Cool Spring Ranch Feasibility Study
Table of Contents
Table of Contents i
Tables and Figures iii
Executive Summary iv
1.0 Introduction 1
1.1 Mission Statement: 1
1.2 Goals and Objectives 1
1.3 Background 1
2.0 Operations Plan 2
2.1 Organizational Structure 2
2.2 Site Plan and Five year Development Plan 3
2.3 Daily Activities 3
2.4 Weekly and Monthly Activities: 4
2.5 Yearly Activities: 4
2.6 Quality Control: 5
2.7 Capital Budget 5
2.8 Working Capital 9
2.9 Operating Expenses 9
2.9.1 Utilities 9
2.9.2 Feed and Animal Supplies 10
2.9.3 Building and Grounds 10
2.9.4 Insurance 11
2.9.5 Manure Removal 11
2.9.6 Food 11
2.9.7 Office supplies 11
2.10 Inventory 11
2.11 Accounts Receivable 12
2.12 Accounts Payable 12
3.0 Human Resource Plan 12
3.1 Owner/ Operator: 12
3.2 Camps Coordinator: 13
3.3 Chef: 13
3.4 Maintenance Staff: 13
3.5 Head Trainer: 14
3.6 Assistant Trainer: 14
3.7 Benefits: 15
4.0 The Marketing Plan 15
4.1 Overview 15
4.1.1 The Marketing Mix (4P’s) 15
4.1.2 Segmentation, Targeting, and Positioning 16
4.1.3 SWOT Analysis 17
4.2 Market Analysis 18
4.2.1 Past Performance 18
4.2.2 The Market 19
4.2.3 Market Distribution 19
4.2.4 Competition 20
4.2.5 Customers 21
4.2.6 Target Markets 22
4.2.7 Product/Service Features 23
4.3 Marketing Strategies 23
4.3.1 Sales and Profit Objectives 23
4.3.2 Channels of Distribution 23
4.3.3 Pricing Policy 24
4.3.4 Select Markets/Service Mix 24
4.3.5 Selling and Advertising 25
4.3.6 Marketing Plan Budget 25
5.0 Accounting/Financial Plan 25
5.1 Balance Sheet for Cool Spring Ranch 25
5.2 Dividend Policy 26
5.3 Economic Forecast 26
5.4 Working Capital 26
5.5 Expense Assumptions 27
5.6 Ratio Analysis 27
5.7 Financial Results 27
5.8 Income Taxes 28
5.9 Break-even Analysis 28
5.10 Sensitivity Analysis 29
5.10.1 Base Case 30
6.0 Summary 30
7.0 Future Considerations 30
8.0 References 31
Appendix A A
Tables and Figures
Table A: Income Statement vii
Table B: Break Even Analysis vii
Table 1: Buildings 6
Table 2: Equipment Rental 6
Table 3: Wages 7
Table 4: Expenses 8
Table 5: Cost of Operations 9
Table 6: Working Capital 9
Table 7: Benefits 15
Table 8: Market Distribution 19
Table 9: Competition and Features 21
Table 10: Revenue Prices. 24
Table11: Marketing Budget 25
Table 12: Balance Sheet 26
Table 13: Ratio Analysis 27
Table 14: Income Statement 28
Table 15: Break Even Analysis 29
Table 16: Operating Expense Analysis 29
Table 17: Amount of Customer Analysis 29
Table 18: Building Sensitivity 30
Figure 1: Organizational Chart 2
Figure 2: Site Plan 3
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Comm. 492 – College of Commerce and College of Agriculture, University of Saskatchewan
Cool Spring Ranch Feasibility Study
Executive Summary
Overview
Cool Spring Ranch is located in the scenic Lac Pelletier Valley. Named for the natural flowing spring in the property, Cool Spring Ranch currently offers many activities and the owners/operators have high hopes for future endeavors. The owners David and Cecilia Fiddler, along with their daughters, operate a training ground for both horse and rider in the summer months. They wish to expand operations to include training throughout the winter. The goal is to offer all types of training and produce a place where all riders may attend, regardless of their ability. They are hoping to market the new facility by offering riding camps for children. The plan will allow for further investment into marketing the ranch as a corporate retreat with the ability to house meetings and group training. New buildings required include a new indoor arena, cabins and headquarters complete with dorms. The following business plan provides an analysis of the human resource, marketing, operations, and financial elements of the proposed business.
Operations
Cool Spring Ranch will focus on two main operations that will take place on a daily basis, horse riding camps and general horse training.
In the summer the horse riding camps will be instructed and coordinated by Marcia Fiddler. Up to ten students at one time can be accommodated. The camps have an expected occupancy rate (E.O.R) of 85% for the week long camps and 60% for weekend camps. Week long camps will last five days. A general day will start with breakfast prepared by the head cook Cecilia Fiddler. After breakfast Marcia will instruct the students on feeding of the horses and general care of the animals. All meals will be provided to the students. Riding drills will be done throughout the day, as well as various fun activities.
The other main operation of the ranch will be the horse training all year round. The (E.O.R) for the horse training is 70% with an expected 2% increase per year. Kristin Fiddler will be responsible for this part of the enterprise, though Marcia will also help train the horses during months when she is not busy with the operating of the camps. The daily activities will include; cleaning, feeding, watering, riding and training of the horses. An assistant will work for Kristin during the summer months that will allow for five to ten horses to be worked with on any given day.
Human Resources
David and Cecilia Fiddler will have overall control of the everyday operations of Cool Spring Ranch as the Owners/ Operators. It is their desire to teach Marcia and Kristin to completely run and operate the business within ten to fifteen years. David Fiddler’s primary duty is working with both the head trainer and the camps coordinator to ensure that Cool Spring Ranch is running efficiently. As such, he will oversee the hiring of employees and the purchase of all materials for the ranch. He will also be responsible for any financial decisions that need to be made.
The Camps Coordinator is responsible for the efficient operation of all camps offered at Cool Spring Ranch. These duties include scheduling, ensuring that rooms/meals are both available and provided, activity planning, ensuring waiver forms are signed, collecting payment, teaching, and any other duties that may be required. In addition to the above duties, the Camp Coordinator will be the supervisor for both the cook and maintenance staff. This position will be filled by Marcia Fiddler.
The Head Trainer will be responsible for coordinating all equestrian training conducted at Cool Spring Ranch. This includes the planning and scheduling of riding clinics and competitions held at the ranch, working with individual clients and their horses to ensure the requested training is done to a high standard, working with the horses on a regular basis, and any other duties that are required to maintain an efficient training environment. In addition, the Head Trainer will be the supervisor of the Assistant Trainer. This position will be filled by Kristin Fiddler.
The Assistant Trainer will be responsible for assisting the Head Trainer in any way required to maintain an efficient training environment. This job will last the duration of the summer. The intent is that this position will be filled by a student from Olds College participating in a summer internship program.
The Chef will be responsible for the preparation of meals at Cool Spring Ranch. These duties include meal planning, purchasing of food, preparation of food, and maintaining a safe and clean kitchen area.
The Maintenance Staff will be responsible for the maintaining the functionality of Cool Spring Ranch. Duties include the maintenance of all living areas including the cabins and kitchen, yard maintenance, cleaning the stable, and any other general duties required. This position is mainly a summer position. Winter duties will be as required.
Due to the nature of the organization, no additional benefits will be provided other than those required by labor laws such as CPP, EI, and WC.
Marketing
The pricing policy of Cool Spring Ranch will focus on competitive rather than premium pricing strategies. Prices will initially be set comparably low to attract new customers and to help offset any costs associated with the perception of an inconvenient location. Once a strong client base is established, prices will increase slightly to reflect the quality of the services offered.
Cool Spring Ranch is selling an experience. The key factors that must be emphasized are the expertise and background of the training staff, the beautiful location of the ranch, and the other opportunities that exist within the surrounding area.
The current geographical market will include the urban centers of Saskatoon, Regina, Moose Jaw, Swift Current, and Medicine Hat. The market will also include surrounding rural centers. With the introduction of the corporate retreat (year 5) and the establishment of business in the current market, the geographical market will expand to include larger Western Canadian centers such as Winnipeg, Calgary and Edmonton.
Initial focus will be placed on attracting the parents of students, members of the horse community and outdoor enthusiasts. When the corporate retreat is phased in, emphasis will be placed upon corporate customers. These market segments are seen to be the key interest groups and will form the core of the clientele.
Financial
The prices used for services offered are considered to be dictated by the market. Key variables in financial analysis then include the number of customers, as well as the costs associated with marketing, operations, and the purchase of capital. The following tables provide an overview of the financial outlook of Cool Spring Ranch.
Table A: Income Statement
Income Statement2005 / 2007 / 2009 / 2011 / 2013 / 2014
Revenues
Horse Training / $63,000 / $69,291 / $75,987 / $83,111 / $90,686 / $94,651
Lessons / $1,575 / $1,920 / $2,289 / $2,686 / $3,111 / $3,334
Camps / $39,938 / $42,940 / $46,120 / $49,486 / $53,050 / $54,909
Corporate Retreat / $18,900 / $32,773 / $47,735 / $55,646
Rental of Facilities / $2,053 / $3,504 / $5,069 / $6,754 / $8,567 / $9,524
Total / $106,566 / $117,654 / $148,364 / $174,809 / $203,149 / $218,064
Expenses
Total / $174,976 / $186,285 / $211,426 / $216,023 / $212,208 / $210,636
Before Tax Income (Loss) / ($68,410) / ($68,631) / ($63,062) / ($41,213) / ($9,059) / $7,427
Income Tax / $0 / $0 / $0 / $0 / $0 / $0
Net Income Loss / ($68,410) / ($68,631) / ($63,062) / ($41,213) / ($9,059) / $7,427
Table B: Break Even Analysis
Break Even Analysis*Based on quantity of sales as compared to capacity.
Required / Current
Horse Training / 160% / 70%
Camps / 290% / 85%
Retreat / 260% / 30%
Conclusion
This project is not financially feasible in its current form. Though the services offered by Cool Spring Ranch are of a high standard, the cost of acquiring the capital assets required as well as the related operating costs do not exceed the potential revenues.
Possible alternatives to make this venture profitable may include one or a combination of the following:
a) Decreasing the number of cabins built from four to two.
b) Eliminating the building of cabins completely.
c) Phasing in the corporate retreat immediately.
d) Eliminating the building of the corporate retreat.
e) Only building the indoor arena.
Main Report
ix
Comm. 492 – College of Commerce and College of Agriculture, University of Saskatchewan
Cool Spring Ranch Feasibility Study
1.0 Introduction
1.1 Mission Statement:
To provide an attractive and relaxing setting for recreation, business and travel accommodation.
1.2 Goals and Objectives
Goal: The goal is to study the feasibility of an expansion to the current facilities on the Fiddler farm. This expansion year round horse training and weeklong summer camps with a phase in of a corporate retreat.
Objectives:
- Develop an operations plan for the expansion.
- Develop a human resource plan for the business
- Develop a marketing plan, which will show product, place, promotion, and pricing.
- Develop a financial plan for a ten year period.
1.3 Background
Cool Spring Ranch is located in the scenic Lac Pelletier Valley. Named for the natural flowing spring in the property Cool Spring Ranch currently offers many activities, and the owner and operators have high hopes for future endeavors. The owners David and Cecilia Fiddler, along with their daughters, operate a training ground for horses and riders in the summer months. The knowledgeable riders wish to train throughout the winter in an indoor arena. They hope to offer all types of training and produce a place where all riders may attend, regardless of their ability. This plan will be organized in a way to accommodate retirement wishes put forth by Mr. Fiddler. Mr. and Mrs. Fiddler will operate a small portion of the plan while the daughters take over the other operations.
David Fiddler operates a consulting business off the farm which sees high gross revenues. Mr. Fiddler’s daughters have been educated in Texas to train cutting horses[1] and are knowledgeable equestrians. The current clientele is growing and made up of a large number of repeat customers. They usually have between ten and twenty horses during the summer months for training. Although they specialize in cutting/cow horses they train a lot for showing and pleasure riding. They currently charge a price of $500 per month including feed to train the horses. They have a camp ground serviced with power that can accommodate fourteen trailers with ease. The Fiddlers also run a herd of 160 head of Angus, the cattle will not be a part of this business plan although the client has aspirations of his own to extend this venture. These assets may, however, play a role in our financial analysis. The ranch is extremely busy during the summer months which led the client to believe there is a market for year-round activities. They have a new five stall barn but need an arena with minimum dimensions of 70X200 ft.
2.0 Operations Plan
2.1 Organizational Structure
The organizational structure of Cool Spring Ranch is as follows:
Figure 1: Organizational Chart
2.2 Site Plan and Five year Development Plan
SE 7 - 11 - 14 W of 3
Figure 2: Site Plan
2.3 Daily Activities
For Cool Spring Ranch there will be two main operations that will take place on a daily basis, horse riding camps and general horse training.