Double Decker Tours of Washington

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Sightseeing Bus Tours Business Plan

Financial Plan

Double Decker Tours of Washington's financial plan is detailed in the following sections.  Preliminary estimates suggest a substantial profit after our first two quarters of operations.  Income estimates are based on garnering 2% of the tourist/sightseeing business in Washington with a growth rate of 20% for the next three years and a growth of 10% after that.

All our financial projections present a conservative but realistic depiction of DDTOW's financial position based on loans and financing of $800,000.

8.1 Important Assumptions

DDTOW, LLC assumes the following:

  • Market growth projections for sightseeing will be down because of war fears that permeate the city but with over 4 million residents in the area and over 20 million visitors per year, DDTOW, LLC will be able to experience a 20% growth rate over the next three years.
  • Local economic conditions will remain viable and favorable to the tourism industry for the next five years.
  • International conditions will change from a war footing to peace thus increasing tourism to the city.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 24.00% 24.00% 24.00%
Other 0 0 0

8.2 Break-even Analysis

The break-even analysis is based on an average monthly fixed cost of approximately $121,200. By placing our ticket price between Tourmobile's price and Old town Trolley's, we needed only4,000 riders per month to break even. On a thirty-day basis that comes to about 134 riders per day or 12 riders per bus per day. During the fall, spring and summer months, we will more than surpass that number of riders.

Break-even Analysis
Monthly Revenue Break-even $111,821
Assumptions:
Average Percent Variable Cost 1%
Estimated Monthly Fixed Cost $110,741

8.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table, with sales increasing from more than $14 million the first year to more than $21 million the third, and profits varying substantially for the start-up phase of this business. We show a profit in the first year on 2% of 22 million visitors to the city or 453,000 customers which equals 1,286 customers per day or making two tours per day for 12 buses.

As with the break-even analysis, we are projecting very conservatively regarding cost of sales and gross margin. Our cost of sales should be much lower, and gross margin higher, than in this projection. We prefer to project conservatively so that we make sure we have enough cash.

The detailed monthly projections are included in the appendices.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $14,765,866 $17,679,253 $21,171,338
Direct Cost of Sales $142,631 $163,962 $191,410
Other Cost of Sales $0 $0 $0
Total Cost of Sales $142,631 $163,962 $191,410
Gross Margin $14,623,235 $17,515,291 $20,979,928
Gross Margin % 99.03% 99.07% 99.10%
Expenses
Payroll $750,000 $839,000 $996,000
Sales and Marketing and Other Expenses $144,000 $180,000 $220,000
Depreciation $61,090 $81,090 $101,090
Rent $84,000 $92,400 $101,640
Utilities $9,600 $11,520 $13,824
Insurance $18,000 $21,600 $25,920
Payroll Taxes $0 $0 $0
Local Taxes $24,000 $28,800 $34,560
Bus Maintenance $120,000 $144,000 $172,800
Bookkeeping/Payroll $18,000 $21,600 $25,920
Professional Asst. $6,000 $7,200 $8,640
Telephones and Nextels $7,200 $8,640 $10,368
Office Supplies $3,000 $3,600 $4,320
Brochures $4,200 $5,040 $6,048
Licenses/Permits $1,800 $2,160 $2,592
Website Maintenance $18,000 $18,000 $18,000
Miscellaneous $48,000 $57,600 $69,120
Uniforms $12,000 $28,800 $34,560
Total Operating Expenses $1,328,890 $1,551,050 $1,845,402
Profit Before Interest and Taxes $12,565,035 $15,903,677 $19,088,979
EBITDA $12,626,125 $15,984,767 $19,190,069
Interest Expense $73,075 $59,848 $44,757
Taxes Incurred $2,998,070 $3,802,519 $4,570,613
Other Income
Interest Income $0 $0 $0
Other Income Account Name $0 $0 $0
Total Other Income $0 $0 $0
Other Expense
Interest Expense $74,157 $60,564 $45,547
Profit tax $737,335 $927,140 $1,107,878
Total Other Expense $729,310 $60,564 $45,547
Net Other Income ($729,310) ($60,564) ($45,547)
Net Profit $9,493,889 $12,041,310 $14,473,609
Net Profit/Sales 64.30% 68.11% 68.36%

8.4 Projected Cash Flow

Cash flow projections are critical to our success. Our analysis shows strong cash generation over the projected period. Some of our assumptions for the cash flow table below are as follows:

  • We start repaying on the $800,000 five-year long-term loan at the very beginning of our operations. The first few months will be critical to our survival as we need to make sure that our cash balance remains strong.
  • We do not plan any additional long-term asset purchases, except for those summarized in the start-up table earlier in this document, for the first year. During the second and third year we budget $100,000 for each year for additional long-term asset, which may include some additional or replacement buses.
  • We assume collecting the District of Columbia's sales tax (5.75%) off the ticket sales. These sales taxes will be paid out quarterly. For all additional purchases (i.e., operational expenses and capital assets) we assume prices inclusive of applicable sales taxes.

The monthly cash is shown in the illustration below, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $14,765,866 $17,679,253 $21,171,338
Subtotal Cash from Operations $14,765,866 $17,679,253 $21,171,338
Additional Cash Received
Non Operating (Other) Income $0 $0 $0
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $14,765,866 $17,679,253 $21,171,338
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $750,000 $839,000 $996,000
Bill Payments $3,359,554 $4,646,520 $5,481,300
Subtotal Spent on Operations $4,109,554 $5,485,520 $6,477,300
Additional Cash Spent
Non Operating (Other) Expense $729,310 $60,564 $45,547
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $129,814 $143,408 $158,425
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $100,000 $100,000
Dividends $0 $0 $0
Subtotal Cash Spent $4,968,679 $5,789,492 $6,781,272
Net Cash Flow $9,797,187 $11,889,761 $14,390,066
Cash Balance $9,911,187 $21,800,947 $36,191,013

8.5 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendices.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $9,911,187 $21,800,947 $36,191,013
Other Current Assets $0 $0 $0
Total Current Assets $9,911,187 $21,800,947 $36,191,013
Long-term Assets
Long-term Assets $305,450 $405,450 $505,450
Accumulated Depreciation $61,090 $142,180 $243,270
Total Long-term Assets $244,360 $263,270 $262,180
Total Assets $10,155,547 $22,064,217 $36,453,193
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $372,022 $382,791 $456,583
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $372,022 $382,791 $456,583
Long-term Liabilities $670,186 $526,778 $368,353
Total Liabilities $1,042,207 $909,568 $824,935
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($420,550) $9,073,339 $21,114,648
Earnings $9,493,889 $12,041,310 $14,473,609
Total Capital $9,113,339 $21,154,648 $35,628,257
Total Liabilities and Capital $10,155,546 $22,064,217 $36,453,193
Net Worth $9,113,339 $21,154,649 $35,628,258

8.6 Business Ratios

We expect to maintain healthy ratios for profitability, risk, and return. The following table outlines some of the more important ratios from the Sightseeing tour company industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 4725.9902.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 19.73% 19.75% 5.03%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 38.77%
Total Current Assets 97.59% 98.81% 99.28% 63.07%
Long-term Assets 2.41% 1.19% 0.72% 36.93%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.66% 1.73% 1.25% 31.32%
Long-term Liabilities 6.60% 2.39% 1.01% 17.81%
Total Liabilities 10.26% 4.12% 2.26% 49.13%
Net Worth 89.74% 95.88% 97.74% 50.87%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 99.03% 99.07% 99.10% 39.36%
Selling, General & Administrative Expenses 9.89% 9.64% 9.43% 28.53%
Advertising Expenses 0.00% 0.00% 0.00% 1.21%
Profit Before Interest and Taxes 85.10% 89.96% 90.16% 1.07%
Main Ratios
Current 26.64 56.95 79.26 1.51
Quick 26.64 56.95 79.26 1.17
Total Debt to Total Assets 10.26% 4.12% 2.26% 2.79%
Pre-tax Return on Net Worth 137.07% 74.90% 53.45% 55.37%
Pre-tax Return on Assets 123.01% 71.81% 52.24% 6.25%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 64.30% 68.11% 68.36% n.a
Return on Equity 104.18% 56.92% 40.62% n.a
Activity Ratios
Accounts Payable Turnover 10.03 12.17 12.17 n.a
Payment Days 27 30 28 n.a
Total Asset Turnover 1.45 0.80 0.58 n.a
Debt Ratios
Debt to Net Worth 0.11 0.04 0.02 n.a
Current Liab. to Liab. 0.36 0.42 0.55 n.a
Liquidity Ratios
Net Working Capital $9,539,165 $21,418,156 $35,734,430 n.a
Interest Coverage 171.95 265.73 426.51 n.a
Additional Ratios
Assets to Sales 0.69 1.25 1.72 n.a
Current Debt/Total Assets 4% 2% 1% n.a
Acid Test 26.64 56.95 79.26 n.a
Sales/Net Worth 1.62 0.84 0.59 n.a
Dividend Payout 0.00 0.00 0.00 n.a