Download - On Your Bike | Business Plan · Web view‘On Your Bike’ is a new bicycle hire business, capitalizing on a new opportunity in Sheffield. With First Group cutting it’s bus services

4/2/2009

2009 On Your Bike | Business Plan

Oliver Partridge (50%) | Anton Courtney-May (50%)

Contents1. Summary........................................................................................................................................32. Business overview.............................................................................................................................4

Introduction.................................................................................................................................4Current position............................................................................................................................4Competitive advantage...................................................................................................................4Growth plan.................................................................................................................................5

3. Business strategy..............................................................................................................................6Tactics........................................................................................................................................6Strategic issues.............................................................................................................................6Core values..................................................................................................................................7The importance of core values..........................................................................................................7Corporate and Social Responsibility (CSR)............................................................................................7

4. Marketing.......................................................................................................................................8SWOT and critical success factors.......................................................................................................8Market research............................................................................................................................8Distribution channels......................................................................................................................9Strategic alliances..........................................................................................................................9Tactical promotion plan...................................................................................................................9Marketing budget........................................................................................................................10Credibility and risk reduction..........................................................................................................10‘On Your Bike’’s 5 P’s:...................................................................................................................10PESTEL analysis of ‘On Your Bike’:....................................................................................................10

5. Team and management structure.......................................................................................................116. Financial budgets and forecasts..........................................................................................................126. Financial budgets and forecasts..........................................................................................................12

In our realistic (modest) projection of what that ‘On Your Bike’ will make in terms of profit:...........................12Break even point per day (measured over a month as an average):...........................................................12Our optimistic (What IF) projection (this is if we rented all units all days):..................................................12Equipment & Supplies...................................................................................................................13Running Costs.............................................................................................................................13Loan.......................................................................................................................................14Tax.........................................................................................................................................14

Business plan prepared Month Year

1. Summary

‘On Your Bike’ is a new bicycle hire business, capitalizing on a new opportunity in Sheffield.

With First Group cutting it’s bus services for students in Sheffield, their only alternative is using normally priced services at £4 per day!

Using existing technology and innovative business management ‘On your Bike’ will make a pre-tax profit of £9,000 in its first year of operation.

‘On your Bike’ will provide a competitively priced, safe and carbon neutral means of transport for the university student of Sheffield.

Our product consists of: 1 bike, 1 helmet, 1 combination lock & 1 set of lights, all for just £3.60 per day and yes we do make a profit.

With over 45,000 students in Sheffield and a break even point of 11 bikes per day, we are more than confident that ‘On Your Bike’ will go from strength to strength as a transport provider within Sheffield.

At ‘On your Bike’ we believe in not just driving for success but RIDEing for it!

So, if you want to know how we do it, read on and we’ll tell you…


2. Business overview

Introduction

First Group Bus Company has taken the decision to terminate the free bus services to and from Sheffield Universities. This has left the students of Sheffield with two options, either walking to university or paying an increased bus fare. Some student accommodation is located on the outskirts of the city centre, so walking is not an option.

The purpose behind the business is to give students an easy and affordable alternative. Offering a rental facility for bicycles will allow students to get to/from university quickly, easily and with very little cost. Students would be able to rent bicycles and cycling equipment from us for travelling to and from their homes and the universities.

Our bikes will be kept centrally at our warehouse in the city centre. At the universities and student halls of residence there are facilities to keep bicycles. We feel that it is important to have a number of locations for the bikes to be easily stored, as this will increase the attractiveness of our service to our customers.

Our idea is to buy a number of mountain bikes (with safety equipment) that are to a standard specification. We shall make them available to hire, to students for travel to and from university. This will provide the students of Sheffield an easy and affordable means of transport around Sheffield.

Current position

Our business is currently in the introductory phase, and after our market research we believe there is definitely a position for our new business in the market place. We have ascertained quotes for the products and services we will require. We’ve put together some projections for our business and it will be profitable. See: (On Your Bike Finance, 2009)

Our cycle hire company comes into the leisure and transport industry. Although this industry has been around for some time, with first group cutting its routes and fares going up, this has created a gap in the market, which will allow our company to grow within the leisure & transport industry.

As a new start up business, we are setting up as a partnership. As we have a low turnover and relatively low liabilities we believe this is a safe bet to begin with.

Competitive advantage

Our competition recently created a gap in the market, by cutting out essential bus services ‘First Group Plc’ provided to the local community. The number of students in Sheffield is very high due to Sheffield hosting two major universities. With over 45,0001 university students studying in Sheffield this effects a lot of people.

The student communities are concentrated within certain areas, so not only is there an extensive client base, logistically this is an ideal opportunity to get our business up and running within the student community. Unlike our competitors we will have fewer outgoings on items such as; maintenance, fuel, staff, administration and insurance costs etc. This will be advantageous as a start up business to ensure that our company is profitable within a short period of time. Also, due to our position within the community (being students ourseelves) we know how to provide an excellent and reliable service to our customers.

Our competitors, ‘First Group Plc’ currently charge £4.002 a day for unlimited travel around Sheffield. In year one we are charging £3.60 a day for unlimited travel around Sheffield and unlike buses our customers can go wherever they want, whenever they please.

11 “Sheffield has a big student population, being home to more than 45,000 students studying at the two universities…” (Sheffield Hallam University, 2009)22 “FirstDay Sheffield - £4.00” (First Group Plc, 2009)


We believe that our business could grow and expand rapidly not only due to shear number of students concentrated in Sheffield centrally, but beyond the student community by also offering services to the general public.

From our market research we have discovered that when consulting with the general public the main contributing factors in support of our services are; Negative economic factors; which have put increasing pressure on consumer finances. Our low cost option would sit well financially within the general consumer’s transport mix. Also, in an increasingly more socially responsible & environmentally aware market place our transport solution which provides a carbon neutral option would be greatly welcomed.

Within the leisure industry the recession has affected the number of people using gym services. With the expense of gym membership people are deciding that gym membership isn’t a necessary cost. These people not choosing to renew their gym3 memberships could be easily persuaded by our fitness & leisure services; by being able to save money on fitness & leisure costs, and combining their fitness & leisure costs with their transport costs we can save the customer time and money.

Growth plan

Our main target for growth within the short term is to build our client base and company profile, but essentially, to hire out as many of our bikes as possible. We will be starting with 25 units. Each unit consist of a; bike, helmet, bicycle lock and a set of lights. In order to keep these units in service we require; 5 foot pumps, £30 per month in maintenance costs (estimated).

Also, to enhance our business’ growth we won’t be taking any profits from the business until year two. Assuming that the business remains true to our projections we will re-invest the remaining profits back into the business. If a high level of demand remains in year two we will increase our fleet of bikes, associated equipment & staff.

In year two we plan on doubling our fleet to 50 units and taking a wage of £1000 per month (£500 each). By year three we plan on having 75 bikes and taking a wage of £2000 per month (£1000 each). The associated running costs for these units as regards labour and equipment we have kept in proportion with year one. Obviously these are forecasts so we will re-asses our position after years one and two respectively.

In future we plan on having drop off/pick up points manned at both the universities and student halls of residence (this would involve either; more members of staff or a partnership with the halls of residence’s and universities, where they would receive some kind of commission or fee). To our advantage, student halls of residence accommodate many students densely packed into large accommodation blocks. This provides a large customer base around each potential ‘drop off/pick up’ point so is definitely worth looking into.

33 In support of this theory I provide an extract from the guardian. In this article it summarised the Office of National Statistics 62nd consumer spending review “It predicts a continued rise in online shopping but a drop in spending on nightclubs and gym membership as younger people bear the brunt of recession.” (The Guardian, 2009)


3. Business strategy

Our business strategy is to rent out as many bikes as is reasonably practicable.

Initially we will be targeting students. In May we will start marketing to the general public, mainly focused towards the fitness, leisure & tourism industry.

Year one our fleet will consist of 25 hireable units. Year two, 50 units and 75 units in year three. We feel that this is a steady growth forecast.

For the short to medium term we plan on being the number 1 bike hire service in Sheffield. Our target is to have a fleet of over 150 units by the 4th year of our business. This can be attained by:

Successive re-investment of profits into the company. Expansion of services around the Sheffield area. Working closely with the local communities; Sheffield universities, Sheffield city council and

Sheffield tourist board. Competitive pricing. Increasing our marketing mix.

For the medium to long term we plan to replicate our business model in other cities. To start we would like to launch our services in Manchester. This is because Manchester hosts three major universities and a high number of students that are concentrated within the city centre like Sheffield.

Tactics

At the moment being a new business we have a long way to go. Firstly we need to recruit our staff, and then implement our marketing strategy. Focussing on building our customer base is paramount.

There is a potential risk that demand may outstrip supply. In this case we would need to purchase more equipment. We believe that as long as we can prove that our business is successful, profitable and that we’ve paid off our debts, the bank would be happy to do business with us in future. Failing this we would look into other sources of investment such as approaching venture capitalists or selling shares in our business as a private limited company.

Strategic issues

Our potential threats are: If the bus company decides to put a low cost bus back on, and/or compete on price. If another company started to hire bikes out in Sheffield. If our bicycles were stolen. (Increased Insurance Premium)

As regards our bicycles being stolen we have set up a deposit scheme where each member of our service has to pay £20 deposit, of which is returned to the customer if they decide to end their membership.

As part of the membership process we shall be taking full contact details, along with student identification numbers and bank account details including a signed request (cheque or card details) for £100 that can be taken from the member’s account if the bicycle isn’t returned & a signed request for £55 if the associated equipment isn’t returned. This is to ensure that the customer pays due care and attention whilst using our service.

Our potential opportunities are: If the bus company cuts more bus routes, or continues to raise fares. If the cost of oil continues to increase further. If the universities and or local government decide to go into partnership with us. If our business does better than we expected.

In the event of these opportunities arising we plan to be in as best a financial position as possible in order for us to be able to capitalise upon them.


Core values

Our core values are: RIDE to success Inspire progress Deliver excellence Environmental champions

Our core values are integral to our business strategy. We believe that if we are to succeed/Ride to success we need to inspire progress throughout our; business, staff and customers. Without progress our business will not succeed.

In order for us to be able to inspire progress then we need to deliver excellence. ‘On Your Bike’ is committed to delivering excellence in all elements of the business. This is delivering excellent service to all our stakeholders all of the time.

Championing environmental issues is key to our business model. Reducing carbon emissions is very important to us that is why we don’t stop at bicycles (which are a great way of helping to save the planet); we are committed to ensuring that wherever possible we source our supplies from ethical and sustainable sources.

Our values come as a package, and like a business they rely upon each other in order to succeed. If we fail to deliver excellent service to our customers, if we don’t drive environmental issues, then we won’t inspire progress within our business, or our customers and ultimately we wont succeed.

Within our staff and our customers we put our core values at the heart of everything that we do so together we will make ‘On Your Bike’ RIDE to success!

The importance of core values

Having core values is highly important in today’s corporate world of public relations. It sets out positive work ethics and business practices for within the business, and projects a positive image to those outside of the company.

Corporate and Social Responsibility (CSR)

Corporate and social responsibility is an important part of a business in order to stop and think of a world outside of just making a profit. Obviously making a profit is the cornerstone of good business. However, it doesn’t have to be at the expence of everything else. That’s why at ‘On Your Bike’ we are dedicated to helping the environment. This doesn’t just help us to sleep at night, but being “Green” is a popular cash cow that is in full flow of being milked, and ‘On Your Bike’ is in a prime position to milk it.


4. Marketing

SWOT and critical success factors

Market research

To help understand our market we decided to create a questionnaire4 initially visited both universities and a few student bars to gather interest. Then a separate questionnaire was put to non-students around Sheffield. The questionnaire was designed to help get an understanding of how many people would be interested in the services our business offers.

To achieve the best results for the questionnaire we visited a number of popular student locations. These included the Hubs for Sheffield Hallam, Sheffield Union for Sheffield University, a number of popular Student bars, at both Universities and finally at three student halls. We also distributed non-student surveys in the high street in the city centre, museums, libraries and train stations. These opportunities allowed us to get a wide range of feedback to the company, and look how different people looked at the prospect of city cycle hire.

44 For copies of the questionairs and results please see: (O.Y.B. Questionairs & Results, 2009)


Following the start up of the business there is the opportunity to expand.

Expansion into normal consumer markets, with the general public being able to hire bikes.

Depended upon success in Sheffield, would could expand to other cities.

There is opportunity to use different locations. For example the train station would be a good place to rent bikes.

We have undercut bus prices, for any routes that might be covered elsewhere.

The bus company that was running in the area, recently closed the student routes, so there is an open market.

The weather can affect our business. Snow & rain may reduce the amount of students wanting to use bikes, therefore harming our profit.

Competition. If the bus company decides to restart services again, people may use our service less.

Theft or damage to the bikes could jepordise our business. Taking deposts from customers may reduce this risk of this happening.

Students attend university on a term basis, so the summer months will be less busy. We will combat this by offering services to the general public.

Bikes are an enviromentally friendly way to travel with no associated fuel costs.

Bikes are cheap to buy and cheap to run. We have the opportunity to expand, it is not a

restricted market. We can set up alliances with the council, unversities

and tourist board to support the business.

HarmfulTo achieving the objective

HelpfulTo achieving the objective

Keeping our focus on Students initially allowed us to understand them more, along with what their needs and requirements are. From our survey we found that a lot of students left Sheffield over the summer. It was important to take this into consideration, as it could certainly harm our profits in the summer as no students would be around to hire our bicycles.

Distribution channels

Initially we have limited marketing to the student community. As mentioned in the Business overview, First Group who used to run the bus service in this area has discontinued the service, leaving students without alternative travel options.

One of our distribution channels for advertising is through leaflets that will be handed out locally at popular student locations such as;

The Student Unions. Student Bars. Outside the Universities. At bus stops where the cancelled bus service ran.

Our second main distribution channel is e-commerce. We are looking into setting up a web-site (which being IT students doesn’t cost a penny). Also, we will be using Facebook as a form of advertising. We will not be advertising directly on Facebook. However, we will be setting up groups and discussions on Facebook to raise our company’s profile.

A price has already been quoted for the cost of the leaflets of £125 per 2,500. We are ordering 7,500 in total over the year. We plan to have a first batch of 2,500, followed by a further 2,500 in May and a further 2,500 for September.

The reasoning behind the second and third batches is that the second batch is aimed towards the fitness, leisure & tourism industry within Sheffield and the third batch is aimed at the new intake of students at the Sheffield universities.

As our business expands over the next 3-5 years we will increase our advertising budget and marketing mix. Possibly billboard advertising, sponsoring local events, giving free gifts at fresher fairs, newspaper adverts, etc.

Strategic alliances

We plan to gain alliances with the two universities in Sheffield and their respective student unions and halls of residence. We have been in discussion with the two Sheffield universities and they have been very positive about the services our business can offer. We have looked at other locations, such as the train stations throughout Sheffield, where (when conducting our market research) we found a lot of people who would be interested in renting our bikes.

Tactical promotion plan

Our main target for the short term is to get as many students interested in our service as possible. Then begin marketing our service to non-students. This will begin late May/early June. This is to ensure that we have a viable business during the summer months whilst the vast majority of our main demographic are not at university in Sheffield. This is where we will be aiming our marketing more towards the environmental, leisure & tourism markets within Sheffield. We will be liaising with the Sheffield tourist board in the coming months to co-ordinate our efforts.

Phase one, we will be raising our profile at student events such as “Fresher Fairs”. Distributing leaflets around the universities and bus stops. Advertising on our own web-site, and setting up Facebook groups/discussions.


For phase two we shall be attending “Green”/CO2 reduction/ environmental awareness & Sheffield tourism fairs, meetings and events. Distribute leaflets around tourist hot spots such as; train stations, museums and main shopping high streets. Raise our profile on the internet by blogging and commenting on “Green” forums.

Marketing budget

£375 has initially been set aside for the production of leaflets. As for the distribution of the leaflets, this has no associated cost (at present) as we shall be distributing them ourselves. If necessary we may employ our staff to do a few extra hours.

Credibility and risk reduction

To increase the credibility of our business we will be looking to gain endorsements from the university’s student unions.

To reduce the risk for our customer in doing business with us, we will be transparent in our operations. We will hold our customer deposits separate from our business running costs. Ensure that our business is in profit within the first few months. Provide a high level of customer service and maintain our equipment to the highest possible standard.

‘On Your Bike’’s 5 P’s:

Product – Our bikes are cheap to hire, cheap to maintain, easy to store and emit 0g CO2. Price – Our £3.60 per day is cheaper than our competitors at £4 per day. Place – Our bikes are already located at the heart of our customers local community. Promotion – We are using the best methods of communication for students; leaflets and the

internet. People – Our people are trained to the highest standards and embrace our “RIDE to success”

mentallity.

PESTEL analysis of ‘On Your Bike’:

Political – The main political factor that would be associated with our business is probably the governments intrest in education and the environment. If successful we may be able to receive some kind of support from the universities or local government.

Economic – In the current economic climate (recession), the fact that our prices are competitive will help our business. Also, as oil prices inevitably go up, (as the planet is running low on this resource) in the gap between the new non-oil based transport and current modes of (oil based) transport, our service will become cheaper (and therefore more attractive) in comparison with other (current) modes of transport.

Social – As people like to keep fit and as most students are young, this method of transport of which has been associated with students for many years, would not be out of place within the customers transport mix.

Technological – Bikes are technically mavelous. Yes, they’ve been around for years, but they’re extreemly efficient, easily transportable, cheap, durable and they work! There’s no point re-inventing the wheel, so were not. We’re using proven technology to provide a reliable service.

Environmental – In the threat of global warming, El Niño and freak weather systems, the world is in fear of CO2 our transport solution emits 0g of CO2.

Legal – Obviously like all companies we have to adhear to health and satefy regulations, tax laws, discrimination laws etc. there aren’t any laws in particular that pose a major hiderance to our company’s success.


5. Team and management structure

Our management team consists of two entrepreneurs (ourselves) of which have a variety of previous experience in business, customer service, marketing, IT, sales and engineering. This puts us at an advantage in that we have the skills in order to do the job; both managerially and technically. Having the technical knowledge already saves potentially dangerous mistakes as regards our fleet of bikes this makes it easier and cheaper when training our staff.

We will be employing four members of staff. We are targeting our recruitment campaign towards engineering students as they are more likely to have had experience in this area.

We estimate that for a fleet of 25 bikes we require 4.5 hours of labour per day, 7 days a week. As our fleet increases we have forecast that we shall employ proportionally more staff. However, we will re-assess staffing levels on a monthly basis.

We will have weely, monthly and annual meeting in order to discuss and monitor our busines’s progress. We will be using a series of financial monitoring tools5 to see how our business is doing. This is key for any business to be able to easily check the health of the company.


6. Financial budgets and forecasts

In year 1 we need to hire out (on average over the month) 11 units per day. With over 45,000 university students in Sheffield and up to 25 units at our disposal per day we feel more than confident that we’ll be able to make a profit5.

In our realistic (modest) projection of what that ‘On Your Bike’ will make in terms of profit:

Year 1 – £9,356. That is with us (the management) not taking anything out of the business. Year 2 – £15,332. In year two we will be taking a wage of £1000 per month (between the two of

us). We will have a fleet of 50 units. Year 3 – £22,538. In year three we will be taking a wage of £2000 per month (between the two of

us) and we will have a fleet of 75 units.

Break even point per day (measured over a month as an average):

Year 1 – 16 out of 25 units (64%) - That’s 0.035% of Sheffield’s student population. Year 2 – 34 out of 50 units (68%) - That’s 0.076% of Sheffield’s student population. Year 3 – 52 out of 75 units (70%) - That’s 0.116% of Sheffield’s student population.

The rise in the percentage of bikes needing to be sold per day in order to break even is a reflection of the increased wage bill and the lowering of our rates from £3.60/unit/day to £3.20/unit/day. The associated costs for equipment, staff etc. have remained proportional the number of units in service.

Our optimistic (What IF) projection (this is if we rented all units all days):

Year 1 – £11,996 Year 2 – £20,372 Year 3 – £38,928

55 All figures are quoted exclusive of tax.


Equipment & Supplies

In our first year we have purchased:

25 Mountain bikes @ £99.95 Each 25 Safety helmets @ £19.95 Each 25 Combination bicycle locks @ £11.95 Each 25 Sets of lights @ £6.90 Each 5 Bicycle pumps @ £15.95 Each 1 Computer @ £258.11 1 Printer @ £34.80 1 Desk @ £38.17 1 Chair @ £6.35 1 Pack of paper @ £4.85 (Consumable supply, not asset)

We shall be renting out; 1 bike, 1 helmet, 1 combination lock & 1 set of lights, as one unit. We provide combination locks in order to secure our assets. Also, the use of combination locks prevents the costs and inconveinence associated with customers losing their keys. We believe that the inclusion of helmets and bicycle lights is necessary not for our customer’s safety but in order to comply with the Highway Code.

“59 Clothing You should weara cycle helmet which conforms to current regulations, is the correct size and securely fastened” (Her Majesty's Government, 2009)

“60 At night your cycle MUST have white front and red rear lights lit. It MUST also be fitted with a red rear reflector (and amber pedal reflectors, if manufactured after 1/10/85).” (Her Majesty's Government, 2009)

We have not provided reflective clothing as part of our service. However, we will advise our customers that when riding at night the use of reflective clothing is advisable.

We believe that these assets are more than capable of lasting three years of good use. After three years we will write these assets off and purchase more equipment. In the event of loss or damage to our assets then we will discus (on a case by case basis) the cost of replacing the item(s). In the event of non-compliance we will be able to recoup our costs by means of the customer’s contract (terms stated above).

Running Costs

The running costs are:

Staff @ £7 per hour Maintenance @ £30 per month (estimated) Advertising @ £375 per annum Insurance @ £1000 per annum Wearhouse @ £200 per month

These costs are essential to the operation of our business. Insurance and wearhouse costs are fixed. Advertising costs are unlikely to change throughout year one. Maintenance & Staffing costs are variable and will be reviewed on a more regular basis.

Loan


The business loan we have been quoted for is for £2000 capital, of which we are taking out at 13%6 interest over three years. The total cost of this loan is £2426. We will be making monthly repayments of £67.39 which wont greatly effect the running of our business.

Tax

For our final calculations for our net profit we deducted corporation tax at 20%.

BibliographyFirst Group Plc. (2009, 04 01). First Group - UK Bus South Yorkshire. Retrieved 04 01, 2009, from www.firstgroup.com: http://www.firstgroup.com/ukbus/yorkhumber/southyorkshire/fares/firstday.phpHer Majesty's Government. (2009, 04 01). 59-82: Rules for cyclists. Retrieved 04 01, 2009, from Directgov: http://www.direct.gov.uk/en/TravelAndTransport/Highwaycode/DG_069837O.Y.B. Questionairs & Results. (2009). On Your Bike Questionairs & Results. Sheffield: On Your Bike.On Your Bike - Finance. (2009). Finance Overview. Sheffield: On Your Bike.On Your Bike Finance. (2009, 04 01). Financial Forecast.Sheffield Hallam University. (2009, 04 01). Life in Sheffield. Retrieved 04 01, 2009, from www.shu.ac.uk: http://www.shu.ac.uk/international/sheffield.htmlThe Guardian. (2009, March 24). Recession brings out changes in shopping habits. Retrieved March 2009, 30, from guardian.co.uk: http://www.guardian.co.uk/business/2009/mar/24/consumer-spending-inflation-basket-ons

6 For loan rates please see apendix
