1. business and industrial

logo created by kathryn duncan
Nauvoo Management Group
Brett Bartlett
Carl Dixon
Kathryn Duncan
Darren Walkenhorst
Brad Wilsted
plan submitted to Brother Keller
March 20, 2009
Rex Off-Road Rentals
Table of Contents
Executive Summary……………...………………………………………………………………..2
Business Profile
Current Situation………………………………………………………………………….……….3
Company Objectives……………………………………………………………………...……….3
Marketing and Operations
Target Market…………………………………………..…………………………………….……4
Product/Service Strategy…………………………………………………………………………..4
Operations Strategy………………………………………………………………………………..4
Pricing Strategy……………………………………………………………………………...…….4
Promotional Strategy………………………………………………………………...……………5
Management
Management Team…………………………………………………...……………………………6
Financial
Financial Projections……………………………………………………...……………………….8
Statement of Resource Needs……………………………………………………………………9
Implementation Schedule……………………………………………………………………….12
Executive Summary
Rex Off-Road Rentals is a local company that serves the college-aged market of Rexburg, Idaho
and the surrounding areas. The company helps provide another option to have a fun time in the
Rexburg area. Many college students come long distances to go to school and can’t bring
everything they need to have fun, so we can provide some of that fun by renting out ATV’s. The
opportunity to enter this market is now, because people want to have another option to have a
good time in the Rexburg area, and because of the lack of competition.
The ATV’s that we will rent out will be both automatic transmission and manual transmission.
The automatic transmission ATV’s will be for people who are beginners on ATV’s, youth, or for
people who just want to relax while they are riding around on the quads. The manual
transmission ATV’s will be more for the experienced ATV driver, and for those that want to go
into extreme off road areas. There are also two sizes of ATV’s a full size and a small size. Full
size ATV’s are usually for adults, and the small size ATV’s are usually for children.
The Rexburg area is a great place to rent ATV’s because of how rural the area is. Close by there
are mountains, sand dunes, farms, parks, rivers, and many other places where ATV riding can be
done. If the Rexburg area were more urban, it would make it much more difficult to have success
in renting off road transportation. Rexburg is also a place where a company can flourish for
lower costs than other cities. Since our costs will be substantially lower than other cities nearby,
Jackson Hole for example, we can rent our ATV’s at a cheaper price, while still maintaining a
large profit margin. The price for renting a large ATV is $60 per day per ATV. The price for
renting a small ATV is $40 per day per ATV. Whether you choose to ride an ATV with
automatic transmission or manual transmission the cost will stay the same.
Rex Off Road Rentals will be a relatively small business for the first few years. Our projected net
income after the first year is $20,000. The net income is projected to stay relatively close to
$20,000 until our fifth year of business when we plan to expand the company. After year five the
net income should increase at a steady rate. All investors will be paid off within a 10-year period.
The initial investment will be substantial because of the cost of buildings and ATV’s. We will
need to raise a total of just under $132,000 for the first round of investments. Rex Off Road
Rentals has huge potential and will be a huge source of income for those that choose to invest in
the company. Those that join with us in this venture will be involved in something very special,
and that will be very lucrative for everyone involved.
2
General Business
Rex Off-Road Rentals is a small local operation that will focus on serving the college aged
market of Rexburg, Idaho. There is currently an unmet demand among students who enjoy offroading, that are not able to supply their own off-road vehicles. Generally these students live in
apartments and are coming from other parts of the nation so the opportunity to own a fourwheeler at this point is unrealistic for them. We plan to provide these students with a couple
options that will give them the ability to get out and enjoy the outdoors. There will be two
varieties of four wheelers that we offer, the main difference being a manual or automatic
transmission. We will also provide trailers for the transportation of up to two four wheelers at a
time. If the customer doesn’t have a vehicle capable of towing then we will also provide a
delivery option.
Current situationThere is extreme opportunity for growth in this company, and we realize that there are also
obstacles that we must overcome, the greatest obstacle being that of getting the word out to our
potential customers. We have already taken steps towards over coming this by student surveys of
possible locations for the business site and models four wheelers that would be provided. The
most promising location that we have been led to is the building that was previously Craigo’s
Pizza which has sat vacant since that company moved. We have contacted the owner of the land
there and have established a five year loan with an option to buy at that point. We have also
contacted another local company, Rex MotorSports that will be supplying us with our four
wheelers. We still need to procure a supplier for our trailers and possible delivery vehicle.
Company ObjectivesFor the first year of we will focus on getting services visible. We will utilize campus advertising
and promotions through the Starving Student Card. As we our foothold grows in this untapped
market we will move a portion of our rentals to another site in St. Anthony near the sand dunes
that will allow customers to avoid the need to rent a trailer and provide them with the
opportunity to ride the four wheelers out of the shop and directly onto the sand dunes. We plane
to make this option a reality after the second year in business at the old Craigo’s location. By the
third year we take measures to buy the Craigo’s building and make it essentially a store front for
our company and move our operation chiefly to the St. Anthony location. We will also begin
providing a shuttle service from the campus to the dunes at this time.
3
Marketing and Operations
Product Consumer and Market Demographics:
The target consumers of Rex Off-Road Rentals will consist of students of BYU-Idaho living in
Rexburg. 60% of Rexburg’s population (2000 U.S. Census shows that Rexburg’s population
was 17,079) consists of young adults between the ages of 15 and 24. As BYU-Idaho’s school
population is steadily increasing, we will have a constant supply of consumers. We will focus
primarily on young adult males who are interested in escaping from the stress of school by offroading.
Consumers’ Motives:
Students in the Rexburg area generally live in apartments, meaning that they come from other
parts of the nation. This means that owning a four-wheeler is unrealistic for these students,
creating a need for rentals. Students are frequently looking for social activities (Family Home
Evening groups, dates, roommate outings, etc.), and Rex Off-Road Rentals can meet that need as
there are no competitors in the immediate area.
Product Strategy:
The only difference in between the two options that we will offer will be the transmission. One
model will feature an automatic transmission. This is preferable for those who are not familiar
with the sport of off-roading, and this will give them the simplest way to enjoy it. This also
lessens our loss in damages caused to a manual transmission by an inexperience rider. The other
option provided will be a manual transmission. For those who have experience dirt biking or
with other off-road activities this model will be the first choice. It gives them the control and
performance that they are looking for.
Operation Strategy:
Our operation will be very simple. We will provide our two models of four wheeler for pick-up
at our main store front or for delivery at another location. The employees that we will seek after
will be of the student/local population that have knowledge of the attractions of the area. Also a
basic knowledge of four wheelers, their maintenance, and operation will be required.
Pricing Strategy:
Rex Off-Road Rentals plans to offer a 10% discount for the first rental to students who use the
Starving Student Card or who show our ad in The Scroll. Each new season we will offer a new
promotion – with the first week of school offering a “rent one, get one half price” special. We
think that if we offer these student-focused promotions, they will be more likely to take larger
groups. This way, we will make more sales.
4
Promotional Strategy:
Rex Off-Road Rentals will use a variety of promotional strategies to draw in consumers. At our
first opening, we will primarily weekly advertise through The Scroll (BYU-Idaho’s student-run
newspaper) and the Starving Student Card. We will offer basic promotions for students who
reference these advertisements, such as free hats or t-shirts, as well as entering their names in a
monthly drawing for a free rental.
The location which we are pursuing is the vacant building that previously housed Craigo’s Pizza.
This building is extremely visible to the student population, so we will be especially dedicated to
making the location as aesthetically interesting and noticeable as possible to attract student
interest. Our promotion will focus around the idea that students need to “Rev up with Rex OffRoad Rentals!”
5
Management
Management Team:
Rex Off-Road Rentals, because of its size, will be a rather simple operation to run. The
management group is made up of a network of good friends who are very familiar with off-road
vehicles. Carl Barnes, founder, president, and CEO will lead the group with his expertise in
sales/rentals. Kathryn Kerns will be head manager, as she has excellent customer relation skills
as well as a delightful personality. Darren Watkins with his background in service and repairs of
off-road vehicles will be the Service manager. Brad McDonald will double as a sales manager,
and a marketing specialist. This team is very qualified and well educated in this line of business.
Their history, abilities, responsibilities, and prospective salaries are as follows:
Carl Barnes, President and Chief Executive Officer
Carl Barnes is a graduate of Brigham Young University-Idaho. Carl graduated with a B.S. in
Accounting, and later received his MBA from the Brigham Young Provo campus. Carl is very
self-motivated and loves the numbers. Carl started and sold three rental businesses in Utah,
similar to Rex Off-Road Rentals. His previous businesses were very successful and this will not
be his last venture. Carl’s previous salaries have varied with the success of his ventures, but he
averaged $80,000 to $100,000 a year. Carl prides himself on keeping very clean and precise
books, and will monitor all of the cash flow. Carl is interested in expanding the company to
provide more locations to reach a larger market. Although profits will be low in our first year,
Carl’s prospective wage will be $75,000.
Kathryn Kerns, Head Manager
Kathryn Kerns is an enchanting, well spoken, do all type of Manager. Kathryn received her B.S.
in English from Brigham Young University-Idaho. Kathryn has held several managing positions
of importance previous to this opportunity. She worked as a Customer Service manager at Best
Buy, Head of human resources at a Frito-Lay plant, and a regional customer service manager for
Trek bicycles. Kathryn is indeed over qualified for a simple head manager position, but wants to
spend more time with her family in a good town. Previously Kathryn averaged about $65,000 a
year. Kathryn will ensure that customers are pleased with their experience, and will be the initial
person to deal with customers who have damaged our vehicles. Kathryn will work with
customer complaints and do all to ensure the customer has had a good experience with their
rental. Kathryn will be compensated with $50,000 dollars a year.
Darren Watkins, Parts and Service Manager
Darren Watkins is the man. Darren has always been interested in all things that are considered
“manly”. Darren graduated from Brigham Young University-Idaho with a B.S. in automotive
technology. Darren formerly worked as a mechanic for a General Motors dealership where he
went on to be parts and service manager. Darren previously earned about $40,000 per year
which is also his projected salary at Rex Rentals. Darren will be in charge of the maintenance
and repair of the vehicles.
6
Brad McDonald, Sales Manager/Marketing Specialist
Brad McDonald is an upbeat person with many acquaintances, and has the ability to influence
others. Brad like Carl, Kathryn, and Darren is a graduate of Brigham Young University-Idaho.
Brad graduated with a B.S. in business management with an emphasis in marketing. This will be
Brad’s first job since receiving his degree. Brad has many contacts at the BYU-Idaho campus
and knows he will be successful at properly advertising for the company. Brad will also be in
charge of sales, and will be our head cashier. Brad’s salary will be $35,000 a year.
7
Financial
Carl Gardner Dixon, Rex Off-Road Rentals Chief Financial Officer, has prepared the following
budgeted financial statements concerning its first year of operations with explanatory notations:
income statement, balance sheet, statement of cash flows, and cash budget.
Rexburg Off-Road Rentals
Budgeted Income Statement
For the year ended December 31,2009
Rent Revenue
Expenses
Bank Expense
Employee Salary
Prepaid Expense
SG&A
Misc. Expense
Total Expenses
Net Income(loss)
$ 130,000
$ 56,000
20,000
5,000
5,000
10,000
96,000
$
20,000
Notes to Income Statement:
Rex Off-Road Rentals is expecting annual rent revenue of $130,000. This is calculated by
average rentals of the larger quad for $60 per day at 1500 rentals per year, $40 dollars per day at
1000 rentals per year for the smaller quad, and 640 trailer rentals at a cost of $25 per use.
Expenses include a building lease of $20,000 annually and financial startup costs.
8
Rexburg Off-Road Rentals
Budgeted Balance Sheet
For the year ended December 31,2009
Assets
Current Assets
Cash
Accounts Recievable
Inventory
Prepaid Expenses
Property, Plant, and Equipment
Equipment
Less: Accumulated Depreciation
$
50,000
16,000
46,000
13,000
10,000
(2,000)
Total Assets
$ 133,000
Liabilities
Liabilities
Lease on Building
Accounts Payable
Bank Loan Payable
Income Tax Payable
Salaries Payable
Total Liabilites
20,000
5,000
86,000
4,000
18,000
$ 133,000
Notes to Balance Sheet:
Rex Off-Road Rentals will collect the majority of its cash in from rent revenue. All major credit
cards will be accepted as well as checks, thus there is an expected $16,000 debit balance in
accounts receivable at year end. Since the building is being leased, it is not recorded on the
balance sheet under PP&E, but instead is recorded as a liability of $20,000. Mechanical
equipment to maintain all quads is recorded with its annual accumulated depreciation of $2,000.
All depreciation expense will be amortized at a rate of 20% over 5 years.
9
Rexburg Off-Road Rentals
Budgeted Cash Budget
For the year ended December 31,2009
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Cash balance, beginning
Add receipts:
Collections from cust.
Total Cash Available
Less disbursements:
Wages and Salaries
Merchandise Purchases
Utilities
Land Purchases
Miscellaneous
Total Disbursments
Excess (deficiency) of cash over disbutions
Financing
Borrowing
Repayments
Interest
Total Financing
Cash balance, Ending
$
$
18,000
$
10,650
$
10,425
2,000
20,000
20,000
30,650
20,000
30,425
10,000
19,250
15,000
20,000
3,600
67,850
(47,850)
10,000
40,000
15,000
3,600
68,600
(37,950)
10,000
40,000
15,000
3,600
68,600
(38,175)
70,000
70,000
32,050
70,000
70,000
31,825
43,000
43,000
(4,850) $
$
$
31,825
$
14,090
45,915
10,000
31,750
15,000
3,600
60,350
(14,435)
70,000
(9,000)
(2,690)
58,310
43,875
Notes to Statement of Cash Flows:
Prepaid expenses of $5,000 cover all insurance expenses. Insurance is paid for January 1 of each
year and amortized throughout the year monthly. Prepaid insurance expense includes insurance
on all quads, buildings, sheds, but does not include trailers. This was response to a decision made
by management.
The $40,000 of net income comes from the income statement. Property, Plant, and Equipment
includes all tire changing equipment, air compressors, storage sheds, extra parts, and store
furnishings.
10
Rex Off-Road Rentals
Budgeted Cash Budget
For the year ended December 31,2009
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Cash balance, beginning
Add receipts:
Collections from cust.
Total Cash Available
Less disbursements:
Wages and Salaries
Merchandise Purchases
Utilities
Land Purchases
Miscellaneous
Total Disbursments
Excess (deficiency) of cash over disbutions
Financing
Borrowing
Repayments
Interest
Total Financing
Cash balance, Ending
$
$
18,000
$
10,650
$
10,425
2,000
20,000
20,000
30,650
20,000
30,425
10,000
19,250
15,000
20,000
3,600
67,850
(47,850)
10,000
40,000
15,000
3,600
68,600
(37,950)
10,000
40,000
15,000
3,600
68,600
(38,175)
70,000
70,000
32,050
70,000
70,000
31,825
43,000
43,000
(4,850) $
$
$
$
31,825
Total
$
18,000
14,090
56,090
45,915
74,090
10,000
40,000
31,750
131,000
15,000
60,000
20,000
3,600
14,400
60,350
265,400
(14,435)
(191,310)
70,000
253,000
(9,000)
(9,000)
(2,690)
(2,690)
58,310
241,310
43,875 $
50,000
Notes to Cash Budget:
The above cash budget stresses the exact quarter where cash collections will be received. As
shown above Rex Off-Road Rentals is expecting increased cash inflows in the second and third
quarters due to the summer months and its inherent increase in demand. The $50,000 total
ending cash balance corresponds to the amount shown as cash on the budgeted balance sheet.
Quarterly loans will be taken out and repayments will begin in the last quarter. Rex Off-Road
Rentals is enthusiastic concerning its cash inflows for the year ending December 31, 2009.
11
Implementation Schedule
As shown forth by the cash flow statement and other financial statements, Rex Off-Road Rentals
is looking forward to having a successful business! However, in order to be able start out strong
and additional resources will be required to get Rex Off-Road Rentals up and on its feet. The
following is a projection of expected revenues and expenditures along with their dates of
purchase.
Each large quad will be rented for $60 per day per quad. Each small quad will be rented for $40
a day. Trailers will be rented for $25. It is projected that St. Anthony Motor Sports will have
total rent revenue from quads of $130,000. This is based on having an average of 10 large quads
being rented for an average of 150 days in the year, and 7 small quads being rented for the same
amount of days. Total rent revenue from trailers will total $12.500. This is based on renting
each trailer for $25, 100 times during the year. Total rent revenue is projected to equal
$119,000.
Regarding capital purchases it is projected that St. Anthony Motor Sports will need a loan of
$43,000 starting March 1, 2009. Each subsequent quarter Rex Off-Road Rentals will increase its
loans perpetually by $70,000 until the end of year one. Rex Off-Road Rentals will enter into a
lease contract for a warehouse starting March 1, 2009. This warehouse will be leased on an
annual basis for $20,000 and will act as a center of business transactions. It is already furnished
with plenty of storage space for the quads as well as a mechanics shop, office, and showroom
space. Rex Off-Road Rentals will not be buying a full selection of quads all at once. Beginning
March 2, 2009 it will purchase, on credit, 7 large quads and 7 small quads totaling $89,880.
Each large quad is expected to cost $6,800 with sales tax of 7% totaling $7,276. Each small
quad is expected to cost $5,200 with sales tax of 7% totaling $5,564. From there it will build on
the inventory base by purchasing one new quad of each size every month for two years. Five
trailers will be purchased, each costing $3,400 for a total of $17,000. Total capital expenditures
for the first year will equal $131,880. All accounts payable will be paid off over a 10 year period
with an interest rate of 8.7%.
According to break even analysis that Sales equal variable expenses plus fixed expenses, Rex
Off-Road Rentals will break even in year two during the third quarter. After this quarter Rex
Off-Road Rentals will Increase its repayment schedule to repay its prior financing at a rate of
20% in year two quarter three and 25% in subsequent years. Rex Off-Road Rentals looks
forward to a great future as shown by its projected financial statements.
12