Youcan Adventures
YouCan Adventures
Sample Business Plan
(Other - Adventure Tourism)
Canada / British Columbia Business Services Society
601 West Cordova Street Vancouver BC V6B 1G1
Phone: 604-775-5525 In BC: 1- 800- 667-2272 Fax: 604-775-5520
http://www.smallbusinessbc.ca
YouCan Adventures
Business Plan for the period
starting May 2001
Executive Summary
Business Description
YouCan Adventures has been offering canoe and kayak rentals, expedition tours and
guiding services in Tripping Falls, Yukon since 1990. Joe Crow started the business 8
years ago and Tad Ishiyama has been the operations manager of the business for three
years. They plan to diversify the business and expand the length of the operation schedule
by adding mountain biking, dogsledding and ski touring activities to their product
offering.
Ownership and Management
Joe and Tad have agreed to restructure the business as a new corporation. Joe Crow will
roll the assets of his existing proprietorship into the newly created business and Tad
Ishiyama will contribute $100,000 in capital. Each will own 50% of the shares. Tad will
have the option to buy out the other half at a later date. Joe Crow spent the first 10 years
of his career prospecting for Eureka Gold Consortium. He moved on to work for Tundra
Sport Outfitters in Northern Alberta as a guide then manager of operations. He left
Tundra after 20 years to start YouCan Adventures an has built the business up over the
past 8 years.
Tad Ishiyama has been the operations manager of the business for three years. He came
to Tripping Falls from the Lake Louise, BC where he was the manager of a bicycle and
clothing shop following his wife's career move to the Yukon Ministry of Environment.
Tad has a Bachelor of Commerce in accounting and spent 4 years as an account manager
at Big Bank in Nelson before moving to Lake Louise for the skiing. Tad has been an avid
cyclist for many years and brings with him a numerous experiences as a customer on
mountain biking trips in the United States and Canada.
Key Initiatives and Objectives
The primary objective of the company is to expand the business to provide better
utilization of assets. This will be achieved by lengthening the period of operations from 4
months to about 9 months of the year. On top of the $100,000 investment by Mr.
Ishiyama, the expansion will be financed by a $50,000 term loan.
Marketing Opportunities
The Canadian Adventure Travel Industry grossed $165 million in revenues in 1993.
Within this market, the Yukon industry has grown at the rate of almost 20% per year
since 1987 and revenues totaled $5.74 million in 1995. Of the 118 adventure travel
operators in the Yukon in 1995, 21 provided guided canoe tours, 11 provided cycling
tours, 13 provided dogsledding and 9 provided ski touring. Although the industry has
come a long way in 10 years, there is still much room for expansion for well-run,
professional tour organizations in this region.
Competitive Advantages
YouCan Adventures has been in operation for 8 years. Joe Crow has built a reputation for
excellence in guiding services. He has a steady and growing stream of business, with over
20% of his customers returning for other trips. Our additional product line includes
mountain biking, ski touring and dogsledding in some of the most beautiful terrain in the
Yukon. YouCan has negotiated a contract with a First Nations band to put shelter cabins
on this land to service our adventure activities. Included in the contract are restrictions on
similar tourism-oriented leases for a term of ten years. Having these exclusive rights to
these structures on such ideal land will constitute a large benefit for the company.
Marketing Strategy
Our market is made up of a mixture of Americans, Canadians and off-shore visitors. Over
half of the total is US citizens, divided equally between Alaskans and other Americans.
The majority of Canadians are from BC or Ontario. Canoeists are generally from Ontario,
Minnesota or Germany. Dogsledders come primarily from Japan and mountain-bikers
come mainly from BC, Alaska and the West Coast. The promotional plan targets these
geographical regions as well as sport-specific media. The Internet will be used as a
effective promotional avenue and inclusion in key guides via association membership
will be pursued.
Summary of Financial Projections
Revenue projections for 1998 total $243,000. Canoe revenues are expected to decrease by
about 5% to $125,970, reflecting a diversion of resources toward developing the new
products. Revenues from camping and lodge receipts will be roughly the same, bringing
in $9030. First year revenue projections for newly added activities include: $42,000 for
mountain biking; $18,000 for ski touring; and $48,000 for dogsledding. Projections for
years two and three show a moderate but steady growth in revenue as they become
established, resulting in $317,556 in 1999, and $347,498 in 2000. Net income is expected
to increase from $7,743 in 1998, to $31,051 in 2000.
Confidentiality and Recognition of Risks
Confidentiality Clause
The information included in this business plan is strictly confidential and is provided on
the understanding that it will not be disclosed to third parties without the express written
consent of Joe Crow and Tad Ishiyama.
Recognition of Risk
This business plan represents management's best estimate of the future potential of our
business venture. It should be recognized that not all the major risks can be accurately
predicted or otherwise avoided and that few business plans are free of errors of omission
or commission. Therefore, investors should be aware that this business has inherent risks
that should be evaluated prior to any investment.
Business Overview
Business History
YouCan Adventures has been offering canoe and kayak rentals, expedition tours and
guiding services in Tripping Falls, Yukon since 1990. Joe Crow is 55 years old and
intends to retire in the next few years. He started the business as a single proprietorship 8
years ago after 20 years of working as a guide and manager for Tundra Sport Outfitters.
Tad Ishiyama has been the operations manager of the business for three years.
Joe and Tad have agreed to restructure the business as a new corporation. Joe Crow will
roll the assets of his existing proprietorship into the newly created business and Tad
Ishiyama will contribute $100,000 in capital. Each will own 50% of the shares. Tad will
have the option to buy out the other half at a later date. They plan to diversify the
business and expand the length of the operation schedule by adding mountain biking,
dogsledding and ski touring activities to their product offering.
Vision and Mission Statement
YouCan Adventures Ltd. is dedicated to providing quality adventure services and
accommodation to a selected range of customers.
Objectives
Our main objectives for the next year are to:
1. Increase existing rental and expedition revenues by 75%.
2. Obtain $50,000 term loan for new equipment.
3. Expand product and service line to include mountain bike tours and rentals in the
summer, and dogsledding and ski touring in the winter.
4. Expand and better target marketing effort.
Ownership
Joe Crow and Tad Ishiyama will each own 50% of the outstanding shares of the
company.
Location and Facilities
YouCan Adventures is located near the confluence of two of the most beautiful rivers in
the Northwest Rockies. Despite the proximity to the mountains, Tripping Falls also is at
the edge of 2000 square miles of flat or moderately hilly terrain. It is also within easy
driving distance of Whitehorse and is situated close to one of the major traffic routes
between BC and Alaska.
Tripping Falls is an ideal base camp to start or end river canoe and kayak journeys. The
nearby lake is suitable for landing floatplanes and is used for transport into more remote
expedition sites. In addition to water access, the foothills and mountain plains are ideal
for mountain bike excursions ranging from one day to two weeks. During winter months,
this terrain is also suitable for dogsledding and ski touring activities.
YouCan Adventures currently offers lodging to its customers. The lodge has an
expansive living room and four guest rooms. Two rooms havve queen-sized beds while
the two other rooms each contain two bunk beds, sleeping four apiece. One room has an
ensuite bathroom; the others share two common bathrooms.
There are also 10 campground spots set up on the property, 6 with electricity and water
facilities.
Products and Services
Description of Products and Services
YouCan Adventures has offered canoe touring, rental and expedition services for 8 years.
In addition, seeing an opportunity to offer complementary services, Joe Crow and his
wife Pamela started offering camping and lodging services 5 years ago. This allowed the
business to expand their revenue base by capturing a steady amount of pass-by overnight
traffic. As a result, they developed a market for 1 to 2 day excursions and straight rentals
from customers coming into camp for a night. Rental customers can either canoe the mild
river conditions for up to 50 km downstream from Tripping Falls, or strap the equipment
on their vehicle for a trip to one of ten suitable lakes within two hours of base camp.
YouCan will also provide transportation services for an extra charge to and/or from a site.
This service is included in any river trip from the lodge.
This season, the company plans to further offer mountain bike rentals and touring
services. The nearbyy terrain allows for an ideal mix of levels of difficulty and
endurance. Tours can range from a relatively low stress combination of local highway
and mining roads, to more challenging animal tracks and rocky, mountainous terrain.
Excellent opportunities exist for bikers who can afford fly-in expeditions as well. Two
superb routes exist for tours such as these, lasting 7 and 10 days respectively. Food and
supplies will be air dropped along the route near pre-defined camp spots so customers can
limit the amount of extra baggage they need to transport on the expedition to personal
articles.
YouCan will begin offering dogsledding and ski touring activities starting next winter
season. Dogsledding will include lodge-based day tours as well as multi-day expeditions.
Ski touring will also be offered this coming season. The terrain near Tripping Falls is
well suited for these activities and a number of preset routes are being developed.
Key Features of the Products and Services
All our adventure products come in pre-packaged and customizable form to provide as
much flexibility to the customer as possible. Taking into account the diverse range of
customers who come to the Yukon, it is important to offer a wide selection of activities.
The combination of products we offer is designed to attract both the pre-booked customer
as well as transient traffic and customers already in the Yukon looking for exciting
activities to add to their travel experience.
We offer two tours that combine canoeing and mountain biking. This is a unique tour
feature and will appeal to people who look for a varied routine in their adventure
vacation. These tours are designed so that neither activity is overly taxing, making them
accessible to a wider range of customers. Tour guides cater to a specific group's
capabilities, making the route more lenient or rigorous as required. Winter activities also
have the flexibility for combining both activitiies as well as varying the skill level.
For those customers who do not wish professional guiding services, we can provide rental
equipment and/or access to our cabins at camp areas out in the field. There are four sites
where we plan to build well insulated, basic, yet comfortable shelters for mountain-biking
tours. This service option reduces the weight of equipment needed to be packed and
increases the breadth of terrain that can be covered in each leg of the journey. They are
placed in sites that are ideal for one or two day excursions. They can be used as base
camps for excursions or can be linked together with two other existing cabins in a looped
circuit, covering a diverse variety of terrain. This route and the equipment stashes would
also be suitable for ski touring expeditions.
Production of Products and Services
Suitable transportation is required to move people, equipment and supplies from the
various points of activity. The company owns a van and trailer that will hold up to 10
people and their respective gear. If additional capacity is required, a similar van is
available for rental. A four-wheeler can be used to stock equipment storage sites and
provide any an emergency services required during an expedition. Similarly a
snowmobile is available for this purpose during the winter months.
Tours involving air travel usually require advanced notice due to a high demand during
the summer months. Package tours needing the use of aircraft are pre-booked and require
a three week cancellation notice to avoid paying penalties. In the case of last minute
custom tours, availability is up to the luck of the draw. Any cost premium will be
transferred to the client as this type of customer is relatively insensitive to price.
Experienced guides are reqquired to offer the customers a safe and interesting experience.
All of our guides are proficient in canoe and kayaking skills. Two of the four regular
guides have their American Canoe Association (ACA) certifications. Our guides are also
quite knowledgeable with respect to local history, native customs, geography and
geology of the region. In addition, one guide speaks German and Tad speaks Japanese.
The addition of dogsledding will be achieved by a buy-out of an existing business 100
miles away. The owner, Jim Samson, will trade his dogs and equipment including three
sleds in exchange for a guaranteed base salary and a percentage of the revenues resulting
in dogsled activities. He will be responsible for any debt that exists in his name. His
existing clientele will be retained and we will assume the marketing efforts.
Future Products and Services
We will continue to expand and diversify our editorial and magazine content according to
the wishes of our readers. We also plan to introduce a new Internet website and e-mail
"chat room" in order to solicit additional feedback from our customers.
Comparative Advantages in Production
Because of its road network, the Yukon has excellent highway access to back-country
wilderness areas. This level of access into pristine terrain can be a distinct advantage over
Alaskan operations.
Few local tour operators offer such a wide selection of activities. The wide range of
activities allows us to make fuller use of our equipment and facilities, thereby achieving
economies of scale. The length of our operating season helps us to retain staff year after
year, which improves the quality of our product. Our guides have good personal skills
and an in-depth knowledge of the area which can only be developed over many seasons.
Secondary activities such as wildlife or bird watching attract some visitors and round out
the experience of others.
Industry Overview
Market Research
To analyze market for adventure tourism and the segments, we collected information
from various sources. We talked to a number of mountain bike tour operators in BC and
Utah while participating in similar tour to understand the business, its customers and the
quality of service provided by other operators. We also reviewed literature and market
research reports covering the adventure travel industry. Sources included: Statistics
Canada, the Canadian Tourism Commission, The Professional League of Mountain
Sports, Adventure Research Group, the Yukon Department of Tourism, Discover BC and
the Yukon Bureau of Statistics.
Size of the Industry
The Canadian Adventure Travel Industry grossed $165 million in revenues in 1993. Of
this, $21.5 million was spent on canoeing amongst 96 operators, $4.4 million on cross-
country skiing amongst 19 operators, $3.0 million on cycling amongst 20 operators, and
$1.0 million on dogsledding amongst 19 operators.
According to the Yukon Visitor Exit Survey, total travel expenditures in Yukon in 1987
were $37 million, accounting for 193,000 visitors. The 1986 Interim Tourism Highlights
report indicated that adventure travel in the Yukon had accounted for $1.68 million in
revenue. Tourism Canada's report Adventure Travel in Canada indicated that adventure
travel revenues in the Yukon totaled $5.74 in 1993, reflecting a 20% growth rate each
year between 1986 and 1993. It shows little sign of slowing down. This region represents
3.4% of Canada's total adventure tourism receipts and 6.9% of the total number of
operators in the country.
It should be noted that the adventure activity in the Yukon is understated since there are
operators based in Vancouver, Toronto, and Alaska who plan and market tours that go to
the Yukon but are not included in the regional data.
Key Product Segments
Reflecting its past experience in the canoeing segment, YouCan Adventures will continue
to offer a range of products. YouCan's bread and butter business stems from tours lasting
6 to 10 days and requiring a low to moderate degree of skill. Canoeing has wide appeal
for consumers because of its accessibility to most everyone. Despite this, there are those
who are looking for more challenging expeditions in class 3 waters or higher and are
willing to pay a premium to get to these spots. We will continue to offer products tailored
to this segment. Depending on previous commitments, schedules can be rearranged at a
moment's notice.
Revenues from one or two day trips are not an insignificant source of revenue for
YouCan Adventures, but they are unreliable. The majority of these are arranged on an ad-
hoc basis, primarily from transient traffic. As such, these are an integral part of the
business, but are available secondary to pre-packaged tour products.
The preceding philosophy will apply to mountain biking, ski touring and dogsledding
segments. We will continue to offer a range of products that satisfy a range of ability and
time frames.
Key Market Segments
Next to Alberta, the Yukon has the highest number of foreign adventure travelers,
accounting for 59% of the market. The majority of these travelers are from the US, which
represents a large market for us. Roughly 40% of our canoe tour clients are American. An
even larger proportion of all travelers in the Yukon are American (80%), but a large
number of these are simply passing through to get to Alaska so they spend little money
here. Nevertheless, this explains the fact that our transient guest count at the lodge and
campsite accounts for 65% of this revenue segment. The other significant foreign
segment for the canoe business is made up of Germans, which make up 30% of our
business. Promotion in German guidebooks coupled with the strong interest of German's
in this sport account for these numbers. The domestic market for canoe is split roughly
equally between customers from BC, Ontario and the Yukon.
We expect our market for dogsledding will coome primarily from the Japan. Forty-
percent of customers in this category of adventure travel originate in Japan. Jim Samson
has had some luck with this market segment; Tad Ishiyama plans on building a strong
relationship with clientele through a focused marketing campaign using his language
skills and knowledge of the culture.
The mountain biking crowd is developing into a definable market segment. Ten years
ago, this was a very young market but it is now maturing and we see the main market
aging. Sixty-seven percent of mountain biking clients are between 20 -44 years old, with
a median age of 31. Twenty-seven percent partake as a couple but 32% participate with
one or more friends. Although mountain biking is most prominent in the West, from
which the majority of clientele is expected to originate, it is gaining popularity across
North America.
Similarly for ski touring, the median age is about 33 and consists mostly of people
traveling in groups with their friends.
Purchase Process and Buying Criteria
Foreign visitors opt for higher-priced packages having a longer average duration (7 days)
than those chosen by domestic adventure travelers (3.9 days). Foreign travelers prefer to
stay in cabins or cottages (59%) in the wilderness, whereas domestic visitors prefer tents
(32%). Despite the fact that foreign visitors in Canada prefer lodging, they realize that the
Yukon is a wilderness area. Most travelers here expect to be "roughing it" for at least part
of the time. We ensure that tenting on our canoe trips is as comfortable as possible. Extra
amenities such as gourmet meals and communal tent/areas provide a feeling of relative
luxury.
The quality of the guides is very important. The guide must be technically competent
while being knowledgeable, interesting and entertaining at different times. Cooking is
also the guide's responsibility. These factors can contribute to the customer's decision to
purchase if they are communicated properly in welll designed marketing material. Word
of mouth regarding past experiences often results in repeat customers or spurs family and
friends to try our product.
Along with the quality of amenities and service, customers buy adventure tours based on
the quality of wilderness, scenery and wildlife they expect to see. In addition to
spectacular mountain views and varied water scenery, wildlife siting and bird watching
are two very important secondary activities within the adventure market. There is often a
person on a trip that needs to know if he saw a varied purple-throated thrush. The
promise of a siting of a moose or grizzly is always a selling point in this region of the
world.
Description of Industry Participants
As of 1993, there were 46 adventure tour operators in the Yukon. Thirty-seven percent of
these offer activities that are included in YouCan's offering. This represents 7% of
Canada's 669 adventure tour operators. Within the North American perspective, Canada
has 96 canoeing operations which represents 25% of the combined North American total
of 386. The Yukon represents 2.6% of the North American total with 10 canoeing
operations.
Key Industry Trends
There has been a softening of adventure market as older segments of the population and
more women begin to participate in the various activities. Environmentally friendly
activities sports are growing steadily while certain activities such as hunting are leveling
off or declining in popularity.
Industry Outlook
Increasing sophistication of tour operators and increasing awareness of the Yukon as a
destination has contributed to annual rate of growth in the industry of almost 20%. It is
expected that this trend will continue for at least the next five years. Although the
industry shows a fairly high turnover in companies, established businesses are becoming
more sophisticated and larger as a result.
Marketing Strategy
Target Markets
We will continue to target canoe enthusiasts throughout North America. Americans
represent 60% of the market for adventure travel in the Yukon. Of this, half come from
Alaska. Minnesota, Michigan and Maine are known for high participation rates for
canoeing. Germany is also an important target in this market. In Canada, the canoe
market is concentrated in BC and Ontario.
We will concentrate on the Japanese and American markets with our promotions for
dogsledding and ski touring activities. The majority of hard core participants for
mountain biking will come from California, Washington, Utah, Colorado and BC but the
sport's popularity is growing across North America.
Description of Key Competitors
Competition in the canoeing market in Canada comes from Ontario (28 operators),
Manitoba, and Nova Scotia (both have 11 operators). Of the 96 operators in Canada in
1993, the Yukon had 10. Of these 10, 4 are based on lakes and are rental businesses only.
Four businesses are based out of Whitehorse and provide up to 6 package tours as well as
custom trips. The remaining two, including YouCan Adventures, are based outside of
Whitehorse and offer a full selection of tour packages.
There are three companies offering mountain biking tours in the Yukon. One is based in
Vancouver, one in Anchorage and the third in Whitehorse. The companies based outside
of the Yukon are fairly well established and offer the Yukon trip as part of a larger
offering of tours throughout the Pacific Northwest. The Whitehorse-based company
provides three tours within the Yukon at this point in time. Judging from their success in
the past three years, there appears to be room within this growing market to expand.
Outside of the Yukon, there are a number of areas that have a number of mountain biking
operators including California, Colorado, Utah, Wyoming and BC.
There are 5 dogsled operators in the Yukon and 2 ski touring concerns in the Yukon
representing 26% and 11% of the Canadian market respectively. There are 9 dogsledding
operations in Quebec, accounting for roughly half of the Canadian total. Competition for
ski touring comes mainly from BC where 47% of operators are situated
Analysis of Competitive Position
In the canoe business, we feel that we are well established and have built a reputation for
good service and value. Our tours are comparable or better than those offerred by other
operators in the Yukon and appeal to the person who likes the idea of having a base camp
from which to centralize activities. We do not have a physical presence in Whitehorse,
but still get many referrals from hotels, travel agents and the tourist bureau there.
The mountain biking industry is still small, especially in the Yukon. Despite this, the
terrain and possible routes in the Yukon make the potential market look very good. We
expect to see slow but steady growth in this sport and feel that now is the time to
establish ourselves as the leader in this market. Two of the three competitors are not
specifically committed to this area and the other is based out of Whitehorse. We believe
that being based nearer to some of the best mountain biking spots in the Yukon is a
diistinct advantage in this market.
Pricing Strategy
We price the our tours based on the market rates and our costs, targeting to achieve a
gross margin equal to or exceeding the industry average. The industry average for
canoeing was 19.4% in 1993. We have achieved an average gross margin of 24.3% over
the past three years. Prices for our canoe trips have been slightly above the Canadian
average of $90.96 per day. Average prices per day and gross margins respectively for the
other activities are: $121.75 and 30.1% for mountain biking; $202.30 and 24.8% for
dogsledding; and $115.01 and 10% for ski touring.
Promotion Strategy
Promotional tools must be designed with the following factors in mind: most adventure
travelers come from the US, half of whom come from Alaska; only 17% come with the
express purpose of adventure travel, it is just a part of their vacation; three-quarters of the
potential market visited attractions, half visited a museum, and one-quarter attended arts
and cultural events. We will continue to advertise in various magazines targeted
specifically to canoeing such as Canoe Magazine and Canoe and Kayaker's Monthly. For
the new activities, we will continue this strategy in magazines such as Bike and Ski.
More important than magazine ads is inclusion in travel guides and ensuring accurate
updates. The most widely distributed example of this is the Yukon Vacation guide,
published by the Department of Tourism. Similarly, inclusion in books such as The
Ultimate Adventure Sourcebook is invaluable. Offering familiarization (fam) tours may
be necessary to gain access to thesse types of books.
We have created brochures in the past and find them an effective marketing tool. We will
create a new brochure for distribution at museums, tourist info centres, to travel agents
and enquiring customers. A direct mail campaign will be undertaken, targeting past
customers and an appropriately segmented list of prospective customers.
YouCan will develop a promotional website that displays the products and provides other
information. Registration on all the major search engines with appropriate search terms is
essential. We will continue to use relationships with tour opearators to promote our other
products. We have joined the Canadasia Marketing Initiative. This association combines
the financial contributions of a number of Canadian tour operators and leverages this with
federal funding to co-market these products in the Japanese, Korean and Taiwanese
markets.
Distribution Strategy
Customers will be able to book with us directly through a 1-800 service and website as
well as through tour operators, wholesalers and travel agents. We provide a commission
to wholesalers and agents.
Management and Staffing
Organizational Structure
YouCan Adventures will be co-owned and operated by Joe Crow and Tad Ishiyama.
Aside from Joe's wife Pamela, the company will have a seasonal staff ranging from four
to six guides in the summer down to one or two guides in the winter months.
Management Team
Joe Crow spent the first 10 years of his career prospecting for Eureka Gold Consortium.
He moved on to work for Tundra Sport Outfitters in Northern Alberta as a guide then
manager of operations. He left Tundra after 20 years to start YouCan Adventures and has
built the business up over the past 8 years.
Tad Ishiyama has been the operations manager of the business for three years. He came
to Tripping Falls from the Lake Louise, BC where he was the manager of a bicycle and
clothing shop following his wife's career move to the Yukon Ministry of Environment.
Tad has a Bachelor of Commerce in accounting and spent 4 years as an account manager
at Big Bank in Nelson before moving to Lake Louise for the skiing. Tad has been an avid
cyclist for many years and brings with him a numerous experiences as a customer on
mountain biking trips in the United States and Canada.
Staffing
The canoe business currently requires 2 guides plus Joe and Tad to run the operation
during the four month season. It is expected that we will need one more guide to handle
mountain biking operation in the first year. Idle time will be spent researching new routes
and improving existing itineraries. Jim Samson will be employed to run the dogsled
during the winter. He will also be used as a secondary guide during the summer on larger
expeditions. He has some experience guiding in canoe trips and he is an excellent cook.
Pamela Crow will continue to run the lodge accommodations and food services.
Labour Market Issues
It is difficult to find quality guides. There are not many trained guides available in North
America which makes them a valuable commodity. As such, retention of staff is a
priority, especially in a seasonal business such as this. Our ultimate aim is to extend the
season for at least 2 months on each side of summer with ski touring and dogsledding
activities. This would better enable us to retain staff and reduce turnover year to year.
Regulatory Issues
Intellectual Property Protection
Trademarks, copyrights, or patents are not applicable to our business.
Regulatory Issues
There are no regulations at the moment for tour operators in our situation outside of our
Yukon business license. We follow standard safety guidelines to ensure our customers
are not put at unnecessary risk. Both of our guides are registered with the American
Canoe Association.
YouCan has negotiated a preliminary agreement for the lease of First Nations land to be
used for shelter cabin structures. Before construction is started on the shelter cabins,
YouCan must get land lease approval under the Territorial Lands Act which is
administered by the Department of Indian and Northern Affairs.
Risks
Market Risks
The number of competitors has increased steadily over the past 10 years. This
competition for the adventure travel market is mitigated by two factors. First, the number
of adventure tour participants has also steadily risen, allowing a growing number of
operators to survive. YouCan has done well to survive in an industry that sees a high
turnover in businesses. Secondly, YouCan believes that the development of the shelter
cabins will provide the company with a unique product that will be a distinct competitive
advantage in this market.
Other Risks
The Government of the Yukon may regulate this industry in the future. If this occurs,
adventure tour operators will be subject to meet standards set out in the legislated code of
standards. YouCan has kept high standards of conduct and safety in the past. It fully
intends to continue this practice in all activities it plans to offer.
Implementation Plan
Implementation Activities and Dates
Feb 1997: New company will be incorporated and assets will be transferred. Tad
Ishiyama will invest $100,000 into the company.
March 1997: Lease arrangements will be finalized for the four shelter cabin locations
with the local native band.
March 1997: Promotional plan put into motion. April-May 1997: Cabins will be built.
New mountain biking and related equipment will be purchased
Financial Plan
Discussion of Projected Net Income
Revenue projections for 1998 total $243,000. Canoe revenues are expected to decrease by
about 5% to $125,970, reflecting a diversion of resources toward developing the new
products. Revenues from camping and lodge receipts will be roughly the same, bringing
in $9030. First year revenue projections for newly added activities include: $42,000 for
mountain biking; $18,000 for ski touring; and $48,000 for dogsledding. Projections for
years two and three show a moderate but steady growth in revenue as they become
established, resulting in $317,556 in 1999, and $347,498 in 2000.
Direct cost of sales averages 40%, leaving a gross margin of 60%. Roughly half of this
direct cost goes to wages for the guides. The partners will be paid a monthly salary out of
overhead, however, so their guiding activities are not included in the direct cost figures.
Sales and marketing costs account for 7% of gross sales which is consistent with industry
practice.
Operating expenses account for 2% of gross sales. This is lower than the industry average
due to the low maintenance costs associated with canoes and bicycles.
Net income is projected to be $7,743 in 1998 to $31,051 in 2000. The increase in income
is due to increased revenue generation and better use of resources. The term loan is
payable over 3 years at an interest rate of 8%. Depreciation is calculated on a number of
items including the lodge and shelter cabin structures, touring equipment, computers and
vehicles at their respective rates. Combined provincial and federal taxes are calculated at
22.8% of net income before taxes.
Discussion of Monthly Cash Flow Statement
The $50,000 term loan and Tad Ishiyama's contribution of $100,000 will finance the
purchase of equipment and the building of the shelter cabins. In contrast to previous
years, YouCan will not rely on operating loans to finance activities in the off-season. The
company strategy will spread out the revenue stream over the full year, providing a
smoother cash flow in 1998 onwards.
Discussion of Projected Annual Cash Flow
Revenue streams will be adequate in 1999 and 2000 to ensure positive cash flows. The
planned $50,000 loan will be fully paid by the end of 2000.
Discussion of Pro-Forma Balance Sheet
The starting balance reflects the formation of the new corporation, with Tad contributing
$100,000 cash and Joe transferring assets from the existing business. Expansion plans in
the first year, including the purchase of land and equipment and the building of new
structures raise fixed assets to $250,000. The business will continue to add $25,000 of
equipment each year in 1999 and 2000 to accommodate projected growth in customer
volume.
Discussion of Business Ratios
We have compared our ratios to those compiled in a study by Tourism Canada of the
adventure travel industry. YouCan's overall gross margin of 60% is high with respect to
the industry average. However, if the partner's wages are worked into the cost of sales,
the margin is 30%, which is comparable. Return on assets climbs from 4% in 1998 to
15.5% in 2000 as the new product lines become established and equipment is better
utilized. Similarly, return on owner's equity rises from 4.8% in 1998 to 15.9% in 200.
Times interest coverage climbs quickly in Year 3, reflecting climbing income versus
dwindling term loan interest charges.
Note 1: Revenue Assumptions
a. Our Revenue projections by product and by month for the first year are:
Year 1
Canoe
Bike/Ski
Dogsled
Camp/Lodge
Total
Month 1
70
70
Month 2
70
70
Month 3
105
105
Month 4
350
350
Month 5
25,555
700
26,255
Month 6
32,395
12,000
1,575
45,970
Month 7
32,395
15,000
1,750
49,145
Month 8
25,555
15,000
1,750
42,305
Month 9
10,070
1,575
11,645
Month 10
6,000
16,000
700
22,700
Month 11
6,000
16,000
350
22,350
Month 12
6,000
16,000
35
22,035
Total
$125,970
$60,000
$48,000
$9,030
$243,000
b. Our revenue projections by product for Years 2 and 3 are:
Canoe
Bike/Ski
Dogsled
Camp/Lodge
Total
Year 2
132,269
90,000
84,000
11,288
317,557
Year 3
138,882
108,000
88,200
12,416
347,498
Note 2: Assumptions Regarding the Collection of Sales Revenue
a. We assume that the percent of our sales which are collected: in the month they are made; in
the month following; in two months; and in three months are:
Current Month
90%
In the Following Month
10%
In Two Months
0%
In Three Months
0%
Total
100%
b. Based on these assumptions we have projected how much we will collect from our sales in
each month. The following table also identifies any adjustments we may have made to these
figures.
Projecte
d
Adjustm Revised
Year 1
Collectio
ent
Estimate
ns
Month 1
63
63
Month 2
70
70
Month 3
102
102
Month 4
326
326
Month 5
23,665
23,665
Month 6
43,999
43,999
Month 7
48,828
48,828
Month 8
42,989
42,989
Month 9
14,711
14,711
Month 10
21,595
21,595
Month 11
22,385
22,385
Month 12
22,067
22,067
$240,80
$240,80
Total
$0
0
0
c. Not all of our sales in the first year will be collected during that year. Based on the
assumptions shown above our Accounts Receivable at the end of Year 1 will be:
$2,200
d. We assume that our Accounts Receivable at the end of Years 2 and 3 will be:
Year 2
$3,000
Year 3
$3,000
