Business plan - edwards.usask.ca Painter/businesspl… · Web viewThe beverage menu offers hard alcohol and beer; ... The awareness campaign will have a Sand City Squad who go around

Business plan

Carly Neil

MBA 992 Venture Management

1

Business Plan June 2016

Sand CitySport & Fitness

Business Plan

Prepared for: Professor Marvin Painter, Ph.D.University of SaskatchewanEdwards School of Business

Prepared by: Carly NeilMBA 992

Venture Management

June 2016

Carly Neil

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Executive SummarySand City Sport and Fitness is Saskatchewan’s first ever indoor beach volleyball facility, and it is

open all year around. The business will have a strong focus on sport, fitness and fun, with an

emphasis on creating a social atmosphere for customers. There will be bright beach-like murals

on the walls, beach umbrellas, wooden chairs and beach décor to provide the beach

atmosphere that sets Sand City apart from any other business in the City of Saskatoon.

This facility will feature three indoor beach volleyball courts open 12 months of the year and

two outdoor beach volleyball courts open during the summer months, ideally open from May to

September. In order to successfully promote the social atmosphere and keep up with consumer

demands, this facility will also feature a kitchen and bar.

There are four sessions of beach volleyball offered each year, one for every season. Each session

will be run Sunday to Friday, with each day having a different league. Some leagues will be

competitive and some will be more recreational.

The facility will be located on the outskirts of Saskatoon, ideally the North End of Stonebridge.

These areas are easily accessed and allow for a spacious building and parking lot. The size of this

facility is about 22,000 square feet, and requires a capital investment of $4,600,000. Operating

expenses are between $720,000 - $800,000 each year, with the greatest expenses being wages,

Capital Cost Allowance and debt interest.

The organization will have a management team consisting of a CEO and an assistant manager.

There will be a full time kitchen employee, a full time bartender, and part-time employees will

be hired based on amount of sales of the kitchen and bar.

The primary target market of Sand City are the current beach volleyball players (competitive and

recreational) and University and high school students. The secondary target market will focus on

the general public who have an interest in sports and physical activity. Sand City will promote

that there are leagues for everyone, regardless of age of skill level.

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Focusing on the needs and wants of the customer, the value proposition is, “Bringing the Beach

to You. All Year Round”. The company will have a strong focus on the beach atmosphere, and

have a very ‘fun in the sun’ feel for customers. With this in mind, the positioning statement will

be, “Love at First Spike”. It is clever, catchy and fun, and will stick in people’s minds and bring

out the good thoughts that Sand City wants to promote. It is also memorable to use on

promotional materials, t-shirts, and anything that uses the logo.

The cost of volleyball is $500/team, which is a standard price in Saskatoon for a league. The food

menu is specifically appetizers and easy to make food, with an average price of $10. The

beverage menu offers hard alcohol and beer; there is a no glass rule, and draft beer options for

customers are pints ($6.00), pitchers ($20.00), and titanics ($30.00).

The number of customers visiting the facility per day and the amount that each customer

spends are very critical to the success of the business. There will be an aggressive awareness

campaign executed from three months before opening day right through Year 1. We want to

create a buzz and have people talking about Sand City and its offerings. We want people to think

of Sand City as a place with a great atmosphere, good people, good times, and a great food and

beverage menu. The awareness campaign will have a Sand City Squad who go around Saskatoon

to events, lounges, schools, and anywhere with a social following and promote Sand City and its

offerings. There will be features on news stations, radio, social media, and a strong focus on

word of mouth to create the buzz that will help gain attention.

There is an expected gross profit of over $800,000 in Year 1, growing to $1,200,000 by Year 5.

The sales generated come from an average expected number of customers per day of 189 in

Year 1, growing to 252 from Year 3-5. There are essentially two revenue streams with this

business: volleyball session revenue and food and beverage sales. The volleyball revenue is

$378,000 in Year 1 with food and beverage sales coming to $653,000. By Year 3 the volleyball

session revenue is $529,000 and food and beverage sales are $900,000. Once all costs are

accounted for, the Net Income in Year 1 is $101,000 and grows to $377,500 by Year 5. These

numbers are very promising for investors.

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The two main points to consider are if the business can attract the expected number of

customers and if they will spend the expected amount of money. Analysis shows that this is

possible. The expected numbers used were quite conservative, to ensure that we were not

overshooting the projections. In fact, if just 10% more customers come than expected, the sales

projections will grow tremendously.

In conclusion, Sand City Sport and Fitness will see success in the City of Saskatoon. This company

has a first-mover advantage in the province, and has a very different offering than anything else

in the area. With a fun and energetic team running the business, the atmosphere and happy

customers will continue for years to come. People will be thinking let’s head to the beach, “Sand

City: Love at First Spike” in no time.

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Table of ContentsExecutive Summary........................................................................................................................2

1.0 Introduction..............................................................................................................................9

1.1 What Does Beach Volleyball Look Like?...............................................................................9

1.2 Program Offerings................................................................................................................9

2.0 Operations Plan......................................................................................................................10

2.1 Organizational Structure....................................................................................................10

2.2 Site Plan..............................................................................................................................11

2.3 Floor Plan............................................................................................................................12

2.4 Beach Volleyball Courts......................................................................................................12

2.5 Kitchen & Bar......................................................................................................................13

2.6 Change Rooms and Washrooms.........................................................................................14

2.7 Office & Storage.................................................................................................................14

2.8 Capacity Limits....................................................................................................................14

2.9 Average Business Day.........................................................................................................15

2.10 Service Providers..............................................................................................................16

2.11 Capital Budget..................................................................................................................16

2.12 Net Working Capital.........................................................................................................18

2.13 Operating Budget.............................................................................................................18

3.0 Human Resources Plan...........................................................................................................20

3.1 Organizational Structure....................................................................................................20

3.2 Job Descriptions.................................................................................................................21

CEO......................................................................................................................................21

Assistant Manager...............................................................................................................21

Full-time Bartender..............................................................................................................22

Full-time Kitchen Employee.................................................................................................22

3.3 Wages and Benefits............................................................................................................22

3.4 Human Resources Strategy.................................................................................................23

4.0 Marketing Plan........................................................................................................................23

4.1 Product & Services.............................................................................................................23

4.2 Place...................................................................................................................................23

4.3 Who are the Customers?....................................................................................................23

4.4 What is the Value Proposition?..........................................................................................24

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4.5 Positioning Statement........................................................................................................24

4.6 Customer Feedback............................................................................................................24

4.7 Competition........................................................................................................................25

4.8 Price....................................................................................................................................25

4.9 Promotion Strategy............................................................................................................26

4.9.1 Awareness Campaign..................................................................................................26

4.9.2 Sand City Squad...........................................................................................................26

4.9.3 Global and CTV Morning Shows..................................................................................28

4.9.4 Social Media: Facebook, Instagram, YouTube.............................................................28

4.9.5 Radio Advertisements.................................................................................................29

4.9.6 Booth in Arts Tunnel...................................................................................................30

4.9.7 Word of Mouth...........................................................................................................30

4.10 Marketing Strategy...........................................................................................................30

4.11 Marketing Expenses.........................................................................................................30

5.0 Accounting and Financial Plan................................................................................................31

5.1 Number of Customers........................................................................................................32

5.2 Gross Profit Projections......................................................................................................33

5.3 Year 1.................................................................................................................................33

5.3.1 Number of Customers – Year 1...................................................................................33

5.3.2 Revenue Streams – Year 1...........................................................................................34

5.3.3 Year 1 Gross Profit.......................................................................................................35

5.4 Year 2.................................................................................................................................36

5.4.1 Number of Customers – Year 2...................................................................................37



5.5 Year 3, 4 & 5.......................................................................................................................39

5.5.1 Number of Customers - Year 3, 4 & 5..........................................................................39



5.5.4 Year 4 & 5 Gross Profit................................................................................................41

5.6 Projected Financial Statements..........................................................................................42

5.7 Financing Budget................................................................................................................42

5.8 Base Case Sales...................................................................................................................43

5.9 Dividend Policy...................................................................................................................43

5.10 Economic Forecast............................................................................................................44

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5.11 Financial Performance......................................................................................................44

5.12 Net Income, Dividends and Operating Cash Flow.............................................................44

5.13 Net Income Break Even....................................................................................................45

5.14 Goals.................................................................................................................................46

5.15 Sensitivity Analysis – Number of Customers.....................................................................46

5.16 Sensitivity Analysis - $ Spent per Customer......................................................................47

5.17 Sensitivity Analysis Chart..................................................................................................48

6.0 Summary of Business Plan......................................................................................................49

Appendix 1....................................................................................................................................50

Table of FiguresFigure 1 - Indoor Beach Volleyball..................................................................................................9Figure 2 - Organizational Structure...............................................................................................10Figure 3 - Site Plan........................................................................................................................11Figure 4 - Floor Plan......................................................................................................................12Figure 5 - Volleyball Court Dimensions.........................................................................................13Figure 6 - Capacity Limits..............................................................................................................14Figure 7 - Average Business Day & Volleyball Schedule................................................................15Figure 8 - Capital Budget...............................................................................................................17Figure 9 - Operating Expenses - Year 1.........................................................................................19Figure 10 - Annual Operating Expenses........................................................................................20Figure 11 - Menu Pricing...............................................................................................................25Figure 12 - Sand City Squad Example............................................................................................27Figure 13 - Promotional Card........................................................................................................27Figure 14 - Facebook Example......................................................................................................29Figure 15 - Awareness Campaign Costs........................................................................................31Figure 16 - Marketing Expenses....................................................................................................31Figure 17 - Maximum Number of Volleyball Players per Day.......................................................32Figure 18 - Gross Profit Snapshot.................................................................................................33Figure 19 - Year 1 Customer Projections.......................................................................................33Figure 20 - Volleyball Session Revenue Year 1..............................................................................34Figure 21 - Food and Beverage Revenue Year 1...........................................................................35Figure 22 - Customer Spend per Day............................................................................................36Figure 23 - Year 2 Customer Projections.......................................................................................37Figure 24 - Volleyball Session Revenue - Year 2............................................................................37Figure 25 - Food and Beverage Revenue - Year 2.........................................................................38Figure 26 - Number of Customers - Year 3, 4 & 5.........................................................................39Figure 27 - Volleyball Session Revenue - Year 3............................................................................40

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Figure 28 - Food and Beverage Revenue - Year 3.........................................................................41Figure 29 - Capital Budget Summary............................................................................................42Figure 30 - Base Case Sales...........................................................................................................43Figure 31 - Dividends Paid............................................................................................................44Figure 32 – Income Statement......................................................................................................44Figure 33 – Net Income, OCF & Dividends....................................................................................45Figure 34 –Break Even Analysis....................................................................................................46Figure 35 – Sensitivity Analysis – Number of Customers...............................................................47Figure 36 - Sensitivity Analysis - $ Spent per Customer................................................................47Figure 37 - Sensitivity – Customer Spend $21.50..........................................................................48

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1.0 IntroductionSand City Sport and Fitness is Saskatchewan’s first ever indoor beach volleyball facility, and it is

open all year around. The business will have a strong focus on sport, fitness and fun, with an

emphasis on creating a social atmosphere for customers. This facility will feature three indoor

beach volleyball courts open 12 months of the year and two outdoor beach volleyball courts

open during the summer months, ideally open from May to September. In order to successfully

promote the social atmosphere and keep up with consumer demands, this facility will also

feature a kitchen and bar.

1.1 What Does Beach Volleyball Look Like?

Figure 1 below shows a very good example of what Sand City will look like. There are beach

volleyball courts lined up side-by-side, bright and happy murals on the walls, and a very beach-

like atmosphere; visually promoting that “fun in the sun” feeling for customers.

Figure 1 - Indoor Beach Volleyball

1.2 Program Offerings

The beach volleyball program will run four sessions per year, one every three months, for each

season. Each session will be Sunday-Friday, about 75 days, equaling 300 days of volleyball

sessions per year. Each week day from Sunday to Friday will have a different league, for a total

of six leagues per session. Leagues will run on different skill levels from recreational to

competitive, each running on different nights of the week.

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This business plan will first go over the Operations and Human Resources plan, the Marketing

Plan, and the Accounting and Financial Plan.

2.0 Operations PlanThe following section describes the operations plan for Sandy City Sport and Fitness.

2.1 Organizational StructureSand City will be incorporated to allow for greater protection against liability to the owners,

provide ease of transfer of ownership, and to take advantage of the deferral of taxes of the

business income. The Board of Directors will be composed of the management team, a sport

professional from the community and the company lawyer, who is also an entrepreneur. The

management team consists of the CEO, Carly Neil and the Assistant Manager, to be determined.

The following Organizational Chart (Figure 2) shows how the facility will be run. There is

essentially two businesses within this facility to be managed; these are the kitchen/bar and the

sport management. Descriptions of the positions are included in the Humans Resources section

of this business plan.

Carly Neil

Carly NeilCEO

Carly Neil/Assistant Manager

Kitchen/Bar Manager

Carly Neil/Assistant Manager

Sport Manager

TBA

Assistant Manager

Part Time Bartender

Full Time

Bartender/Manager

Full Time

Kitchen Employee/Cook

Figure 2 - Organizational Structure

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2.2 Site PlanThe facility will be located close to the outskirts of Saskatoon. There should be an easy route to

the location and an open, spacious parking lot for the customers. The optimal location is either

the North End or Stonebridge. Each location has a lot of space for construction of this type of

facility, and are reasonably priced. Because of the court size requirements, the kitchen/bar and

large bathrooms, the building needs to be about 22,496 square feet. According to Colliers

Property Management, buildings need to comprise about 25% of the site area. Therefore, a

building this size needs around 2 acres (88,000 square feet) of land.

According to the City of Saskatoon, parking stall requirements are one for every 258 square feet,

so this site needs at least 85 parking stalls. The following Site Plan (Figure 3) shows what the

facility and parking lot will look like from above, using the corner of Millar Ave and 66 th Street as

an example. This proposed parking lot can provide 92 spacious parking stalls.

Figure 3 - Site Plan

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2.3 Floor PlanThe floor plan is shown in Figure 4 below.

2.4 Beach Volleyball Courts

The main section of the facility will feature three indoor beach volleyball courts and two

outdoor beach volleyball courts. The floor plan is designed so that the indoor courts are on the

south wall, adjacent to the two outdoor courts. Each court is set to Olympic regulations and

measures 33x66 feet and is surrounded by nets that will be ceiling height to ensure no

volleyballs enter the lounge area. The building must have the outdoor courts running north to

south to ensure that the sun is not in the player’s eyes.

Carly Neil

Figure 4 - Floor Plan

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An example of standard Olympic volleyball court dimensions is shown in Figure 5.

Figure 5 - Volleyball Court Dimensions

2.5 Kitchen & Bar

The bar is essential for the success of this business, as it is a major source of revenue. It is 20x23

feet, and is situated in the middle of the facility, for easy access for customers during all

sessions. There will also be a portable bar stand for the summer months for outdoor games. The

tables in the surrounding area of the main bar are 6 feet in circumference, and are movable;

there will be 24 tables inside, with 8 chairs each. There is enough space for 5 feet in between

each table, creating easy access into and out of the chairs without crowding. The bar is 20x23

feet and has enough space for a dishwasher, sink, a large bar fridge, an ice bin and keg storage.

There will also be 15 bar stools at the bar. The table set up is circular and will have a beach-like

feel, featuring umbrellas, wooden chairs, and beach décor.

The kitchen is 29x17 feet, large enough to have a 60 inch range, two deep fryers, a commercial

fridge, a large freezer, food prep station, a triple wash sink, dishwasher, and storage shelves.

The kitchen will be selling only appetizers and easy to prepare food, so storage and prep space is

relatively small.

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2.6 Change Rooms and Washrooms

The customer change rooms/washrooms are 33x48 feet, to accommodate high volumes of

customers at one time. The women’s washroom has 13 toilet stalls, 9 showers, 60 lockers and

lots of space for changing. The men’s washroom has 7 toilet stalls, 6 urinals, 9 showers, 60

lockers and lots of space for changing. The building also has 2 employee washrooms, each with a

shower and change station. Outside of the employees washrooms there is some small storage

space for cleaning supplies and extra kegs.

2.7 Office & Storage

There is an office right inside the main entrance, behind the front desk, where the CEO and

assistant manager will share the duties of running the business. The office will also be file

storage and will be locked at all times of business.

A storage room is also included at the back of the building with access from the inside and

outside. This can hold bleachers, tables, equipment, stock for the kitchen, and miscellaneous

items.

2.8 Capacity Limits

The capacity limits at any one point in time will be about 255 people in the spring, fall and

winter seasons and 351 people in the summer months. These numbers are generated from the

number of seats in the non-playing area, plus the number of players on the courts. With 15 bar

stools, 24 tables (8 seats each) inside, and 8 tables outside, we can seat 207 customers inside

and 64 customers outside. With the potential average of 16 players per court (8 players a team)

at any time, this brings the max capacity at any single point in time to 255 in spring, fall, and

winter, and 351 in the summer. A snap shot of the capacity is demonstrated in Figure 6 below.

Figure 6 - Capacity Limits

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2.9 Average Business DayThe normal business days for Sand City are Sunday – Friday, 9:00am – 12:00am. Saturday’s will

be the extra days to host tournaments, events, and parties that can run all day from 9:00am to

12:00am. An example of an average busy business day is shown in Figure 7 below, with

descriptions to follow.

An average busy business day

will begin at 9:00am with the CEO or the Assistant Manager doing the daily administrative

duties. These include taking stock of items in the kitchen and bar, entering employee time

sheets, doing payables, ensuring the facility is clean and bathrooms are stocked, and making a

trip to the Liquor store to pick up alcohol needed to replenish the stock every 2-3 days. This

person will also be there to let the cleaners in the building. The cleaners will come three

mornings a week, for about 2 hours each day, doing a thorough cleaning of the floor on these

days.

As shown in Figure 7, the beach volleyball schedule can run 4:30pm – 11:30pm (focusing on

after-work hours), Sunday to Friday each week, with each game being one hour long. There can

be a total of up to seven games per court each night. For the spring, fall and winter sessions

there can potentially be 21 games per night, and 35 games per night in the summer session.

Carly Neil

Figure 7 - Average Business Day & Volleyball Schedule

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At 4:00pm the other manager (CEO or Assistant Manager) will arrive to help with the managerial

duties before the busy evenings begin. The night managerial duties will include helping in the

kitchen and bar when needed, ensuring games begin on time, watch for conflicts, socialize with

the customers and ensure that everyone is having a good time. Also at 4:00pm the full-time

bartender and full-time kitchen employee will come in and get their stations ready for the

evening. At around 6:00pm a part-time bartender will come in to help with the busiest hours for

alcohol sales. This person can also help in the kitchen if needed.

At 11:00pm there will be a last call for food and alcohol. By 11:15pm the kitchen and bar can

start to shut down and begin cleaning up. At 12:00am the doors will be locked and all customers

and staff can go home.

2.10 Service Providers

There will be cleaners that come in three times a week for two hours each time. Management

will do all of the internal accounting functions, to minimize service costs. For building

maintenance, an on-call company handyman will be retained for when situations arise. The sand

maintenance will be done each morning, either by the manager or with help from the cleaners.

The indoor courts need to be raked each day, to ensure quality playing space for the customers.

There will be plumbing and drainage installed below each outdoor court, to allow for water run

off when it rains.

2.11 Capital BudgetThe total capital budget to purchase the land, prepare the property, build the facility with 5

beach volleyball courts, a kitchen and bar, is $4,604,182.50. Details are shown Figure 8 below.

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Capital BudgetLand (Quote from Colliers) 500,000.00$ Gravel (Quote from City Gardens @ $35/cubic metre) 50,000.00$ Excavating 15,000.00$ Paving (Outdoor court area) 80 x 120 feet $8sq ft 76,800.00$

85 parking stalls 9 x 25 feet/stall $8sq ft 153,000.00$ Curbing ($48/lineal foot) $48

(115 + 180 + 250) feet 545 26,160.00$ Building (Quote from City Gardens)

Bathrooms, Kitchen, Office Portion 4440 square feet$220 /square foot 976,800.00$

Recreation Portion 18056 square feet$150 /square foot 2,708,400.00$

Fencing 230 feet of fence $4.25 /foot 977.50$ Landscaping (Quote from City Gardens) 15,000.00$ Sand

Leigh Hanson, costs about = $28.44165 tonnes of sand per court 165

Tonnes of Sand for 3 Indoor Courts $14,077.80Tonnes of Sand for 2 Outdoor Courts $9,385.20

23,463.00$ Equipment (Unit Cost) (Quantity)Volleyballs $90.00 15 1,350.00$ Full System $450.00 5 2,250.00$ Score Keeping $300.00 5 1,500.00$ Bleachers (2 row 15ft) $600.00 4 2,400.00$ Tables (35) $200.00 35 7,000.00$ Chairs (8/table) $20.00 280 5,600.00$ Bar Stools $15.00 14 210.00$ Sand Cleaning $525.00 2 1,050.00$ Washing Stations $150.00 3 450.00$

21,810.00$ Kitchen & BarRange - 60", 6 burner 24" griddle 2 oven 3,840.00$ Large Commercial Fridge 2,588.00$ Freezer 3,422.00$ Deep Fat Fryer $1,130.00 2 2,260.00$ Exhaust Hood 2,490.00$ Storage Shelf 136.00$ Dish Washing Sink 600.00$

Food Prep Station (2 x 6 feet) 160.00$

Plastic Trays (24/pack) $38.00 6 228.00$ Dish Washer $500.00 2 1,000.00$

Hand Sink $100.00 2 200.00$

Ice Bin 2,418.00$ Draft Beer Dispenser 1,650.00$ Bar Fridge 1,200.00$ Misc Kitchen & Bar Supplies 2,000.00$

24,192.00$ Net Working Capital 12,580.00$ Total $4,604,182.50

Carly NeilFigure 8 - Capital Budget

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2.12 Net Working Capital

For this type of business, no more than $10,000 cash on hand is needed. This cash can be used

to pay for services to the building, inventory, miscellaneous supplies, and miscellaneous costs

that come up day to day. There are no accounts receivable for this business, as there will be a

strictly enforced policy that customers must pay up front. We will have four days of inventory of

food and alcohol on hand. We have deliveries of food from our suppliers, and we will be picking

up our own alcohol. The networking capital budget is broken down below:

Net Working Capital

Cash $10,000.00

Account Receivable $-

Inventory (alcohol) $2,580.00 ($130/keg x4 kegs x4 days)+$500 hard alcohol

Inventory (food) $1,344.00 ($1120 sales x 30% COS x 4 days)

Accounts Payable $(1,344.00)

Total Net Working Capital $12,580.00

We will only have accounts payable for our food, as we will be paying for alcohol in-store every

2-4 days, as we pick it up when needed. Our food suppliers will require payment every 14 days.

As shown in the cash conversion cycle below, we will not require any financing.

Cash Conversion Cycle

Inventory 4 days

Receivables None

Accounts Payable 14 days

No Financing -10

2.13 Operating BudgetYear 1 Operating Expenses come to $720,700, shown in detail in Figure 9. This number includes

the Capital Cost Allowance (CCA – which is 50% in year 1), debt interest, and initial marketing

costs. For the next four years, the operating expenses grow because of the increase of CCA at

100%, a snapshot of the first 5 years is shown in Figure 10, with full detail in Appendix 1.

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Operating Expenses - Year 1 Including Start-UpGPM

COGS: Food 70%Alcohol 70%Recreation 100%

Other Operating Expenses:Natural Gas, Electricity, Water 70,000$ Accounting & Legal 2,000$ Business License (Quote from City) 85$ Business Tax (Based on $3.5M value/tax $64,000 x 1.3) 83,200$ Marketing 43,700$ Tools and Equipment 2,000$ Repair and Maintenance 2,000$ Telephone and Internet (Phone x2 + internet) $220.00 2,640$ Wages

CEO - Carly Neil 65,000$ Assistant Manager 50,000$

Full Time Bartender 40hrs/week*15 29,450$ Full Time Kitchen Employee 40hrs/week*18 35,280$

Part-time Bartender 4,266$ Benefits 19,044$

Insurance $5000 (kitchen + liquor) + $5000 (building) 10,000$ Cleaning $100 x 2/week x 50 weeks 10,000$ General Supplies (papers, utensils, plates, etc) 5,000$ Sand Replacement 2%/year 469$ Capital Cost Allowance 92,720$ Debt Interest 192,847$ Miscellaneous 1,000$ Total 720,652$

Figure 9 - Operating Expenses - Year 1

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3.0 Human Resources PlanThe following section discusses the Human Resources plan in full detail.

3.1 Organizational StructureAs discussed and shown in Figure 2 above, Sand City will have a management team of two

people, the CEO (Carly Neil) and Assistant Manager. These two positions will have relatively the

same roles, but the CEO will have ownership of the company, the final say in all business

decisions and is in charge of hiring an assistant manager.

The Assistant Manager should have prior experience working with the public, and have an

outgoing personality. Someone who is in their mid-late 20’s to mid-30’s would be ideal for this

position. Sand City is looking for someone who has some previous experience in a

marketing/social role, but is still fresh to the working environment. This person will be energetic

and will personally takes on investing themselves with the long-term success of the business. A

dynamic relationship between the CEO and assistant manager is key to running this successful

business.

Carly Neil

Schedule 4: Operating Expenses 2017 2018 2019 2020 2021

Accounting and Legal 2,000 2,040 2,081 2,122 2,165 Advertizing (Marketing) 43,700 23,113 23,575 25,108 24,528 General Supplies 5,000 5,100 5,202 5,306 5,412 Insurance 10,000 10,200 10,404 10,612 10,824 Property Taxes 83,200 84,864 86,561 88,293 90,058 Telephone 2,640 2,693 2,747 2,802 2,858 Utilities 70,000 71,400 72,828 74,285 75,770 Repair and Maintenance 2,000 2,040 2,081 2,122 2,165 Business License 85 87 88 90 92 Tools and Equipment 2,000 2,040 2,081 2,122 2,165 Cleaning Services 10,000 10,200 10,404 10,612 10,824 Sand Replacement 469 479 488 498 508 Miscellaneous 1,000 1,020 1,040 1,061 1,082 Wages and Salaries 183,946 192,322 202,571 207,441 212,441 Employee Benefits (salaries) 8.19% 9,419 9,607 9,799 9,995 10,195 Employee Benefits (wages) 13.96% 9,625 10,473 11,576 11,922 12,279 Capital Cost Allowance 92,720 180,419 170,770 161,861 153,601 Debt Interest 192,847 185,173 176,962 168,175 158,774 Total Operating Expenses 720,652 793,269 791,259 784,428 775,742

Figure 10 - Annual Operating Expenses

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Initially, there will also be a full-time bartender, a part-time bartender and a full-time kitchen

employee. More part-time staff will be added to the organization once sales begin to rise. The

full-time bartender and kitchen employee will ideally be persons with previous experience in a

restaurant or lounge setting. They will be happy working full-time and working for $15/hr and

$18/hr, respectively. They will each take responsibility for their department, and essentially

ensure operations are smooth and can take action when problems arise. They will monitor stock

and ensure their departments are clean and meet standards. There will be a part-time bartender

who will come in at the busy times to help out the full-time bartender, and assist in the kitchen

if needed. This employee could be a student who is looking for part-time evening work while

going to University.

3.2 Job Descriptions

CEO Oversee all business decisions

Be in charge of all human resources activities

Assist with accounting/book-keeping and payroll functions

Be in charge of all marketing decisions

Assist in ensuring facility is clean

Assisting with stock level maintenance

Take care of the everyday administrative tasks

Scheduling Beach Volleyball games

Manage all volleyball teams

Ensure that customers are happy

Assist in the kitchen and bar when help is needed

Assistant Manager Carry out accounting/book-keeping and payroll functions

Be in charge of all marketing decisions

Ensure sand is clean and tidy

Ensure facility is in good shape

Monitor and replenish stock levels (food, alcohol)

Take care of the everyday administrative tasks

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Scheduling Beach Volleyball games

Manage all volleyball teams

Ensure that customers are happy

Assist in the kitchen and bar when help is needed

Full-time Bartender Take responsibility for everyday functions of bar

Monitor and communicate stock levels to management

Ensure area is clean

Communicate scheduling of part-time bartender with management

Full-time Kitchen Employee Take responsibility for everyday functions of kitchen

Monitor and communicate stock levels to management

Ensure area is clean

3.3 Wages and BenefitsThe CEO will be on a salary of $65,000 per year. The Assistant Manager will be on a salary of

$50,000/year. These salaries are justified for this start-up as both people will relatively young

and have only a few years of prior work experience. Also, as an owner, the CEO can pay

dividends in good years in addition to salary. These salaries can see an increase upon success of

the company. Both positions will have 8 working hours per day, 5 days a week. Outside work

hours will likely be required for these positions at least in the starting phase of the business. The

full-time bartender will be paid hourly, at $15/hour, and working 8 hours a day, 5 days a week.

The part-time bartender will be paid $12/hour and will be working about 4-5 hours a day, 4-5

days a week. The bartenders will also be receiving tips from the customers, which will be shared

based on hours worked. The full-time kitchen employee will be making $18/hour, and working 8

hours a day, 5 days a week. This employee will also be sharing tips with the bartenders, which

will be a percentage of food sales each day. This number will be determined once operations

have been started.

3.4 Human Resources StrategyIn order to ensure that Sand City is successfully and efficiently run, performance assessments

will be done every three months to communicate with one-another what needs to be changed,

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and what is working well. As number of customers grows each beach volleyball session,

management will consider if additions to the part-time staff are needed.

4.0 Marketing PlanThe next section describes the full marketing plan as well as the aggressive awareness campaign

that will be executed.

4.1 Product & ServicesSand City will have a first-mover advantage for indoor beach volleyball in the entire province of

Saskatchewan. Outdoor beach volleyball in Saskatoon is extremely popular. Currently, one

summer session of games (Sunday-Friday from May-August) for our competition (i.e. Sports on

Tap) is easily selling out in a matter of days once registration opens. There is a large market of

customers who play beach volleyball, and Sand City will be able to provide the opportunity to

play this sport and stay active all year round.

Complimentary to the beach volleyball services, a secondary offering is the social atmosphere

offered by Sand City. There will be a large focus on the food and alcohol offerings, as this social

aspect is what a lot of the beach volleyball players are looking for when joining a league. The

food will be mostly appetizers and small snack foods, and the bar will have a no glass rule and

will feature draft beer and hard alcohol.

4.2 PlaceAll of the Sand City offerings will be held at the facility. The promotion will be throughout

Saskatoon, and awareness will be throughout the province.

4.3 Who are the Customers?The target market of Sand City is very diverse. The primary target will be the current beach

volleyball players in Saskatoon and area, including competitive and recreational groups. These

will be the people who play at Sports on Tap and the Sutherland Bar in the summer sessions and

the people who play in beach volleyball tournaments in the summer all over Saskatchewan.

The secondary target market will be University and high school students. The student

demographic is very large in Saskatoon as there are many high school and post-secondary

education facilities throughout the City; the largest is the University of Saskatchewan. The

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school boards can also be prospective customers, as this sport could be integrated into the

physical education curriculum. The final target market of Sand City will be the general public;

raising awareness that there is no age limit and essentially anyone can play beach volleyball no

matter how old they are.

4.4 What is the Value Proposition?The value proposition is taken from the customer’s point of view. What is it that they would

want from this business, and what are we promoting that is different from anything else in the

City of Saskatoon?

Sand City: “Bringing the beach to you. All year round”

The first words that come to mind when someone thinks or hears Sand City will be: atmosphere,

team, sport, fun, cheering, food and beverage, and socializing. These will be the focus of the

company; all employees will embrace these qualities of Sand City and ensure that it is always a

fun and positive atmosphere for customers.

4.5 Positioning Statement The positioning statement that we want for Sand City is something that is funny, sporty, and

memorable. The goal is to have a short saying that can be put on t-shirts, signs, promotional

materials, and stick in everyone’s mind as something clever. The Statement chosen is:

Sand City: “Love at First Spike”

Once Sand City’s reputation is built and awareness has grown, we can use this on all

promotional materials. Just imagine hearing, “Sand City Sport and Fitness. Love at First Spike”.

4.6 Customer FeedbackWith such a large focus on fun, Sand City will have a policy of very open and honest

communication with customers. All staff will be very approachable and open to receiving

feedback. Handling complaints will be a positive experience for customers. We want to try to

make all of our customers happy, and will take complaints and feedback seriously. There will be

a comments box at the facility and also on the website for customers who may not feel

comfortable expressing their concerns with the staff.

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4.7 CompetitionThe main competitors for Sand City are Sports on Tap and the Sutherland Bar. They both offer

beach volleyball sessions in the summer months, and if there is bad weather they have to cancel

the games. Sand City has a competitive advantage in the summer session of no cancelled

games; as we will only be running three league games at once in the summer months, so they

can always be moved inside. The main competitive advantage is that people can play beach

volleyball all year round, there are no limiting factors when it comes to weather. People can

enjoy the beach atmosphere every day of the year if they choose.

4.8 PriceThe price for beach volleyball league is $500.00/team per session; this is a standard price in

Saskatoon. If there are 6 people on a team the cost is about $83.33/person, and with 8 people

on a team it is $62.50. This is a very reasonable price to pay for a recreational activity lasting 3

months. The price of food and drinks are shown in Figure 11 below:

Figure 11 - Menu Pricing

The average price of a food menu item used to calculate expected revenues in the financial

projections of Sand City is rounded to $10. The following numbers are what are used to

calculate expected food and beverage sales per team each day:

An average sale of 2 appetizers/team = $20/team

An average of 2 pitchers of beer/team = $40

An average of 2 single hard drinks/team = $10

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FoodWings 12.00$ Nachos 15.00$ Fries 5.00$ Mozza Sticks 8.00$ Chicken Fingers & Fries 12.00$ Grilled Cheese & Fries 8.00$ Burger 7.00$

DrinksBeer Pint 6.00$

Pitcher 20.00$ Titanic 30.00$

Hard Alcohol Single 5.00$ Double 8.00$

Pop 2.00$ Water 1.50$

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4.9 Promotion StrategyPromotion will happen through a variety of ways. There will first be a large awareness campaign,

followed by a strong marketing plan to follow for the next five years.

4.9.1 Awareness CampaignGaining awareness prior to opening the doors is very important for Sand City. There needs to be

a large awareness campaign to gain interest in the sport of indoor beach volleyball so that the

first session can be as full as expected. We want to focus on building momentum, so before

completion of construction, we will start to get people talking.

The strategy is to begin about two-three months before opening day. We can start by going

around and asking people if they would be interested, we can demonstrate what we have to

offer, begin rolling out a media presence, and promote awareness. In this time we can start to

have wait lists for teams to sign up, and possibly begin early registration. With about three

weeks left, the extremely aggressive awareness campaign will begin. A good length of the final

awareness campaign is three weeks; two weeks does not gain enough time and anything more

than three weeks may lose hype. The entire campaign from the beginning and continuing into

Year 1 will utilize sources such as a Sand City Squad, news stations, social media, radio, the

University and word of mouth, each discussed below.

4.9.2 Sand City SquadThe Sand City Squad will consist of a team of people who go around Saskatoon to events,

functions, malls, the University, lounges, and anything that has a social following of the target

market of the company. The Squad’s members will consist of all of the employees of Sand City,

some of their family and friends who are willing to help out with awareness and promote the

brand and offerings of Sand City. The Squad will be similar to that of the Molson Extreme Team

(see Figure 12) who go to events and promote the brand with potential customers.

The Sand City Squad will engage with customers by playing games, holding contests, and just

promoting that what they are offering is fun and different than anything else. All of the

members of the Squad will wear items that represent the brand and will be having a good time

promoting the products and services.

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Figure 12 - Sand City Squad Example

The Sand City Squad will also be putting up posters, handing out cards and brochures to gain

awareness all over the City. An example of a card to hand to potential customers is shown in

Figure 13 below.

Figure 13 - Promotional Card

This card has all of the information needed for a potential customer. It also promotes the grand

opening weekend, which will be crucial for getting customers to come and see the facility and

that indoor beach volleyball will be a ton of fun and a great success. The grand opening will be

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two days of come and go trials of the courts (free for everyone), with games set every few hours

for people who would like to enter a team in for fun. There is potential for about 500 people

throughout the grand opening, and there will be a budget for one free appetizer and two free

drinks per person. This should be enough to cover everyone, as not all customers will be eating

and drinking.

4.9.3 Global and CTV Morning Shows

Being featured on the Global and CTV Morning shows will be great in gaining awareness of all

ages, especially the thirty-plus age category of viewers who may not frequent the social scene in

the City as often. The morning shows are always willing to host new, local companies to help

them gain awareness and promote what their brand is about. We simply just get in contact with

the Stations and pitch our concept. Not only are these featured on TV, but they move on to the

News Station’s website and social media platforms as well. People can share the links of the

news interview and help gain an audience through the sharing of the news segments as well.

4.9.4 Social Media: Facebook, Instagram, YouTube

The use of social media is key for the major demographic of Sand City. Social Media is an

essential part of people’s lives in today’s society, and it is very easy to reach a large number of

people in a small amount of time. The Facebook management tools for businesses give many

options for hosting “sponsored” posts or utilizing the Facebook advertising feature. Both of

these Facebook channels give a company the option to target specific groups of individuals.

Some examples are to target people who follow the competitors’ pages, people who are part of

a certain sports team or gym, live in a certain area, dealerships, business organizations, and

professional firms; basically any people or organizations who are likely to put in a beach

volleyball team. You can also choose the number of people you would like to reach, from one to

100,000 if you choose. Instagram “sponsored” posts work the same way as Facebook, and

targeting the specific demographics should be a fairly easy process. An example of a Facebook

page is shown here in Figure 14 below.

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Figure 14 - Facebook Example

YouTube promotional videos and advertisements are also a great tool to use. Making a short

two minute video, and then sharing it on Facebook should reach a large audience and showcase

what Sand City has to offer and raise awareness of the exciting new concept. Also, YouTube has

mandatory advertisements that viewers have to watch in order to move on to their search. Sand

City could utilize this tool in Saskatoon at certain times of the day, to reach a larger audience of

people who may not watch the News or be active on Facebook/Instagram, or to just gain more

attention to the brand overall.

4.9.5 Radio Advertisements

The use of local radio stations is another essential tool to gain awareness; especially since there

are a variety of stations, each with a different target market. The Rawlco Radio Company in

Saskatoon has provided a recommendation for an awareness campaign for Sand City. A

breakdown of the cost is shown below.

30 Seconds

C95 $65

Rock 102 $55

Average $60

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A Total Audience Plan (TAP) is what will work best for awareness of Sand City. TAP allows for

25% of messages in Breakfast (AAA) time from 5:00am-10:00am, 40% Daytime/Drive (AA) time

10:00am – 8:00pm and 30% Evening from 8:00pm – 1:00am. There will be 4 ads a day, 3 days a

week, on alternating days; for example, Monday/Wednesday/Friday one week and

Tuesday/Thursday/Saturday another week.

4.9.6 Booth in Arts Tunnel

Hosting a booth in the Arts tunnel at the University of Saskatchewan will gain the student

attention Sand City desires. Doing something out of the ordinary and differently from other

booths will especially help set Sand City apart. Having two people in shorts tossing back and

forth a volleyball, randomly bumping it to students who are walking by, and having loud music

playing is sure to make people stop and have a look. This is also where they can hand out the

brochures and cards for people to take.

4.9.7 Word of Mouth

Lastly, word of mouth is going to be a very important tool for gaining teams at Sand City. The

primary focus of our promotion is to create a buzz to eventually generate word of mouth. If

people stop by and enjoy themselves, they will want to put in a team, tell their friends to put in

a team, who then pass on the word, and the spread is endless.

4.10 Marketing Strategy

Following the awareness campaign, marketing will still continue to be similar and fairly

aggressive, but because of costs, will be scaled down. Also, there will be an initial investment for

outsourcing the construction of a website. We will hire a company to start up the website for

the company, making sure it is sporty, fun, and very integrative for customers. We will also have

the company monitor the website and continuously update it for us when needed.

4.11 Marketing ExpensesThe awareness campaign discussed above is broken down in Figure 15 below to show the total

cost. It is quite a bit more expensive than regular marketing costs, but it is necessary to gain

awareness and to get potential customers in the door.

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3 Week Awareness Campaign/Marketing Start-up

Signage $10,000

Radio ($60/30sec x 4/day x 3 days) $2,160

50 Posters ($7/poster) $350

2000 Brochures ($32/50 cards) $1,280

Grand Opening (500 People)

Food (1 appetizer/person) $1,500

Alcohol (2 beer/person) $1,800

Total $17,090

Figure 15 - Awareness Campaign Costs

The continuing marketing expenses each year will be $26,610 in year one (accounting for $4000

website start-up), and is $23,113 in year 2, generally staying the same thereafter for the next 4

years and only increasing with 2.0% inflation per year. The breakdown is shown in Figure 16.

5.0 Accounting and Financial PlanThe following section discusses the accounting and financial projections for Sand City. The full

financial plan is shown in Appendix 1 (Excel Spreadsheet). There are different tabs for different

scenarios. The tab labelled “BASE CASE” is the most important one, as it shows all of the

projections found using the base case numbers, which will be demonstrated below.

5.1 Number of CustomersBefore discussing the financial statements and outcomes, it is important to demonstrate the

how the projected number of customers and sales was used to find revenues for each of the five

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Figure 16 - Marketing Expenses

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forecasted years.

The revenue projections used for this business plan are fairly conservative. This is to make sure

there is no overshooting the amount of customers we will be attracting, or the amount of

money they will be spending, especially in year one. Revenue projections are based on a

percentage of the projected maximum number of customers that can be accommodated at Sand

City. In the winter/spring/fall sessions, the projected maximum number of volleyball players

visiting per day is about 336 people; in the summer the maximum number of people is 560

(calculations are shown in Figure 17).

Winter/Spring/Fall

7 Games/day

3 courts x 7 hrs of games x 16 players (2 teams (8ppl/team)) =

336 people

Summer

7 Games/day

5 courts x 7 hrs of games x 16 players (2 teams (8ppl/team)) =

560 people

Figure 17 - Maximum Number of Volleyball Players per Day

These winter/spring/fall numbers are calculated based on 7 games per night, on all 3 indoor

courts, with 8 people per team, and 2 teams per game. The max capacity in the summer is

calculated the same way with 7 games per night, including the 3 indoor courts and 2 outdoor

courts, with 8 people per team, and 2 teams per game.

5.2 Gross Profit Projections

A summary of each of the next 5 year’s gross profit is shown in Figure 18 below, with a more

detailed description of each year in the next section.

Year 1 - 2017 Year 2 - 2018 Year 3 - 2019 Year 4 - 2020 Year 5 - 2021

Sales 1,031,373 1,202,286 1,430,721 1,459,335 1,488,522

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COGS 194,929 227,232 270,406 275,814 281,331

Gross Profit $836,444 $975,054 $1,160,314 $1,183,521 $1,207,191

Figure 18 - Gross Profit Snapshot

5.3 Year 1

Revenue projections are based on about 50% capacity for the winter/spring/fall sessions and

about 40% capacity for the summer. There is expected to be enough interest to run five games a

day, starting at 5:30pm and last game beginning at 9:30pm for winter/spring/fall. The summer

will have six games a day, as beach volleyball is already quite popular in the summer months.

There will only be three courts used in the summer, as two games will be held outside and one

inside. Each week they will rotate who is inside. Another reasoning for only running three courts

in the summer is to accommodate poor weather and have the other two indoor courts as back-

ups and warm-up courts.

5.3.1 Number of Customers – Year 1

A breakdown of the number of customers are shown in Figure 19 below.

To make numbers easy to understand, there was one number of average customers per year

chosen. This was found by taking 75% of the winter/spring/fall and 25% of the summer

projections:

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Figure 19 - Year 1 Customer Projections

(180 x .75) + (216 x .25) = 189 Customers per day in Year 1

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5.3.2 Revenue Streams – Year 1

There are essentially 2 revenue streams with Sand City. There is the volleyball session revenue,

and the food and beverage revenue. Revenues for a typical day, for example, a Monday, are

broken down in Figures 20 and 21 below.

Volleyball is a fixed cost of $500/team, and is averaged to about $378,000 for Year 1; with 300

days of beach volleyball per year (Sunday-Friday), session revenue per day is $1,260. If we are

using our conservative estimates, and have 6 people per team, this is an average spend of $6.67

per person each day on volleyball.

Volleyball Session Revenue

Monday

1 Session (3 months) of Winter/Spring/Fall 1 Session (3 months) of Summer

5 games per night per court x 3 courts = 6 games per night per court x 3 courts =

15 games/day 18 games/day

30 teams/day 36 teams/day

30 teams/day/session x $500/team = 36 teams/day/session x $500/team =

$90,000 x 3 Sessions = $270,000 $108,000

Total Year 1 Session Revenue

$378,000

Figure 20 - Volleyball Session Revenue Year 1

The food and alcohol revenues are based on the average sale of two appetizers purchased per

team, two pitchers of beer, and two hard alcoholic drinks for a total of $653,373 in Year 1. These

numbers were drawn from market research done on the amount of purchases made at

competitor facilities, and are only a fraction of the sales of the competitors; however, in order to

be conservative and ensure we are not overshooting, these are fair numbers to use for the

revenue projections in this business plan.

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Food & Alcohol Sales

Winter/Spring/Fall Summer

5 games per night 6 games per night

30 teams 36 teams

On average of 2 appetizers/team = $20/team

$574.29 $689.14

On average of 2 pitchers/team = $40

$1,200 $1,440

On average of 2 single hard drinks/team = $10

$300 $360

Total Daily Sales $2,074 $2,489

75 Days/Session $155,571.43

Total Sessions $466,687.29 $186,685.71

Annual Sales (300 days/year) - 75 days/session

$653,373.00

Figure 21 - Food and Beverage Revenue Year 1

5.3.3 Year 1 Gross Profit

Using the revenue demonstrated above, and a Cost of Sales on Volleyball Session Revenue of 0%

and Food and Drink of 30%, Year 1 Gross Profit is shown below.

Estimated Total Revenue Year 1 $1,031,373

Cost of Sales on Food & Alcohol = 30% $194,929

Gross Profit $836,444

Now the next question to ask is, if these numbers are realistic, are the customers going to spend

what we are projecting? The volleyball session revenue is going to be paid by the customers

upon registration, and is an industry standard cost. Therefore, when calculating the customer

spend on food and alcohol, the cost comes to $11.52 per day, as shown in Figure 22 below. This

is a very reasonable amount of per customer spend, especially since this is going to be a social

facility as well as indoor beach volleyball.

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Daily Session Revenue

($378,000/300) = $1,260.00

Per Customer Sale:

($1,260/189) = $6.67

Av. Daily Food and Drink Sales

(75% x 2,074 + 25% x 2,489) = $2,178

Per Customer Sale:

($2,178/189) = $11.52

Total $18.19

Figure 22 - Customer Spend per Day

5.4 Year 2

Year 2 projections are quite similar to Year 1, but the winter/spring/fall numbers are expected

to rise to about 65% capacity and the summer months will continue to run on just three courts.

There are two reasons for choosing to run games on three of the five courts. First, as the

business is still growing, we may not have enough interest yet to have all five courts filled, and

customers want to enjoy the summer weather. Second, and most importantly, we are

promoting that weather is not a factor for us and we only want three courts running to

accommodate the chance of bad weather.

5.4.1 Number of Customers – Year 2

The breakdown of the number of customers in Year 2 is shown in Figure 23 below.

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Figure 23 - Year 2 Customer Projections

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The revenues in Year 2 were found using Year 1 as a base, increasing the number of teams seen

per day. These projected revenues also account for inflation. The breakdown is shown in Figure

24.


Monday






$108,000 $108,000

x3 Sessions $324,000

Estimates Year 2 Session Revenue $432,000

Total Year 1 Revenue Plus Inflation $ 444,846

The food and alcohol revenues for Year 2 were found using the same projected sales as Year 1,

based on the average sale of two appetizers purchased per team, two pitchers of beer, and two

hard alcoholic drinks for a total of $757,440, shown in Figure 25 below.



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Figure 24 - Volleyball Session Revenue - Year 2

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36 teams 36 teams


$689.14 $689.14


$1,440 $1,440


$360 $360



Total Sessions $560,057.14 $186,685.71


$746,742.86

Total Annual Sales Plus Inflation $ 757,440.00

Figure 25 - Food and Beverage Revenue - Year 2


Using the revenue demonstrated above, and a Cost of Sales on Volleyball Session

Revenue of 0% and Food and Drink of 30%, Year 2 Gross Profit is shown below.

Total Revenue Year 2 $1,202,286

Cost of Sales on Food & Alcohol = 30% $227,232

Gross Profit $975,054

5.5 Year 3, 4 & 5

Year 3, 4 and 5 are a continuation of Years 1 and 2, with the number of games in each session

going to seven games per day, starting each hour from 4:30pm – 10:30pm. The number of

customers will be the same year round, as the number of courts used in the summer will remain

at three; as mentioned above, customers are looking to primarily play outside and enjoy the

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weather, and there may be no benefit to filling all five courts as we cannot move all games

inside in the case of bad weather.

5.5.1 Number of Customers - Year 3, 4 & 5

A breakdown of the number of customers in Years 3, 4 and 5 is shown in Figure 26 below.


The revenues in Year 3, 4 and 5 were found using Year 1 and Year 2 as a base, increasing the

number of teams seen per day. These projected revenues also account for inflation, therefore

the revenues grow slightly from Year 3 to 5. The breakdown of Year 3 is shown in Figure 27.


Monday


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Figure 26 - Number of Customers - Year 3, 4 & 5

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$126,000 $126,000

x3 Sessions $378,000

Total Year 3 Session Revenue $504,000

Total Year 3 Plus Inflation $ 529,367.00

The food and alcohol revenues for Year 3, 4 and 5 were found using the same projected sales as

Year 1 and 2, based on the average sale of two appetizers purchased per team, two pitchers of

beer, and two hard alcoholic drinks. The total for Year 3 is $901,354, shown in Figure 28 below.




42 teams 42 teams


$804.00 $804.00

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Figure 27 - Volleyball Session Revenue - Year 3

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$1,680 $1,680


$420 $420



3 sessions $653,400.00 $217,800.00


$871,200.00

Total Annual Sales Plus Inflation $ 901,354.00

Figure 28 - Food and Beverage Revenue - Year 3


Using the revenue demonstrated above, and a Cost of Sales on Volleyball Session Revenue of 0%

and Food and Drink of 30%, Year 3 Gross Profit is shown below.


Cost of Sales (Food & Alcohol) 270,406

Gross Profit $1,160,314

5.5.4 Year 4 & 5 Gross Profit

As mentioned, the number of customers in Year 4 and 5 will be the same as Year 3, and the

revenues from both volleyball and food and drink will also stay the same, only increasing by

inflation.






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5.6 Projected Financial StatementsThe accounting and financial analyses are based on a 5 year plan for Sand City’s growth. The full

financial statements and financial plan are shown in Appendix 1 with the most important “Base

Case” as tab 1. The main driver for Sand City’s growth and success is not only the number of

customers, but how much they spend. The financials show that both the amount of money

spent per customer and the number of customers are very sensitive factors, and the Net Income

can change substantially by customers spending just $1.00 more per day.

5.7 Financing BudgetReferring back to the Capital Budget, Sand City requires $4,603,683 to start up, a quick summary

is shown in Figure 29 below.

Capital BudgetLand $ 500,000 Building

Bathrooms, Kitchen, Office Portion $ 976,800 Recreation Portion $ 2,708,400

Landscaping $ 336,938 Sand $ 23,463 Equipment $ 21,810 Kitchen & Bar $ 24,192 Net Working Capital $ 12,080 Total $ 4,603,683

Figure 29 - Capital Budget Summary

The financial structure will be 60% debt and 40% equity. With 60% debt, we are asking to

borrow $2,754,952, and that is likely the greatest amount that the bank will lend us for this

business. Ideally, we would want a high ratio of debt, as the cost of debt is much less than the

cost of equity. The debt interest rate used in the financial projections is 7.0%, which was found

using prime (3.0%) plus 4.0%. The cost of equity financing is likely to be more than double the

cost of debt, which is why we want to use as much debt as we can. The total amount of equity

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we will be requesting from investors is $1,836,641; this seems like a lot, but once expected sales

are analyzed, it looks quite positive.

5.8 Base Case Sales

Recall that the average daily customers in year one was 189, and the average daily customer

spend was $18.19, calculations shown below.

Using the number of customers demonstrated in the sections above and their daily spend, with

a growth rate and inflation in mind, the “base case” numbers each year for the financial

projections are shown in Figure 30.

Number of Customers/day 189 216 252 252 252

Number of Days/year 300 300 300 300 300

Average Purchase/customer $18.19 $18.55 $18.92 $19.30 $19.69

Total Sales $1,031,373 $1,202,286 $1,430,721 $1,459,335 $1,488,522

5.9 Dividend Policy

Sand City will pay its investors a dividend when there is an excess of $40,000 cash. As shown in

the Retained Earnings snapshot (Figure 31), there are no dividends paid in the first year, but by

Year 2, there are dividends of $48,750, substantially increasing thereafter. This is a generous

payback for investors.

Retained Earnings Account Year 1 Year 2 Year 3 Year 4 Year 5Beg RE - 100,217 210,529 310,411 290,243 Net Income 100,217 159,062 322,923 349,206 377,518 Dividends - 48,750 223,041 369,374 376,913 End RE 100,217 210,529 310,411 290,243 290,848

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Average Daily Customers= 3 Courts x 5-6 games per day x 12 players

= 189

Daily Customer Spend = Volleyball Revenue + Food & Drink

= $18.19

Figure 30 - Base Case Sales

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5.10 Economic Forecast

The inflation rate used for all of the financial forecasts is 2.0%, resulting in an inflation factor of

1.02. This number was used for all revenues and expenses throughout this business plan.

5.11 Financial Performance

The following Income Statement (Figure 32) summary shows that net income is positive right

from the beginning, and has more than tripled by Year 3. The full income statement is detailed

in Appendix 1.

Income StatementFor the year ended 2017 2018 2019 2020 2021

Sales 1,031,373 1,202,286 1,430,721 1,459,335 1,488,522 COGS 196,012 227,232 270,406 275,814 281,331 Gross Profit 835,361 975,054 1,160,314 1,183,521 1,207,191

Total Operating Expenses 720,827 793,269 791,259 784,428 775,742

Taxable Income 114,534 181,785 369,055 399,093 431,449 Income Taxes 14,317 22,723 46,132 49,887 53,931 Net Income 100,217$ 159,062$ 322,923$ 349,206$ 377,518$

Figure 32 – Income Statement

5.12 Net Income, Dividends and Operating Cash Flow

A comparison of net income to dividends and operating cash flow over the next 5 years is shown

in Figure 33. Each category has a very positive slope. The operating cash flow is quite high,

keeping in mind that this has the Capital Cost Allowance added back into it. The dividends are

nearly as much as net income by Year 5, this is also a very positive factor for investors. These

estimates look promising upon initial analysis.

Carly Neil

Figure 31 - Dividends Paid

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Y ear 1 Y ear 2 Y ear 3 Y ear 4 Y ear 5$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$101,318

$377,518

$194,038

$531,119

$49,820

$376,913

Net I ncome, OCF & Dividends

Operating Cash Flow

Net Income

Dividends

Figure 33 – Net Income, OCF & Dividends

5.13 Net Income Break EvenFigure 34 demonstrates the break-even numbers for Sand City based on the number of

customers. Using the “What If” function in Excel, setting Net Income to $0.00, we found that in

Year 1 the break-even number of customers are 162, and are fairly steady for the next four

years. Figure 34 also shows that the break-even numbers are almost the same as the base case

number of customers in Year 1, but over Years 2-5, the spread becomes quite large. By Year 5

the base case customers is nearly 100 customers more, keeping in mind that the base case

numbers are fairly conservative. By looking at this break-even chart, the number of customers

looks promising.

Carly Neil

46


1 2 3 4 50

50

100

150

200

250

300

189216

252 252 252

162 174 169 163 158

Net Income Br eak-even B ase d on # of Customer s

Year

Base Case

Break-Even

Figure 34 –Break Even Analysis

5.14 GoalsThe initial main goal is to attract the expected number of customers and have them spend at

least $11.52 each day in Year 1. The next goal is to reach our Return on Investment of 20.0%. As

shown in Appendix 1, using our base case numbers, we have an Internal Rate of Return (IRR) of

17.5%, not quite the expected 20.0%. However, this is not a limiting factor with this business, as

the difference is not that great. Even though the IRR is lower than the ROI, it is still a promising

investment. The following Sensitivity Analysis sections will describe why.

5.15 Sensitivity Analysis – Number of CustomersThe Sensitivity Analysis comparison of number of customers is shown in Figure 35 below. As

shown, if just 10%, or 19 more customers visit a day, the IRR rises to 22.0%, this is now greater

than the expected ROI of 20.0%. The same goes for a lesser number of customers per day, and

we see a drop in IRR. However, as the base case numbers were fairly conservative (recall that

they accounted for only six players/team), the number of expected customers should not fall

below the base case.

Carly Neil

47


Figure 35 – Sensitivity Analysis – Number of Customers

5.16 Sensitivity Analysis - $ Spent per CustomerThe Sensitivity Analysis comparison based on number of dollars spent per customer is similar to

the sensitivity analysis done on the number of customers. Figure 36 shows that if each customer

spends $20.01, just $1.89 more (recall that the $6.67 amount spent on volleyball was paid up

front, and that $11.52 is spent per day on food and beverages), for a total spent on food and

beverage per day of $13.41. This is still very reasonable and conservative. Since Sand City will be

a social gathering, with the main hours over supper and into the evening, customers are likely to

spend this amount or even more. If customers spend the $20.01 (or $13.41 on food and

beverage), the IRR rises to 22.0%, greater than the expected ROI of 20.0%. This sensitivity

analysis demonstrates how sensitive these numbers are to a very small increase of dollars spent.

Carly Neil

Sensitivity Analysis - Based on $ Spent per CustomerAverage 5 Year 5

$ Spent year Profit Net Payback IRR Owner Comp$14.55 80% 81381 1965559 6.7 248336$15.46 85% 126,731 3,086,762 9.8% 298,070 $16.37 90% 171,822 4,206,674 12.5% 347,803 $18.19 100% 262,050 6,446,497 17.5% 447,271 $20.01 110% 350,688 8,574,558 22.0% 545,144 $20.92 115% 392,002 9,547,880 24.0% 587,774 $21.83 120% 432,831 10,518,774 26.0% 630,404 $25.00 137% 574,241 13,896,809 32.8% 778,906

Sensitivity Analysis - Based on # CustomersAverage 5 Year 5

Number Cust/day year Profit Net Payback IRR Owner Comp151 80% 81,326 1,967,249 6.7% 248,445 161 85% 126,805 3,088,068 9.8% 298,152 170 90% 171,872 4,207,904 12.5% 347,858 189 100% 262,050 6,446,497 17.5% 447,271 208 110% 350,641 8,573,483 22.0% 545,097 217 115% 391,935 9,456,280 24.0% 587,704 227 120% 432,741 10,516,641 26.0% 630,310

Figure 36 - Sensitivity Analysis - $ Spent per Customer

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5.17 Sensitivity Analysis ChartReferring to Appendix 1, there is a tab labeled “189 Customers Spend $21.67”, this analysis

demonstrates what happens if a customer spends $21.67, which is $6.67 paid up front for

volleyball, plus $15.00 per day on food and beverages (base case was $11.52 on food and

beverage). This is a reasonable amount to use as $15.00 can buy an assortment of food and

beverage items off of the menu. The price a person pays to go see a movie at the theater is

much more than the $15.00 that customers can spend at Sand City. Shown in Figure 37 below,

you can see that if the customer spends $21.67 ($6.67 on volleyball plus $15.00 food and

beverage), just $3.48 more than the base case, the net income substantially increases and the

IRR rises to 25.5%. This analysis again shows just how sensitive this business is to the amount

spent per customer per day.

Year 1 Year 2 Year 3 Year 4 Year 5$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$101,318

$322,923$377,518

$236,038

$499,222$552,203

N et In com e

Base Case Spend $18.19

Spend $21.67

As shown in the sensitivity analyses, there will need to be a strong promotion on the sales of

food and beverage. Some examples of promotions are themed nights such as “Coors Light

Night” with beer specials, draws made each night for people who purchase pitchers of beer, and

burger and beer specials.

Carly Neil

Average 5 year Net Income = $425,652 IRR = 25.7%

Average 5 year Net Income = $262,050 IRR = 17.5%

Figure 37 - Sensitivity – Customer Spend $21.50

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6.0 Summary of Business PlanSand City Sport and Fitness is Saskatchewan’s first indoor beach volleyball facility, also featuring

a kitchen and bar. This new concept is open all year round and has a lot to offer the City of

Saskatoon and surrounding area. The target market is very large, allowing for anyone of any age

to play, featuring recreational and competitive leagues.

The number of customers visiting the facility per day and the amount that each customer

spends are very critical to the success of the business. There will be an aggressive awareness

campaign executed from three months before opening day right through Year 1. We want to

create a buzz and have people talking about Sand City and its offerings. We want people to think

of Sand City as a place with a great atmosphere, good people, good times, and a great food and

beverage menu.

The two main points to consider are if the business can attract the expected number of

customers and if they will spend the expected amount of money. As demonstrated in this

business plan, this is very possible. The numbers used were quite conservative, to ensure that

we were not overshooting the projections. In fact, if more customers come than expected, even

seven or eight players per team, or an outside crowd comes in to watch and enjoy the

socializing, the sales projections will also grow, creating even greater profits.

There is some competition faced in the summer months, but the demand in Saskatoon for beach

volleyball in the summer is so high at this time, that filling the leagues should not be an issue.

Competitors are selling out their leagues in a matter of days, and Sand City will be able to grasp

onto this demographic, as well as expand the target market, all year round.

In conclusion, Sand City Sport and Fitness will see success in the City of Saskatoon. This company

has a first-mover advantage in the province, and has a very different offering than anything else

in the area. With a fun and energetic team running the business, the atmosphere and happy

customers will continue for years to come. People will be thinking let’s head to the beach, “Sand

City: Love at First Spike” in no time.

Carly Neil

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Appendix 1See Excel Spreadsheet Labeled Sand City Financial Models

Carly Neil

Documents

Business plan - edwards.usask.ca Painter/businesspl… · Web viewThe beverage menu offers hard alcohol and beer; ... The awareness campaign will have a Sand City Squad who go around