Sightseeing Bus Tours Business 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.

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.

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.

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.

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.

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.