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Table of Contents

1.0 Executive Summary.....................................................................................................................1

Chart: Highlights...........................................................................................................................3
1.1 Objectives....................................................................................................................................3
1.2 Mission...........................................................................................................................................4
1.3 Keys to Success.........................................................................................................................4
2.0 Company Summary......................................................................................................................4
2.1 Start-up Summary....................................................................................................................5
Chart: Start-up..............................................................................................................................5
Table: Start-up...............................................................................................................................5
Table: Start-up Funding..............................................................................................................6
2.2 Company Ownership................................................................................................................6
2.3 Company Locations and Facilities.......................................................................................7
3.0 Services.............................................................................................................................................7
3.1 Service Description...................................................................................................................7
3.2 Competitive Comparison........................................................................................................7
3.3 Sales Literature..........................................................................................................................8
3.4 Fulfillment....................................................................................................................................8
3.5 Technology...................................................................................................................................8
3.6 Future Services..........................................................................................................................8
4.0 Market Analysis Summary.........................................................................................................8
4.1 Market Segmentation..............................................................................................................8
Table: Market Analysis................................................................................................................9
Chart: Market Analysis (Pie).....................................................................................................9
4.2 Target Market Segment Strategy......................................................................................10
4.2.1 Market Trends...................................................................................................................10
4.2.2 Market Growth..................................................................................................................10
4.2.3 Market Needs....................................................................................................................10
4.3 Service Business Analysis....................................................................................................10
4.3.1 Competition and Buying Patterns.............................................................................11
4.3.2 Main Competitors............................................................................................................11
4.3.3 Business Participants.....................................................................................................11
4.3.4 Distributing a Service....................................................................................................12
5.0 Strategy and Implementation Summary...........................................................................12
5.1 Value Proposition.....................................................................................................................12
5.2 Competitive Edge....................................................................................................................12
5.3 Marketing Strategy.................................................................................................................12
5.3.1 Promotion Strategy........................................................................................................13
5.3.2 Distribution Strategy......................................................................................................13
5.3.3 Marketing Programs.......................................................................................................13
5.3.4 Positioning Statement...................................................................................................13
5.3.5 Pricing Strategy...............................................................................................................14
5.4 Sales Strategy..........................................................................................................................14
Chart: Sales by Year..................................................................................................................14
5.4.1 Sales Forecast..................................................................................................................14
Page 1

Table of Contents

Chart: Sales Monthly.............................................................................................................15

Table: Sales Forecast.............................................................................................................15
5.5 Strategic Alliances...................................................................................................................15
5.6 Milestones..................................................................................................................................15
Table: Milestones.........................................................................................................................16
6.0 Management Summary.............................................................................................................16
6.1 Organizational Structure......................................................................................................16
6.2 Personnel Plan..........................................................................................................................17
Table: Personnel..........................................................................................................................17
7.0 Financial Plan................................................................................................................................18
7.0 Financial Plan................................................................................................................................18
7.1 Important Assumptions........................................................................................................18
Table: General Assumptions...................................................................................................18
7.2 Key Financial Indicators........................................................................................................19
7.2 Key Financial Indicators........................................................................................................19
Chart: Benchmarks....................................................................................................................19
7.3 Break-even Analysis...............................................................................................................20
Table: Break-even Analysis.....................................................................................................20
Chart: Break-even Analysis....................................................................................................20
7.4 Projected Profit and Loss.....................................................................................................21
Chart: Gross Margin Yearly.....................................................................................................21
Table: Profit and Loss................................................................................................................21
Chart: Profit Monthly.................................................................................................................22
Chart: Profit Yearly.....................................................................................................................23
7.5 Projected Cash Flow...............................................................................................................24
Table: Cash Flow.........................................................................................................................24
Chart: Cash...................................................................................................................................25
7.6 Projected Balance Sheet......................................................................................................26
Table: Balance Sheet.................................................................................................................26
7.7 Business Ratios........................................................................................................................27
7.7 Business Ratios........................................................................................................................27
Table: Ratios.................................................................................................................................27
Table: Sales Forecast...........................................................................................................................1
Table: Personnel....................................................................................................................................2
Table: Personnel....................................................................................................................................2
Table: Profit and Loss..........................................................................................................................3
Table: Profit and Loss..........................................................................................................................3
Table: Cash Flow...................................................................................................................................4
Table: Cash Flow...................................................................................................................................4
Table: Balance Sheet...........................................................................................................................6
Table: Balance Sheet...........................................................................................................................6

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Adventure Travel International

1.0 Executive Summary

Adventure Travel International (ATI) will begin operations this year and provide adventure
and sport/travel packages to people in the Pacific Northwest, specifically the greater Woodville
area. An opportunity for ATI's success exists because the national tourism and travel industry is
growing at 4%, and adventure travel at 10% annually. Further, the Woodville adventure travel
market is growing at least 12% annually and there are no providers who specialize solely in
adventure travel in the greater Woodville area. ATI is poised to take advantage of this growth
and lack of competition with an experienced staff, excellent location, and effective management
and marketing.
The company's goals over the next three years are:

Sales of $650,000 by year three.

Maintain margins of 10% on all airline travel.
Achieve 15% of sales from the Internet.
Develop strategic alliances with service providers nationally, internationally, and in the
Woodville area.

In order to achieve these goals ATI needs to focus on the three key areas of:

Effective segmentation and targeting of adventure travelers within the larger travel market.
Successfully position ourselves as adventure travel specialists.
Communicate the differentiation and quality of our offering through personal interaction,
media, and regional marketing.
Develop a repeat-business base of loyal customers in order to create sufficient sales.

ATI will be a sole proprietorship owned and operated by Shea Delaney in the town of Atkins
Grove, California. The founder and employees of ATI are experienced travel industry
professionals and are passionate about the activities ATI will promote and offer.
ATI's total start-up capital requirement is approximately $102,500. Start-up will be financed
through the owner's personal investment and a long-term note of $85,000 secured from the
Woodville First National Bank.
The travel agency market is competitive, and technology, namely the Internet and
Computerized Reservation Systems (CRS), has changed the way travel agencies operate. The
Internet gives agencies and individuals the ability to perform travel related research. Discount
airfare brokers have taken advantage of the Internet by offering tickets online at discounted
rates. This has increased price competition. Computerized Reservation Systems have increased
the speed and efficiency of the agency-to-customer transaction. They have also increased the
start-up costs for travel agencies who wish to be competitive. One notable trend in the travel
industry is increased deregulation. Deregulation has increased the need for differentiation and
has, in many cases, lowered the prices of airfare and other travel-related services. Additional
trends include caps on agency commissions by many of the larger airlines, increases in
adventure travel, and reduction of profit margins.
The travel industry is highly fragmented. There are large national chains, small home-based
businesses, consolidators on the Internet, etc. Membership numbers in some of the travelrelated associations give some indication of the number of participants in this market. The
American Society of Travel Agents (ASTA) reports 25,000 members in 135 countries, most of

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Adventure Travel International

whom are small businesses. ATI has approximately 30 immediate competitors in the greater
Woodville area, including two agencies that are branches of national travel agency chains.
ATI is researching the market to identify potential opportunities for future sales in this rapidly
changing environment. ATI's long-term goal is to establish itself as an internationally recognized
provider of top-of-the-line adventure travel. This goal does not prohibit ATI from participating in
additional segments. It does, however, provide a corporate focus and a differentiated offering.
ATI's target customers are health-conscious couples and individuals, with median household
incomes of approximately $50,000. They are interested in popular adventure activities such as
skiing, whitewater sports, and mountain biking. ATI's most important target customers,
however, will be married couples, ages 25-35, with children and household incomes over
$50,000.
The Woodville area, like much of the Pacific Northwest, has a large concentration of outdoor
recreation enthusiasts. These health-conscious individuals, couples, and groups interested in
popular adventure sports, such as skiing, kayaking, trekking, etc., are ATI's primary customers.
ATI's target market is an exploitable niche, and ATI will provide a specialized and thus
differentiated service.
ATI has established relationships with providers of travel-related products and services. Two
major airlines have been selected as our primary ticket providers in part because they do not
cap the agent's profit on tickets. This allows us to capture the 10% margin on ticket sales that
was for many years the industry standard. Market research has enabled us to identify and
establish working relationships with service providers around the world. ATI has been able to
identify opportunities to capture margins of up to 25% from certain parties. Sourcing will be
continuously evaluated. ATI will take advantage of trade shows, travel industry publications,
and other sources of industry-related information to monitor the quality of its offering.
ATI has a number of major competitors that the company will seek to acquire market share
from. They are:

Rollins & Hayes;

Sundance Travel;
Global Adventure Travel.

None of these competitors have the combination of price, scope, or local focus that ATI will be
able to offer.
ATI's pricing strategy will be a major consideration. Much of it will be determined by market
standards. ATI will attempt to maintain margins of 10% on all airline travel. Margins on all other
products and services vary depending upon the provider but are expected to average 20%. ATI
will make every effort to maintain a competitive pricing policy. However, as ATI builds its
reputation as the premier provider of adventure travel, it expects to earn the ability to charge a
premium for its services.
The company will also pursue an aggressive marketing campaign. During ATI's first year of
operation it will hold a grand opening and will organize and sponsor several athletic events. All
ATI employees promote ATI's services to local athletic clubs. Negotiations with area health clubs
have begun and additional promotions will likely occur through these strategic alliances.
Specialty, rather than large national publications, will serve as media vehicles for ATI
advertising. Local radio stations will also be used. Personal selling will occur, though phone

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Adventure Travel International

solicitation will be limited. ATI plans to occasionally station sales personnel in locations around
Woodville such as shopping malls. ATI's goal is to develop personal familiarity between its
employees and the community.
ATI will be a small organization and its employees will share in management duties and decision
making. Shea Delaney will act as the General Manager, but it will be important for each member
of the team to be capable in all aspects of the business. Prerequisites for all ATI employees
include at least five years travel industry experience, knowledge and ability in the types of
activities ATI will promote, and Certified Travel Counselor (CTC) certification for applicable
positions. The CTC designation can be obtained through the Institute of Certified Travel Agents
(ICTA).
Prices will be competitive with the remainder of the market. The company's estimated sales for
the first year of operations are approximately $534,000, increasing 10% annually for the next
two years.
ATI will begin operations with four full-time positions. The positions are as follows; general
manager and president: Shea Delaney; marketing and advertising director: Jordan Barnes;
accountant: Paul Mclellan; and one travel agent.
The company does not expect any problems with expenses or cash flow within the next three
years. Annual cash flow for the first year of operation becomes positive in the second quarter of
operation.

Chart: Highlights

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Adventure Travel International

1.1 Objectives

Sales of $650,000 by year three.

Maintain margins of 10% on all airline travel.
Achieve 15% of sales from the Internet.
Develop strategic alliances with service providers nationally, internationally, and in the
Woodville area.

1.2 Mission
Adventure Travel International (ATI) is a travel agency that specializes in adventure tourism and
travel. It will provide consulting and custom travel arrangements and packages. ATI's mission is
to become the foremost provider of adventure travel to the people of the Pacific Northwest.
ATI's employees and owner are outdoor adventure and travel enthusiasts as well as seasoned
travel industry professionals. ATI seeks to connect adventure travel newcomers and veterans
with service providers, adventure activities, and accommodations that fit the client's desires,
budget, and skill level.
1.3 Keys to Success

Effectively segment and target adventure travelers within the larger travel market.
Successfully position ourselves as adventure travel specialists.
Communicate the differentiation and quality of our offering through personal interaction and
media.
Develop a repeat-business base of loyal customers.

2.0 Company Summary

ATI is a full service travel agency that specializes in adventure travel and provides recreational
and business travelers with professional service and consultation. ATI will position itself as a
specialist in the field of adventure travel and will generate the majority of its income from this
segment.

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Adventure Travel International

2.1 Start-up Summary

ATI's total start-up capital requirement is approximately $103,000. Start-up will be financed
through the owner's personal investment and a long-term note secured from the Woodville First
National Bank. Start-up details are located in Table 1.

EXPENSES: These will be rent, office supplies, consultant's fees, insurance, utilities, etc. The
largest start-up expense will be for computers.
ASSETS: Primarily cash and computers.
INVESTMENT: The bulk of the investment will come from a loan from Shea Delaney's
personal savings.
LOANS: An $85,000 loan has been secured from Woodville First National Bank.

Chart: Start-up

Table: Start-up

Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Brochures
Consultants
Insurance
Rent
Equipment
Other

$550
$500
$1,000
$2,000
$400
$2,625
$16,000
$500

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Adventure Travel International

Total Start-up Expenses

$23,575

Start-up Assets
Cash Required
Other Current Assets
Long-term Assets
Total Assets

$35,000
$17,500
$26,925
$79,425

Total Requirements

$103,000

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$23,575
$79,425
$103,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets

$44,425
$35,000
$0
$35,000
$79,425

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$0
$85,000
$0
$0
$85,000

Capital
Planned Investment
Owner
Investor
Additional Investment Requirement
Total Planned Investment
Loss at Start-up (Start-up Expenses)
Total Capital

Total Capital and Liabilities

Total Funding

$18,000
$0
$0
$18,000
($23,575)
($5,575)

$79,425
$103,000

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Adventure Travel International

2.2 Company Ownership

ATI is a sole proprietorship owned and operated by Shea Delaney in the town of Atkins Grove,
California. ATI's owner is researching the possibility of establishing ATI as a Limited Liability
Company (LLC) or Partnership (LLP). This may occur within eighteen months of operation.
2.3 Company Locations and Facilities
ATI has identified three potential locations for office space. All potential locations are in the
town of Atkins Grove, California, and are between 800 and 1000 sq. ft. Once successfully
established, ATI will be one of approximately 30 travel agencies in the greater Woodville area,
population 325,000. ATI will be the only adventure travel specialist in the immediate area.
3.0 Services
ATI provides individual and group travel to leisure and corporate clients. Services and products
provided by ATI include travel consultation, pre-arranged tours, custom packages, reservations
for lodging, rental cars, rail passage, etc. ATI seeks to differentiate itself as the premier
adventure travel agency in the greater Woodville area.
3.1 Service Description
ATI is a full service agency and sells standard travel agency goods and services, including
airfare and travel packages. Additional services include assistance with passports, providing
access to top-of-the-line equipment and supplies, and a superior offering that includes access to
better than average terrain and activities, accommodations, and entertainment. The value
added of ATI's offering is its knowledge and expertise, competitive rates, and specialty focus on
adventure travel, which translates into increased satisfaction for the customer.
Adventure travel is divided into two categories, hard and soft adventure. Both hard and soft
adventures involve active and athletic activities. Hard adventure activities, as the name
suggests, generally consist of activities that involve risk and athletic competence. Soft
adventure activities are less physically demanding and more passive than their hard adventure
counterparts. Economic indicators suggest that an increased demand for adventure travel
services exists. ATI can position itself as a niche service provider within the travel and tourism
market and offer high quality travel packages for various sporting trips. ATI will serve the
adventure travel market as a top quality, full service provider. All suppliers with whom ATI will
deal will be top-notch professionals with accomplished backgrounds. If suppliers fail, at any
time, to meet our rigid standards of quality, they will not be used.
3.2 Competitive Comparison
The travel agency market is competitive, and technology, namely the Internet and
Computerized Reservation Systems (CRS), has changed the way travel agencies operate. The
Internet gives agencies and individuals the ability to perform travel related research. Discount
air fare brokers have taken advantage of the Internet by offering tickets on line at discounted
rates. This has increased price competition. Computerized Reservation Systems have increased
the speed and efficiency of the agency to customer transaction. They have also increased the
start-up costs for travel agencies who wish to be competitive. Moreover, industry competition
and the increased number of travel options available have made it necessary for smaller travel
agencies to establish themselves as specialists in one or more types of travel. ATI has done this
by positioning itself as an adventure travel specialist. ATI has not identified a direct competitor
in the greater Woodville area. However, a travel agency does not have to be an adventure travel

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Adventure Travel International

specialist to book an adventure travel trip. Therefore, ATI will compete with other Woodville
area travel agencies as they offer alternatives to adventure travel, have the ability to arrange
adventure travel themselves, and have the advantage of established relationships with clients.
3.3 Sales Literature
Brochures for travel locations, rental car companies, entertainment, etc. are obtained from the
wholesale houses and service providers with whom ATI deals. Brochures for ATI are handled by
a local graphic arts company and are mailed to potential customers upon request. Additional
literature such as direct mail, print ads, and sales promotion materials will be utilized as
needed. ATI will maintain a database from which customer/contact information will be drawn.
3.4 Fulfillment
ATI has established relationships with providers of travel related products and services. Two
major airlines have been selected as our primary ticket providers in part because they do not
cap the agent's profit on tickets. This allows us to capture the 10% margin on ticket sales that
was for many years the industry standard. Market research has enabled us to identify and
establish working relationships with service providers around the world. ATI has been able to
identify opportunities to capture margins of up to 25% from certain parties. Sourcing will be
continuously evaluated. ATI will take advantage of trade shows, travel industry publications,
and other sources of industry related information to monitor the quality of its offering.
3.5 Technology
ATI will rely on a Computerized Reservation System (CRS) for all client reservations. The CRS
enables travel agencies to identify what the customer is looking for and make that information
available quickly. It also increases the speed and efficiency with which ATI can communicate
with suppliers. In addition, the CRS makes customer data storage and retrieval relatively
simple. ATI will also make use of the Internet for market research and communications.
3.6 Future Services
ATI may in the future open agencies at additional locations. In addition, as the adventure travel
market reaches maturity, ATI may participate in additional segments of the travel market. ATI is
researching the market to identify potential opportunities for future sales. ATI's long-term goal
is to establish itself as an internationally recognized provider of top-of-the-line adventure travel.
This goal does not prohibit ATI from participating in additional segments. It does, however,
provide a corporate focus and a differentiated offering.
4.0 Market Analysis Summary
ATI plans to focus its initial efforts on the adventure travel market in the greater Woodville
area. Adventure travel falls primarily under the leisure travel category. Revenues from leisure
travel earned by U.S. travel agencies exceed $50 billion annually. Adventure travel is a subcategory of leisure travel and can be further broken down into hard and soft adventure travel.
Annual expenditures in the U.S. market are estimated to be approximately $40-50 million for
soft and $12-15 for hard adventure travelers.

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Adventure Travel International

4.1 Market Segmentation

ATI's target customers are health-conscious couples and individuals, with median household
incomes of approximately $50,000. They are interested in popular adventure activities such as
skiing, whitewater sports, and mountain biking and major purchasers are located in urban areas
within these states:
1. California
2. Florida
3. New York
4. Texas
5. Illinois
6. Nevada
7. Hawaii
8. New Jersey
9. Pennsylvania
10. Georgia
Adventure travelers are slightly more likely to be men between the ages of 18-34. However an
increasing number of hard adventure travelers are women (some statistics suggest that women
comprise 49% of the adventure market). Men on average spend more than women on their
adventure travels. ATI's primary customers, however, are married couples, ages 25-35, with
children and household incomes over $50,000.
Table: Market Analysis

Market Analysis
Potential Customers
National
Woodville
Internet
Total

Year 1

Year 2

Year 3

Year 4

Year 5

9,000,000
100,000
3,000,000
12,100,000

9,900,000
115,000
3,600,000
13,615,000

10,890,000
132,250
4,320,000
15,342,250

11,979,000
152,088
5,184,000
17,315,088

13,176,900
174,901
6,220,800
19,572,601

Growth
10%
15%
20%
12.78%

CAGR
10.00%
15.00%
20.00%
12.78%

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Adventure Travel International

Chart: Market Analysis (Pie)

4.2 Target Market Segment Strategy

ATI is located in the heart of the Pacific Northwest. The natural beauty and abundance of
outdoor activities attract many fitness oriented individuals. Per capita, the area has more
people than any other in the nation who actively participate in mountain and water sports such
as skiing, climbing, kayaking, whitewater rafting, mountain biking, etc. These are the people in
ATI's target market. ATI will focus on the sale and promotion of adventure travel primarily to
individuals, but also to corporate clients in the Woodville area.
4.2.1 Market Trends
One notable trend in the travel industry is increased deregulation. Deregulation has increased
the need for differentiation and has, in many cases, lowered the prices of airfare and other
travel related services. Additional trends include caps on agency commissions by many of the
larger airlines, increases in adventure travel, and reduction of profit margins. More than 50% of
the U.S. adult traveling population, or 147 million people, have taken an adventure trip in their
lifetime, 98 million in the past five years. Approximately 31 million adults have engaged in hard
adventure activities like whitewater rafting, scuba diving, and mountain biking. An additional 25
million engaged in both a hard and soft adventure activity. Activities most commonly
participated in during adventure vacations: camping (85%), hiking (74%), skiing (51%),
snorkeling or scuba diving (30%), sailing (26%), kayaking or whitewater rafting (24%), and
biking trips (24%). Customers tend to be young and affluent, ages 18-34, and one fourth are
from households with annual incomes of $75,000 or more.
4.2.2 Market Growth
The travel industry is growing. Reasons for this growth include a healthy domestic economy and
the devaluation of currency in other regions which has made travel less expensive for U.S.
residents. Leisure travel has increased by 3.2% in 1997 and is predicted to grow 2.0% in 1998.
The healthy economy has increased business which in turn boosted domestic business travel

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Adventure Travel International

4.8% in 1997 with an estimated increase of 3.6% in 1998. Adventure travel, which is growing
10% annually, is one of the fastest growing segments of the travel industry. Statistics show that
8,000 U.S. companies offered adventure packages that generated $7 billion in 1997. There also
has been a 66% increase in executive participation in adventure travel between 1992 and 1996.
4.2.3 Market Needs
Many potential customers are unsure of the location they wish to reach. Part of the value
associated with travel agencies is the knowledge they possess about destinations. Customers
look to the agency to provide them with sound advice for a competitive price. ATI is confident in
its ability to do so. Time is a precious commodity. ATI can save the customer time and money,
and help to ensure that they are satisfied with their vacation.
4.3 Service Business Analysis
The U.S. travel and tourism industry is the nation's third largest retail industry, and the U.S.
Department of Commerce says that it will be number one by the year 2000. Revenues from
travel have increased approximately 100% in the last decade. U.S. travel agencies produce over
$100 billion in revenues each year. The market is separated into two main categories, business
and leisure travel. Each contribute about 45% to total revenues. The remainder of revenues are
generated from combined business/leisure trips. The market is further separated into domestic
and international travel. Domestic travel accounts for approximately 70% of industry revenues.
Business travel can be divided into two categories, the medium to large corporate account and
the small independent businessman. Leisure travelers are classified according to the types of
trips they take, income, or age.
The four primary leisure travel groups are:
1.
2.
3.
4.

Adventure, Special-Interest, R&R, Honeymoons, and Sightseeing Trips.

High-Income Travelers.
Budget-Conscious Travelers.
Families, Students and Seniors.

4.3.1 Competition and Buying Patterns

There are many activities and types of travel available to people contemplating an adventure
vacation. These substitute products and services are one type of competition. Theme parks,
motorhome trips, and cruises are just a few. Other substitutes include less expensive, selfplanned, or trips geared towards more traditional types of vacations. In addition, potential
customers do not have to vacation. Instead, they may elect to spend elsewhere, or invest the
money they would have otherwise spent on a vacation. Direct competition can come from
virtually any agency, and there are several agencies who specialize in adventure travel in the
United States. Lifestyle, age, and disposable income influence the decision to travel and in
which type of travel to participate. Adventure travelers make purchase decisions based upon
their desire to combine athletic interests with vacation time. The average adventure traveler
engages in one adventure travel vacation every 12-18 months.
4.3.2 Main Competitors
1. Rollins & Hayes: Based on the east coast, Rollins & Hayes are the most well known and
respected adventure travel agency in the world. They have been providing adventure travel
packages for over twenty years. Rollins & Hayes have successfully integrated travel agency

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Adventure Travel International

services and adventure travel activities. This offers them complete control over the entire
vacation. They have the advantage of an established reputation, high-quality trips,
economies of scale, and strategic alliances. However, their packages are expensive and
appeal primarily to a high-income clientele.
2. Sundance Travel: Based in Colorado, Sundance is a traditional agency and has been in
business for 10 years. They have gradually made the move towards adventure travel
specialists and are now recognized as such. Their strengths are experience, reputation, and
financial solvency. Weaknesses may include high personnel and management turnover and
the lack of a clear plan for future growth.
3. Global Adventure Travel: Global was established in 1995 and they have successfully
established themselves as adventure travel specialists. They are based in the Los Angeles
area. Global has done a good job positioning themselves through successful marketing
communications and management. The Los Angeles area contains a large adventure travel
market. It is, however, a very competitive area.
4.3.3 Business Participants
The travel industry is similar to many others. There are large national chains, small home-based
businesses, consolidators on the Internet, etc. Membership numbers in some of the travel
related associations give some indication of the number of participants in this market. The
American Society of Travel Agents (ASTA) reports 25,000 members in 135 countries, most of
whom are small businesses. The Association of Retail Travel Agencies (ARTA) has another 3,000
members. In addition, there are many agencies not affiliated with these associations but with
one or more of the approximately 35 travel industry organizations in the country. ATI has
approximately 30 immediate competitors in the greater Woodville area, including two agencies
that are branches of national travel agency chains.
4.3.4 Distributing a Service
The primary distribution pattern in the travel industry is from supplier to agent to consumer.
Distribution between supplier and agency is regulated by a conference system. The two
conferences through which agencies gain access to air travel providers are the Airline Reporting
Corporation (ARC) and the International Airlines Travel Agents Network (IATAN). These
suppliers can be contacted through Computerized Reservation System (CRS). Travel agencies
receive a supply of blank airline ticket vouchers from the ARC. The agency is responsible for
proper storage of and collecting payments for the vouchers. One notable change in the
distribution channel has occurred. Wholesale houses have started buying large quantities of
airline tickets and selling online for reduced prices.
5.0 Strategy and Implementation Summary
In order to reach its goal of becoming the Pacific Northwest's premiere adventure travel agency,
ATI will adopt the following strategy:
1. Establish ATI's reputation as a differentiated, specialty provider of adventure travel. This will
be accomplished through a diverse marketing communications program at ATI's target
market, utilizing various media.
2. Provide unparalleled service to the people of Woodville in order to gain repeat business and
build trust. This will include providing superior service in all phases of the transaction,
including timely follow-through.

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Adventure Travel International

3. Aggressively promote adventure sports as healthy and exciting activities and those who
participate in them as pioneers, heroes, and true Pacific Northwesterners.
5.1 Value Proposition
The value proposition of ATI's services comes from ATI's experience with and love of adventure
sports. ATI's employees are confident in their ability to meet the needs of their customers
because they share the customers' enthusiasm for the activities ATI offers. ATI's confidence and
ability translates into confidence for the consumer and a starting point towards developing longterm relationships and trust.
5.2 Competitive Edge
ATI's competitive edge is its focus, passion, and experience. ATI seeks to promote and provide
access to adventure sports and travel. ATI provides a differentiated offering with the
management experience, capital, and commitment to make it work.
5.3 Marketing Strategy
ATI adheres to the theory that the goal of business is to create and keep customers. Its
marketing strategy will reflect this goal as it builds its reputation in the Woodville area. Though
ATI operates in the travel industry, it provides much more than travel. ATI provides adventure
and freedom. Many of ATI's customers spend 50 weeks of the year in an office. ATI offers
people the ability to get away and remember how much they love the challenge and excitement
of an athletic endeavor. ATI will promote the benefits of adventure travel. These benefits include
better health, excitement, personal growth, ear-to-ear grins, and a whole lot of fun.
5.3.1 Promotion Strategy
During ATI's first year of operation it will hold a grand opening and will organize and sponsor
several athletic events. Events will include an off-road triathlon, 10k race and 5k fun run, and a
mountain bike race. ATI will provide various travel packages and other items as prizes. All ATI
employees belong to local athletic clubs and will, through interaction with other members,
promote ATI's services. During the grand opening and other events, ATI will provide literature
with information about the trips and activities. Negotiations with area health clubs have begun
and additional promotions will likely occur through these strategic alliances. Specialty, rather
than large national publications, will serve as media vehicles for ATI advertising. Local radio
stations will also be used. Personal selling will also occur, though phone solicitation will be
limited. ATI plans to occasionally station sales personnel in locations around Woodville such as
shopping malls. ATI's goal is to develop personal familiarity between its employees and the
community.
5.3.2 Distribution Strategy
ATI's distribution strategy will focus on the target market in the Woodville area to whom it will
sell directly. Secondarily, ATI seeks to establish distribution capability on the World Wide Web.
Doing so will improve ATI's ability to establish a national reputation.
5.3.3 Marketing Programs
Customers will be reached through traditional marketing communication methods. Information
has been located detailing profiles of both hard and soft adventure travelers, where they live,

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Adventure Travel International

work, what they do, etc. Research suggests that many of our target customers, and travelers in
general, are Internet savvy and many adventure travelers purchase over the Internet or buy
through travel agents. As such, the Internet will serve as an appropriate and effective medium
of communication. ATI will target the primary customer group initially. This group has been
defined as persons who have purchased or are likely to purchase an adventure vacation. In
addition to the Internet, methods by which we will communicate with customers will depend on
the results of our marketing research. ATI will likely use trade or special interest magazines,
mailing lists and direct mail, and personal selling. Initially, service will be introduced regionally.
Sales will be extended into the national and global markets within a few years of operation. We
hope to promote out of season services through frequent customer contact and through our
own publication, most likely a monthly newsletter.
5.3.4 Positioning Statement
For individual and corporate clients who wish to participate in adventure travel, ATI is the
premier adventure travel agency in the Pacific Northwest. ATI's experience with and enthusiasm
for adventure travel is displayed in the exceptional service, value, and advice it provides for the
customer.
5.3.5 Pricing Strategy
Much of ATI's pricing is determined by market standards. ATI will attempt to maintain margins
of 10% on all airline travel. Margins on all other products and services vary depending upon the
provider but are expected to average 20%. ATI will make every effort to maintain a competitive
pricing policy. However, as ATI builds its reputation as the premier provider of adventure travel,
it expects to earn the ability to charge a premium for its services.
5.4 Sales Strategy
ATI will sell the benefits of the services it offers and the activities it promotes. ATI sells the
freedom that is part of a healthy and balanced lifestyle. The benefits of that lifestyle are many.
People need to be reminded occasionally that there is more to life than building bigger barns.
ATI can provide clients with all of the arrangements they can think of and likely many they
would not have thought of. Our concern is not to maximize profits on any individual sale but to
satisfy the customer. Doing so will reduce costs and increase profits in the long run. It is less
expensive to maintain a relationship than it is to develop a new one. At ATI we believe in the
benefits of the activities we promote, and we are confident that we can satisfy the desires of
the seasoned adventure traveler and the newcomer alike.
Sales projections are detailed in the Yearly Sales Total chart.

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Adventure Travel International

Chart: Sales by Year

5.4.1 Sales Forecast

Detailed projections are located in the Total Sales by Month table in the appendix. ATI expects
sales to be slow in the first quarter of operation. Sales growth is estimated at 20% annually
through year three of operation.

Chart: Sales Monthly

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Adventure Travel International

Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

Woodville
National
Internet
Corporate
Total Sales

$427,685
$42,768
$10,693
$53,058
$534,204

$382,245
$70,568
$47,046
$88,210
$588,069

$258,751
$97,032
$97,032
$194,063
$646,878

Direct Cost of Sales

Woodville
National
Internet
Corporate
Subtotal Direct Cost of Sales

Year 1
$333,595
$33,900
$8,417
$42,081
$417,993

Year 2
$294,329
$54,337
$36,225
$67,922
$452,813

Year 3
$196,651
$73,744
$73,744
$147,488
$491,627

Sales

5.5 Strategic Alliances

Strategic alliances for promotion have been developed with Body Works Health Club, Woodville
Whitewater, The Great Wall climbing gym, and several area retailers. Alliances with adventure
trip providers in several U.S. states and foreign countries have also been established.
5.6 Milestones
ATI's important milestones are detailed in the following table. The milestones reflect ATI's
philosophy that it is important for a company to set goals. Goals determine strategy and tactics,
and help to maintain corporate focus. The milestones can be seen as progress points and will be
used as a way to measure ATI's success in reaching its goals.
Table: Milestones

Milestones
Milestone
Grand Opening & Giveaway
Breakeven
World Wide Web sales capability
Strategic Alliance Development
program
Totals

Start Date
9/1/1999
1/2/2000
9/15/1999
9/1/1999

End Date
11/1/1999
1/2/2001
1/1/2000
12/1/1999

Budget
$1,500
$0
$5,000
$1,500

Manager
Jordan Barnes
Paul Mclean
Steve Fergusee
Shea Delaney

Department
Marketing
Accounting
Sales
Managers

$8,000

6.0 Management Summary

Shea Delaney will act as the General Manager. However, ATI is a small organization and its
employees will share in management duties and decision making. It will be important for each
member of the team to be capable in all aspects of the business. Prerequisites for all ATI
employees include at least five years travel industry experience, knowledge and ability in the
types of activities ATI will promote, and Certified Travel Counselor (CTC) certification for
applicable positions. The CTC designation can be obtained through the Institute of Certified
Travel Agents (ICTA).

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Adventure Travel International

6.1 Organizational Structure

ATI will begin operations with 4 full-time positions. The positions are as follows.
General Manager and President: Shea Delaney, age 37, B.A. Marketing Management, University
of California Santa Cruz. Shea has 12 years experience in the travel industry, including five
years experience as manager of the Transworld travel agency, Southern California branch. As
manager at Transworld, Shea increased revenues by $1.5 million and established the adventure
travel division which, in its first 18 months, generated an additional $400,00 in revenues. His
background in adventure sports includes four years on the U.S. pro kayaking tour, two years as
a sponsored cross-country mountain bike racer, 25 years surfing, including three years as an
amateur competitor, and participation in many other adventure and organized sports such as
snowboarding, beach volleyball, and track and field.
Marketing and Advertising Director: Jordan Barnes, age 31, B.S. Communications, Brigham
Young University. Jordan spent five years as an adventure travel and freelance writer and has
been a marketing consultant specializing in adventure sports for the past three years. Jordan
has an extensive mountaineering background and has summitted three 8,000 meter peaks,
including Everest. In addition to mountaineering, Jordan is an avid climber and has skied since
the age of five.
Accountant: Paul Mclellan, age 45, B.S. Accounting, University of Alaska, Anchorage. Paul is an
accountant and an Alaskan. His ability with numbers has helped keep his mind occupied during
competition in the Iditarod, marathons, and mountaineering expeditions. Paul worked as an
auditor for the State of Alaska for four years after college and then as an accounting
department manager for a non-profit organization for another four years. Before going back to
school and earning his degree, Paul was a commercial sport fisherman out of Homer, Alaska.
During that time he established connections with many service providers in the state of Alaska.
ATI will capitalize on these connections as Alaska is a popular destination amongst adventure
travelers.
Travel Agent #1: Sue Taylor, Certified Travel Counselor. Sue has eight years experience as a
travel counselor. She is an avid cyclist, runner, and kayaker. In addition, Sue has traveled
extensively and has first-hand knowledge of many of the destinations our clients wish to reach.
Her trips include a year-long trek in South America, four months in Nepal, and a four-month
stint as a ski instructor in Wanaka, New Zealand.
6.2 Personnel Plan
The personnel plan depicts ATI's anticipated head count for the start up year. The following
table provides more detailed information. ATI does not anticipate the need to significantly
increase personnel in the first 2-3 years.
Table: Personnel

Personnel Plan
Manager/President
Accountant
Travel Agent
Marketing & Advertising Dir.
Total People

Year 1

Year 2

Year 3

$6,000
$13,200
$12,000
$13,800
4

$6,240
$13,728
$12,480
$13,800
4

$6,490
$14,277
$12,979
$13,800
4

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Adventure Travel International

Total Payroll

$45,000

$46,248

$47,546

7.0 Financial Plan

ATI's financial plan is detailed in following sections. Preliminary estimates suggest that ATI will
experience slow growth in the first two quarters of operation. This is partly due to ATI's status
as a start-up company and seasonal factors. Income estimates are based, in part, on
anticipated revenues from accounts that were secured by ATI employees prior to their
departure from former employers. ATI has sufficient cash to endure the negative cash flow
situation that it may encounter initially. ATI also anticipates an increase in gross margin and
sales volume. Thus, the overall financial plan presents a conservative but realistic depiction of
ATI's financial position.
7.1 Important Assumptions
ATI assumes the following:

Market growth projections for the travel industry and for adventure travel are accurate.
National economic conditions, which are favorable to the travel industry, will not experience
significant decline in the next five years.
International conditions will remain favorable for service providers and ATI will be able to
maintain those relationships.

Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Year 1

Year 2

Year 3

1
10.00%
10.00%
30.00%
0

2
10.00%
10.00%
30.00%
0

3
10.00%
10.00%
30.00%
0

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Adventure Travel International

7.2 Key Financial Indicators

The following chart indicates ATI's key financial indicators for the first three years. ATI
anticipates growth in sales with relatively stable operating expenses. Favorable economic
conditions and forecasts of continued growth in the adventure travel market support ATI's
planned financial success.

Chart: Benchmarks

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Adventure Travel International

7.3 Break-even Analysis

The following table details ATI's break-even analysis, including monthly sales break-even points.
Break-even calculations assume a 20% gross margin. This is a conservative estimate, and it will
be improved as strategic relationships develop and the benefits of ATI's offerings are realized by
customers.
Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$33,902

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

78%
$7,375

Chart: Break-even Analysis

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Adventure Travel International

7.4 Projected Profit and Loss

ATI's profit picture improves as operations progress into the third quarter of the first year of
operation. ATI anticipates improving its gross margin from 22% in year one to 23% in year two.
Annual estimates of profit and loss are detailed in the following table.

Chart: Gross Margin Yearly

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales
Direct Cost of Sales
Other Costs of Sales
Total Cost of Sales

$534,204
$417,993
$0
$417,993

$588,069
$452,813
$0
$452,813

$646,878
$491,627
$0
$491,627

Gross Margin
Gross Margin %

$116,211
21.75%

$135,256
23.00%

$155,251
24.00%

Payroll
Marketing/Promotion
Depreciation
Rent
Utilities
Insurance
Payroll Taxes
Other

$45,000
$26,100
$0
$10,500
$4,500
$2,400
$0
$0

$46,248
$26,280
$0
$10,500
$4,500
$2,400
$0
$0

$47,546
$26,280
$0
$10,500
$4,500
$2,400
$0
$0

Total Operating Expenses

$88,500

$89,928

$91,226

Expenses

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Adventure Travel International

Profit Before Interest and Taxes

EBITDA
Interest Expense
Taxes Incurred

$27,711
$27,711
$8,078
$5,890

$45,328
$45,328
$7,330
$11,399

$64,025
$64,025
$6,550
$17,243

Net Profit
Net Profit/Sales

$13,743
2.57%

$26,599
4.52%

$40,233
6.22%

Chart: Profit Monthly

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Adventure Travel International

Chart: Profit Yearly

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Adventure Travel International

7.5 Projected Cash Flow

Monthly cash flow is shown in the following illustration. Annual cash flow figures are estimated
based on a 60-day collection period. Cash flow for the first year of operation becomes positive
mid-year.
Table: Cash Flow

Pro Forma Cash Flow

Year 1

Year 2

Year 3

$400,653
$100,048
$500,701

$441,052
$143,639
$584,691

$485,159
$158,031
$643,190

$0
$0
$0
$0
$0
$0
$0
$500,701

$0
$0
$0
$0
$0
$0
$0
$584,691

$0
$0
$0
$0
$0
$0
$0
$643,190

Year 1

Year 2

Year 3

$45,000
$415,328
$460,328

$46,248
$533,008
$579,256

$47,546
$555,493
$603,039

$0
$0
$0
$7,800
$0
$0
$0
$468,128

$0
$0
$0
$7,800
$0
$0
$0
$587,056

$0
$0
$0
$7,800
$0
$0
$0
$610,839

$32,574
$67,574

($2,365)
$65,208

$32,351
$97,559

Cash Received
Cash from Operations
Cash Sales
Cash from Receivables
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

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Adventure Travel International

Chart: Cash

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Adventure Travel International

7.6 Projected Balance Sheet

The pro forma balance sheet indicates sustained and planned growth. Net worth improves
considerably in year two and will provide ATI with a strong financial position. Monthly estimates
are included in the appendix.
Table: Balance Sheet

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

$67,574
$33,503
$17,500
$118,576

$65,208
$36,881
$17,500
$119,589

$97,559
$40,569
$17,500
$155,628

$26,925
$0
$26,925
$145,501

$26,925
$0
$26,925
$146,514

$26,925
$0
$26,925
$182,553

Year 1

Year 2

Year 3

$60,133
$0
$0
$60,133

$42,347
$0
$0
$42,347

$45,953
$0
$0
$45,953

Long-term Liabilities
Total Liabilities

$77,200
$137,333

$69,400
$111,747

$61,600
$107,553

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$18,000
($23,575)
$13,743
$8,168
$145,501

$18,000
($9,832)
$26,599
$34,767
$146,514

$18,000
$16,767
$40,233
$75,000
$182,553

$8,168

$34,767

$75,000

Assets
Current Assets
Cash
Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

Net Worth

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Adventure Travel International

7.7 Business Ratios

The following table details our primary business ratios. Initial analysis indicates that ATI's ratios
for profitability, risk, and return are financially favorable and will improve greatly in year two of
operation. Industry Profile ratios are based on Standard Industry Classification (SIC) Index
code 4724.
Table: Ratios

Ratio Analysis
Year 1

Year 2

Year 3

Industry Profile

n.a.

10.08%

10.00%

4.00%

Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets

23.03%
12.03%
81.50%
18.50%
100.00%

25.17%
11.94%
81.62%
18.38%
100.00%

22.22%
9.59%
85.25%
14.75%
100.00%

25.20%
38.80%
64.00%
36.00%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

41.33%
53.06%
94.39%
5.61%

28.90%
47.37%
76.27%
23.73%

25.17%
33.74%
58.92%
41.08%

39.60%
16.30%
55.90%
44.10%

100.00%
21.75%
19.18%
0.00%
5.19%

100.00%
23.00%
18.48%
0.00%
7.71%

100.00%
24.00%
17.78%
0.00%
9.90%

100.00%
38.30%
27.50%
0.40%
1.30%

1.97
1.97
94.39%
240.36%
13.49%

2.82
2.82
76.27%
109.29%
25.93%

3.39
3.39
58.92%
76.63%
31.48%

1.44
1.13
55.90%
3.20%
7.20%

Sales Growth
Percent of Total Assets

Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

Return on Equity

2.57%
168.25%

4.52%
76.51%

6.22%
53.64%

n.a
n.a

3.99
56
7.91
27
3.67

3.99
87
12.17
36
4.01

3.99
87
12.17
29
3.54

n.a
n.a
n.a
n.a
n.a

16.81
0.44

3.21
0.38

1.43
0.43

n.a
n.a

$58,443
3.43

$77,242
6.18

$109,675
9.77

n.a
n.a

0.27

0.25

0.28

n.a

Activity Ratios
Accounts Receivable Turnover
Collection Days
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales

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Adventure Travel International

Current Debt/Total Assets

Acid Test
Sales/Net Worth
Dividend Payout

41%
1.41
65.40
0.00

29%
1.95
16.91
0.00

25%
2.50
8.63
0.00

n.a
n.a
n.a
n.a

Page 28

Appendix
Table: Sales Forecast

Sales Forecast
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$20,000
$2,000
$500
$2,500
$25,000

$22,000
$2,200
$550
$2,750
$27,500

$24,200
$2,420
$605
$3,025
$30,250

$26,620
$2,662
$666
$3,328
$33,276

$29,282
$2,928
$732
$3,660
$36,602

$32,210
$3,221
$805
$4,026
$40,262

$35,431
$3,543
$886
$4,026
$43,886

$38,974
$3,897
$974
$4,872
$48,717

$42,872
$4,287
$1,072
$5,359
$53,590

$47,159
$4,716
$1,179
$5,895
$58,949

$51,875
$5,188
$1,297
$6,484
$64,844

$57,062
$5,706
$1,427
$7,133
$71,328

Sales
Woodville
National
Internet
Corporate
Total Sales

0%
0%
0%
0%

Direct Cost of Sales

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Woodville

$15,600

$17,160

$18,876

$20,764

$22,840

$25,124

$27,636

$30,400

$33,440

$36,784

$40,463

$44,508

National

$1,560

$1,716

$1,888

$2,076

$2,824

$2,512

$2,764

$3,040

$3,344

$3,678

$4,047

$4,451

Internet

$390

$429

$472

$519

$571

$628

$691

$836

$836

$920

$1,012

$1,113

$1,950

$2,145

$2,360

$2,596

$2,855

$3,140

$3,455

$4,180

$4,180

$4,598

$5,058

$5,564

$19,500

$21,450

$23,596

$25,955

$29,090

$31,404

$34,546

$38,456

$41,800

$45,980

$50,580

$55,636

Corporate
Subtotal Direct Cost of Sales

Page 1

Appendix
Table: Personnel

Personnel Plan
Manager/President
Accountant
Travel Agent
Marketing & Advertising Dir.
Total People
Total Payroll

0%
0%
0%
0%

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$500
$1,100
$1,000
$1,150
4

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

Page 2

Appendix
Table: Profit and Loss

Pro Forma Profit and Loss

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Sales

$25,000

$27,500

$30,250

$33,276

$36,602

$40,262

$43,886

$48,717

$53,590

$58,949

$64,844

$71,328

Direct Cost of Sales

$19,500

$21,450

$23,596

$25,955

$29,090

$31,404

$34,546

$38,456

$41,800

$45,980

$50,580

$55,636

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$19,500

$21,450

$23,596

$25,955

$29,090

$31,404

$34,546

$38,456

$41,800

$45,980

$50,580

$55,636

Other Costs of Sales

Total Cost of Sales
Gross Margin

$5,500

$6,050

$6,654

$7,321

$7,512

$8,858

$9,340

$10,261

$11,790

$12,969

$14,264

$15,692

Gross Margin %

22.00%

22.00%

22.00%

22.00%

20.52%

22.00%

21.28%

21.06%

22.00%

22.00%

22.00%

22.00%

Payroll

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

Marketing/Promotion

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$2,175

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Rent

$875

$875

$875

$875

$875

$875

$875

$875

$875

$875

$875

$875

Utilities

$375

$375

$375

$375

$375

$375

$375

$375

$375

$375

$375

$375

Insurance

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

$7,375

Profit Before Interest and Taxes

($1,875)

($1,325)

($721)

($54)

$137

$1,483

$1,965

$2,886

$4,415

$5,594

$6,889

$8,317

EBITDA

($1,875)

($1,325)

($721)

($54)

$137

$1,483

$1,965

$2,886

$4,415

$5,594

$6,889

$8,317

$703

$698

$692

$687

$681

$676

$670

$665

$660

$654

$649

$643

($773)

($607)

($424)

($222)

($163)

$242

$388

$666

$1,127

$1,482

$1,872

$2,302

Net Profit

($1,805)

($1,416)

($989)

($518)

($381)

$565

$906

$1,555

$2,629

$3,458

$4,368

$5,372

Net Profit/Sales

-7.22%

-5.15%

-3.27%

-1.56%

-1.04%

1.40%

2.06%

3.19%

4.91%

5.87%

6.74%

7.53%

Expenses

Depreciation

Payroll Taxes
Other
Total Operating Expenses

Interest Expense
Taxes Incurred

15%

Page 3

Appendix
Table: Cash Flow

Pro Forma Cash Flow

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$18,750

$20,625

$22,688

$24,957

$27,452

$30,197

$32,915

$36,538

$40,193

$44,212

$48,633

$53,496

$0

$208

$6,271

$6,898

$7,588

$8,347

$9,181

$10,096

$11,012

$12,220

$13,442

$14,786

$18,750

$20,833

$28,958

$31,855

$35,039

$38,543

$42,096

$46,633

$51,204

$56,432

$62,075

$68,282

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

New Other Liabilities (interest-free)

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Investment Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Cash Received

$18,750

$20,833

$28,958

$31,855

$35,039

$38,543

$42,096

$46,633

$51,204

$56,432

$62,075

$68,282

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Cash Received
Cash from Operations
Cash Sales
Cash from Receivables
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing

0.00%

Expenditures from Operations

Cash Spending

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$3,750

$768

$23,125

$25,243

$27,574

$30,151

$33,323

$36,056

$39,369

$43,539

$47,362

$51,907

$56,909

$4,518

$26,875

$28,993

$31,324

$33,901

$37,073

$39,806

$43,119

$47,289

$51,112

$55,657

$60,659

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$650

$650

$650

$650

$650

$650

$650

$650

$650

$650

$650

$650

Purchase Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Dividends

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$5,168

$27,525

$29,643

$31,974

$34,551

$37,723

$40,456

$43,769

$47,939

$51,762

$56,307

$61,309

$13,582

($6,692)

($685)

($119)

$488

$820

$1,639

$2,864

$3,265

$4,669

$5,768

$6,974

Bill Payments
Subtotal Spent on Operations
Additional Cash Spent

Long-term Liabilities Principal Repayment

Subtotal Cash Spent

Net Cash Flow

Page 4

Appendix
Cash Balance

$48,582

$41,890

$41,205

$41,086

$41,574

$42,394

$44,033

$46,897

$50,163

$54,832

$60,600

$67,574

Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$35,000
$0
$17,500
$52,500

$48,582
$6,250
$17,500
$72,332

$41,890
$12,917
$17,500
$72,307

$41,205
$14,208
$17,500
$72,913

$41,086
$15,629
$17,500
$74,215

$41,574
$17,192
$17,500
$76,266

$42,394
$18,911
$17,500
$78,805

$44,033
$20,701
$17,500
$82,234

$46,897
$22,785
$17,500
$87,182

$50,163
$25,171
$17,500
$92,833

$54,832
$27,688
$17,500
$100,020

$60,600
$30,457
$17,500
$108,557

$67,574
$33,503
$17,500
$118,576

$26,925
$0
$26,925
$79,425

$26,925
$0
$26,925
$99,257

$26,925
$0
$26,925
$99,232

$26,925
$0
$26,925
$99,838

$26,925
$0
$26,925
$101,140

$26,925
$0
$26,925
$103,191

$26,925
$0
$26,925
$105,730

$26,925
$0
$26,925
$109,159

$26,925
$0
$26,925
$114,107

$26,925
$0
$26,925
$119,758

$26,925
$0
$26,925
$126,945

$26,925
$0
$26,925
$135,482

$26,925
$0
$26,925
$145,501

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$0
$0
$0
$0

$22,286
$0
$0
$22,286

$24,327
$0
$0
$24,327

$26,573
$0
$0
$26,573

$29,043
$0
$0
$29,043

$32,125
$0
$0
$32,125

$34,749
$0
$0
$34,749

$37,922
$0
$0
$37,922

$41,965
$0
$0
$41,965

$45,638
$0
$0
$45,638

$50,016
$0
$0
$50,016

$54,835
$0
$0
$54,835

$60,133
$0
$0
$60,133

$85,000
$85,000

$84,350
$106,636

$83,700
$108,027

$83,050
$109,623

$82,400
$111,443

$81,750
$113,875

$81,100
$115,849

$80,450
$118,372

$79,800
$121,765

$79,150
$124,788

$78,500
$128,516

$77,850
$132,685

$77,200
$137,333

$18,000
($23,575)
$0
($5,575)
$79,425

$18,000
($23,575)
($1,805)
($7,380)
$99,257

$18,000
($23,575)
($3,220)
($8,795)
$99,232

$18,000
($23,575)
($4,209)
($9,784)
$99,838

$18,000
($23,575)
($4,728)
($10,303)
$101,140

$18,000
($23,575)
($5,109)
($10,684)
$103,191

$18,000
($23,575)
($4,544)
($10,119)
$105,730

$18,000
($23,575)
($3,638)
($9,213)
$109,159

$18,000
($23,575)
($2,083)
($7,658)
$114,107

$18,000
($23,575)
$546
($5,029)
$119,758

$18,000
($23,575)
$4,004
($1,571)
$126,945

$18,000
($23,575)
$8,372
$2,797
$135,482

$18,000
($23,575)
$13,743
$8,168
$145,501

($5,575)

($7,380)

($8,795)

($9,784)

($10,303)

($10,684)

($10,119)

($9,213)

($7,658)

($5,029)

($1,571)

$2,797

$8,168

Starting Balances

Current Assets
Cash
Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities
Long-term Liabilities
Total Liabilities
Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

Page 5