October 1999

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Table of Contents

Page 1

1.0 Executive Summary.............................................................................................................................1

1.1 Mission ........................................................................................................................................2

1.2 Objectives ...................................................................................................................................2

1.3 Keys to Success ........................................................................................................................3

2.0 Company Summary.............................................................................................................................4

2.1 Company Ownership .................................................................................................................4

2.2 Company Locations and Facilities ..........................................................................................4

2.3 Start-up Summary ......................................................................................................................4

3.0 Services................................................................................................................................................7

3.1 Competitive Comparison ..........................................................................................................8

3.2 Service Description ...................................................................................................................9

3.3 Macroenvironment ...................................................................................................................10

3.4 Sales Literature........................................................................................................................10

3.5 Fulfillment ..................................................................................................................................10

3.6 Technology ...............................................................................................................................11

3.7 Future Services ........................................................................................................................11

4.0 Market Analysis Summary................................................................................................................12

4.1 Market Segmentation ..............................................................................................................12

4.2 Target Market Segment Strategy...........................................................................................13

4.2.1 Market Needs .......................................................................................................................14

4.2.2 Market Trends .......................................................................................................................14

4.3 Service Business Analysis .....................................................................................................14

4.3.1 Distributing a Service...........................................................................................................14

4.3.2 Competition and Buying Patterns .......................................................................................15

4.3.3 Main Competitors .................................................................................................................15

5.0 Strategy and Implementation Summary ..........................................................................................16

5.1 SWOT Analysis ........................................................................................................................16

5.1.1 Strengths ...............................................................................................................................17

5.1.2 Weaknesses .........................................................................................................................17

5.1.3 Opportunities.........................................................................................................................17

5.1.4 Threats ...................................................................................................................................17

5.2 Marketing Strategy ..................................................................................................................18

5.2.1 Pricing Strategy ....................................................................................................................18

5.2.2 Promotion Strategy ..............................................................................................................19

5.2.3 Positioning Statement..........................................................................................................20

5.3 Sales Strategy..........................................................................................................................20

5.3.1 Sales Forecast .....................................................................................................................21

5.4 Strategic Alliances...................................................................................................................22

5.5 Corporate Social Responsibility ............................................................................................22

6.0 Management Summary ....................................................................................................................22

6.1 Organizational Structure..........................................................................................................23

6.2 Management Team .................................................................................................................23

6.3 Personnel Plan .........................................................................................................................23

6.4 Training .....................................................................................................................................24

6.5 Feedback and Control ............................................................................................................24

7.0 Financial Plan ....................................................................................................................................25

7.1 Important Assumptions............................................................................................................25

Table of Contents

Page 2

7.2 Key Financial Indicators ..........................................................................................................26

7.3 Break-even Analysis................................................................................................................27

7.4 Projected Profit and Loss .......................................................................................................28

7.5 Projected Cash Flow ...............................................................................................................32

7.6 Projected Balance Sheet ........................................................................................................34

7.7 Business Ratios .......................................................................................................................35

8.0 Controls ..............................................................................................................................................37

Sephats Tours

Page 1

1.0 Executive Summary

The tourism industry has undergone rapid growth of unsurpassed nature over the last several

decades. This has mainly been due to the advent of a 'borderless' world and increased

information dissemination about the majestic sceneries throughout the world, with the southern

African region being no exception.

We are on the brink of penetrating a lucrative market in a rapidly growing industry. The current

trend towards an increase in the number of tourists entering the country presents an

opportunity for Sephats Tours to penetrate the market. An opportunity for Sephats Tours'

success exists because the national tourism industry is growing at a rapid pace annually.

Sephats Tours is poised to take advantage of this growth and moderate competition in the city

travel portion of the industry, with a dedicated and experienced staff, excellent networking, and

effective management and marketing. Sephats Tours intends to provide travel and adventure

packages to tourists primarily in the Southern region, but also the whole of Botswana. Services

and products provided by Sephats will initially include pre-arranged tours, custom packages

according to clients specifications, travel consultation, and as time progresses making

reservations for lodging amongst other related services. Sephats Tours seeks to differentiate

itself as the premier adventure mobile operator in the greater Gaborone area.

Our services will be positioned very carefully: they will be of extremely high quality, comfortable,

informative and tailored to the clients needs such that they will enable individuals to have a

greater appreciation of the natural environment and its intricacies.

Our marketing strategy will be based mainly on ensuring customers know about our existence and

the service(s) we fulfill. Hence our intention is to make the right information available to the right

target customers. This will be done through implementing a market penetration strategy that will

ensure that we are well known and respected in the tourism industry. We will ensure that our

prices take into consideration peoples' budgets, that these people appreciate the service(s),

know that it exists, and how to contact us. The marketing will convey the sense of quality in

every picture, every promotion, and every publication. Our promotional strategy will involve

integrating advertising, events, personal selling, public relations, direct marketing and the

Internet, details of which are provided in the marketing section of this plan.

It is important to recognize that we do not intend to just take individuals on sightseeing

excursions, but also to ensure that they appreciate nature through informative briefings on

objects' origins. This element will assist in differentiating us from our competitors and contribute

towards the development of a sustainable competitive advantage. Hence we need to engage the

right people in the right place at the right time if we are to ensure optimum growth. We intend to

develop our team so that our people can grow as the company grows - a mutually beneficial

relationship.

We project sales to increase from more than P350,000 (Botswanan Pula [P]) the first year to

more than P556,500 the second, and P630,000 in the third year.

In a nutshell, we do not just intend to market and sell our service, but to market and sell travel

solutions and a total-quality environment. This will ensure we establish a reputable corporate

image.

Sephats Tours

Page 2

1.1 Mission

Internally we intend to create and nurture a healthy, exuberant, respectful, and enjoyable

environment, in which our employees are fairly compensated and encouraged to respect the

customer and the quality of the service we intend to provide. In addition follow-up will be

mandatory so as ensure customer satisfaction and make any improvements as recommended by

the customers in future. We seek fair and responsible profit, enough to keep the company

financially healthy for the short and long term, and to fairly remunerate employees for the work

and effort.

1.2 Objectives

Our business strategy will revolve around the need to provide quality service to our various

target customers, in the process fully satisfying their needs. This shall be undertaken through

recruitment of a professional team and the provision of good quality custom-designed travel

packages, catering to the client's particular needs.

With time our marketing campaign will increase the awareness of our services in the various

market segments we shall be targeting. This is particularly so with the organization looking at

establishing a clear advantage(s) in an increasingly competitive market. We will provide clients

with the opportunity to focus on their core activities whilst their transportation side needs are

fully satisfied. Marketing material shall be professionally done so as to be reflective of our

intended image and reputation. We shall position ourselves as a quality commercial

transportation operator that provides customer-need fulfillment, enjoyment, reliability and a good

image. We intend to establish a good rapport with all the relevant stakeholders, especially hotels

and travel agents.

We also intend to have well-designed brochures and other promotional material that will enable

clients to have an understanding of the types of services we offer and advantages of utilizing

them. In addition well-done, informative brochures, fact sheets and business cards often have a

triggering effect on clients contemplating utilizing our services. Hence this will undoubtedly

generate increased sales of our service.

In summary we intend to attain the following objectives:

Continuously provide enjoyable quality excursions/trips on time and on budget.

Develop enthusiastically satisfied customers all of the time.

Establish a market presence that assures short-term and long-term profitability, growth and

success.

We are fully committed to supporting growth and development in the tourism and overall

economy of Botswana.

Contribute positively to our communities and our environment.

Sephats Tours

Page 3

1.3 Keys to Success

The keys to Sephats Tours success will undoubtedly be effective market segmentation through

identification of several niche markets and implementation strategies. Along these lines the

company intends to implement advertising, personal selling and direct marketing strategies to the

target markets. Our personal selling marketing strategies will rotate around keeping in touch with

hotels and travel agencies for major customers, and advertising for more individual customers.

Hence our key success factors will include the following:

1. Excellence in fulfilling the promise: We intend to offer completely enjoyable, comfortable

and informative travel excursions that will ensure that travelers are thoroughly satisfied and

appreciative at the end of their trip.

2. Timely response to customers' requests: We cannot afford to delay our clients for

whatever reason, as this will have a negative bearing on our image and reputation, including

future business. Hence we need to be continually communicating with the client, including

hotels and lodges so as to ensure that we are constantly available to the client meeting

their expectations.

3. Solid and fruitful strategic alliances: Considering the nature of our services and our

relative infancy on the market, we realize the importance of establishing and maintaining

fruitful strategic alliances with various stakeholders, including hotels, lodges, and travel

agencies, amongst others, so as be assured of a constant flow of customers, fulfilling their

needs at every opportunity.

4. Marketing know-how: As a relatively new company on the market there will be a need to

aggressively market our business and the services we provide so as to be continuously at

the top of our prospective clients minds. This will also act as a temporary deterrent for

companies contemplating entering our market. Advertising shall be undertaken on a regular

basis.

Sephats Tours

Page 4

2.0 Company Summary

Sephats Tours intends to provide individual and group travel to leisure clients. Services and

products provided by Sephats will initially include pre-arranged tours, custom packages

according to clients specifications, travel consultation, and as time progresses making

reservations for lodging amongst other related services. Sephats Tours seeks to differentiate

itself as the premier adventure travel company in the greater Gaborone area.

As it grows it will take on people and expand into related markets and services. It will also look

for additional leverage by establishing relationships and representations with appropriate

strategic allies.

2.1 Company Ownership

Sephats Tours is a Private Limited company incorporated at the Registrar of Companies in

October, 1999, through the foresight and vision of Mr. X and Mrs. Y. It is a 100% wholly owned

Botswana firm.

2.2 Company Locations and Facilities

At present the company offices are located at Plot Number 28338, Block 3, Belabela road

opposite Gaborone Television Station, near Hill Crest Primary School. However, as time

progresses the intention is to move into more accessible and attractive offices in a prime area.

This regardless of the fact that our type of business is not too dependent on office location and

size.

2.3 Start-up Summary

Thus far the directors have contributed one hundred and sixty seven thousand pula (P167,000)

to purchase a Mercedes Benz mini bus currently in its possession and P30,000 for cash expenses.

Total start-up expenses covered (including legal costs, business plan compilation, license costs

and related expenses) come to approximately P5,000.

NOTE: All currency values in the charts and tables are expressed in Botswanan pulas (P).

Sephats Tours

Page 5

Table: Start-up

Start-up

Requirements

Start-up Expenses

Legal $1,000

Stationery etc. $500

Brochures $700

Consultants $1,200

Insurance $800

Rent $500

Other $300

Total Start-up Expenses $5,000

Start-up Assets

Cash Required $30,000

Start-up Inventory $0

Other Current Assets $0

Long-term Assets $167,000

Total Assets $197,000

Total Requirements $202,000

Sephats Tours

Page 6

Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund $5,000

Start-up Assets to Fund $197,000

Total Funding Required $202,000

Assets

Non-cash Assets from Start-up $167,000

Cash Requirements from Start-up $30,000

Additional Cash Raised $0

Cash Balance on Starting Date $30,000

Total Assets $197,000

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabil ities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabil ities (interest-free) $0

Total Liabil ities $0

Capital

Planned Investment

Investor 1 $100,000

Investor 2 $102,000

Additional Investment Requirement $0

Total Planned Investment $202,000

Loss at Start-up (Start-up Expenses) ($5,000)

Total Capital $197,000

Total Capital and Liabil ities $197,000

Total Funding $202,000

Sephats Tours

Page 7

3.0 Services

Sephats Tours is a travel company that intends to deliver leisure travel excursions to customers.

Sephats intends to guide customers in selecting a trip(s) based on pre-defined vacation criteria.

This analysis will be based on user profiles, set by the consumers, which includes preferences

such as:

Budget

Activities sought

Destination, and

Time of Travel

A traveler will hence be able to select areas of interest based on their preferences and

subsequently identify destinations to visit. The intention is to provide customers with access to

exclusive travel destinations, service to fully appreciate destinations through information

packages, not just sight-seeing, and access to special interest travel according to the

group's/individual's preferences.

Sephats Tours

Page 8

3.1 Competitive Comparison

There are presently few competitors offering services similar to ours. However considering the

pace of change and current growth rate of the tourism industry luring many companies into the

sector, this may be short-lived. Hence there will be a need to not only firmly establish ourselves

on the market, but also strongly differentiate ourselves from these other businesses. However on

a broader scale our competition comes in several forms:

1. The most significant competition are hotels and travel agencies offering travel excursions to

their clients. They undertake this service in order to establish a competitive advantage over

their competitors. However, instead of directly competing with them we intend to establish

good working relationships in the form of strategic alliances such that we are able to offer

the service for their clients and thus enabling them to concentrate on their core activities

whilst ensuring customers are fully satisfied. Our key advantage in this regard will be our

specialty of the service and hence wide knowledge ensuring customer satisfaction at all

times as well as flexibility in providing the service.

2. Existing hotels, lodges and travel agencies may identify the opportunity to diversify into our

intended services utilizing their current client database. Naturally, existing clients will be

inclined towards utilizing these familiar companies due to the fact that a good relationship

may have already been nurtured over the years during their business dealings. This presents

a potential challenge to us, as we need to aggressively market our services and expertise in

the field.

3. Existing safari operators that mainly focus on the remote environs such as Maun and Kasane

are at times able to compromise, offering excursions in and around Gaborone, though very

rare. Hence we intend to focus on this market.

An analysis of competition is provided in the Market Analysis section of this plan.

Sephats Tours

Page 9

3.2 Service Description

Sephats Tours intends to offer the service and knowledge a discerning leisure traveler seeks

whilst on vacation, with the intention of seeing and appreciating the numerous sights in the

area. Keeping in mind the comforts of a tourist, our fleet shall be very well maintained and

designed as per customer standard and expectations. However not wanting to limit ourselves we

intend to be open to special hire by churches, organizations, groups, schools and sports teams,

amongst other related groups.

The game reserves and lodges that we intend to be our main destinations are:

Mokolodi Nature Reserve

Goborone Game Reserve

Gaborone Dam

The Oodi and Mochudi Craft Villages

Kolobeng and Thamaga

Khutse Game Reserve

Below is a briefing of several places of interest and their various attractions.

1. Mokolodi Nature Reserve: Set in a wide valley just 10 minutes drive from the city, this

scenic reserve offers a well-developed network of game drives and stone and thatch chalets

overlooking a water hole. Mokolodi also offers the rare opportunity to track rhino or to walk

through the bush with young elephants. These excursions offer excellent photographic

opportunities. Evening drives can include a bush braai giving visitors the chance to see the

more unusual nocturnal creatures.

2. Gaborone Game Reserve: This 550 hectare reserve provides an ideal get-away for tourists

who can see a remarkable range of wildlife in the park including rhino, eland, zebra, gemsbok,

wildebeest, kudu, ostrich and impala, all on well-maintained bush roads that are designed for

easy access. Bird watching in the Gaborone Game Reserve is excellent, particularly along the

eastern edge, bounded by Notwane River, and it typifies the incredible diversity of bird life to

be found throughout the Gaborone area.

3. Gaborone Dam: On the south bank a remarkably rich variety of bird and wildlife can be

seen, including herds of impala, kudu and scuttling families of warthog. New picnic sites,

which are currently under development will also provide places of interest. The Gaborone

Yacht Club is the main attraction on the dam with its swimming pool, bar and wide verandah

overlooking the water off a rocky koppie in the middle of the dam which often becomes an

island in the wet season.

4. The Oodi and Mochudi Craft Villages: In Oodi the main attraction will be the Lenstwe-la-

Oodi weavers. In Mochudi apart from traditionally decorated Setswana architecture, the

tourists will find the most southerly baobab trees in Botswana and traditional crafts including

the Ithuteng Tin Workshop and Ikgabiseng handmade jewelery. The Phuthadikobo Museum in

Mochudi will also be an attraction site.

Other sites will include Matsieng Foot Point, Gemsbok National Park, Mabuasehube Game Reserve,

Legaga la ga Kobokwe, Central Kgalagadi Game Reserve, Nxaii Pan and Khama Rhino Sanctuary.

Integrating the above places of interest into our tours we intend to be offering the following

tours:

1. "Capital Crusade" - City Tour: This will be a professionally guided tour around the city

centre including visits to the Main Mall, Finance Mall, National Museum, City Council Library,

Sephats Tours

Page 10

Gaborone Station, and House of Parliament including others. These tours shall be eye

opening in terms of the normal Botswana town folk life style providing knowledge and

information throughout the guided tour. Included in this package will be refreshments and

information folders detailing the main sites and history of Gaborone. This tour will cover

approximately 50 kilometers taking about half a day to complete. Cost: PX per person.

2. "Cultural Enrichment" - Cultural Tour: This shall involve tours to the main historical and

cultural sites in and around Gaborone including Mokolodi Nature Reserve, Oodi and Mochudi

Craft Villages, including the cultural dances. This tour shall reveal the 'Kgotla' - cultural

villages, traditional paintings and art, as well as the traditional lifestyle. Obviously baobabs

will make for good viewing. The tour package will include an information folder, guided tour

and refreshments. This tour will cover approximately 200 kilometers taking the whole day to

complete. Cost: PY per person.

3. "The Essence: Past & Present" - City & Cultural Tour: This will be a combination of the

cultural tour and city centre excursion. This will be marketed as a "total package" enabling

tourists with very little time to appreciate the Botswana lifestyle, both in the present and

past. This tour will invariably take the whole day and cover approximately 250 kilometers.

The tour package will include the information folder, guided tour, refreshments and a picnic

lunch. Cost: PZ per person.

3.3 Macroenvironment

At a large scale research demonstrates that tourism is undergoing a rapid growth of unsurpassed

nature. Generally there is a trend towards shorter stays but increased visits, as individuals strive

to experience as many cultures as possible, including seeing as many attractions as possible.

Increasingly Botswana is being marketed as "one of the few places in Africa where game

sanctuaries have remained completely unspoiled. A destination that unlocks the mystery of

nature - an oasis in a wilderness which is an ideal escape for nature lovers. Very little of this

fascinating country has seen human habitation - this is true Africa in all her remoteness and

authenticity." With such marketing in place the number of tourists entering the country is bound

to increase, presenting a larger potential market for ourselves. This potential market is what we

seek to tap.

3.4 Sales Literature

The business will begin with a general corporate brochure establishing its position on the market.

This brochure will be developed as part of the start-up expenses including the business cards

and Company Profile, mainly for the large organizations that often recommend services to

potential customers. Compliment slips are also intended so as to raise awareness of the company

and its services. We also intend to have information pamphlets that will provide information on

our various tour packages.

Literature and mailings for the initial market forums will be very important.

3.5 Fulfillment

1. The key fulfillment and delivery will be provided by the employees of the company. The real

core value will be professional expertise, provided by a combination of expertise, experience,

hard work, and education (in that order). Hence we intend to ensure that the work we

undertake is always thorough and relevant to the clients' needs.

2. We will turn to reputable companies for supplying the necessary individuals and groups for

our services. Hence the need to establish good relationships with our strategic allies.

Sephats Tours

Page 11

3.6 Technology

Sephats Tours will strive to ensure that it contains the latest, or extremely recent personal

computer including relevant software so as to ensure that the company is continuously at the

forefront in our market arena. The one certainty in our industry is that technology will continue

to evolve and develop, changing what we market as well as how we market it. Our aim will be to

be aware of the implications of this new technology and utilizing it in our existing framework

where possible. However it should be noted that as we are new on the market it will take some

time before we have in place our own website and other multimedia presentations. With time we

also intend to have the latest and most efficient software in place to enable smooth operations.

3.7 Future Services

In putting the company together we have attempted to offer enough services to allow us to

always be in demand by our customers and clients. The most important factor in developing

future services/products is market need. Our understanding of the needs of our target market

segments shall be one of our competitive advantages. It is critical to our effort to develop the

right new services. In the future, Sephats Tours intends to broaden its coverage by expanding

into additional markets. One of the main services it aims at providing is to become a destination

management company that brings alive the magnificence of this country to the traveler. This will

be done by co-coordinating the traveler's entire experience from hotel bookings, safaris and

tours, greeting and porter services, and to tour packages and incentives. However in doing so

we will strive to ensure that it is compatible with the existing products and company personnel.

As time progresses the intention will to provide a Southern Africa tour package covering the

whole of southern Africa.

Sephats Tours

Page 12

4.0 Market Analysis Summary

We are today experiencing a rapid growth in the economy of unsurpassed nature. This has been

brought about by, amongst other things, the relaxation of foreign exchange policies and

macroeconomic policies geared towards attracting foreign investors into the country. The fiscal

and monetary policies of the government geared towards maintaining growth with social justice

have largely contributed towards this, evidenced by our economy averaging a growth rate of 7%

since 1990 - very high by international standards.

The current drive and emphasis by the government on diversification of the industrial base away

from the minerals sector presents an opportunity for Sephats Tours to make a valuable

contribution towards achieving this goal. Having undertaken a thorough and comprehensive

research of the market we realized that there was a need for a tourist transport company that

focuses on providing leisure excursions to tourists. Though there are mobile operators currently

on the market, some of whom have been in existence for a relatively long period of time, we

believe that there is a market need for one that specializes on providing comfortable and

enjoyable transport to tourists and visitors. This, also considering the fact that, potentially

Botswana's richest natural resource, the tourism industry is becoming an increasingly important

player in the economy and may in the long term prove even more valuable than mineral resources

in earning foreign exchange.

Aware of the fact that operating in such a market is largely dependent on good networking, we

intend to establish networks and strategic relationships with various hotels, lodges and travel

agents to ensure a steady stream of clients. However in so doing we intend to ensure that the

service we provide is of extremely high quality and comfortable. Our initial overall target market

share shall be 10% of the market, mainly focusing on the greater Gaborone area and southern

Botswana.

We appreciate that entering such a market is not a 'bed of roses' and will require us establishing

strong links with strategic partners as outlined previously. Hence we intend to implement an

aggressive marketing strategy, well supported by the other business functions. The above

prognosis influenced our decision to enter the tourist transport industry.

4.1 Market Segmentation

We will be focusing on those foreign tourists seeking leisure travel and excursions whilst on

vacation in Botswana, with the intention of letting them see and appreciate the numerous

attractions in our country. Though we realize that the majority of our tourists come from South

Africa we shall be mainly targeting those from Europe and the Americas who often do not have

transport or adequate knowledge about the country, unlike their South African counterparts who

often do. Hence we shall be mainly targeting those who are not that mobile but wanting to see

as many sites as possible. These people often do not want to waste their money on hiring

vehicles to move about by themselves, but instead want to be escorted around places of

interest by a reliable source. Hence the need to professionally market ourselves and the services

we provide, offering a service of uncompromised nature.

Sephats Tours

Page 13

Table: Market Analysis

Market Analysis

1999 2000 2001 2002 2003

Potential Customers Growth CAGR

Tourists from Europe and

Americas

15% 124,000 142,600 163,990 188,589 216,877 15.00%

Tourists from South Africa 25% 400,000 500,000 625,000 781,250 976,563 25.00%

Total 22.85% 524,000 642,600 788,990 969,839 1,193,440 22.85%

4.2 Target Market Segment Strategy

Our marketing strategy will be based mainly on making the right service(s) available to the right

target customer. We will ensure that our services' prices take into consideration organizations'

and peoples' budgets, and that these people know that we exist, appreciate the value of our

services, and how to contact us. The marketing will convey the sense of quality in every

picture, every promotion, and every publication. Our intension will be to target those individuals

and groups looking for leisure activities and places to visit. We realize the need to focus our

marketing message and our service offerings. We need to develop our message, communicate it,

and make good on it. The decision to establish strategic alliances with several hotels, lodges and

travel agencies is aimed at tapping our target market effectively and efficiently.

Sephats Tours

Page 14

4.2.1 Market Needs

Though the tourism sector has undergone rapid growth over the last decade the vast majority

entering this sector have rushed to the North where we have the Okavango Delta, Chobe

National Park, and other sites as attraction points. Very few have focused on south and central

Botswana. With this in mind we intend to exploit the untapped market in this area so as to

provide our customers with a good service and realize our business objectives.

We understand that our target markets need more than just being shown the areas of interest

but also to be informed about their significance and origins. Hence we don't just intend to

provide a service(s), but to provide one of unparalleled nature relative to the market.

4.2.2 Market Trends

Of all the uncertainty surrounding this industry, one fact is certain: tourism is here to stay. The

only question is how large the industry will become and whether it can sustain, if not exceed, its

current growth rate. However large the market ultimately becomes, the company strongly

believes that travel will be an important component of this market place.

Tourism statistics provide a reliable guide as to the size of the market. According to the latest

tourism statistics total arrivals for 1998 amounted to 1,351,798 representing an increase of

approximately 12.65% from the previous year. Of the total arrivals in 1998 205,146 (15.2%) were

holiday/tourists whilst 319,440 (23,6%) were visitors, both groups of which constitute our target

market, totaling approximately 524,586 individuals.

Source: Tourism Statistics 1998 - Central Statistics Office.

4.3 Service Business Analysis

Potentially Botswana's richest natural resource, the tourism industry is becoming an increasingly

important player in the economy and may in the long term prove even more valuable than mineral

resources in earning foreign exchange. With this in mind Sephats Tours intends to play a

contributing role towards development of the tourism industry through provision of an impeccable

mobile service facility primarily directed at tourists.

4.3.1 Distributing a Service

Mobile operations such as ours are sold mainly on a word of mouth and referral basis with

relationships and previous experience being, by far, the most important factor. Relationships in

this regard means establishment of links with the various hotels, lodges, and travel agencies who

often come into contact with our target customers. Invariably the experience a customer has

with us will go a long way toward influencing them in whether they should refer their friends to

use our service(s). To this end we intend to ensure we provide a luxurious, comfortable and

unforgettable experience to our customers that will only encourage them to pass on a good word

about us.

In the medium term we intend to be connected on the World Wide Web so that we can market

ourselves on the Internet, as well as enabling potential customers to make pre-bookings over the

Web, helping save time and money. This will also assist in widening our customer catchment area

increasing customers.

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4.3.2 Competition and Buying Patterns

The key element in service utilization decisions made at the company's client level is trust in the

reputation and reliability of the firm. The most important factor in this market will be the quality

of the service and places of excursion. This is particularly so considering the various interests of

individuals and groups as they strive to see as many places as possible. The very nature of our

services dictates that the pricing of our services will vary according to distance traveled, as

different customers opt to visit different areas and within specified time frames.

In our line of business, clients often compare travel companies directly, looking for two, or more,

possible companies. However, they usually follow word of mouth recommendations obtained from

hotels, travel agencies, government departments, car hire companies and other such related

companies.

4.3.3 Main Competitors

We have identified competing companies, some firmly established, that fill the same needs as

Sephats Tours. We intend to market ourselves in such a way that with time competitor

customers will choose our service over competitors' on the basis of our higher quality and

informative excursions. A more thorough outline of our main competitors including their strengths

and weaknesses follows:

1. XXX: Located on the first floor of the G Hotel, Gear Adventures specializes in tailor-made

safaris throughout Botswana and her neighboring countries. Gear Adventures offers Mobile

Wilderness Safaris, Weekend Adventures, One-day explorations and safari operators. Of

particular concern to us are the day tours around Gaborone that it offers to G Hotel guests.

Research indicated that Gear Adventures is the only operator that offers day trips in and

around Gaborone. Several of its services include: [details omitted].

2. YYY: Arguably one of the most reputable companies in our intended line of business. It has

a fleet of nineteen buses comprising two semi-luxury B7 Volvo train-buses, six semi-luxury B7

Volvo, five M/Benz, four Nissan and two DAF buses. All the Volvo buses have radio facilities,

and one of the train-buses has toilet facilities. With close to twenty years of experience Mr.

K supported by his wife, Mrs. K, are achieving most of what they envisioned when they

started their business-to provide a nation-wide road transport service renowned for its

efficiency and reliability. The recent launch of a new imported South American double-decker

luxury bus serves as testimony of their continued dedication towards providing a good

service to their clients.

3. ZZZ: Similar to YYY, Z is well respected in the market with a large fleet of buses. As well as

providing daily transport to Selebi Phikwe and several towns it also provides local and

international trips by hire. However they lack the marketing edge and foreign tourist focus

we intend to have.

Upon closer analysis of the above competitors it may be observed that the majority of these are

offering safari excursions, and this represents an opportunity to be realized by us. According to

the Central Statistics Office there are approximately 81 travel agents, tour operators and safari

operators in Botswana at present, the majority of which have a South African background either

in directorship or actual origin.

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5.0 Strategy and Implementation Summary

Initially Sephats Tours will focus on the local market in the adventure travel sector. The target

customers will mainly include foreign tourists intending on sightseeing various attractions.

Our marketing strategy will emphasize focus. We are a relatively new company on the market

and hence must focus on certain kinds of services with certain kinds of clients. Initially the

business will focus on the local market, expanding into the regional market as time progresses,

and as we gain the necessary experience. Therefore the initial aim will be to instill awareness

and confidence in our services. In order to achieve its goal of becoming the premiere mobile

operator, Sephats intends to adopt the following strategies:

1. Establish Sephats reputation as a differentiated, specialty provider of city/ adventure travel

and excursions. This will be accomplished through a diverse marketing communications

programme directed at Sephats target market, utilizing various media as well as the

establishment of strategic allies.

2. Provide unparalleled service to the tourists, local and international, of Botswana in order to

gain repeat business and build trust. This will include providing superior service in all phases

of the transaction, including timely follow-through.

3. Aggressively promote excursions as healthy, eye-opening and exciting activities with those

who participate in them as appreciative of the finer things in life.

4. We intend to build image and awareness through consistency and distinctiveness in our

service provision.

Our strategy is to grow the business by nurturing clients, differentiating the service from our

competitors, particularly through service and staff behavior. All criteria from customer

satisfaction, service provision, price competitiveness to staff attitudes are to be looked at

thoroughly in the initial stages as areas for improvement. Alliances and collaboration with hotels,

lodges and travel agencies are to be adopted as strategies for market penetration. Training will

be conducted on a regular basis to ensure that our staff is fully meeting customer expectations.

Through the implementation of a fair, effective and competitive remuneration policy we intend to

optimize our human resource output and advancement. We need the right people in the right

place at the right time if we are to ensure optimum growth. We intend to develop our team so

that our people can grow as the company grows - a mutually beneficial relationship. We are

currently vigorously searching and recruiting the right people for our organization.

5.1 SWOT Analysis

We intend to enter a highly lucrative market in a rapidly growing economy. We foresee our

strengths as the ability to respond timeously to the market dictates and to provide custom

designed travel excursions to travelers. Our key personnel will have a wide and thorough

knowledge of the areas we intend to take travelers, which will go a long way towards

penetrating the market. Below are the summarized strengths, weaknesses, opportunities and

threats.

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5.1.1 Strengths

Diversified client base: This will reduce our dependency on one particular market.

Combination of skills in employees: The directors intend to engage well-qualified and

experienced employees to jointly develop business strategy and long-term plans, so as to

attain company objectives.

Extensive advertising and marketing: The company will undertake extensive advertising

and marketing, promoting both its name as well as service/product awareness. Hence an

aggressive and focused marketing campaign with clear goals and strategies shall be one of

our mainstays.

5.1.2 Weaknesses

Lack of a reputation in comparison to our competitors. This is due to the fact that we are

still new on the market. However this shall be addressed as shown in the marketing section

of this plan.

The introduction of new organizational practices and personnel who have not previously

worked together presents a challenge to the organization.

A limited financial base compared to the major players in the industry.

Lack of clear strategic allies.

5.1.3 Opportunities

Current drive by government towards encouraging the participation of indigenous

entrepreneurs in tourism presents an opportunity which we may fully utilize.

Current growth rate of tourism presents an opportunity for ourselves which we may take

advantage of. This is further supported by the current marketing campaigns by both the

government and regional tourism body, the Regional Tourism Organization of Southern Africa

- RETOSA, aimed at promoting tourism into the region.

Presently there is no reliable public transportation company to take tourists to areas of

interest.

International tourism trends indicate that today's traveler wants a more enriching experience

than that provided by conventional 'sun and sea' vacations.

5.1.4 Threats

The present growth in the tourism sector may result in an increasing number of firms entering

the market. This may led to increased competition emerging from a variety of given sources

including:

Established travel agencies, hotels and lodges may look at the development of new lines and

vertically integrate transportation so as to provide additional services to clients.

New marketing strategies and tactics by established companies aimed at providing excursions

of our intended nature.

Existing competition.

Other start-up travel companies generated by healthy nationwide economic and tourism

growth.

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5.2 Marketing Strategy

One core element of our strategy will be that of differentiation from our competitors. In terms of

marketing we intend to ensure that our name and services are marketed on an extensive basis

so that customers are aware of our existence. In price, we intend to offer reasonable and

competitive prices in comparison to competition and we need to be able to sustain that. Our

service marketing will strive to ensure that we establish long relationships with clients.

Marketing Expenses

Initial marketing and training expenses will be relatively high as we seek to become known on the

market and staff get trained in the professional provision of our services. This will be brought

about by the development of sales literature and advertising expenses. As our market share

increases and capital is generated, further marketing programmes and the expansion of those in

existence at the time will be undertaken, to ensure market development. However with time

these programmes will start generating revenue for the business, which we shall in turn reinvest.

5.2.1 Pricing Strategy

Sephats Tours will be competitively priced in relation to the dictates of the market. Due to the

introductory nature of our services we intend to implement a penetration pricing strategy which

will ensure that potential customers are not frightened away by our prices, up until our services

are appreciated and fully operational. However this will dictate that our costs are prudently kept

so as to ensure our financial goals come to fruition. This is reflected in our prices as stated in

the services description of this plan charging close to PX per kilometre per person. Each trip will

include an average of eight to ten persons.

We intend our income structure to match our cost structure, so as to ensure that the salaries

we pay to our employees to assure good service are balanced by the cost we charge to the

customer.

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5.2.2 Promotion Strategy

This strategy will be based primarily on informing potential customers of the existence of our

services and making the right information available to our target customer. The intention will be

to highlight the benefit of utilizing our service(s), which will include:

Access to exclusive travel destinations

Service to fully appreciate destinations through information packages, and not just sight-

seeing

Access to special interest travel according to the groups preferences

In such a market we cannot afford to appear in or produce second-rate material with poor labels

that make our services look less than they are. Hence we intend to leverage our presence using

quality brochures and other sales literature, including promotional material such as pens,

complimentary slips and pads. We intend to spread the word about our business through the

following:

1. Advertising: This shall be undertaken through trade and industry publications, which are

read by tourists, as well as the local newspapers. A constant look out will be made of any

special editions in the local newspapers, which may provide an opportunity for us to

advertise our services and business name.

Sephats Tours will also be advertised through professionally done brochures, and other such

sales literature, which allow enough detail to be communicated about the services offered by the

company. This literature will be mainly targeted at potential clients and placed or made available

at strategic points, such as travel agencies. With time we also intend to utilize billboards to

advertise ourselves, likewise located at strategic points. Hence we intend to design and put up

posters communicating the services we provide located around hotels, lodges, airports and other

such areas where tourists typically pass by. However in doing so we always intend to obtain the

consent of the respective authority.

2. Personal Selling: Undoubtedly customer solicitation face-to-face will be a powerful form of

promotion mainly due to the fact that its flexibility will enable us to match the customer's

needs to specific attributes of our services as well as giving concise details of what we have

to offer. Another important determinant in utilizing personal selling is the fact that we are

relatively new on the market. As such, potential customers/clients will, to a certain degree,

be skeptical towards the intended service(s) and how they are able to benefit from them.

In cases where the opportunity of obtaining a large order exists it may be necessary for the top

management to go out personally, especially considering the fact that we are still a relatively

new firm on the market. However this shall be the situation in the majority of cases due to our

relative infancy.

3. Direct Marketing: This will be used but only to a limited extent in the form of telemarketing

and informing potential customers and obtaining referrals where possible. In the case of

telemarketing it will involve our targeting potential customers of our services and informing

them of our existence and destinations. We may then arrange for an appointment with the

respective decision-maker, with the intention being to lure them into utilizing of our services.

4. Events: These are increasingly becoming important as more firms establish in the country

and hence the need to be known. The organization aims to promote itself through attending

trade shows and expositions. Not only will these increase awareness of our services and

business name, but also enable us to interact with potential clients who may decide to utilize

our service. Trade shows that come to mind include Botswana International Trade Fair

(BITF) and BITEC.

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5. Internet Marketing: The increasing growth of the Internet as an information source

provides an opportunity for ourselves that we may exploit. This is particularly so in view of

the increasing dissemination of information over the World Wide Web, as individuals and

groups look at obtaining the best deal possible. More often than not these individuals and

groups seek out information over the Internet due to its relatively low cost and ease of use

helping to minimize time wasting. However this will require adequate planning so as to ensure

that all information on the website is accurate and up-to-date, ensuring we market a

professional image. This will mainly serve foreign tourists and other interested stakeholders.

In all the above we intend to communicate our ability to deliver a good service that will satisfy

the customers needs. Hence our messages will influence the engagement decision of prospective

customers by emphasizing our customer focus and, persuade prospective clients that we are

different from our competitors. All the above promotional tools shall be well integrated and

utilized in tandem so as to maximize their effect.

5.2.3 Positioning Statement

Sephats intends to offer a unique service to all of its customers, primarily travelers, so as to

position itself as the premier travel provider in Botswana. This shall be undertaken through

provision of affordable, comfortable and luxurious transport as well as informative insights about

the various sights and areas. These excursions will be tailored to the individuals'/groups'

interests and thus providing enjoyment and satisfaction. Our competitive advantage shall be our

customer orientation and friendly staff who shall go at lengths to ensure the customer is served

and fully satisfied.

Through our reasonable charges and satisfying excursions we intend to attract a large portion of

the market, both directly and indirectly. Hence all promotional material and campaigns shall be

directed to fulfilling our intended positioning on the market.

5.3 Sales Strategy

For the short term at least, the selling process will depend on personal selling/networking and

advertising to lure and inform potential customers about the services we offer and the benefits

of utilizing our services. Our marketing does not intend to affect the perception of need as much

as knowledge and awareness of the service category.

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5.3.1 Sales Forecast

The following chart and table show our planned Sales Forecast for the next three years.

Table: Sales Forecast

Sales Forecast

FY 2000 FY 2001 FY 2002

Sales

All tourist services $350,000 $556,500 $630,000

Other $0 $0 $0

Total Sales $350,000 $556,500 $630,000

Direct Cost of Sales FY 2000 FY 2001 FY 2002

All tourist services $70,000 $111,300 $126,000

Other $0 $0 $0

Subtotal Direct Cost of Sales $70,000 $111,300 $126,000

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5.4 Strategic Alliances

In today's competitive environment it is becoming increasingly essential for organizations to

concentrate on their core activities so as to gain and maintain a competitive advantage. This

brings out the advantage of undertaking strategic alliances with organizations that the firm may

benefit from and visa versa. Sephats Tours intends to establish strong partnerships with several

hotels, lodges and travel agencies so as to be able to deliver customer wants. These alliances

will assist in ensuring that we obtain a regular stream of customers from various establishments.

At this writing, strategic alliances with several companies are possibilities, given the content of

existing interest and discussions. However ultimately it is the quality of our service(s) and the

skill and experience of the staff that will attract customers. During the start-up phase word-of-

mouth from satisfied customers will play a large part in increasing awareness and gaining

exposure for our services.

5.5 Corporate Social Responsibility

Sephats Tours recognizes the fact that as it is involved in the tourism sector of the overall

economy there is need to be involved in a wide range of social responsibility engagement

programmes so as to invest back into the community in which we operate. We believe that

through our social responsibility programme we can indeed assist in improving peoples lives. We

believe that if we are to contribute to development in a sustainable way, we need to support

numerous projects.

However, before we commit ourselves to projects we intend to ensure that they will be

beneficial to the community, particularly in the long term. We know that we cannot address all

the development needs of our society. Where we can, we assist and sometimes may form

partnerships so as to increase capacity.

One of the ways the company intends to be involved in corporate social responsibility is through

organizing cleaning campaigns with various communities. Basically this will involve briefing the

community on the advantages of having a clean environment, now and in future. In order to

entice the community to get involved in these campaigns, as well as to increase awareness

about our business and services we intend to give out T-shirts and caps with our company

name. These campaigns will also assist in us being perceived and appreciated as a good

corporate citizen.

6.0 Management Summary

The human resources element shall be an essential component in the delivery of the total

service. By encouraging all employees to handle customers well, and by having enthusiastic,

capable and empowered people interacting with our customers, we intend to build the

competitive advantage of being able to comprehensively meet our customers' needs. There will

be need to evaluate jobs and remuneration packages against market benchmarks to employees

for their agreed and set out tasks so as to ensure they are competitive. These principles extend

to accident, medical, death and welfare benefits.

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6.1 Organizational Structure

Sephats Tours shall be managed primarily by working owners/partners. The company will engage

more of a functional organization structure whereby people shall be focusing on their prime area

of expertise. However in engaging this organization structure we intend to ensure that there is

open communication between all personnel at all levels. With such a group we believe it will be

simple to communicate with and support one another. Our organizational structure demonstrates

the importance we shall put on our customers, and ensuring their satisfaction in utilizing our

services.

As the company grows there will be more structure to the utilizing, with new employees being

assigned a supervisor or subordinate. When the company is at its full staff potential, it will

operate as any closely held utilizing, but maintain the personal interest in each employee's

personal and family welfare and their contributions to the business.

We acknowledge the fact that successful recruiting, motivation, and discipline procedures are

keys to the growth of the utilizing. Hence we intend to promote and maintain good labour

relations, strong morale and high quality work per employee through undertaking the following:

[discussion omitted].

6.2 Management Team

The founders of Sephats Tours are passionate about the activities it will promote and offer on

the market. Management style will reflect the participation of the directors/shareholders. The

company intends to respect its community and treat all employees well. We will develop and

nurture the company as community. However we realize that we are not fully conversant in

tourism and as such intend to engage experienced staff as well as undergo a training course

from a reputable institution.

The Managing Director's experience in public commercial transportation and government will

assist in the establishment of good networks. He also has attended a course in Auto Mechanics

at X Centre that will assist in servicing the vehicles. However acknowledging the importance of

continuous training and improvement the Managing Director intends to undergo a course in

Travel and Tourism so as to be fully conversant in the field, as well as obtain knowledge of the

latest developments in the industry.

6.3 Personnel Plan

The detailed monthly personnel plan for the first year is included in the appendix. The annual

personnel estimates are included here. We believe this plan is a good compromise between

fairness and expedience, and meets the commitments of our mission and business objectives.

We intend to compensate our personnel well, so as to retain their invaluable expertise and to

ensure job satisfaction and enrichment through delegation of authority. Our compensation will

include health care, generous profit sharing, plus a minimum of three weeks vacation. Sephats

Tours recognizes that our employees contribute fundamentally to the company's long-term

prosperity, acknowledging our obligation to remunerate them competitively. We intend to

enhance our capacity to attract and retain people of quality through competitive remuneration

packages.

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Table: Personnel

Personnel Plan

FY 2000 FY 2001 FY 2002

Directors $0 $48,000 $60,000

Accountant $30,000 $36,000 $36,000

Tour Guide $21,600 $48,000 $48,000

Sales & Marketing $19,200 $32,400 $43,200

Driver $14,400 $36,000 $36,000

Personal Assistant $13,200 $18,000 $18,000

Cleaner $7,200 $18,000 $18,000

Nightwatchman $7,200 $9,600 $9,600

Mechanic $0 $20,400 $20,400

Total People 11 14 16

Total Payroll $112,800 $266,400 $289,200

6.4 Training

In-house training shall be continuous so that we are continuously up-to-date in meeting

customer requirements. With time we also intend to undertake regular external training

particularly following any new developments in the market. This will ensure we are implementing

the latest techniques and aware of customers expectations. By setting our standards against

industry benchmarks we will be able to ensure a regular flow of customers as they are

continually referred to us.

Internal training will not only include service and technical aspects, but also expand to give

much greater knowledge of customers, market trends, services, new technology aids, time

management amongst other such variables. Marketing sessions in particular will be a regular

occurrence, as this will ensure that our personnel continuously portray a positive image of the

business, assisting in bringing in more business.

6.5 Feedback and Control

1. We intend to make sure that each employee understands the goals of the firm, is customer

focused, proud of their work and work as a team. This will encourage employees to become

entrepreneurial and customer responsible, in addition to unifying staff in customer focus and

values.

2. Important notices and developments will be continuously communicated to employees so as

to keep them abreast of developments and promoting a sense of belonging and oneness in

the organization.

3. We will encourage our employees to put forward any suggestions they might have regarding

the improvement of any of the company's functions - an open door philosophy. Such a

culture will enhance innovativeness and creativity in turn leading to job satisfaction and

enrichment.

4. We undertake to continuously formalize and measure cross-functional working

communication so as to ensure that the various departments work harmoniously towards

attainment of company objectives.

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7.0 Financial Plan

The financial plan shall be essential if we are to meet our objectives. The intention is to finance

growth through cash flow and equity.

One of the most important factors will be the payment terms as agreed between the client or

customer. We can't push our customers hard on collection days, because they are extremely

sensitive and will normally judge us on our terms. Therefore there is need to develop a

permanent system of receivables financing systems mutually agreed between both parties.

Hence in the financial plan we intend to have the following:

1. A fundamental respect for giving our customers value, and for maintaining a healthy and

congenial workplace.

2. Cash flow as first priority, growth second, profits third.

3. Respect for realistic forecasts, and conservative cash flow and financial management.

7.1 Important Assumptions

The financial plan depends on important assumptions. From the beginning, we recognize that

payment terms and hence collection days are critical, but not a factor we can influence easily.

At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and

personnel burden are based on conservative assumptions.

Some of the more important underlying assumptions are:

We assume a strong economy, without major recession.

We assume, of course, that there are no unforeseen changes in economic policy to make our

service immediately obsolete or unwanted.

We assume amongst other things a 60-day average collection period, sales entirely on invoice

basis except for individuals who come directly to us, expenses mainly on a net 30 day basis, 30

days on average for payment of invoices, and present-day interest rates.

Table: General Assumptions

General Assumptions

FY 2000 FY 2001 FY 2002

Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 18.08% 17.00% 18.08%

Other 0 0 0

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7.2 Key Financial Indicators

We foresee a slow initial growth in sales, as we strive to ensure we are known on the market,

though operating expenses will be relatively high, and a bump in our sales and revenue

generation as we spread our services during expansion.

Collection days are very important. We do not want to let our average collection days get above

the client's actual subscription period under any circumstances. This could cause a serious

problem with cash flow, because our working capital situation is chronically tight. However, we

recognize that we cannot control this factor easily, because of the relationship we wish to

create with our clients.

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7.3 Break-even Analysis

Our break-even analysis will be based on running costs, that is costs we shall incur in keeping

the business running, including salaries and wages, rent, vehicle and computer maintenance

costs, water and electricity, insurance amongst others. Hence many fixed costs shall be included

in these costs. We will thus ensure that our sales levels are running comfortably above break-

even.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $18,656

Assumptions:

Average Percent Variable Cost 20%

Estimated Monthly Fixed Cost $14,925

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7.4 Projected Profit and Loss

Our projected profit and loss is shown in the table below, with sales increasing from more than

P350,000 the first year to more than P556,500 the second, and P630,000 in the third year. Our

net profit margin is relatively good for a start-up organization in our line of business. Hence we

do expect to more than break-even in the first year of operation.

As with the break-even, we are projecting very conservatively regarding cost of sales and gross

margin. Our cost of sales may be much lower, and gross margin higher, than in this projection.

We prefer to project conservatively so that we make sure we have enough cash. The detailed

monthly projections are included in the appendix.

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Table: Profit and Loss

Pro Forma Profit and Loss

FY 2000 FY 2001 FY 2002

Sales $350,000 $556,500 $630,000

Direct Cost of Sales $70,000 $111,300 $126,000

Other $0 $0 $0

Total Cost of Sales $70,000 $111,300 $126,000

Gross Margin $280,000 $445,200 $504,000

Gross Margin % 80.00% 80.00% 80.00%

Expenses

Payroll $112,800 $266,400 $289,200

Sales and Marketing and Other Expenses $23,700 $27,163 $29,879

Depreciation $0 $0 $0

Miscellaneous $2,400 $2,640 $2,904

Leased Equipment $0 $0 $0

Rent $14,400 $15,840 $17,424

Travel $1,800 $1,980 $2,184

Insurance $12,000 $13,200 $14,520

Maintenance $12,000 $0 $0

Payroll Taxes $0 $0 $0

Other $0 $0 $0

Total Operating Expenses $179,100 $327,223 $356,111

Profit Before Interest and Taxes $100,900 $117,977 $147,889

EBITDA $100,900 $117,977 $147,889

Interest Expense $0 $0 $0

Taxes Incurred $16,799 $20,056 $26,743

Net Profit $84,101 $97,921 $121,146

Net Profit/Sales 24.03% 17.60% 19.23%

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7.5 Projected Cash Flow

The following chart and table highlights the projected Cash Flow statement for Sephats Tours.

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Table: Cash Flow

Pro Forma Cash Flow

FY 2000 FY 2001 FY 2002

Cash Received

Cash from Operations

Cash Sales $175,000 $278,250 $315,000

Cash from Receivables $133,700 $253,883 $306,327

Subtotal Cash from Operations $308,700 $532,133 $621,327

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabil ities (interest-free) $0 $0 $0

New Long-term Liabil ities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $308,700 $532,133 $621,327

Expenditures FY 2000 FY 2001 FY 2002

Expenditures from Operations

Cash Spending $112,800 $266,400 $289,200

Bill Payments $144,204 $199,521 $219,625

Subtotal Spent on Operations $257,004 $465,921 $508,825

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabil ities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $257,004 $465,921 $508,825

Net Cash Flow $51,696 $66,212 $112,502

Cash Balance $81,696 $147,907 $260,409

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7.6 Projected Balance Sheet

The table below outlines the company's Balance Sheet.

Table: Balance Sheet

Pro Forma Balance Sheet

FY 2000 FY 2001 FY 2002

Assets

Current Assets

Cash $81,696 $147,907 $260,409

Accounts Receivable $41,300 $65,667 $74,340

Inventory $9,240 $14,692 $16,632

Other Current Assets $0 $0 $0

Total Current Assets $132,236 $228,266 $351,381

Long-term Assets

Long-term Assets $167,000 $167,000 $167,000

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $167,000 $167,000 $167,000

Total Assets $299,236 $395,266 $518,381

Liabilities and Capital FY 2000 FY 2001 FY 2002

Current Liabil ities

Accounts Payable $18,134 $16,244 $18,213

Current Borrowing $0 $0 $0

Other Current Liabil ities $0 $0 $0

Subtotal Current Liabil ities $18,134 $16,244 $18,213

Long-term Liabil ities $0 $0 $0

Total Liabil ities $18,134 $16,244 $18,213

Paid-in Capital $202,000 $202,000 $202,000

Retained Earnings ($5,000) $79,101 $177,022

Earnings $84,101 $97,921 $121,146

Total Capital $281,101 $379,022 $500,168

Total Liabil ities and Capital $299,236 $395,266 $518,381

Net Worth $281,101 $379,022 $500,168

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7.7 Business Ratios

The following table shows some important ratios for the Tour Operators industry, as determined

by the Standard Industry Classification (SIC) Code, 4725.

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Table: Ratios

Ratio Analysis

FY 2000 FY 2001 FY 2002 Industry Profile

Sales Growth 0.00% 59.00% 13.21% 4.00%

Percent of Total Assets

Accounts Receivable 13.80% 16.61% 14.34% 22.30%

Inventory 3.09% 3.72% 3.21% 0.70%

Other Current Assets 0.00% 0.00% 0.00% 42.80%

Total Current Assets 44.19% 57.75% 67.78% 65.80%

Long-term Assets 55.81% 42.25% 32.22% 34.20%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabil ities 6.06% 4.11% 3.51% 33.10%

Long-term Liabil ities 0.00% 0.00% 0.00% 16.40%

Total Liabilities 6.06% 4.11% 3.51% 49.50%

Net Worth 93.94% 95.89% 96.49% 50.50%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 80.00% 80.00% 80.00% 40.10%

Selling, General & Administrative Expenses 56.07% 62.40% 60.52% 30.80%

Advertising Expenses 4.71% 3.26% 3.17% 0.80%

Profit Before Interest and Taxes 28.83% 21.20% 23.47% 1.20%

Main Ratios

Current 7.29 14.05 19.29 1.66

Quick 6.78 13.15 18.38 1.29

Total Debt to Total Assets 6.06% 4.11% 3.51% 49.50%

Pre-tax Return on Net Worth 35.89% 31.13% 29.57% 2.70%

Pre-tax Return on Assets 33.72% 29.85% 28.53% 5.30%

Additional Ratios FY 2000 FY 2001 FY 2002

Net Profit Margin 24.03% 17.60% 19.23% n.a

Return on Equity 29.92% 25.84% 24.22% n.a

Activity Ratios

Accounts Receivable Turnover 4.24 4.24 4.24 n.a

Collection Days 56 70 81 n.a

Inventory Turnover 10.91 9.30 8.05 n.a

Accounts Payable Turnover 8.95 12.17 12.17 n.a

Payment Days 27 32 28 n.a

Total Asset Turnover 1.17 1.41 1.22 n.a

Debt Ratios

Debt to Net Worth 0.06 0.04 0.04 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $114,101 $212,022 $333,168 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.85 0.71 0.82 n.a

Current Debt/Total Assets 6% 4% 4% n.a

Acid Test 4.51 9.11 14.30 n.a

Sales/Net Worth 1.25 1.47 1.26 n.a

Sephats Tours

Page 37

Dividend Payout 0.00 0.00 0.00 n.a

8.0 Controls

The local tourism industry has been growing rapidly over the last decade due to increases in the

number of people seeking holidays in the country. With this in mind we intend our marketing

programmes to expand accordingly. The introduction of good brochures and other sales literature

will enable Sephats Tours to market to potential customers. We project sales to increase

accordingly, though slightly slower as we establish a reputation for ourselves. With time, we

intend to be at the forefront of customers' minds with regards to travel excursions.

Throughout the year we intend to undertake regular evaluations of our marketing programmes so

as to ensure that we are in line with our intended objectives. In summary we intend to

undertake the following:

1. Tracking and follow-up: We intend to have the discipline, as an organization, to track

results of the business plan and make sure that we implement it.

2. Market segment focus: We intend to have the discipline to maintain the market segment

focus.

3. Customer Follow-up: We intend to have the discipline as an organization to constantly

follow-up on customers so as to ensure that we are meeting their expectations at all times.

Appendix

Page 1

Table: Sales Forecast

Sales Forecast

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Sales

All tourist services 0% $14,000 $17,500 $17,500 $28,000 $28,000 $28,000 $28,000 $31,500 $35,000 $38,500 $42,000 $42,000

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Sales $14,000 $17,500 $17,500 $28,000 $28,000 $28,000 $28,000 $31,500 $35,000 $38,500 $42,000 $42,000

Direct Cost of Sales Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

All tourist services $2,800 $3,500 $3,500 $5,600 $5,600 $5,600 $5,600 $6,300 $7,000 $7,700 $8,400 $8,400

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $2,800 $3,500 $3,500 $5,600 $5,600 $5,600 $5,600 $6,300 $7,000 $7,700 $8,400 $8,400

Appendix

Page 2

Table: Personnel

Personnel Plan

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Directors 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Accountant 0% $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500

Tour Guide 0% $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800

Sales & Marketing 0% $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Driver 0% $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200

Personal Assistant 0% $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100

Cleaner 0% $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600

Nightwatchman 0% $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600

Mechanic 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total People 11 11 11 11 11 11 11 11 11 11 11 11

Total Payroll $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400

Appendix

Page 3

Table: General Assumptions

General Assumptions

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

Page 4

Table: Profit and Loss

Pro Forma Profit and Loss

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Sales $14,000 $17,500 $17,500 $28,000 $28,000 $28,000 $28,000 $31,500 $35,000 $38,500 $42,000 $42,000

Direct Cost of Sales $2,800 $3,500 $3,500 $5,600 $5,600 $5,600 $5,600 $6,300 $7,000 $7,700 $8,400 $8,400

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of Sales $2,800 $3,500 $3,500 $5,600 $5,600 $5,600 $5,600 $6,300 $7,000 $7,700 $8,400 $8,400

Gross Margin $11,200 $14,000 $14,000 $22,400 $22,400 $22,400 $22,400 $25,200 $28,000 $30,800 $33,600 $33,600

Gross Margin % 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00%

Expenses

Payroll $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400

Sales and Marketing and Other

Expenses

$1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975 $1,975

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Miscellaneous $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Rent $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200

Travel $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150

Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Maintenance $0 $0 $3,000 $0 $0 $3,000 $0 $0 $3,000 $0 $0 $3,000

Payroll Taxes 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $13,925 $13,925 $16,925 $13,925 $13,925 $16,925 $13,925 $13,925 $16,925 $13,925 $13,925 $16,925

Profit Before Interest and Taxes ($2,725) $75 ($2,925) $8,475 $8,475 $5,475 $8,475 $11,275 $11,075 $16,875 $19,675 $16,675

EBITDA ($2,725) $75 ($2,925) $8,475 $8,475 $5,475 $8,475 $11,275 $11,075 $16,875 $19,675 $16,675

Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Taxes Incurred ($818) $13 ($497) $1,441 $1,441 $931 $1,441 $1,917 $1,883 $2,869 $3,345 $2,835

Net Profit ($1,908) $62 ($2,428) $7,034 $7,034 $4,544 $7,034 $9,358 $9,192 $14,006 $16,330 $13,840

Net Profit/Sales -13.63% 0.36% -13.87% 25.12% 25.12% 16.23% 25.12% 29.71% 26.26% 36.38% 38.88% 32.95%

Appendix

Page 5

Table: Cash Flow

Pro Forma Cash Flow

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Cash Received

Cash from Operations

Cash Sales $7,000 $8,750 $8,750 $14,000 $14,000 $14,000 $14,000 $15,750 $17,500 $19,250 $21,000 $21,000

Cash from Receivables $0 $233 $7,058 $8,750 $8,925 $14,000 $14,000 $14,000 $14,058 $15,808 $17,558 $19,308

Subtotal Cash from Operations $7,000 $8,983 $15,808 $22,750 $22,925 $28,000 $28,000 $29,750 $31,558 $35,058 $38,558 $40,308

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received $7,000 $8,983 $15,808 $22,750 $22,925 $28,000 $28,000 $29,750 $31,558 $35,058 $38,558 $40,308

Expenditures Oct Nov Dec Jan