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REVIVAL Auto Centre kkPrepared by: Aaron Moffatt

Nicole Batty

Business Plan

Prepared For: Prof. Marvin Painter Comm 447 Entrepreneurship and Sm Business Mgmt December 2nd 2011

Auto Restoration Centre – Business Plan

Table of Contents1.0 Executive Summary......................................................................................4

2.0 Business Overview........................................................................................52.1 Introduction...................................................................................................................................5

2.2 Mission Statement.........................................................................................................................5

2.3 Goals and Objectives.....................................................................................................................5

3.0 Industry Overview........................................................................................6

4.0 The Operations Plan.....................................................................................64.1 Work Plan......................................................................................................................................6

4.2 Site Plan.........................................................................................................................................7

4.3 Floor Plan.......................................................................................................................................7

4.4 Average Business Operations........................................................................................................9

4.5 Supply Analysis..............................................................................................................................9

4.6 Service Providers.........................................................................................................................10

4.7 Operating Expenses.....................................................................................................................10

4.8 Capital Budget.............................................................................................................................11

4.9 Working Capital Plan....................................................................................................................12

4.10 Business Structure.....................................................................................................................13

4.11 Considerations...........................................................................................................................14

5.0 The Human Resources Plan.........................................................................145.1 Organizational Structure..............................................................................................................14

5.2 Job Descriptions...........................................................................................................................16

5.3 Recruitment Plans........................................................................................................................17

5.4 Training Programs........................................................................................................................17

5.5 Strategy........................................................................................................................................17

5.6 Labour Break-down.....................................................................................................................18

6.0 The Marketing Plan.....................................................................................196.1 Competitors.................................................................................................................................19

Aaron Moffatt & Nicole Batty 2


6.2 Positioning...................................................................................................................................20

6.3 Marketing Mix.............................................................................................................................20

6.4 Target Market..............................................................................................................................22

6.5 Marketing Expenses.....................................................................................................................23

6.7 Objectives....................................................................................................................................24

7.0 The Financial Plan.......................................................................................247.1 Financial Structure.......................................................................................................................24

7.4 Ratio Analyses..............................................................................................................................26

7.5 Sensitivity Analysis.......................................................................................................................27

7.6 Break-Even Analysis.....................................................................................................................27

7.7 Contingency Plan.........................................................................................................................28

8.0 Conclusion..................................................................................................28

9.0 References..................................................................................................29

10.0 Appendices...............................................................................................3010.1 Appendix A – Financial Statements............................................................................................30

10.2 Appendix B – Expenses..............................................................................................................40

10.3 Appendix C – Marketing Samples..............................................................................................45

Figure 4.1 – Work Plan 7Figure 4.2 - Site Plan 7Figure 4.3 -2011 Floor Plan 8Figure 4.4 – 2016 Floor Plan 9Figure 5.1 – 2011 Organizational Chart 15Figure 5.2 –2016 Organizational Chart 15Figure 6.1 – Positioning Map 20Figure 6.2 Marketing Timelines 22Table 6.2 – Marketing Budget 23Figure 6.3 – Sales Projections 24

Table 4.1 – Suppliers 10Table 4.2 – Operating Expenses 11Table 4.3 – Capital Budget 11Table 4.4 – Shareholder List 13Table 5.1 – Supervisor Tasks 16Table 5.2 – Mechanic Tasks 16Table 5.3 – Hunter Tasks 17Table 5.4 –Labour Costs 18Table 6.1 – Competitors 19Table 7.1- Contract Clauses 25Table 7.2 – Financial Analysis 26Table 7.3 – Investment Analysis 26Table 7.4 – Liquidity Ratios 26Table 7.5 – Investment Utilization Ratios26Table 7.6 – Solvency Ratios 26Table 7.7 - Profitability Ratios 27Table 7.8 – Sensitivity Analysis 27Table 7.9 – Break Even Analysis 28

List of Figures List of Tables



1.0 Executive SummaryRevival Auto Restoration is a private corporation that will repair and refurbish classic cars for residents of Saskatchewan. This auto centre will be the only one of its kind in the Saskatoon area serving a large, ever increasing target market.

The services at Revival will be solely based on customer specifications. Beginning with a customer inquiry, the mechanics, sales personnel and body technicians will restore, repair and acquire parts for cars in a variety of conditions. A process plan that utilizes separate bays for each type of mechanical work will improve efficiency and avoid bottle necks.

Specialists in the automotive industry will represent Revival’s biggest expense and the most profitable competitive advantage. Revival will hire employees with knowledge and experience to fill its flat hierarchy by utilizing local, low-cost recruitment methods.

Revival will be promoted based on these employees’ expertise. By positioning itself as an expert on car culture and a quality service Revival will attract car enthusiasts living within Saskatchewan and its neighbouring provinces. Emphasis will be placed on forming close relationships with established car clubs and societies.

The financing of this business will be done through a combination of debt and equity. Profitability is achievable within the first two years of business with a minimum amount of associated risk.

The following plan provides more details on the proposed start-up of an auto restoration centre in Saskatoon.



2.0 Business Overview2.1 IntroductionRevival is an auto centre that offers restoration services and mechanical repairs, and acts as a link between consumers and parts manufacturers. The main feature of Revival will be the restoration of classic automobiles based on customer orders and specifications. With an emphasis on expertise and service Revival plans on becoming the only auto centre in Saskatoon that specializes in working on classic automobiles and outfitting them with specialized performance parts.

2.2 Mission StatementThe specialists at Revival will strive to provide premium automotive vehicles, repairs, and parts to detail-specific consumers. The focus of the company is the quality restoration of American-made automobiles in the muscle and sports categories.

2.3 Goals and ObjectivesLong-term goals have been identified along with a series of more immediate short-term objectives that assist with making the major goals more attainable.

To promote the classic car culture in Saskatoon• Attend functions of all substantial Saskatchewan car clubs and societies• Become a partner with Rawlco for Saskatoon’s next annual show and shine• Establish a presence at the local SIR racetrack

Establish an image and name synonymous with quality • Treat every potential client with courtesy and respect• Review every detail of finished automobiles before their given to customers• Conduct post-purchase satisfaction inquires

To become a profitable and sustainable organization• Break-even within two years• Generate a large enough customer base to warrant expansion within 5 years



3.0 Industry OverviewThe automotive industry has suffered many setbacks in the last few years due to bankruptcy and economic instability. The classic car market however has been spared these misfortunes. In fact the value of classic automobiles has risen over the last 30 years (Burton, 2011). This is due to the nature of the classic car industry. Overtime these cars experience extreme appreciation due to their rarity, brand equity and nostalgic value. In fact the sales of classic cars have generated returns starting at 12% (Burton, 2011). Looking at these facts it is safe to say that the classic car industry has escaped any major negative effects of the current economic climate. It is predicted that this will continue to be true as the economy remains unstable people are turning to investments in the form of tangible assets such as “art, wine and classic cars” (Burton, 2011). This does not mean the market is immune to any negative consequences. It is true that the sales at major auctions have increased 11% this year but this is only on certain makes and models (Reyburn, 2011). The market has become segmented. Some cars are experiencing substantial increases in value while others are decreasing. Thus the classic automotive industry has remained strong throughout troubled-years but it will remain a safe haven only for the vehicles that still posses high brand equity.

4.0 The Operations Plan4.1 Work PlanThe main component of the Revival business is restoring automobiles based on customer specifications. The following diagram illustrates how the process begins with a customer inquiry which is relayed to the hunter. The hunter then searches his database for an appropriate selection of vehicles for the customer to choose from. After making a selection the customer can then purchase the vehicle from Revival as is or enter it into the garage for restoration. The restoration process will differ based on each customer’s specifications but the general process will remain consistent. A vehicle will move from bay to bay depending on the work being done on it for the sake of convenience and organization. After completion the vehicle will be stored in one of the three extra bays until the customer takes possession. Other aspects of the business include doing mechanical and auto body repairs as well as ordering parts for customers. Each of these aspects follows the same work plan without step 3, going through the hunter’s database. Figure 4.1 assists in explaining this process.



Figure 4.1 – Work Plan

4.2 Site PlanThe ideal site for Revival has been located within a commercial area of Saskatoon known as Idylwyld drive. It was selected because of the consistent stream of traffic that drives by and for the current building erected on the site. This location was listed on a commercial real estate site as 7700 square feet with a 3300 square foot existing structure. (ICR, 2011). The current structure on this property was operated by a Kal-Tire chain so minimal building improvements would have to be done for Revival to take over. These improvements include painting the exterior and replacing the current business signs.

Revival will operate out of one building that serves as a shop and office space. The lot will adequately suit Revival’s needs during the initial stages of operation but Figure 4.2 includes the current site plan along with a plan to accommodate future expansion. Revival’s intentions are to purchase another commercial lot across the back alley to serve as the primary paint and storage center. These expansions are planned to occur within five to ten years.

2011 2016

Figure 4.2 – Site Plan

4.3 Floor PlanAaron Moffatt & Nicole Batty 7

CustomerOrder

RestorationSupervisor

Hunter

Storage

Customer

Autobody

Interior

Electrical

Transmission

Engine


The plan for Revival’s facility is to keep much of the existing floor plan currently used by Kal-Tire; its design will provide a smooth flow of work. Out of the eight car bays four will be operational, each one dedicated to a specific area of automotive repair and maintenance. Three of the other four bays will be used to store vehicles whenever needful. The final bay will be used as space for the operation of the necessary machinery.

Revival’s expansion plan includes making three car bays used as storage operational and converting the paint booth into another auto body terminal. This would give Revival eight functional car bays and double their capacity limits. This will be possible by procuring an adjacent lot that will be converted into an upgraded paint booth and an area of outside storage.

Figure 4.3 – 2011 Floor Plan



Figure 4.4 – 2016 Floor Plan

4.4 Average Business OperationsRevival will be open six days a week but will close operations on Sundays and statutory holidays. Business hours will be:

Monday – Saturday 8:00 AM – 5:00 PM

4.5 Supply AnalysisRevival will form a relationship with approximately five separate suppliers located in the United States. These suppliers were selected because they specialize in parts that are necessary for the restoration process. Each of these suppliers offers a 30 day period for payables that will allow Revival to collect their receivables from customers before paying for supplies. Year One Inc will be the primary supplier that Revival deals with. Due to their size and inventory they offer the most convenience when ordering car parts. This means that the supply chain for Revival has minimal amounts of risk associated with it. Any parts that cannot be provided by Year One Inc will be acquired from other large manufacturers all of which have a return policy and a guarantee on their products. If none of the following suppliers have a product the industry has many other options Revival can pursue.



Supplier Parts OfferedYear One Inc. GM, Ford and Chrysler partsElectric Limited Inc. Electrical suppliesLegendary Auto Interiors Ltd. InteriorsMr. G’s Enterprises Small partsABS Competition Enterprises Specialty EnginesTable 4.1 – Suppliers

4.6 Service ProvidersRevival will require a few basic services to be provided. SaskEnergy will provide natural gas while the City of Saskatoon will supply the power, water and sewage. Phone and Internet will be provided from a company such as Sasktel.

A few additional services that require expertise outside of Revival’s purview will also be outsourced. Legal counselling will be provided by Benesh Bitz & Company based out of Saskatoon and accounting services will be from Hergott Duval Stack also located in the city. Insurance will be purchased though the closest SGI accredited branch. Employee benefits will be guaranteed from the Co-operators due to the customizable features they offer.

Occasional repairs will have to be outsourced for the larger pieces of machinery. These services will be provided by the companies that Revival purchased the product from, such as Snap-on or Mac Tools. This is to ensure the work is done correctly and the warranty is not voided.

4.7 Operating ExpensesThe following table includes the annual cost of operating for Revival. As Table 4.2 indicates salaries and wages are the highest expense for the organization. Appendix B provides a detailed explanation of all expenses.



2012 2014 2016Property Taxes 13,000 13,658 14,350 Utilities 6,412 6,737 7,078 Wages 304,042 386,060 508,867 Employee Benefits 46,245 58,720 77,399 Repair and Maintenance 24,000 25,215 26,492 Other Variable Costs % Sales 31,500 36,486 50,696 Accounting 600 630 662 Legal 2,400 2,522 2,649 Insurance 600 630 662 Marketing 12,221 9,510 15,996 General Supplies 200 210 221 License 95 72 75 Fees 355 266 268 Equipment 10,000 10,506 11,038 Travel 15,032 15,793 32,376 Stationery 70 74 77 Capital Cost Allowance 24,060 38,684 37,383 Debt Interest 11,117 9,451 33,712 Total operating Expenses 501,949 615,224 820,001

Operating Budget

Table 4.2 – Operating Expenses

4.8 Capital BudgetThis budget is compromised of the necessary start-up costs for Revival. Appendix B provides a detailed summary of all costs.

2012 2014 2016Land 150,000 - 80,000 Buildings 457,050 - 270,000 Furniture and Fixtures 5,441 - 200 Equipment 143,753 - 23,622 Total 756,244 - 378,822

Budget Summary

Table 4.3 – Capital Budget



4.9 Working Capital Plan4.9.1 InventoriesDue to the nature of Revival’s restoration centre, very little inventory will be kept on hand. The service offered will be unique to each and every customer specification. The needs of each customer will be assessed and the necessary parts will be ordered when needed. Revival plans to keep a small amount ($10,000) of generic inventory on hand that will be necessary for most jobs; items such as nuts and bolts. This generic inventory will be fairly small items that will be easy and cheap to store. Revival will also have very little need to hold finished goods in inventory since projects will be picked up almost immediately upon completion.

Average days for generic unfinished inventory: 30

4.9.2 Accounts receivableAlthough Revival offers a relatively high cost service it may not be beneficial to offer financing or credit to customers. The target market and consumer profiles suggest customers will be able to afford Revival’s services without financial assistance. This approach will save the business from many potential problems associated with giving people credit, such as invoicing, collection policies and people refusing or being unable to pay. This is feasible because the customer will receive monthly bills which must be paid before they can take the finished project.

Average days for our accounts payable: 0

4.9.3 Operating line of creditSince Revival is keeping a very low inventory, a line of credit will be used to purchase the majority of the supplies and parts required for each job. A $100,000 line of credit that is secured against the building at a rate of prime plus .7 will be more than adequate.

4.9.4 Accounts PayableRevival’s suppliers offer credit terms of 2/10 net 30 so it is beneficial to take the 2% discount within the 10 days offered based on the following:

Cost of not taking discount = (2%/98%) x (365 days / 20 days) = 36.5%

This means the cost of financing a part through the supplier would be an additional 36.5% whereas the line of credit can finance the part for a mere 3.5%.

Average days for our accounts payable: 10

4.9.5 Cash conversion cycle (CCC):



CCC = Average days inventory + Average collection period – Average Days PayablesCCC = 30 + 0 – 10CCC = 20

4.10 Business Structure Revival will be a private corporation due to the following advantages:

• Limited liability• Access to Capital• Continuity of business• Income tax deferment

These advantages outweigh the minor inconveniences of paying an annual fee or disclosing financial information. Revival will state a fiscal year end of December 31st for the sake of convenience. The primary shareholders will also form the board of directors and hold various officer positions. This is to take advantage of their various skills and knowledge. After the issuance of 1,000 shares primary ownership will belong to the President/Director with the remaining shares divided among the other five directors. All of these will be Class A preferred shares so each shareholder receives voting rights along with security against bankruptcy and a claim on assets.

Personal Information

Position Number of Shares

Ownership Skills and Knowledge

Aaron Moffatt CEO/Director 200 20% Concept creator Nicole Batty President/Director 300 30% Concept creatorBruce Batty Vice

President/Director125 12.5% Entrepreneur and

car enthusiastRob Greensides

Secretary/Director 125 12.5% Industry Knowledge of car sales

Chuck Rust Treasurer/Director 125 12.5% Entrepreneur and knowledge of auto body industry

Curtis Nelson Director 125 12.5% Entrepreneur and knowledge of car dealership/garage industry

Table 4.4 – Shareholder List



4.11 ConsiderationsOther aspects of business operations have been considered to ensure that Revival encounters no unforeseen issues.

4.11.1 Capacity LimitsDue to the limited amount of car bays and staff members Revival will only be able to accommodate three automobiles at a time. The number of vehicles per year is limited only to the amount that can be annually put through these three bays. The circumstantial nature of each vehicle makes predicting the annual number of vehicles difficult.

4.11.2 Cost of SalesAs previously mentioned the circumstantial nature of this business makes estimations difficult. Revival will maximize the return on service with a 100% margin on labour. The gross profit margin for parts however will be on the low average of industry at 30% in order to attract customers. Schedule 3 in Appendix A explains how these margins will be achieved.

4.11.3 Quality ControlThe services provided by Revival will need a limited system of quality control. To ensure that the mechanical staff correctly perform the necessary procedures the vehicle will be evaluated before being given to the customer. These evaluations include:

• Performance Measurements such as dynamometers• Standardized 100-point inspection• Comparison to Costumer Specifications

To further ensure a level of quality, Revival will offer a limited-warranty for 12 months with the single stipulation that it does not apply to any performance parts. This is an industry norm due to the nature of these parts.

5.0 The Human Resources Plan5.1 Organizational StructureThe initial organizational structure for Revival will be relatively flat. As Figure 5.1 indicates below the Board of Directors and Officers there are only two levels of employees. The managerial position will initially be held by one individual but in the expansion plan the managerial responsibilities will be divided between two positions. Figure 5.2 shows that the reasoning for this is an increased staff and a more functional organizational structure split into



the sales and restoration departments. There will also be an increase in the restoration crew and an additional hunter to accommodate the increase in business.

Figure 5.1 – 2011 Organizational Chart

Figure 5.2 – 2016 Organizational Chart


CEO


"Hunter" Engine Mechanic

TransmissionSpecialist

AutobodyTechnician

CEO


Engine Mechanic

Engine Mechanic

TransmissionSpecialist

Transmission Specialist

AutobodyTechnician

Autobody Technician

Sales Supervisor

"Hunter" "Hunter"


5.2 Job DescriptionsAll Employees will work 8:00 – 5:00 daily and receive 1 hour unpaid lunch break as well as thirty minutes of paid breaks throughout the day. Described below are the responsibilities and duties of each organizational level.

Restoration Supervisor

Daily Tasks Weekly ResponsibilitiesMeeting with Shop Team to review their schedules for the day

Plan facilitation and scheduling of new orders

Contact Suppliers and order parts/tools as needed

Review Shop Team productivity to ensure on schedule

Receive and store any parts shipped Check shop cleanlinessAssist Shop Team when necessary Ensure stock and cleanliness in offices and

reception areaJoin Shop Team on coffee breaksOversee Reception Area (greet customers, answer phones, etc.)

Monthly Responsibilities

Take Car Orders Compile payables from suppliers and deliver to CEP

Deal with incoming or out-going vehicles Compile receivables and send bills to costumers

Draft contracts with customers Update customers on progressContact Hunters to determine whereabouts/tasksTable 5.1 – Supervisor Tasks

Shop Team

Daily Tasks Weekly ResponsibilitiesReceive instructions from supervisor Clean Hoist AreaWork on assigned project for necessary time Meet with supervisor to review feasibility of

next week scheduleTake two 15 minute coffee breaks in staff roomWhen completed project move on to nextIf no new projects available assist shop-mate of do necessary work at shop ie- organize storage, machinery maintenance, etcTable 5.2 – Mechanic Tasks



Hunter

Daily Tasks Weekly ResponsibilitiesResearch possible vehicle locations Update vehicle databaseTravel to inspect/retrieve vehicles Meet with supervisor

Table 5.3 – Hunter Tasks

5.3 Recruitment PlansThe workforce at Revival requires a high level of skills and knowledge, thus it is vital to acquire people with a certain degree of education and experience. The restoration supervisor must be someone with previous managerial experience and certified as a journeyman mechanic specializing in any area. The shop staff will all be required to have their journeyman certification or an equivalent amount of work experience in their expert areas. To recruit these people, job descriptions and wanted ads will be included on the following:

• Workopolis.com• SaskJobs.ca• SaskatoonJobShop.ca• Kijiji• The Star Phoenix• Siast Job Postings

These mediums were selected because of their ability to reach potential employees. However, if these methods fail to yield applicants with the necessary skills, a more active recruitment method of personally contacting current mechanics will be utilized. Enticements such as task variety, enrichment and job autonomy will be used to attract applicants. Revival also plans to attract and retain employees by offering competitive wages. Emphasis is put on building a team that customers can trust and form relationships with.

5.4 Training ProgramsThere will be no extensive training programs at Revival. Upon arriving at the organization, all new employees will be given a tour of the facility and an explanation of duties, expectations and safety procedures. These individuals will be professionals that know how to perform their tasks, rendering a formal training program unnecessary at this point.

After expansion, Revival will consider hiring trainees who will be provided with on-the-job mentorship and training. These trainees will also be offered the chance to have their apprenticeship costs subsidized upon an agreement of further employment.



5.5 StrategyRevival will promote a family culture with an emphasis on car enthusiasm. This will be done by treating the employees as individuals and always focusing on the value they bring to the organization. The strategies for this plan are as follows:

Constant acknowledgment of achievements in the form of written or verbal recognition and commemorative images displayed in the reception area

Personalized rewards after completion of goals or for special occasions Sponsor employee attendance at any local car events Encourage employee use of equipment after hours Annual employee trips or events

This will foster employee commitment and provide meaning to their work. The purpose of this strategy is to make the staff feel valued, as well as to create an environment where they feel empowered and able to do their jobs well. Revival will strive to provide its staff with a job they enjoy doing every day.

5.6 Labour Break-downTable 5.3 explains all the components that make up the labour expenses for Revival. It includes all the extrinsic rewards and benefits that will be provided by management. As mentioned before, an expansion is planned after five years of successful operations which explains the increase in labour costs for 2016. The high expenses of this table reflect the emphasis Revival will place on recruiting an educated and satisfied team of employees.

2011 2014 2016Full-Time 296,039 374,706 493,095 Part-Time 8,003 11,351 15,772 Benefits 46,244 58,719 67,314 Rewards/Gifts 1,500 1,500 3,000 Total 351,786 446,276 579,181

Labour

Table 5.4 – Labour Costs



6.0 The Marketing Plan6.1 CompetitorsSaskatoon was selected for the first Revival retail location because it is an untapped market. There are currently no direct competitors operating anywhere in the greater Saskatchewan area. Table 6.1 includes all the near and far competitors that Revival will encounter in Canada. There are only two near competitors, Cars by Nibet in Alberta and Boot Hill in Ontario. The other competitors are basic dealerships located within the Saskatoon area. They are included as competitors because some of the more standardized parts that consumers will need for their classic cars could be ordered through these dealerships. However it is projected that they will take a minimal share of Revival’s potential market.

Near Competitors LocationCars by Nibet Cochrane, AlbertaBoot Hill Erin, Ontario

Far Competitors LocationAuto-Clearing Chrysler Dodge Jeep 331 Circle Dr W, SaskatoonCars R Us 400 43rd St E, SaskatoonDodge City Auto 220 8th St E, SaskatoonBridge City Auto Sports 2100A Millar Ave, SaskatoonJubilee Ford Sales 1111 Louise Ave, SaskatoonMerlin Ford Lincoln 715 Melville St, SaskatoonSaskatoon Motor Products Ltd 715 Circle Dr E, SaskatoonSherwood Chevrolet Oldsmobile 550 Brand Rd, SaskatoonVillage Super Centre 429 20th St W, SaskatoonWheaton Pontiac Buick Cadillac GMC Ltd 2102 Millar Ave, SaskatoonTable 6.1 - Competitors

The two near competitors have been furthered analyzed. They are also not a major concern for Revival mainly due to their locations. None of these auto centers are close enough to be competing directly for the same customers. They also have very different marketing mixes. Cars by Nibet is a small operation based on an acreage in Alberta with very limited advertising that appears to only be done locally. Boot Hill is a large organization, but most of their advertising appears to be through social media techniques with their website being heavily utilized. The positioning of these organizations also differ from Revival’s. Cars by Nibet concentrates on primarily classic imports, while Boot Hill focuses on Hot Rods. To better illustrate this, a positioning map has been prepared. The axis on this map compare the year of automobiles the organization specializes in and the emphasis they put on having either original components or performance parts. After placing Revival and its main competitors on the map it



became clear that competition will not be a major issue for the organization. Revival will have a first-mover advantage in Saskatchewan.

Performance

1920s 2011Original

Figure 6.1 – Positioning Map

6.2 PositioningAfter analyzing Revival’s direct competitors, a positioning plan has been developed. The desired position for Revival is to be seen as experts on muscle cars that offer quality service. To communicate this desired position to the staff and consumers, the following positioning statement was created: “For the expert and novice car enthusiast Revival is an authority on the restoration and preservation of classic American-made automobiles.” This positioning will be achieved through the following marketing mix.

6.3 Marketing Mix 6.3.1 ProductRevival will offer three different types of services: repairs, parts shipment and complete restoration projects. A few main features of the business will be the atmosphere and the quality of service. These intangible features will need to be promoted along with the actual services in order to achieve the desired positioning. Customers will purchase these offerings because the consumers in the target market are already car enthusiasts, and Revival offers a service to improve the condition and performance of their valuable automobiles. These customers want show-worthy vehicles with maximum performance and Revival has the knowledge and expertise to assist them.

6.3.2 PriceThe pricing for Revival is based on a competitive strategy. It was developing using a market-based approach. The price for labor will be based on billable hours, for every hour a mechanic works on a project the customer will be billed $100. Revival will also charge for parts with a mark-up starting at 30%. This mark-up will be determined by the type of the part, and will be a percentage between 30% and 100%. These prices were chosen for multiple reasons. The industry average for this type of mechanical work is between $65 to $135 (Mechanic Finder, 2011). Revival chose to select a price-point that would allow them to be positioned as quality experts and perceived as a premium location without over charging customers. Another reason



for this pricing strategy is because it allows Revival to become profitable within 2 to 3 years. It also allows Revival to operate at less than maximum capacity during the initial, awareness-building years.

6.3.3 PlaceRevival will sell directly to consumers. It will have two distribution channels to provide offerings to consumers. The first one is when the vehicle bodies need to be initially picked up or dropped off after completion. This will be done using the Hunter’s truck and trailer at no expense to the customer. The second distribution channel is when individual parts are ordered from the manufacturers. If the parts are being utilized by the Revival mechanics during restoration, the products will be shipped using the manufacturer’s preferred method to the Revival Auto Centre. If the part is order by a customer for their own restoration process, then the part will go from the manufacturer directly to the customer without arriving at Revival using a priority shipping method such as Fedex. These channels were selected because they ensure that the finished product is treated with due care and that the parts are delivered to the costumer in a timely manner. Even though priority shipping may incur more costs, a timely delivery is valued by the consumers in this industry, and will present Revival with an advantage over slower competitors.

6.3.4 PromotionsThe promotions for Revival will have the sole purpose of creating brand awareness. At this point the goal will be to increase the number of people that know about the company. In order to do this every consumer touch-point will be integrated. This includes every aspect of the business that a consumer will encounter such as the promotional items, the store front and the reception area. These touch-points were selected because it is important for Revival to have promotions with a high frequency rather than a large reach at this point. They will all be designed to move Revival closer to their desired position by utilizing a consistent red and black color scheme and featuring the campaign slogan: “No Replacement for Displacement”. This slogan was developed because it conveys the appropriate message to consumers, that Revival is an authority on classic cars, while also utilizing a common expression that will be familiar among the target market. Each touch-point and the desired timeline for utilizing them is include in Figure 6.3 below. Examples of the main promotional items are included in Appendix C.



Time Lines 2011 2014 2016 2018

Store

Magazine Ads

Pamphlets

Gifts

Car Shows

Website

Commercial

Burnout Competition

Figure 6.2 – Marketing Time-lines

6.4 Target MarketRevival chose to segment the market based on four factors. The gender will be males between the age of 25 to 65 making an income of $50,000 or more annually, and residing in the Prairie Provinces.

This market is currently unsought by any competitors. It also presents a viable source of customers. According to Stats Canada there are 2, 164, 400 males in the segmented age group living in these provinces, with 355,000 of them residing directly in Saskatchewan. A large portion of these males are car enthusiasts. Auto Events is a website that compiles a list of all automotive events in the Canadian prairies and neighboring states. Its list includes over 100 car shows this year alone. Many of these car shows in Saskatchewan receive considerable attendance records; an annual event in Saskatoon attracts over 900 cars and automobiles (Tourism Saskatoon, 2012). Another source of potential customers are the members of local automobile clubs. There are approximately 70 of these clubs in the prairies (Auto Clubs, 2011). It is not foreseen that any environmental, technological or social trends will have an impact on the availability of this target market. Regardless of advances in the automotive industries or social trends, these car enthusiasts are loyal to their favored muscle cars.



Based on the demographics explained above, it is predicted that the business will attract two distinct sets of consumers, so to better understand their needs the following profiles have been developed:

Rob - Rob is a farmer with mechanical experience. He has been working with his hands his whole life and is familiar with an engine. While he is able to do much of the work himself, he does not have the education or technical expertise to do it all. Todd – Todd is a retired businessman. Ever since boyhood he has wanted a classic muscle car, but without the mechanical-inclination or funds he was unable to get one until now.

6.5 Marketing ExpensesTable 6.5 includes the costs of all advertising and promotional materials projected for the next 7 years of operations. A detailed explanation of each expense is included in Appendix B.

Marketing BudgetItem 2011 2014 2016 2018AdvertisingMagazine Advertising 5,260 5,260 6,160 31,160Pamphlets 2,138 2,138 4,276 4,276Commercial - - - 10,000Total Advertising 7,398 7,398 10,436 45,436

PromotionGifts 1,599 - 2,359 -Car Shows 1,222 800 1,200 1,200Event - - - 530Website 2,000 1,080 2,000 1,080Total Promotion 4,823 1,880 5,560 2,810

Table 6.2 – Marketing Budget

6.6 ProjectionsSales and profit projections for a five year period have been developed. These projections are estimates for the billable hours that will be worked and the mark-up that will be gained from the sale of parts. Figure 6.6 illustrates the sales that Revival has developed after reviewing marketing expenses and market place demographics. A more detailed description of these projections can be found in schedule 2 of appendix A.



Figure 6.3 – Sale Projections

6.7 Objectives Two initial objectives have been set for Revival. After completion of each objective, another will be added so Revival becomes an organization continually working towards growth and innovation.

To achieve market share of 20% within year 1

• To achieve financial stability by year 3

7.0 The Financial Plan 7.1 Financial StructureTo finance the $756,244 required in initial capital costs, Revival will use a combination of debt and equity financing. A loan of $158,811 will be obtained from the Conexus Credit Union, the land and equipment purchased by Revival will be used as collateral for this loan. The remaining $597,433 will be financed through the selling of common shares. There are other sources for financing that will be explored. Specifically there are two grant programs provided by the federal government. Program W02-B offers $150,000 for women entrepreneurs, and program C04-B offers up to $45,000 for young entrepreneurs (Centre for Small Business Financing, 2011). These programs will be used as additional financing to supplement the debt and equity; they have not been included in the financial statements because there is no guarantee of procuring these grants due to the number of people competing for them. An expansion is planned for 2016 which will require an additional $373,822. This will be financed through



additional bank debt secured once again from the Conexus Credit Union under the same contract clauses. Any necessary asset replacement has been accounted for in the operation expenses each year and will be financed by profits reinvested in the company.

7.1.1 Debt ClausesRevival will sign a debt contract with Conexus Credit Union to receive the necessary $158,811. A summary of the most important clauses in this contracts are included in Table 7.1. Other clauses will be negotiated prior to receiving the loan.

Clause MeaningAcceleration Clause The full amount of the debt will be called in

immediately if one of the clauses is not fulfilled

Missed Payment Clause If a payment is missed a time an allowance time will be set after which the bank will take action in the form of foreclosure or receivership

Fist Mortgage Clause If the business declares bankruptcy the bank will take possession of all major assets

Dividend Clause Dividends will not be permitted if payments are in arrears or if an adequate cash balance is not maintained

Table 7.1 – Contract Clauses

7.1.2 DepreciationThe assets purchased through these financing sources will be depreciated through a declining balance approach based on the federal CCA rate, as seen in schedule 8 of Appendix A. Revival has three different classes of debt amortization. The first class is buildings.It will be depreciated by a rate of 4% , which assumes a lifetime of approximately 30 years. The other two classes are furniture and equipment, which are both depreciated at a rate of 4%, with a lifetime of 5 years.

7.2 Dividend PolicyFor the five years of operation, Revival will re-invest any profits to assist the company in the next year’s performance. If Revival continues to see future success, $150,000 will continue to be reinvested in the operation of the business. Any excess profits that are generated will be paid out in the form of dividends to common shareholders.



7.3 Financial AnalysisThe projected profits and cashflows indicate both long and short term feasibility. The income is large enough to make investing worthwhile and enough cashflow will be generated to satisfy investors.

Indicator 2012 2013 2014 2015 2016Net Income 144,633 124,223 150,703 213,225 238,820Cash Flow 136,846 155,110 174,520 228,512 228,972Table 7.2 – Financial Analysis

Table 7.3 – Investment Analysis

7.4 Ratio AnalysesThe management information system will include the following financial ratios calculated monthly. For the purpose of decision making and monitoring, these ratios will be kept above the provided targets.

7.4.1 Liquidity Ratios

Table 7.4 – Liquidity Ratios

7.4.2 Investment Utilization Ratios

Table 7.5 – Investment Utilization Ratios

7.4.3 Solvency Ratios


Net Payback 1,089,770NPV 26, 291IRR 31.6%

Ratio 2012 Results Minimum TargetCurrent Ratio 15.1 1.5

Ratio 2012 Results Minimum TargetInventory Turnover 10 3.3Average Days Inventory 36.5 110.6Total Asset Turnover .99 .65

Ratio 2012 Results Minimum TargetDebt Ratio .18 .31Debt to Equity Ratio .21 .45


Table 7.6 – Solvency Ratios

7.4.4 Profitability Ratios

Table 7.7 – Profitability Ratios

7.5 Sensitivity AnalysisTo identify which variables are critical for Revival, several values were changed to observe their affect on NPV and IRR. As the following table indicates, the only variable that had a significant effect was billable hours.

Table 7.8 – Sensitivity Analysis

7.6 Break-Even AnalysisRevival’s break-even level was calculated using the critical value, billable hours, it can be seen that the company needs a considerable number of hours in order to break-even.


Ratio 2012 Results Minimum TargetGross Profit Margin .65 .50Net Profit Margin .16 .09Return on Assets .16 .09Return on Equity .19 .15

Wages ($) $239,280 $280,114 $198,447

NPV $26,291 $-175,650 $228, 232

IRR 31.6% 18% 43%

Billable Hours (hr) 15 9 21NPV $26,291 $-479,595 $531, 180IRR 31.6% -13.4% 58.3%

Debt (years) 10 4 15NPV $26,291 $-123,376 $58, 195IRR 31.6% 21.5% 33.5%


1 2 3 4 50

5

10

15

20

25

Table 7.9 – Break-Even Analysis

7.7 Contingency PlanIf Revival makes less than seven sales a day it will run out of money in five years. If this happens Revival has prepared an exit plan to sell all assets in order to pay back debt collectors. If any additional money is made from the sale of assets Revival will distribute it among common shareholders and equity investors.

If Revival experiences unprecedented increases in sales, two strategies will be used to accommodate this extensive growth. The first one will be to schedule projects considerably in advance to accommodate as many customers as possible. The second strategy is to expand the business before initially planned if sales have grown enough to warrant the additional costs. This will double Revival’s capacity limits.

8.0 Conclusion The province of Saskatchewan currently has no large scale business promoting the restoration of classic automobiles. Revival plans to serve the middle-aged men of this province who do not have the technical expertise or necessary space to do these restorations themselves. A competitive advantage will be built around the expertise of the employed mechanics and the quality of their work. The low amount of debt and risk associated with this business makes it feasible. However, even though there are limited competitors in Saskatchewan, a market analysis suggests that there are not enough potential clients to achieve Revival’s relatively large break-even point. Thus it is recommended that Revival research alternative locations in more heavily populated areas.



9.0 ReferencesAuto Clubs. (2011). Car Club Listings. Retrieved October 17, 2011, from http://autoclubs.ca/clubs.html

Auto Events. (2011, October 12). 2011 Auto Events Calenday. Retrieved October 17, 2011, from Auto Events: http://www.autoevents.ca/

Burton, L. (2011, September 16). Classic Cars Rev Up Their Investment Credentials. Retrieved September 28, 2011, from BBC News: http://www.bbc.co.uk/news/business-114956377

Centre for Small Business Financing. (2011). Canadian Small Business Grants and Loans can be the Key to Success. Retrieved November 15, 2011, from Small Business Financing: http://www.grants-loans.org/small-business-grants.php

ICR. (2011, September 30). Retrieved September 17, 2011, from Commercial Real Estate: http://icrcommercial.com/all-listings-brandon-ha?view=property&id=115

Mechanic Finder. (2011). Online Mechanic - Labor Cost. Retrieved October 13th, 2011, from Mechanic Finder: http://www.mechanicfinders.com/mechanic-online-answers.aspx?questID=301&questName=labor%20cost

Reyburn, S. (2011, August 30). Classic Car Market Split: between big money and less desirables. Retrieved September 28, 2011, from Sympatico: http://autos.sympatico.ca/auto-news/9582/classic-car-market-split-between-big-money-and-less desirables

Statistics Canada. (2011, September 9). Population by sex and age, by province and territory. Retrieved October 17, 2011, from Statistics: http://www40.statcan.gc.ca/l01/cst01/demo31b-eng.htm

Tourism Saskatoon. (2012, August 26). Rock 102 Cruise Weekend. Retrieved October 17, 2011, from Tourism Saskatoon Official Site: http://www.tourismsaskatoon.com/festivals/Festivals/Rock_102_Cruise_Weekend/



10.0 AppendicesAppendix A – Financial Statements



Revival Auto

Income StatementFor the year ended 2012 2013 2014 2015 2016

RevenuesLabour Sales 450,000 484,313 521,241 614,413 724,240

Parts Sales 450,000 484,313 521,241 614,413 724,240 COGS Parts 315,000 339,019 364,869 430,089 506,968 Gross Profit Parts 135,000 145,294 156,372 184,324 217,272

30% 30% 30% 30% 30%

Total Gross Profit 585,000 629,606 677,614 798,737 941,511

Operating ExpensesProperty Taxes 13,000 13,325 13,658 14,000 14,350 Utilities 6,412 6,572 6,737 6,905 7,078 Wages 239,280 281,578 298,984 339,928 387,879 Employee Benefits 36,395 42,828 45,475 51,703 58,996 Repair and Maintenance 24,000 24,600 25,215 25,845 26,492 Other Variable Costs % Sales 18,000 19,373 20,850 24,577 28,970 Accounting 600 615 630 646 662 Legal 2,400 2,460 2,522 2,585 2,649 Insurance 600 615 630 646 662 Marketing 12,221 9,278 9,510 9,748 15,996 General Supplies 200 205 210 215 221 License 95 70 72 74 75 Fees 355 265 266 267 268 Equipment 10,000 10,250 10,506 10,769 11,038 Travel 15,032 15,408 15,793 16,188 32,376 Stationery 70 72 74 75 77 Capital Cost Allowance 24,060 44,771 38,684 33,699 37,383 Debt Interest 11,117 10,312 9,451 8,530 33,712 Total operating Expenses 413,837 482,597 499,266 546,399 658,884

Taxable Income 171,163 147,009 178,347 252,338 282,627 Income Taxes 26,530 22,786 27,644 39,112 43,807 Net Income 144,633 124,223 150,703 213,225 238,820

Retained Earnings AccountBeg RE 0 144,633 268,856 419,559 632,785 Net Income 144,633 124,223 150,703 213,225 238,820 Dividends - - - - - - End RE 144,633 268,856 419,559 632,785 871,605



Balance SheetYear 2012 2013 2014 2015 2016Current AssetsCash 136,846 291,956 466,476 694,989 923,961 Accounts Receivable - - - - - Inventories 31,500 33,902 36,487 43,009 50,697 Total Current Assets 168,346 325,858 502,963 737,998 974,658

Non-Current AssetsLand 150,000 150,000 150,000 150,000 230,000 Buildings 457,050 457,050 457,050 457,050 727,050 Furniture and Fixtures 5,441 5,441 5,441 5,441 5,641 Equipment 143,753 143,753 143,753 143,753 167,375 Accumulated CCA (24,060) (68,832) (107,515) (141,214) (178,597) Total Non-Current Assets 732,184 687,412 648,729 615,030 951,469

Total Assets 900,530 1,013,270 1,151,692 1,353,027 1,926,126

LiabilitiesAccounts Payable 11,147 11,964 12,842 15,033 17,613 Long Term Debt 147,317 135,018 121,858 107,777 439,476 Total Liabilities 158,464 146,982 134,700 122,810 457,089

Common Shares 597,433 597,433 597,433 597,433 597,433 Retained Earnings 144,633 268,856 419,559 632,785 871,605 Total Equity 742,066 866,288 1,016,992 1,230,217 1,469,037

Total Liab & Equity 900,530 1,013,270 1,151,692 1,353,027 1,926,126



Cash Flow StatementFor the year ended 2012 2013 2014 2015 2016

Net Income 144,633 124,223 150,703 213,225 238,820 CCA 24,060 44,771 38,684 33,699 37,383 Operating Cash Flow 168,693 168,994 189,387 246,924 276,203

Changes in Working CapitalAccounts Receivable - - - - - Inventories (31,500) (2,402) (2,585) (6,522) (7,688) Accounts Payable 11,147 817 878 2,191 2,580 Total (20,353) (1,585) (1,707) (4,331) (5,108)

Investment ActivitiesLand (150,000) - - - (80,000) Buildings (457,050) - - - (270,000) Furniture and Fixtures (5,441) - - - (200) Equipment (143,753) - - - (23,622) Total (756,244) - - - (373,822)

Financing ActivitiesLong Term debt 147,317 (12,299) (13,160) (14,081) 331,699 Common Shares 597,433 - - - - Dividends - - - - - Total 744,750 (12,299) (13,160) (14,081) 331,699

Net Cash Flow 136,846 155,110 174,520 228,512 228,972 Cash Bal Beg of Year - 136,846 291,956 466,476 694,989 Cash Bal End of Year 136,846 291,956 466,476 694,989 923,961



Schedule 1: Economic Variables 2012 2013 2014 2015 2016Debt Interest Rate 7.0% 7.0% 7.0% 7.0% 7.0%Inflation 2.5% 2.5% 2.5% 2.5% 2.5%Inflation Factor 1.025 1.025 1.025 1.025 1.025

Schedule 2: Revenues 2012 2013 2014 2015 2016

Billable Hours/day 15 16 17 19 22Number of Days/year 300 300 300 300 300Price Charged/hour 100.00$ 102.50$ 105.06$ 107.69$ 110.38$ Labour Sales 450,000 484,313 521,241 614,413 724,240 Parts sales/billable hour 100.00$ 102.50$ 105.06$ 107.69$ 110.38$ Parts Sales 450,000 484,313 521,241 614,413 724,240 Total Sales 900,000 968,625 1,042,483 1,228,826 1,448,479

Growth Rate Billable Hours 0% 5% 5% 15% 15%

RevenuesLabour 450,000 484,313 521,241 614,413 724,240 Parts 450,000 484,313 521,241 614,413 724,240 Total Revenues 900,000 968,625 1,042,483 1,228,826 1,448,479

Schedule 3: Cost of Goods Sold 2012 2013 2014 2015 2016Gross Profit MarginLabour 100% 100% 100% 100% 100%Parts 30% 30% 30% 30% 30%

Cost of goods SoldLabour - - - - - Parts 315,000 339,019 364,869 430,089 506,968 Total Cost of Goods Sold 315,000 339,019 364,869 430,089 506,968



Schedule 4: Operating Expenses 2012 2013 2014 2015 2016

Property Taxes 13,000 13,325 13,658 14,000 14,350 Utilities 6,412 6,572 6,737 6,905 7,078 Wages 239,280 281,578 298,984 339,928 387,879 Employee Benefits 15.21% 36,395 42,828 45,475 51,703 58,996 Repair and Maintenance 24,000 24,600 25,215 25,845 26,492 Other Variable Costs % Sales 2% 18,000 19,373 20,850 24,577 28,970 Accounting 600 615 630 646 662 Legal 2,400 2,460 2,522 2,585 2,649 Insurance 600 615 630 646 662 Marketing 12,221 9,278 9,510 9,748 15,996 General Supplies 200 205 210 215 221 License 95 70 72 74 75 Fees 355 265 266 267 268 Equipment 10,000 10,250 10,506 10,769 11,038 Travel 15,032 15,408 15,793 16,188 32,376 Stationery 70 72 74 75 77 Capital Cost Allowance 24,060 44,771 38,684 33,699 37,383 Debt Interest 11,117 10,312 9,451 8,530 33,712 Total operating Expenses 413,837 482,597 499,266 546,399 658,884

Salary and Wage ExpenseNumber of Employees:Manager (full time) 1 1 1 1 1 Mechanics 2.1 2.7 2.8 3.2 3.7 Technician 0.9 1.0 1.0 1.2 1.4 Hunter 0.21 0.27 0.28 0.32 0.37

Salaries/WagesManager Salary 77,376 79,310 81,293 83,325 85,409 Mechanic (wage rate/hr) 27.00$ 27.68$ 28.37$ 29.08$ 29.80$ Technician (wage rate/hr) 25.00$ 25.63$ 26.27$ 26.92$ 27.60$ Hunter (wage rate/hr) 14.00$ 14.35$ 14.71$ 15.08$ 15.45$

Salary and Wage CostsManager 77,376 79,310 81,293 83,325 85,409 Mechanic staff 110,250 145,294 156,372 184,324 217,272 Technician staff 45,938 49,440 53,210 62,721 73,933 Hunter staff 5,717 7,534 8,108 9,558 11,266 Total Salaries and Wages 239,280 281,578 298,984 339,928 387,879



Schedule 5: Capital Budget 2012 2013 2014 2015 2016

Land 150,000 80,000 Buildings 457,050 270,000 Furniture and Fixtures 5,441 200 Equipment 143,753 23,622Total 756,244 - - - 373,822

Working CapitalInventory 31,500 33,902 36,487 43,009 50,697 Acc Pay 11,147 11,964 12,842 15,033 17,613

Number of DaysInventory 30 30 30 30 30 Acc Pay 10 10 10 10 10

Schedule 6: Financing Budget 2012 2013 2014 2015 2016Bank debt 21% 158,811 373,822Equity 597,433 Total 756,244 - - - 373,822

Schedule 7: Debt Ammortization 2012 2013 2014 2015 2016Beg Balance 10 - 147,317 135,018 121,858 107,777 Addition 158,811 - - - 373,822 Payment 22,611 22,611 22,611 22,611 75,835 Interest 11,117 10,312 9,451 8,530 33,712 Principal Reduction 11,494 12,299 13,160 14,081 42,123 End Balance 147,317 135,018 121,858 107,777 439,476



Schedule 8: CCA 2012 2013 2014 2015 2016Class: BuildingsBeg Balance 4% - 447,909 429,993 412,793 396,281 Addition 457,050 - - - 270,000 CCA Expense 9,141 17,916 17,200 16,512 21,251 End Balance 447,909 429,993 412,793 396,281 645,030

Class: Furniture and FixturesBeg Balance 20% - 4,897 3,918 3,134 2,507 Addition 5,441 - - - 200 CCA Expense 544 979 784 627 521 End Balance 4,897 3,918 3,134 2,507 2,186

Class: EquipmentBeg Balance 20% - 129,378 103,502 82,802 66,241 Addition 143,753 - - - 23,622 CCA Expense 14,375 25,876 20,700 16,560 15,610 End Balance 129,378 103,502 82,802 66,241 74,253

Total CCA Expense 24,060 44,771 38,684 33,699 37,383



Schedule 9: Income Taxes 2012 2013 2014 2015 2016Input Corporate Tax RatesFederal Small Business 27.0% Saskatchewan Small Business Rate 4.5%Small Business Tax Credit 16.0% Saskatchewan M & P Rate 10.0%Federal Small Business Limit 500,000 Saskatchewan Corporate Rate 12.0%

Saskatchewan Small Business Limit 500,0001 2 3 4 5

Federal Corporate Rate 18.0% 16.5% 15.0% 15.0% 15.0%

Income Before Taxes 171,163 147,009 178,347 252,338 282,627 Accumulated Loss Carryforward - - - - - Loss Carryforward Used - - - - - Taxable Income 171,163 147,009 178,347 252,338 282,627

Federal Tax 46,214 39,693 48,154 68,131 76,309 Small Bus Tax Credit (27,386) (23,521) (28,536) (40,374) (45,220) Provincial Tax 7,702 6,615 8,026 11,355 12,718 Total Taxes 26,530 22,786 27,644 39,112 43,807

15.5%

Schedule 10: Investment Analysis 1 2 3 4 5

Required ROI 30.0%

Net Cash Flow 136,846 155,110 174,520 228,512 228,972 Dividends - - - - - Terminal Value 763,241 3.3 Total Cash Flow to Equity Investors 136,846 155,110 174,520 228,512 992,214

Equity Investment 597,433



Payback Gross 1,687,203 Net 1,089,770

Net Present Value 26,291 Equity Value 623,724

IRR 31.6%Non-Leveraged IRR 26.9%

External Cash Flow 1 2 3 4 5Dividends - - - - - Terminal Value 763,241 Total External cash flow (597,433) - - - - 763,241

ERR 5.0%



10.0 Appendices Appendix B – Expenses



Building BudgetItem Price Source

Commercial Lot600,00

0 ICRImprovements:Siding 5,000 BFC Paint

Sign 2,050Outdoor Signs

Total607,05

0

Cost Explanation:This table illustrates the necessary expenses for procuring a retail location. The land and existing structures were quoted at $600,000 for an outright purchase. The only improvements that will be need are a few changes to the exterior appearance and the inclusion of Revival’s business signs. These improvements will costs around $7,000.



Operating Budget2012 2014 2016

Property Taxes 13,000 13,658 14,350 City of SaskatoonUtilities 6,412 6,737 7,078 City of Saskatoon, SaskEnergy,

SastelWages 304,042 386,060 508,867 Pay ScaleEmployee Benefits 46,245 58,720 77,399 calculatedRepair and Maintenance 24,000 25,215 26,492 Kal-TireOther Variable Costs % Sales

31,500 36,486 50,696 calculated

Accounting 600 630 662 BeneshLegal 2,400 2,522 2,649 Consumer InfoInsurance 600 630 662 Kal-TireMarketing 12,221 9,510 15,996 Assorted SourcesGeneral Supplies 200 210 221 (estimated)License 95 72 75 City of SaskatoonFees 355 266 268 Corporation CentreEquipment 10,000 10,506 11,038 (estimated)Travel 15,032 15,793 32,376 Fuel Economy, Holiday InnStationery 70 74 77 VistaPrintCapital Cost Allowance 24,060 38,684 37,383 calculatedDebt Interest 11,117 9,451 33,712 calculatedTotal operating Expenses 501,949 615,224 820,001

Cost Explanation:Utilities are made of three components. Heat will be provided by Sask Energey at $126 monthly. Power and water will come from the City of Saskatoon at $408 monthly. The final utility provider is Sasktel. The 2012 expense includes a $35 installation fee, $34.95 for internet and $21.54 for a phone line. This expense also includes a Blackberry plan for the Hunter costing $25; the 2016 expense has an additional cellphone for the 2nd Hunter. The $10,000 cost of equipment is for any necessary additions to the shop’s tools and machinery. The cost of the stationery includes personalized envelopes, letterhead and notepads that will all include Revival’s logo and address. The travel expense is compromised of an annual estimation for fuel costs and a $120 living allowance to cover food and accommodation. The annual total comes to $3512 for fuel and $11,520 for living allowance based on the Hunter being gone for 2 days a week. This cost is doubled in 2016 to account for the additional Hunter.



Equipment Budget

Item Price Source4 Hoists 20,000 Babco equipment

Tire Changer 1,565 Babco equipmentWheel Balancer 1660 Babco EquipmentBrake lathe 5,160 Babco EquipmentWheel aligners 11,910 Babco EquipmentEngine Analyser 58 E-tool cartDynamometer 14,950 Land & Sea ChassisMetal Lathe 8,239.99 Mac ToolsEngine Calibration Kit 137.3 Snap-onInjector cleaner 299.99 Snap-onHose reel 509 Snap-onBench Grinder 274.99 Mac ToolsCompressor 5,895 Babco EquipmentGrease Kit 30.2 Snap-onOil drainage pump 496.3 Snap-onOil extractors 150 Harbor Freight Tools 2 Jacks 749.9 Snap-on4 Jack Stands 389 Snap-onTransmission jack 839.95 Snap-onUnder hoist drainers 149.99 Mac ToolsParts washer 2,999 Snap-onPedestal drill 353.64 Just ToolsPressure washer 1,137.75 Snap-onEngine crane 549.75 Snap-onEngine stand 136.99 Mac toolsVacuum cleaner 1,113.85 Snap-onWelding equipment 1,495 Snap-onWheel dolly 399.99 Autobody Tool MartAngle grinder 299.99 Snap-onCreepers 134.75 Snap-onBench Vises 318 Snap-onPipe bender 6,645 Babco EquipmentBody Straightener 1,269.99 Autobody Tool MartSpray Gun 142.65 Snap-onPaint Booth 19,699 Autobody Tool MartCuring Light 1,759.99 Autobody Tool MartBody repair kit 445.25 Snap-onSand blasting cabinet 1,574.25 Snap-onHydraulic gear puller 1,851.95 Snap-onGoggle Supply 144 Snap-onEar protection Supply 106.4 Snap-onFirst aid kit 175 In-first-aid kitFire extinguishers 800 Flame BustersFace shield 52.85 Snap-onGloves 143.8 Snap-onCompany Truck 18,995 Kijiji



Car Trailer 5,950 Kramer TrailersWork Benches 1,595 Snap-onTotal 143,753

Cost Explanation:Under the advertising section the cost of the magazine advertisements are taken from two sources. The Autotrader costs $200 for a full-page advertisement ran for six weeks with the potential to reach 14 million viewers each month. The Starpheonix will be utilized for two different advertisements. The first is an online ad featured on their website, with currently over 4 million views, for $60. A print ad will be ran it the Starpehonix for $5,000 annually. This paper reaches 71% of the local target market and will continue to be heavily utilized. In 2016 the magazine advertising costs includes ads in popular car magazines for $5,000 per month; this includes magazines like Chevy Performance. A radio ad on Rock 102 costing $90 has also been included in this cost. The pamphlets will be from Ad Graphics costing $2,138 for 50,000 items. The commercial will run on the Speed Tv cable channel with the potential to reach 80,000 people for approximately $10,000.In the section gifts for local car clubs is the first cost. In 2012 this gifts will be car stools, costing $75.99 each, embroidered with the Revival logo for a total of $80. Initially these stools will be given to the approximately 30 car clubs in Saskatchewan resulting in an annual cost of $2,359. In 2016 the bar stools will be given to car clubs in the neighbouring provinces of Manitoba and Alberta to expand the customer base. An important part of promotions is the attendance at local car shows, there is no fee associated with setting up a booth at these events. In 2012 supplies will be purchased. A canopy embroidered with the Revival logo will cost a total of $267.94. A folding table and chairs will be purchased for $155 for Uline and a price will be raffled off at every event for approximately $40 each. An estimated 20 events will be attended in 2012 so the raffle prizes will total $800 which will also be the only cost associated with car shows for 2014. In 2016 the amount of car shows attended will be increased to 30 raising the cost of prizes to $1,200. A website will be created


Marketing BudgetItem 2011 2014 2016 2018 SourceAdvertisingMagazine Advertising 5,260 5,260 6,160 31,160 Auto-trader, Starpheonix Pamphlets 2,138 2,138 4,276 4,276 AdGraphicsCommercial - - - 10,000 GaeblerTotal Advertising 7,398 7,398 10,436 45,436

PromotionGifts 1,599 - 2,359 - All Bar Stools, Blue Water GraphicCar Shows 1,222 800 1,200 1,200 Spider, Blue Water Graphic, Uline, EbayEvent - - - 530 City of SaskatoonWebsite 2,000 1,080 2,000 1,080 Webpage FXTotal Promotion 4,823 1,880 5,560 2,810


and maintained by the company Webpage FX for an initial $2,000 and a fee of $1,080 for a redesign and update every two years. This website will be basic yet attractive with basic e-commerce functions and limited multimedia capabilities. The final cost in promotions is the annual event that will begin in 2016. Appropriate outdoor locations in Saskatoon can be booked for no fee so the only costs associated with this event are the trophies or prizes awarded to the winners of the car show or burnout competition depending on the nature of the event. These trophies have been estimated to cost $53 each.

10.0 AppendicesAppendix C – Marketing Samples



1) Magazine Advertisement Sample



2) Gift Sample

3) Car Show Booth



4) Pamphlet Sample


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