ZIP RIVER ADVENTURES
Business Plan
Prepared by Douglas Brecht
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Table of Contents
Executive Summary
1.0 Introduction
1.1 Industry Overview
1.2 Mission Statement
1.3 Goals and Objectives
2.0 Operational Plan
2.1 Site Plan
2.2 Flow of Organization
2.3 Training and Certification
2.4 Organizational Tasks
2.4.1 Daily
2.4.2 Weekly
2.4.3 Monthly
2.4.4 Semi-Annually
2.4.5 Annually
2.5 Supply Analysis
2.6 Service Providers
2.7 Capital Budget
2.8 Cost of Sales
2.9 Operating Expenses
2.10 Working Capital
2.10.1 Cash
2.10.2 Inventories
2.10.3 Accounts Receivable
2.10.4 Accounts Payable
3.0 Human Resources Plan
3.1 Organizational Structure
3.2 Job Descriptions and Qualifications
3.2.1 Manager
3.2.2 Attendants
3.3 Human Resource Strategy
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3.4 Shareholders’ Agreement
4.0 Marketing Strategy
4.1 Target Market
4.2 Purchasing Patterns of Customers
4.3 The Marketing Mix
4.3.1 Products
4.3.2 Pricing
4.3.3 Promotion
4.3.3.1 Place
4.3.3.2 Advertising
4.4 Competitive Analysis
4.5 Marketing Expenses
5.0 Financial Plan
5.1 Capital Requirements
5.2 Summary of Projected Income Statement
5.3 Summary of Projected Balance Sheet
5.4 Risk Analysis
5.4.1 Critical Variables
5.4.2 Contingency Plan
5.5 Dividend Policy
5.6 Economic Forecasts
5.7 Ratio Analysis
5.8 Break Even Analysis
5.9 Net Present Value
5.10 Internal Rate of Return
6.0 Summary and Conclusion
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Executive Summary
With the increase in leisure time and its attendant quest for diversion the
popularity of recreational facilities has grown significantly in the past few years.
The City of Saskatoon’s development of the River Landing Site has increased the
number of citizens attending that area. However there are no plans for a
participatory recreation facility on The Landing. Zip River Adventures will provide
that attraction.
The ensuing dissertation is a Business Plan describing the construction and
operation of a zipline recreational facility on the bank of the South Saskatchewan
River in downtown Saskatoon.
There is no other such business in Saskatoon and so there is no direct competition
for customers. The facility will cross the river along side the existing traffic bridge,
terminating at River Landing.
Financially the business is a high risk proposition with the potential for an
extremely high return on investment as high as 200%. However as all expenses
are fixed there is also a potential for loss.
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1.0 Introduction:
1.1 Industry Overview
The Outdoor Adventure industry in Saskatoon and area is pretty much
restricted to Paintball, Laser Tag, Mountain biking, hiking and similar outdoor
activities. Many of which require extensive expenditure on personal
equipment, training and time commitment. Most require travel to outside the
city itself. There are very few such offerings within the city and even less of a
spontaneous nature.
In locations throughout the world Ziplines are rapidly becoming a popular
attraction with people seeking an adventurous thrill without a great deal of
time and training invested. Many existing recreational adventure facilities
have been adding or retrofitting to add Zipline attractions to their offerings.
As a result safety standards for construction and operation have been
developed and accepted throughout North America.
While Ziplines are not new to North America, they are to Saskatoon. This will
be the first of its kind in Saskatoon.
1.2 Mission Statement
“Giving You A Ride You Will Remember For The Rest Of Your Life!”
1.3 Goals and Objectives
The goals and objectives of Zip River Adventures are:
- To provide an adventure experience that our customers will remember
forever.
- To process 14,000 customers a year through our site.
- To provide a return on Investment of over 20%
- To be what visitors remember most about their visit to Saskatoon.
- To be the activity most recommended in Saskatoon and Area.
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2.0 Operations Plan
2.1 Site Plan
Zip River Adventures will be located in downtown Saskatoon. The west end of the
Zipline will be located in Rotary Park immediately up stream of the Traffic Bridge.
The facility will be composed of a 60 foot tall tower rising out of a 500 square foot
retail outlet. Future expansion of this outlet to include a 1000 square foot lounge
with a view of the river and the Zipline Ride is in the works for year six.
The ride will terminate at a landing pad on the west bank of the river at the north
end of river landing, as depicted in the picture below.
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The picture below depicts the launch tower.
The retail outlet/tower and landing pads will be on land leased from the City of
Saskatoon.
The location has been specifically selected to highlight River Landing Park and the
view obtained from the Zip ride. It was also chosen to ensure that minimal
damage would be done to the river bank and fauna. It will also provide absolutely
no obstruction of the view of the river by east side residents.
2.2 Flow of Organization
The customer flow for Zip River Adventures will be a combination of drive up and
walk in business, as well as a company provided shuttle. Customers will be able to
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drive to park their vehicles in Rotary Park parking lot and walk one block to the
retail outlet and launch tower. Customers could also park at River Landing and
taker the company free shuttle to the retail outlet. The free shuttle would run
every 15 minutes from River Landing to the Launch point and return. The shuttle
would also be used to return the Zip Harnesses from the landing pads to the
launch point for reuse.
As the facility is located on the Meewasin Walking and Running Trail, customers
could drop in at the facility as they went past making an Impulse purchase so to
speak.
2.3 Training and Certification
All staff would capable of performing al duties and of relieving at any of the
positions.
All staff would be trained in the operation of the retail sales terminal, launch
tower duties, harness inspection and installation, landing pad customer arrival
and disembarkation, harness storage and customer relations.
Trainers would be imported from the Canada Olympic Park Zipline facility in
Calgary to provide the necessary training. All staff would be required to obtain a
class four drivers license to permit them to operate the free shuttle.
Semi-annual re-certification testing would be required for all staff as a requisite of
employment.
2.4 Organizational Tasks
2.4.1 Daily
The manager would be responsible to arrive one half hour before opening to be
present to open for staff and ensure that all the positions were staffed by
qualified personnel. He would be responsible to over see daily operations,
monitor and order inventory supplies, and troubleshoot any problems which
might arise. It is his responsibility to cash out at the end of the day. They will also
be responsible for the hiring, training and dismissal of staff.
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Retail staff would be responsible for the operation of the retail sales terminal, ride
pass sales and souvenir transactions. They would also control access to the launch
tower entry.
Upon arrival at eh facility in the morning Launch tower staff would be responsible
for daily inspection of the zipline cable and attachments as well as the harnesses.
Any safety concerns must be immediately reported to the manager. They would
be responsible for the outfitting of patrons with harnesses, connection to the
zipline and launch in the ride. At eh end of the day their responsibility would be to
inspect all the harnesses before storing them for the night and locking up the
launch platform.
The landing pad attendant is responsible for unlocking the landing pad compound
and inspecting the zip cable and mounting brackets. They are responsible for
ensuring the safe landing of the patrons at the landing pad and their
disconnection from the line, removal of the harness. They are also required to be
proficient in CPR and first aid for any patrons who might find the experience to
traumatic. They are responsible for reporting any major safety or customer
relation issues to the manager.
The shuttle operator will ensure the shuttle is properly fueled and will report any
maintenance issues to the Manager. The driver is responsible for the
transportation of patrons to and from river landing and the retail outlet and
return. They are also responsible for collection of the harnesses from the landing
pad and transporting them to the top of the launch tower for reuse.
2.4.2 Weekly
All duties remain the same except for the following;
Launch and Landing attendants will conduct detailed inspection of the harnesses,
zip cables and mounting hardware at eh end of each Sunday Shift. Items needing
replacement will be brought to the Managers attention. Retail Staff will perform a
weekly sales summary and present it to the manager.
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The manager will arrange for the scheduling of staff, replacement or maintenance
of faulty equipment, and appointments for maintenance of the shuttle. They will
make the weekly bank deposit and also forward receipts and sales information to
the accountant.
2.4.3 Monthly
The manager is the only one with monthly duties. They will handle the
replacement of retail inventory and meet with the accountant to prepare a
monthly financial statement.
2.4.4 Semi Annually
Recertification of all staff in all aspects of the staff positions.
2.4.5 Annually
Annual Financial Statement to be prepared by the Accountant.
2.5 Supply Analysis
Retail Supplies will be obtained from three sources.
Items for the snack counter will be purchased from The Real Canadian Wholesale
Club. Bulk goods will be purchased at lowest prices.
Supplies for customer souvenir videos and office supplies will be purchased from
Staples.
Souvenir t-shirts, pins, hat etc will be purchased from Rocky Mountain Imprinted
Sportswear.
2.6 Service Providers
Zip River Staff will consist of:
1 Manager
1 Retail Attendant
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1 Launch Tower Attendant
1 Landing Pad Attendant
1 Free Shuttle Attendant
Zip River Adventures will retain an accountant to generate monthly, quarterly,
and Annual Financial Reports.
2.7 Capital Budget
The primary expenses in the Capital Budget will be purchase and construction
costs of the Retail Outlet, Launch Tower, Landing Pads, Shuttle and Harnesses.
East Side Tower and West Side Line Mounts:$85,000
Two ½ Inch Stainless Steel Cable: $20,000
Main Building: $50,000
Rigging Equipment: $10,000
Retail and Office Equipment: $10,000
Training: $ 3,000
Vehicle: $10,000
Total Capital Expenses:$188,000
2.8 Costs of Sales
The majority of Zip River Adventures Sales will be of a service nature. However
some income will be derived from the sale of snacks, and souvenirs such as Tshirts and ride videos.
Retail Materials Costs: $3,480
2.9 Operating Expenses
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Monthly Expenses:
East Land Lease: $5,000/Month
West Land Lease:$14,000/Month
Salaries(Mgr@$24/hr & 4 Staff @ $13/hr):$15,808
Insurance: $4,185
Utilities: $500
Retail Materials: $3,480
Office Expenses: $200
Vehicle Expenses: $300
Marketing (Web page/Kijiji/Radio Ads)$1,200
Total Monthly Operating Expenses: $44,673
Total Annual Operating Expenses:$536,076
2.10 Working Capital
2.10.1 Cash
The initial investment of $220,000 provides $32,000 in operating
cash to cover the bills until such time as the business generates profits. Dividends
will not be paid out for the first three years.
2.10.2 Inventories
Inventories for the Snack Bar will be ordered by the Manager on a
weekly basis. Due to the time lag present in souvenir production the manager will
only order souvenir inventory on a monthly basis.
2.10.3 Accounts Receivable
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In this particular enterprise credit will not be given to customers so
Accounts Receivable will not be a factor.
2.10.4 Accounts Payable
Accounts payable will be on an immediate basis as billed. When bills
are received they will be paid.
3.0 Human Resources Plan
3.1 Organizational Structure
Zip River Adventures Human Resources will consist of a Manager, and four
Attendants, and one Accountant on retainer. The senior Attendant will assume
the duties of the manager in the manager’s absence.
3.2 Job Descriptions and Qualifications
3.2.1 Manager
Zip River Adventures will have one manager. The manager is
responsible for the overall operation of the business, following the business plan,
and collaborating with the accountant to monitor the financial status of the
business. He is responsible for the hiring, firing, training, certification and
scheduling of the Attendants.
He/She is responsible for the monitoring and replacement of inventory, and
equipment.
The manger’s responsibilities including implementing the marketing plan as
outlined in the business plan, making weekly bank deposits, and issuing staff
paychecks.
The Manager must have previous experience in supervising staff, and scheduling.
They must also have an understanding of the outdoor adventure industry. A fear
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of heights will be a definite detriment in this position, while a talent for public
relations would be a definite asset in this position.
The initial manager will be Douglas Brecht. Mr. Brecht has 22 years experience in
the outdoor adventure industry from running a successful paintball. He has
experience in customer service, business management, staff relations including
hiring/firing and training. He is also experience in dealing with accounts receivable
and payable.
3.2.2 Attendants
The four attendants will be capable of performing any of the tasks
associated with their scheduled positions. Those positions and duties are:
Retail Attendant is responsible for the sale of ride tickets, souvenirs
and refreshments. They are also responsible for admission of customers to the
launch tower.
The Launch Pad Attendant is responsible for maintain order on the
launch pad, the assistance of customers using the Zipline, the calming of anxious
customers and parents, the outfitting of customers with zipline harnesses,
connecting the customers to the line and launching customers onto the ride. They
are also responsible for the timely processing of riders to prevent backlogs from
occurring.
The landing pad attendant is responsible for handling the arrival of
customers at the bottom of the ride, the disconnection of them from the line, the
removal of the harnesses, the encouragement of customers to return to the retail
outlet for souvenirs, and the encouragement of spectators to try the ride.
The Free Shuttle Attendant is responsible for the safe operation of
the shuttle bus and the encouragement of potential customers from River
Landing to the Retail Outlet/Launch Tower and back. They are also responsible for
collecting the harnesses at the landing pad and transporting them to the top of
the launch tower for reuse.
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The qualifications for the Attendant positions are a talent for customer relations,
a lack of fear of heights, and a class four drivers license. The ability to calm the
anxieties of riders and their parents is a definite asset. A meticulous attitude
towards safety and procedures is necessary to ensure customer safety.
3.3 human Resources Strategy
Our Human Resource Strategy will be based on the concept of safe, exciting,
adventure. We are focused on providing our customers with an experience that
will expand their horizons and stretch their limits. We want our staff to view their
job as more than a job; to view it as assisting others to potentially change their
outlook on life.
Regular training and certification will be provided on company time at no cost to
the employees. We will seek to engender an attitude of safety. It will be their
mission to provide the customer with the feeling of danger without there actually
being any.
Staff will be required to participate in the ride, because we feel that you can’t
convince a customer of the safety and excitement of the experience without
having participated in it yourself.
Staff will be encouraged to submit suggestions for ways to improve the business
and the customer experience, with credit being given to employees whose ideas
are used.
3.4 Shareholders Agreement
Zip River Adventures will be a sole proprietorship with financing coming from the
owner’s personal assets/bank loans and Equity investors. Dividends will be paid
on the equity investment starting in the fourth year of operation with over 100%
of equity investment being paid out to investors by the end of the sixth year of
operation. This will provide shareholders with an average return on investment
over the 6 year period of over 20% per year.
4.0 Marketing Strategy
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4.1 Target Market
Our target market will be males and females between the ages 12 and 70.
This will include both residents and visitors to Saskatoon. Customers who are
looking for excitement and something unique, an experience they cannot obtain
anywhere else.
4.2 Purchasing Patterns of Customers
Our marketing push will be based on the concept of the initial purchase
being made by the adventurous at heart. We will then capitalize on their urge to
share their experience with their friends and relatives in the only way possible
which is convincing them to try it a well. With the presence of two ziplines they
will be able to enjoy it side by side along with them. While we will have many new
and single use customers we will develop a solid base of regular riders bringing in
the single timers.
4.3 Marketing Mix
4.3.1 Products
Our marketing mix will be heavily biased towards the rider experience.
However we will generate additional income through the sale of souvenirs
commemorating their ride. Also our rider base will consist of two types, by
implementing to rider programs, the Single Use Pass at or the Daily Multiuse Pass.
A single use pass gets you one ride down the zipline or one hour on the 60 foot
climbing wall up one side of the tower. The Daily Pass will allow a rider to ride the
zipline as many times as they can during a single day. It will not apply to the
climbing wall.
4.3.2 Pricing
The Single Use Pass will cost $30, while the Daily Pass will cost $50. T-shirts
will sell for $20, while a DVD of the persons ride down the Zipline will sell for $10.
Group rates will be available for groups numbering over 10 receiving a 20%
discount.
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4.3.3 Promotion
4.3.3.1 Place
The very existence of our facility and it’s location on the riverbank in
downtown Saskatoon will promote itself. Potential customers will be
attracted by the mere sight of the facility. As they investigate the vision of
this tower with two cables spanning the river, while they walk the
Meewasin Trail or visit River Landing they will motivated to investigate it.
4.3.3.2 Advertising
The primary source of advertising will be on the Internet. From
experience our target group is very tech savvy, making considerable use of the
Internet. For this reason our advertising will have a four pronged approach.
- Radio ads. Our target group listens to the more up beat stations like C95,
Rock 102, Magic 98.3, and the Bull (in the country music market). Radio
spots purchased here will provide the most benefit. Also periodic “Live
from Zip River” promotions would boost this.
- The Internet. Three main areas will provide the most exposure here. A Zip
River Adventures webpage will catch those browsing for something to do.
Kijiji ads will attract those with more bargain entertainment in mind. Finally
Facebook, with its “Fan of Zip River Adventures” features will attract the
teenage element that almost lives by Facebook’s direction.
4.4 Competitive Analysis
As this is the only facility of its type in Saskatoon it is difficult to compare a
competitive analysis. The only industries that come close are Paintball
fields and rock Climbing Facilities. Paintball fields are all located outside the
city limits and as such require travel capability. Our downtown location
precludes travel arrangements as we are readily accessible by city transit
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or foot. Rock Climbing Facilities are located within the city and as such
don’t have the travel problem.
Cost comparison on Paintball and Rock Climbing:
Merril Dunes Paintball---$50 for 2 hours.
306 Rock Climbing---$30 for one hour.
At $30 for single use and $50 for an all day pass our facility compares quite
favorably with its competition.
4.5 Marketing Expenses
Our marketing expenses while included in general operating budget break
down to monthly:
Facebook----$0
Webpage----$50
Kijiji----$100
Radio-----$1000
Total Monthly Marketing Expenses $1150
Total Annual Marketing Expenses $13,800
5.0 Financial Plan
Zip River Adventure will require startup financing of $230,000. The majority of
this will be used for leasehold improvements and equipment startup costs. The
long term debt will be financed by liens against private assets of the manager,
while the Equity Investment will come from Venture Capital.
5.1 Capital Requirements
Long Term Debt/Bank Loan:
$100,000
Equity Financing:
$120,000
Total Financing Required:
$220,000
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5.2 Summary of Projected Income Statement
The following is the Base Case Summary of Projected Income Statement:
Income Statement
For the year ended
1
2
3
4
5
Revenues
564,960
665,947
750,855
808,107
869,726
Cost of Goods Sold
42,372
49,946
56,314
60,608
65,229
Gross Profit
522,588
616,001
694,541
747,499
804,496
Total Operating
Expenses
528,071
585,857
636,908
690,644
747,069
Income before Taxes
(5,483)
30,144
57,633
56,855
57,427
Taxes
-
3,822
8,933
8,813
8,901
Net Income
(5,483)
26,321
48,700
48,043
48,526
Retained Earnings Account
1
2
3
4
5
Beg Balance
-
(5,483)
20,838
69,538
100,143
Net Income
(5,483)
26,321
48,700
48,043
48,526
-
-
-
17,437
50,598
(5,483)
20,838
69,538
100,143
98,071
Dividends
100,000
End Balance
5.3 Summary of Projected Balance Sheet
The following is the Base Case Summary of Projected Balance Sheet:
Balance Sheet
at Dec 31,
1
2
Total Current Assets(Cash and
Inventory)
31,741
65,913
Total non-Current Assets(Building&
Furniture&Fixtures&CCA)
180,000
165,168
3
4
5
119,751
153,089
151,747
152,456
141,473
131,906
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Total Assets
211,741
231,081
272,207
294,562
283,654
Total Liabilities
(AccPay&LongTermDebt)
97,224
90,243
82,669
74,419
65,583
Equity (Common Stock)
120,000
120,000
120,000
120,000
120,000
Retained Earnings
(5,483)
20,838
69,538
100,143
98,071
Total equity
114,517
140,838
189,538
220,143
218,071
Total Liab & Equity
211,741
231,081
272,207
294,562
283,654
5.4 Risk Analysis
5.4.1 Critical Variables
The majority of the costs are fixed for this enterprise. As it is a weather
dependant outdoor activity the only real variables are the number of days the
business can be open and the numbers of customers per day. The Base Case
Assumes being open 214 days per year and average of 66 customers per day. This
will produce the desired level of income. Reducing the numbers from 66 to 65
customers per day changes the return on investment from over 20% to only 12%.
This makes Customers per day the most critical variable. It should be noted that
66 customers per day is only operating at 50% of peak capacity.
5.4.2 Contingency Plan
The way to compensate for insufficient numbers of customers per day is to
either increase the numbers of days open for business, or increase the amount
spent per customer.
As the weather controls the numbers of days open, this is an uncontrollable
variable. The amount spent can be controlled to a certain extent.
This could be accomplished by opening a lounge in the retail facilty. A place
where customers could fortify their courage prior to the ride, and relive their ride
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while relaxing over a drink while watching others take their ride. As the markup
on alcoholic drink sales is approx 80%, the purchase of a single drink would
increase amount spent per customer by 12%.
5.5 Dividend Policy
The Base Case Financial Model shows dividends being paid out starting in
year four. By the end of year six the dividends paid out will have exceeded the
amount invested, giving a return of over 100% on investment within 6 years.
5.6 Economic Forecast
The economic forecast makes the assumption that the Canadian Economy
will remain stable. Even though the current inflation rate in Saskatchewan is only
.8% per year, I have used the Canadian Inflation Rate of 2.5%.
I have also made the assumption that the Bank of Canada will be making no
major interest rate adjustments over the next 5 years and pegged the long term
debt interest rate at 7%.
5.7 Ratio Analysis
In analyzing the business finances I used the following ratios as indictors of
how the business would perform. The Gross Profit Margin which performs
consistently at 93% may be misleading since most income is generated by nonmaterial sales.
The Internal Rate of Return on Investment of 21.4% gives a more realistic
portrayal of the financial progress of the business.
The NPV of 3,639 shows a healthy business performing better than
required by its investors.
5.8 Break Even Analysis
As the crucial variable is customers per day, adjusting this number until the
financial model gives the Break Even figures. Reducing the customers per day to
64 creates our break even case where the initial extra equity invested is sufficient
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to keep the business afloat until its second year when it would become a
profitable venture.
5.9 Net Present Value
The net present value on the Base Case where there is $120,000 of equity
investment is $3,693.
5.10 Internal Rate of Return
In the Base Case Analysis the Internal Rate of Return on $120,000 equity
invested is a respectable 21.2%.
6.0 Summary and Conclusion
The crucial variable in this business is the average number of customers per day.
A slight change in this number can change a very profitable enterprise into a
money losing venture. As the attached financial Models illustrate at 64 customers
per day the business will break even, while an increase of only two customers per
day will change it from a break even enterprise into one with an over 20% return
on investment.
This obviously illustrates the high risk nature of this venture. While it has high risk
it also has a potential for a very high rate of return. As I mentioned in my business
plan one way to reduce the risk and thereby stabilize returns would be to open a
licensed lounge in conjunction with this recreational facility. It would provide the
income stability needed while the recreational aspect of the business established
itself.
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