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MBA 992Business Plan – Car Solver

Presented by: Denson LiuPresented to: Dr. Marvin Painter

June 2nd, 2016

Car Solver – Denson Liu

Table of Contents1.0 Executive Summary 3

2.0 Business Introduction 4

2.1 Introduction 4

2.2 Objectives 4

2.3 Success Factors53.0 Operation Plan 5

3.1 Location5

3.2 Floor Plan 6

3.3 Business Hours 7 3.4 Capacity Projections 8

3.5 Suppliers/Services Providers 9

3.6 Capital Budget 10 3.7 Operating Expense 10

3.8 Working Capital Planning 114.0 Human Resource 12

4.1 Organizational Structure 12

4.2 Human Resource Strategy 13

4.3 Weekly Schedule 13 4.4 Human Resource Expenses 14

5.0 Marketing Plan 15

5.1 Products/Services 15

5.2 Prices 16

5.3 Places 16 5.4 Promotions 17

5.5 Competition 20

5.6 Marketing Budget 21

5.7 Marketing Time Lines 22

5.8 Estimated Sales Projections 23

6.0 Financial Plan 23

6.1 Financial Breakdown 23

6.2 Breakeven Analysis 24

6.3 Sensitivity Analysis 25

6.4 Financing Budget 26

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6.5 Average Owner’s Compensation 26

6.6 Economic Forecast 27

7.0 Summary 27

Reference 28

Appendix A: Financial Analysis 29

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1.0 Executive SummaryThe purpose of this report is to provide the potential stakeholders with better

understanding about the Car Solver’s business models and financial models. The

intention is to help stakeholders make better decisions regarding the business.

Car Solver is a tire and auto repairs store in Saskatoon. It provides high quality and

reliable products and services to its customers. Customers are always the priority to Car

Solver. The company’s business covers tire section, auto body repairs section and auto

repairs section.

The company’s mission is to build as the one-stop auto parts and repairs store in

Saskatoon. Customers no longer need to go to several places to get their vehicle problems

solved.

The operation plan discussed the ideas of the business and how the company will be

physically set up. In order to meet the company’s missions, Car Solver is located close to

downtown area in Saskatoon. The location is convenient to the near residents and people

who work in the downtown area. The target customers for Car Solver would be white

collars and seniors who are looking for convenient and high quality products/services.

In order to meet the company’s sales objectives, Car Solver will use several

advertising strategies to attract its target customers. The main purpose of the marketing

strategies for the company is to increase the brand awareness in Saskatoon Area.

The financial analysis in this report will further discuss the critical variables about the

business and the projections of the profitability for Car Solver in the next 5 years’

operations.

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2.0 Business Introduction2.1 Introduction

Car Solver is a local auto parts and repairs store that offers its customers with a

variety of services. Car Solver will provide with the following products and services:

Tires Fixing/Tire Rotation

This includes the tires sale, general tire rotation services for the summer tires and

winter tires and the flat tire fixing services

Auto Body Repairs

This includes the services that fix the body parts of vehicles after any collisions

Auto Repairs/Mechanical repairs

This includes the services that fix any kind of mechanical issues and electronic

problems on the vehicles

In addition to provide quality services to its customers, Car Solver will also offer its

clients with superior quality of products, such as tires, vehicles parts, and etc. Providing

the outstanding services and products could make Car Solver stand out from the industry

and make the store as the best auto parts and repairs stores in local Saskatoon.

2.2 Objectives

Car Solver highly valued our customers’ shopping experience and the company

always puts the customers in the first priority. In order to meet the missions, Car Solver

has outlined specific objectives:

Deliver customers with high quality products

Educate customers about the products and services while they shop

Offers long-lasting after-sale services if it’s necessary

Provide customers with convenience and comfortableness

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2.3 Success Factors

In order to meet Car Solver’s specific objectives, there are several key success factors

that the company needs to aware:

Make sure the staffs have been trained properly

Collect feedback from customers regularly for the performance improvements

Meet the pre-setting sales goals

Make sure that the materials we acquire from the suppliers are the lowest that the

company could get in the market place

Build the loyal customer base and seek for the potential customers

3.0 Operation Plan3.1 Location

Figure 1:

Car Solver will be located at 201 Avenue B S, Saskatoon. There is a used-truck

dealer operating at this location. Car Solver will try to buy the building because the

current platform is suitable to be changed to fit Car Solver’s operation.

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The reason why Car Solver is going to pick this location is because the location is

in the downtown area. This means that the nearby residents will be convenient to shop in

the store. Moreover, this location will attract the nearby people who work in the

downtown. To this group of people, they can drop off their vehicles in the store in the

early morning before their work and come and pick up their vehicles after they finish

their work in the afternoon. More importantly, the current location has a huge parking lot

that is essential to Car Solver’s business. Car Solver needs a place with enough parking

spots. Convenience to our customers is highly valued and ease of parking should be an

important factor for us to consider.

3.2 Floor Plan

The Floor Plan shows the layout of Car Solver’s business. As we could see from

the picture below, the up left part is the auto body repair section. This section is designed

to be isolated from the other two sections because the ventilation needs to be specified

and meets the standards from the SGI requirements in the auto body sections in order to

get the certification. The right part of the floor plan will be the tire section and the auto

repair section. Generally, these two sections could be designed together and most

equipment could be used in both sections. For example, the automotive diagnostic

technicians from the auto repairs section could help rotate the tires and change the oils

during the busy season in their sections.

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Figure 2:

3.3 Business Hours

Monday – Friday:

7:30 am – 5:30 pm

Saturday:

8:00 am – 4:00 pm

Sunday:

Closed

Business hours are general in the auto parts/repairs store. For Car Solver, we are

going to open from 7:30am – 5:30 pm from Monday to Friday. The intention of doing

this is we need to make sure some people who work in the downtown area could drop off

their vehicles before their work and come to pick their vehicles after their work. The

intention that we open on Saturday is because we want to make sure that our customers

could still come to the store and get their vehicles fixed other than the week days.

However, the open schedule for Saturday will be shorter than normal week days because

we don’t expect too much work before 8:00 am or after 4:00 pm. Like most of the auto

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parts/repairs store in Saskatoon, Car Solver is not going to open on Sunday. It’s

expensive and highly pressured by opening 7 days a week for the auto parts/repairs store.

3.4 Capacity Projections

Figure 3:

The diagram above is the capacity projections for the business. Generally

speaking, the auto parts/repairs stores are seasonal business that means that the business

will be highly affected by months through the year. Normally, April and October are the

two busiest months for the business. In April, people change their summer tires on and

they rotate their winter tires on in October. Moreover, people tend to change oils/do the

regular maintenance at the same time when they rotate their tires. This makes the store

become even busier. Thus, in these two months, the store will operate at 100% capacity.

The slow months for the stores will be Jan, Feb, July and Aug. Being told by a tire store

manager, the store operates at 50% of its total capacity during the slow season.

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3.5 Suppliers/Service Providers

The majority inventories that Car Solvers need are the tires. Tires are with

different brands and sizes and most tire stores will at least have several pairs of each size

of tires in their stock. To Car Solver, we currently plan to have 4 brands of tires. These 4

brands are Michelin, BF Goodrich, Coopers and Evergreen. (Note: Evergreen is the

Chinese manufactured tires with low prices. The reason why Car Solver will have these 4

different brands of tires in our stock is because we hope to fulfill different needs from our

customers. Michelin tires are one of the best tires in the world and could be considered as

high-end products. BF Goodrich tires are extremely good for trucks and we know we

have a lot of trucks in Saskatoon. Cooper Tires could be considered as products that are

in the middle range. They are decent quality with relatively lower price. The Evergreen

tires are the Chinese tires that are with low prices with relatively low quality. This

product line could be considered as our low-end products that are suitable for the

customers who do not care about the product quality and simply look for the lowest price

for the tires. For the tires purchase, Car Solver will purchase directly from the

manufacturers since the manufacturers could provide us with the lower price as a

wholesale customer.

The other big part in the inventories of Car Solver is the auto parts. The parts that

we need in the auto body fixing and the auto repairs are also important. For the

mechanical tools, wheels and other related tools, Car Solver is going to buy from the

Keystone that is one of the largest vehicle tools manufacturers in North America. For

vehicle parts, Car Solver is going to get most of them from NAPA Auto Parts. NAPA

Auto Parts is one of the largest auto parts providers in North America and you can find

them almost in any large city. NAPA Auto Parts provide its customers with competitive

prices and free deliveries. Thus, Car Solver will purchase most parts from NAPA Auto

Parts if they are available. Some parts that are specific to some vehicles and you could

not purchase from NAPA. In this case, Car Solver might purchase directly from the car

dealers and make a markup on the costs in order to guarantee the profits from our

customers.

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3.6 Capital Budget

Table 1:

Car Solver – Capital Budget

Land 400,000

1,600,000

300,000

4,650

90,000

9,000

2,403,650

Building

Equipment

Computers & Printers

Trucks

Furniture

Total

The capital budget for Car Solver is going to be approximately 2.4 Million

dollars. Firstly of all, Car Solver is planning to purchase the land and the building

because we consider buying out the land and building would be good to the business in

the long run and the lease will be extremely important because the business needs a huge

space. The equipment is a big part of the capital budget as well. As mentioned, there are 6

bays for the back shop and each would need at least two types of equipment. The average

costs for buying one piece of used equipment would be around 25k. Therefore, 6 bays

will need 12 pieces of used equipment and will need around 300k in total. For the

delivering purchase, Car solver needs the own several trucks to pick up parts if it’s

necessary or give our customers rides if needed. Currently, three trucks will be enough.

We estimated each used truck would be 30k. By having three, Car Solver needs to invest

90k for the trucks.

3.7 Operating Expense

Table 2:

Schedule 4: Operating Expenses 2017

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Accounting and Legal 3,500

Advertising (Marketing) 24,300

General Supplies 3,000

Insurance 20,000

Property Taxes 30,000

Telephone 2,400

Rents (warehouse and shop) 47,000

Utilities 20,000

Repair and Maintenance 5,000

Wages and Salaries 595,720

Employee Benefits (salaries) 8.19% 12,285

Employee Benefits (wages) 13.96% 26,105

Misc Variable Costs % Sales 0.5% 9,360

Capital Cost Allowance 72,365

Debt Interest 93,000

Total Operating Expenses 964,035

The total operating expense for the first year will be 964,035 dollars. The

employee benefits will be 8.19% for the managers that have the regular salaries and the

employee benefits will be 13.96% for the regular employees that get paid based on hours

they work. One thing we have not mentioned in the previous section is the warehouse.

Car Solver will rent a warehouse for the storage of its inventories. This includes tires/auto

parts and could even provide the storage services to our customers if we have enough

room in the warehouse. All other expenses are close to the similar size of a tire store.

3.8 Working Capital Planning

Most of the working Capital costs for Car Solver would be the inventories. As

mentioned, Car Solver needs to storage several pairs of tires for different sizes and

different brands. Moreover, Car Solver needs to have regular parts like synthetic oils,

brakes, wind sheer and etc. in stock. The days of inventory on hand are projected to be 90

days. The numbers of days of payables for the parts are expected to be 30 days to the

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suppliers. At current point, Car Solver is not planning to provide our customers with

credits on the purchases. All the purchases would be paid immediately after the service

and Car Solver won’t accept cheques.

4.0 Human Resource4.1 Organizational Structure

Figure 4:

In the current stage, Car Solver is planning to have 15 people working in the

store. There will be 3 major managers in the Store. The Store Manager is in the highest

hierarchy in the organization. Under the store manager’s supervision, there are one

assistant manager and one back shop assistant. The assistant manager will take charge of

the store’s daily operation, including meeting with customers directly and supervising

salespeople who work in the front counter. Therefore, the assistant manager is expected

to be someone who is excellent in the leadership role and who knows how to deal with

customers. The interpersonal skills are important for this role. The back shop manager

will manage the daily operation of the back shop and focus on the technical parts. The

experience in auto repairs/tires would be an asset for back shop managers. Normally the

back shop manager is the most experienced person in the store. Since Car Solver has

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three different functions, each function better to have a leader. Therefore, under back

shop manager, there are three entry-level managers for the three sections. These entry-

level managers will focus on doing their daily tasks and assign the works in their own

functions. These entry-level managers are expected to be the most experience persons in

their functions that understand the work and have good estimates about the potential

hours that need for each job. Under the entry-level managers are the regular employees

for each section. These regular employees will work with their managers and perform

their functions well.

4.2 Human Resource Strategy

Since Car Solver is in the auto parts/repairs industry and this industry contains a

lot of the risks and safety issues, it’s crucial to educate our employees to put the safety in

the first place during the work.

All the employees will have the training for the safety in their first days in Car

Solver. The safety training will include what need to wear in the work. For example,

everyone in the store needs to wear safety boots. Everyone includes our customers enters

the back shop should have protective glasses and protective ear plugs to the further

protections. Also the safety entrance, fire alarms and the standpoint for the emergency

should be educated for the precautions. The intention of doing so is to prevent the

potential working hazard and provide our employees with a safe place to work.

Other than the safety training, the knowledge/skills training are important as well. For

sales associate, they need to know the benefits and fitness for the tires when they

recommend them to customers. Moreover, by knowing the mechanical issues and how it

get fixed could help sales associates describe the problems with our customers and help

them have better understandings about their vehicles.

4.3 Weekly Schedule

The weekly schedule showed the projected working schedule from 15 employees

in Car Solver. For now, all the employees that work in Car Solver is expected to be full

time employees. However, due to store’s opening hours, we requires our employees to

have slight different schedules in order to make sure we always have enough people to

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work. Some employees need to start at 7:30 am and finish the work early at 4:30pm while

others may need to start at 8:30 and finish the work late at 5:30pm. Moreover, since Car

Solver will open 6 days a week. Thus, some employees may need to work from Monday

to Friday while other may need to work from Tuesday to Saturday. From the weekly

schedule, it’s not hard to find that Car Solver will not run at full capacity on either

Monday or Saturday because some of our employees take off in those two days. For the

appointment schedules, we will put more work during Tuesday to Thursday because

those days we have all 15 employees working in Car Solver.

Table 2:

Table 3:

4.4 Human Resource Expenses

Car Solver’s first year salary expense will be $595,720. This number is not

included the employee benefit (managers) that is $12,285 and the employee benefit (other

employees) that is $26,105.

There will be three managers in Car Solver (Store Manager, Assistant Manager

and Back Shop Manager). Each manager will get $50,000 annually. For the three sales

associate, each of them will get $20 on hour base. For the tire technician and tire

managers, their hourly wage will depend on their experience. Their average hourly wages

will be $16. For the Automotive Diagnostic Technicians, their hourly wage will depend

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on their experience too. Their average hourly wage will be around $28. For the Auto

Body Technicians, their hourly wage will base on their experience and their average

hourly wage will expect to be around $25.

All the employees are expected to work full-time because it’s easier for Car

Solver to arrange their time schedule. The salary of the managers and regular employees

will increase at 2% per year (2% is expected to be the inflation rate).

Normally, we don’t expect our employee to work over time because it will cost

more. Therefore, the time schedule will be extremely important for Car Solver to save

money.

5.0 Marketing Plan5.1 Products/Services

Car Solver has three functions in its store. It could help its customers deal with

any problems related to tires, auto body fixing and mechanical issues on their vehicles.

Tire Section – related products/services:

Car Solver will have 4 brands of tires for our customers’ selections. The brands

are Michelin, BF Goodrich, Cooper Tires, Evergreen. These 4 brands of tires provide the

customers with the choices from high-end tires to low-end tires. Also Car Solver offers a

variety of wheel selection for our sincere customers.

The services that Car Solver offers are:

Tire rotations (summer tires/winter tires)

Tire fixing (flat tires)

Tire Storage (after tire rotation, our customers are allowed to storage their

tires/wheels at our warehouse with low costs)

Auto Body Fixing services:

Car Solver helps its customers fix their vehicles after any collisions. The company

is going to connect with SGI and work as SGI certified place for the auto-body fixing.

Therefore, the charge of the work for the auto body section will be billed directly to the

SGI instead of customers for the most cases.

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Mechanical repairs services:

Car Solver also helps its clients fix any mechanical/electrical issues on their

vehicles. Our mission is to provide our customers with fast and convenient services.

Moreover, Car Solver offers excellent after-sale services to its customers. Whenever they

figure out any problem that has not been solved completely, the customers are always

welcome to get their vehicles back at Car Solver for further analysis with no costs.

5.2 Prices

Prices are variable based on the products. Overall, Car Solver is expected to earn

35% of the profit over tires, 45% of the profit over auto repairs and another 45% of the

profit over auto body repairs. The labour charge per hour is $120. The price is considered

to be average in the industry.

Car Solver’s pricing strategy is to keep relatively good profit margin and in the

meanwhile provide our customers with superior services.

In the unattainable triangle theory, you can’t provide the competitive price, quality and

speed at the same time in a competitive market. What Car Solver expected to do is to

provide the customers with good quality products and timely services (convenience)

while sacrificing the price competitiveness.

Figure 5:

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5.3 Places

Saskatoon is the largest city in Saskatchewan. The city had a civic population of

260,900 and an estimated metropolitan population of 305,000 (City of Saskatoon, 2014).

The population of Saskatoon is projected to grow to 400,000 in the near future. Currently,

Saskatoon is the 14th largest city in Canada. (Wikipedia) All the facts prove that there is a

huge market for vehicle parts/repairs industry. The location of Car Solver will be 201

Avenue B S that is closed to downtown area in Saskatoon. Car Solver expects to benefit

from its location by providing convenience and enough parking spots for the customers.

Target Market

Since Car Solver locates in the downtown area in Saskatoon, the target market

would be people who frequently appear in downtown of the city. The first group will be

the nearby residents. We know that there are a lot of condos/apartments in the downtown

Saskatoon. Thus, it’s not hard to imagine the population of the residents from the

downtown area is huge. This group of people is the primary target for Car Solver to

target. When I talked with some auto repairs store owners in Saskatoon, they told me that

most people would still prefer to go to the closest store to fix their vehicles simply

because of the convenience. By having a large group of people live close to Car Solver, it

should not be difficult for the store to attract those potential customers. The second group

to target will be the white collars that work in downtown area. This group of people

typically make decent amount of money but are busy. If people from this group want to

find some places to fix their vehicles, they prefer to have some places that close to their

working place and they could drop off their vehicles before the work and get it fixed

when they finish their work. Thus, fixing their vehicles will not disturb their normal work

life. By having the location close to downtown, Car Solver will have great

potentials/opportunities to attract this group of people. The last but not the least, the

seniors are the other target group Car Solver need to aware. Since Car Solver is going to

set itself as a one-stop shop for vehicle repairs in Saskatoon, it defines itself as the store

that provides its customers with convenience. For many seniors who are wealthy and care

about the convenience, Car Solver will be a perfect place for them to fix their vehicles.

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5.4 Promotions

Radio Advertising

Radio Advertising is the most effective marketing strategy to implement for Car

Solver. Car Solver is a local auto parts and repairs store in Saskatoon. For the company’s

market campaign, it wants to reach the target market and increase its exposure locally.

Thus, radio advertising could help the company reach its goals. Radio Advertising is very

effective in the local area. Even though the radio advertising is no longer the most

popular advertising method nowadays, it still very practical for companies that looks for

local exposure. Another interesting finding is that most drivers are still listening to radios

when they are on their way to work. Thus, Car Solver believes that radio advertising

could reach many customers in the local Saskatoon and could help the company increase

its brand awareness effectively.

Website

Online advertising has become the most popular advertising method for most

companies nowadays. People will try to search on your website if they want to know

about you. Thus, website is extremely important. That’s the first impression the company

would provide to its potential customers. Car Solver should build its website seriously

and in a professional way. If people could know about your products and services from

your website, they will know better about whether or not to call in to book an

appointment for the services.

Bus Advertising

As mentioned above, one intention for Car Solver in the marketing campaign is to

create brand awareness in the city. Bus Advertising is relatively effective and with low

costs. Having bus advertising could help Car Solver expose to the certain area by using

certain bus. For example, if Car Solver wants to increase its exposure in the downtown

area in Saskatoon, it should find some buses with the routes that running around the

downtown area. By putting the advertisements/posters on the bus, it could let more

people from downtown area visualize the ads and have impressions about Car Solver.

Social Media Accounts

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The social media accounts like Facebook, twitter and Google plus could

effectively increase the possibility to be searched in the search engine. However, since

Car Solver is in a traditional industry, it’s tough to tell how well it could be by using the

social media accounts for marketing campaign. Generally speaking, the social media

accounts are easy to setup and with low costs. The only related costs would be someone

who needs time to manage those accounts. It’s still worth a try.

Coupons

Coupons could be used in the opening events to attract new customers. Car Solver

could use coupons in its first couple months in order to increase the sales. However,

coupons could damage the brand image for the long run. Customers may think you over

charge them if the company frequently issues the coupons. But the coupons are extremely

effective for the business in the beginning period.

Business Card

Business card is another way for the marketing campaign. Unlike other methods,

business card could increase customers’ and other stakeholders’ perceptions about the

professionalism of your business. It’s very important to have not only for the managers,

but also for the sales associates who are closely engage with the customers.

Donation

Donation is the way that company shows its social responsibility to the

community. So far, we still could not prove that the expenses the company puts in to

improve its social responsibility will bring more returns for the company. However,

donations could help Car Solver stand out from its competitors and declare itself as the

entity that cares about others. Brand Image will get enhance in the long run from the

donations.

Word of mouth

Last but not the least, word of mouth marketing strategy should be implemented

in the long run for Car Solver. Word of mouth marketing strategy has the lowest costs but

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probably the longest time to be effective. The marketing strategy will depend on the

quality of your products and services. It will only be effective when you can provide your

customers with satisfied products and services. Car Solver is trying to build itself as the

most recommended store for vehicle fixing in Saskatoon, the company should implement

word of mouth marketing strategy for its long run operation..

5.5 Competition

Car Solver faced a lot of local competition. There are two three large groups of

competitors. The first group is the tire/auto repairs stores like KalTire and Fountain Tire.

The competitors in this group generally have better reputations and have built their own

loyal customer base. The way Car Solver would compete with this group is to provide

similar quality products with better services. The second group is the large players in the

retail industry but not focus in tires/auto repairs section. Players in this group are Costco,

Canadian Tire and etc. These players are normally giants in the retail industry. They have

more funds and generally could get the lowest prices from manufacturers. It’s almost

impossible for Car Solver to compete price with these players. Car Solver will need to

build up its own reputation and provide better services to compete with the companies in

this group. The third group will be the car dealers. Most new car owners will prefer

service their new vehicles in the car dealers because they don’t trust the secondary

market. For certain group of customers, it’s tough for Car Solver to compete with Car

Dealers. However, Car Dealers usually charge the highest fees in the industry. Therefore,

Car Solver could compete with those car dealers with lower prices.

The positioning map shows the relative positions of the perceived competitors in

the industry. As we could see in the diagram below, Car Dealers provide the highest

value of products/services with the highest prices. Other competitors are positioned

related to their prices and the value of the products/services. To Car Solver, we want to

position the company to provide high value of products and services and in the

meanwhile charge a reasonable high price to our customers.

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Figure 6:

5.6 Marketing Budget

The total marketing budget for the first year will be $24,300. This includes the

costs of radio advertising, website, bus advertising, Posters’ and Coupons and the

business cards. For radio advertising, Car Solver plans to run it for 6 months in the first

year instead of entire year. We consider that 6 month radio advertising is enough for the

company. The radio advertising will be placed one month before the busy season to

remind our customers to book appointment ahead and in the slow season to remind our

customers for doing regular maintenance/oil change for their vehicles. During the busy

season, most auto parts/repairs stores will operate at the full capacity and customers

normally don’t have the patience to wait too long. If they could not find a place to rotate

the tires, they will go to others places instead. For the website, generally it only costs

$2,000 to build up a company’s website from a third party. However, Car Solver highly

valued the quality of the website and would like to build a professional website instead a

normal one. Therefore, we estimate the website cost will be $5,000. The Bus advertising

is projected to be running the whole year. The Posters & Coupons include the posters for

the bus advertising. For more detailed figures, please see the chart below.

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Table 4:

Item Cost

Radio Advertising 9,000

Website 5,000

Bus Advertising 9,000

Posters & Coupons 1,000

Business Cards 300

Total 24,300

5.7 Marketing Time Lines

Figure 7:

The marketing time lines show the projected marketing campaign for Car Solver

in the next five years. As the picture showed above, the website should be built and

updated all the time. The expected money for building the website is $5,000 in the first

year and regular maintenance is $2000/year afterwards. The radio advertising will be

implemented every two years. The Coupons advertising will be used in the first two

years. As we mentioned, coupons advertising will damage the brand image in the long

run. Car Solver will only use the coupon advertising for the first two years to increase the

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brand awareness and prevent using it afterwards. The Bus advertising is going to be

implemented every two years but differs from the radio advertising. Car Solver expected

to have some sort of marketing campaign running all the time. Thus, the bus advertising

will be implemented in the first, second and forth year in the first 5 years projections. The

amount for the donations is expected to be $ 15,000/year. After the third year, the

company could start spending donations that help the community. This helps the

company build up its brand image and will benefit the company in the long run.

5.8 Estimated Sales Projections

Table 5:

2017 2018 2019 2020 2021

Number of

Customer/day

30 38 41 43 45

Number of Days/year 312 312 312 312 312

Average

Purchase/customer

220 224.40 228.89 233.47 238.14

Total Sales 2,059,200 2,625,480 2,945,789 3,154,940 3,378,940

Growth rate number of

customers

25% 10% 5% 5%

For the base case analysis, Car Solver projected to have an average of 30

customers every day in the first year. It opens 6 days a week that is 312 days per year.

The Growth rate number of customers will be 25% in the second year and 10 % in the

third year and 5% afterwards. Therefore, the number of customers will increase to 38

people per day in the second year, 41 people per day in the third year, 43 people per day

in the forth year and 45 people per day in the fifth year. The average purchase per

customer is projected to be $220. The average purchase per customer is projected to grow

at 2% every year that is the same as the inflation rate.

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6.0 Financial Plan6.1 Financial Breakdown

A detailed breakdown of the Car Solver’s financials can be found in Excel form. This

breakdown contains an income statement. Included in this income statement is the Car

Solver’s operating expenses, retained earnings account, balance sheet, and cash flow

statement. In order to gain an in-depth understanding of the Car Solver’s financial plan

the following schedules are included:

Schedule 1: Economic Variable

Schedule 2: Revenues

Schedule 3: Cost of Goods Sold

Schedule 4: Operating Expenses

Schedule 5: Capital Budget

Schedule 6: Financing Budget

Schedule 7: Debt Amortization

Schedule 8: CCA

Schedule 9: Income Taxes

Schedule 10: Investment Analysis

6.2 Breakeven Analysis

In order to make sure the number of customers Car Solver needs to cover all the

costs and make the net income to be zero, we conducted the breakeven analysis. As we

mentioned the sales projections, the base case for the customers is 30 for the first year, 38

for the second year, 41 for the third year, 43 for the forth year and 45 for the fifth year.

However, in the breakeven analysis, we figure out that Car Solver will stay breakeven if

the store could have 33 customers in the first year, 37 in the second year, 36 in the third

year, 36 in the forth year and 35 in the fifth year.

From the chart below, it’s not tough to see that Car Solver is projected to have a

negative net income in the first year since the projected number did not reach the break-

even quantity. However, Car Solver will start generating positive net income from the

second year. In the chart, the gap between projected quantity and breakeven quantity

becomes larger and larger. This implies that Car Solver will generate more and more net

income from the continuous operation.

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Figure 8:

6.3 Sensitivity Analysis

The sensitivity analysis is to give readers better understanding about how

variables would affect Car Solver’s business. The major risks we have for Car Solver is

the number of customers per day and the average purchase per customers.

From the tables below, it’s not hard to figure out that number of customer per day has

more influences than the average purchase per customer. This is because our projected

average purchase per customer is $220. This is a large number compare to other business

such as restaurants, fitness places and etc. From the sensitivity analysis, we could know

how the net payback, IRR, year 5 owner’s compensation and average 5 year profit would

reflect to the change of the variables. This could give potential stakeholders better

understanding about Car Solver and help them make wise decisions whether or not to

invest in Car Solver or deal with Car Solver.

Table 6:

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6.4 Financing Budget

Table 7:

As the chart indicated, the total financing budget I need to set up Car Solver is

$2,760,000. By getting this amount of money, I will apply for the bank loan of

$1,860,000. The equity of Car Solver will be 900,000. I will contribute 50% of the totally

equity for Car Solver and try to find another potential shareholders for another 50% of

the equity.

6.5 Average Owner’s Compensation

As the business owner, I will also be the store manager for Car Solver. This

means that I will get $50,000 as annual salary plus the dividends I get from the business

operation. The dividend policy is that Car Solver needs to have at least $100,000 before it

pays the dividends. As I mentioned in the financing budget part, I will only has 50% of

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the equity for Car Solver. Thus, I would only get 50% of the dividends that pay out. The

charts below showed the owners’ compensation based on the base scenario. In the base

projection, I will start receiving dividends from year 4 and will get $138,949 in year 5.

Table 8:

6.6 Economic Forecast

For the purpose of this business plan, Car Solver has assumed the Canadian

economy will remain stable for the next five years. This will allow the inflation rate to

remain at 2% for all the projections. Moreover, debt interest rate is projected to be at 5%

giving the good credits from the owners and the ownership of the buildings/land for the

business.

7.0 Summary Car Solver is trying to build itself as the first choice one-stop auto parts/repairs

store in Saskatoon. As the business owner, I conducted detailed analysis based on the

company’s operation, Human Resource, potential marketing plan and the projected

financial plan.

All the analyses are based on the reasonable assumptions and the quotes from

auto parts/repairs stores with the similar size.

We hope that the readers could have better understandings about Car Solver and the

models that Car Solver are going to use. The potential stakeholders could make their own

projections based on different variables and realize the “real value” under Car Solver.

Personally, I believe Car Solver is a very good business in the traditional industry and

could make profits for the shareholders in the long run if it’s managed properly. If you

have any questions, feel free to contact me for further inquiries. I will be happy to discuss

Car Solver with more details.

Reference

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City of Saskatoon. (2014). Demographics. Retrieved May 25th, 2016 from:

https://www.saskatoon.ca/sites/default/files/documents/asset-financial-management/

finance-supply/office-finance-branch/2014-issues-and-trends.pdf

Appendix A: Financial Analysis

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https://www.saskatoon.ca/sites/default/files/documents/asset-financial-management/finance-supply/office-finance-branch/2014-issues-and-trends.pdf

https://www.saskatoon.ca/sites/default/files/documents/asset-financial-management/finance-supply/office-finance-branch/2014-issues-and-trends.pdf


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