,331
10,705
8,564
19,800
15,840
12,672
10,138
Class: Webpage (Class
9)
Beg Balance
25% -
Addition
22,000
-
-
-
-
CCA Expense
2,200
3,960
3,168
2,534
2,028
End Balance
19,800
15,840
12,672
10,138
8,110
Total CCA Expense
4,847
8,849
7,316
6,430
5,704
i. Income Tax Schedule
Schedule 9: Income
Taxes
Input Corporate Tax
Rates
Federal Small
Business
Small Business Tax
Credit
Federal Small
Business Limit
Federal Corporate
Rate
Income Before Taxes
Accumulated Loss
Carryforward
Loss Carryforward
Used
2015
28.0%
17.0%
500,0
00
15.0%
2016
2017
2018
2019
Saskatchewan Small Business Rate
Saskatchewan M & P
Rate
2.0%
10.0%
Saskatchewan Corporate Rate
12.0%
Saskatchewan Small Business Limit
1
2
3
500,000
5
4
(10,429)
13,775
46,845
71,612
97,109
(10,429)
(10,429)
-
-
-
-
(10,429)
-
-
-
v|Page
Taxable Income
-
3,346
46,845
71,612
97,109
Federal Tax
-
937
13,117
20,051
27,190
Small Bus Tax Credit
-
(569)
(7,964)
(12,174)
(16,508)
Provincial Tax
-
67
937
1,432
1,942
Total Taxes
-
435
0.0%
6,090
9,310
12,624
3.2%
13.0%
13.0%
13.0%
j. Investment Analysis
Schedule 10: Investment
Analysis
Required ROI
20.0%
1
2
3
4
5
Net Cash Flow
6,916
18,751
50,017
48,397
50,961
Dividends
-
-
-
21,612
34,484
Terminal Value
Total Cash Flow to Equity
Investors
256,336
6,916
18,751
50,017
70,009
341,781
k. Average Owners’ Compensation
Average Owners'
Compensation
Owner Salary
42,000
43,050
44,126
45,229
46,360
Dividends
total Owners'
Compensation
-
-
-
10,806
17,242
42,000
43,050
44,126
56,035
63,602
2016
2017
2018
l. Income Statement
Income Statement
For the year ended
2015
2019
Sales
923,450
1,088,517
1,283,089
1,446,683
1,631,135
COGS
775,698
914,354
1,077,795
1,215,214
1,370,153
vi | P a g e
Gross Profit
147,752
174,163
205,294
231,469
260,982
16%
16%
16%
16%
16%
Lease
39,300
40,283
41,290
42,322
43,380
Heat - Natural Gas
750
769
750
750
750
Electricity
3,630
3,721
3,814
3,909
4,007
Water & Sewer
225
231
236
242
248
BBID Fees
500
513
525
538
552
Business License
125
128
131
135
138
Trademark License
200
205
210
215
221
Accounting
3,000
3,075
3,152
3,231
3,311
Advertising
10,000
6,000
1,000
1,000
1,000
Financial Charges
240
246
252
258
265
Insurance
3,000
3,075
3,152
3,231
3,311
Internet & Phone
960
984
1,009
1,034
1,060
Website Hosting
3,000
3,075
3,152
3,231
3,311
Office Security
480
492
504
517
530
Office Supplies
800
820
841
862
883
Office Greenery
1,150
-
1,179
-
1,179
Rugs
600
615
630
646
662
Stationairy
200
205
210
215
221
Coil Supplies
200
205
210
215
221
Cleaning Supplies
550
564
578
592
607
Wages
Misc Variable Costs %
Sales
80,000
82,000
84,050
86,151
88,305
923
1,089
1,283
1,447
1,631
vii | P a g e
Capital Cost Allowance
4,847
8,849
7,316
6,430
5,704
Debt Interest
Total Operating
Expenses
3,500
3,247
2,976
2,686
2,375
158,181
160,388
158,449
159,857
163,873
Income before Taxes
(10,429)
13,775
46,845
71,612
97,109
Income Tax
-
-
-
-
12,624
Net Income
(10,429)
13,775
46,845
71,612
84,484
m. Balance Sheet
Balance Sheet
Year
Current Assets
2015
2016
2017
2018
2019
Cash
6,916
25,667
75,684
124,081
175,042
Total Current Assets
6,916
25,667
75,684
124,081
175,042
Non-Current Assets
Leaseholder
Improvements
25,684
25,684
25,684
25,684
25,684
Website
22,000
22,000
22,000
22,000
22,000
Furniture and Fixtures
16,200
16,200
16,200
19,800
19,800
Accumulated CCA
Total Non-Current
Assets
(4,847)
(13,696)
(21,011)
(27,442)
(33,146)
59,037
50,188
42,873
40,042
34,338
Total Assets
65,952
75,855
118,557
164,124
209,380
Accounts Payable
-
-
-
-
-
Long Term Debt
46,381
42,509
38,366
33,932
29,189
Total Liabilities
46,381
42,509
38,366
33,932
29,189
Liabilities
viii | P a g e
Common Shares
30,000
30,000
30,000
30,000
30,000
Retained Earnings
(10,429)
3,346
50,191
100,191
150,191
Total Equity
19,571
33,346
80,191
130,191
180,191
Total Liab & Equity
65,952
75,855
118,557
164,124
209,380
2017
2018
n. Cash Flow Statement
Cash Flow Statement
For the year ended
2015
2016
2019
Net Income
(10,429)
13,775
46,845
71,612
84,484
CCA
4,847
8,849
7,316
6,430
5,704
Operating Cash Flow
(5,581)
22,623
54,161
78,042
90,189
Inventories
-
-
-
-
-
Accounts Payable
-
-
-
-
-
Total
-
-
-
-
-
Investment Activities
Leaseholder
Improvements
(25,684)
-
-
-
-
Website
(22,000)
-
-
-
-
Furniture and Fixtures
(16,200)
-
-
(3,600)
-
Total
(63,884)
-
-
(3,600)
-
Long Term debt
46,381
(3,872)
(4,143)
(4,433)
(4,744)
Common Shares
30,000
-
-
-
-
Changes in Working
Capital
Financing Activities
ix | P a g e
Dividends
-
-
-
(21,612)
(34,484)
Total
76,381
(3,872)
(4,143)
(26,045)
(39,228)
Net Cash Flow
6,916
18,751
50,017
48,397
50,961
Cash Bal Beg of Year
-
6,916
25,667
75,684
124,081
Cash Bal End of Year
6,916
25,667
75,684
124,081
175,042
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p. University Television Advertisement
xi | P a g e
q. Website Mock-Up
xii | P a g e