The business is expected to grow through additional relationships with houseboat owners. These relationships do not require investments of capital, just the work of Robert Hopkins. The business will grow from three boats offered in the first year to eight offered in the third year. This can be done without expanding the marina, as these will all be relatively small boats.
Robert Hopkins will provide the bulk of the equity investment from the proceeds of the sale of his bed and breakfast business. Credit cards will provide a small amount of current borrowing. Additionally, a three-year loan will be taken out for the remaining required financing.
For the purpose of simplifying projections, Houses On The Lake projects that an average rental length will be a four-day period and that the houseboats will be filled with an average of three individuals per boat.
An average of 11 four-week rentals is projected to produce the monthly break even revenue per month. At first this will be difficult with three boats in the off season, although it will be possible once the first summer arrives.
Gross margins will improve in the summers and in future years as cost of sales are a lower rate during summer when rates and prices are higher.
Print marketing includes additional brochure printing and press kits for travel agents as needed. Marketing will increase as efforts intensify to market an increased number of boats and to market to owners.
Depreciation is for the depreciable assets of the marina (~$25,000) over a five year period.
Website marketing includes $1000 per month for ongoing search engine marketing, $750 per month for search engine optimization, and $250 per month for website hosting and maintenance.
Rent is set at $2,000 per month and utilities (electricity, phone, Internet for the office/store space) at $150 per month in the first year. Rent will increase based on increased space for moorage of boats at the marina.
Payroll burden includes payroll taxes and insurance/benefits for employees.
Office and boat maintenance covers light maintenance of the office/store and boats and general supplies.
Most costs are expected to rise at least with inflation.
Based on these projections, the business will have a loss in the first year and move to profit in the second, with significant profit in the third for Hopkins as the number of boats under management increases.
The business will continue to invest in some equipment for the marina in years 2 and 3 ($5000 per year). The business loan will be repaid over three years with 10% interest. Dividends can be paid to the owner starting in the third year and will be withdrawn with the goal of keeping approximately $40,000 in cash in the business to see it through off season months and to fund needs for renovation or repair to the marina or boats as needed. The credit card borrowing will be paid off over the first year.
The business will not be asset-intensive, as shown, as the houseboats themselves will be used through contract and revenue sharing with their owners. The office furnishings and the ski boats are the main assets of the business, and could be sold if the business folded. The liabilities of the business will decrease as the debts are paid off, improving the net worth of the business.
The ratios for Houses On The Lake are compared here to those for the Recreational Goods Rental - Houseboat Rental industry; NAICS code 532292/SIC code 7999, for businesses with less than $500,000 in sales. The gross margins for the business will not be as high as industry averages due to the revenue sharing that the Houses On The Lake business model requires with the boat owners. This also leads to a much reduced level of assets in the business.