The type of ownership for the business will be a partnership. This is the most obvious choice as there are two people involved, my business partner and me. A partnership can involve between two and twenty partners allowing for further expansion and more financial backing if needed. The partnership would be owned in a ratio of 60:40, me owning 60%. This means we would share the cash input and profits and losses in this ratio, which is bad in the short-term for me, but hopefully good in the long-term. A partnership brings additional expertise from all the partners. A formal partnership agreement would have to be drawn up to settle any disputes. The problems with a partnership are that there is unlimited liability meaning that it is possible to lose personal possessions e.g. car and house, and that there is limited cash input. Cash would only be available internally and with loans. The alternative was a private limited company (ltd.) which would have a larger financial backing and limited liability to the value of shareholding, but in the long-term there is less profit and less control when shareholders come in to the plan as well as high set-up costs. Limited companies also have to pay more tax.
The name for the business that I have decided on is Europinia Tours, this conveys the message that the company operates in Europe and it also illustrates tours which can be linked to coach tours as this is the most obvious one. Added to this, the name is quite comprehensive in a number of European countries e.g. Germany, should the business wish to expand in to other countries.
Administrative Decision Making Headquarters: Three Limited Parkway Internet Address: www.limited.com Top Officers: Leslie H. Wexner, Chairman and Chief Executive Officer Kenneth B. Gilman, Vice Chairman and Chief Administrative Officer V. Ann Hailey, Executive Vice President and Chief Financial Officer Arnold F. Kanarick, Executive Vice President and Chief Human Resources Total Number of ...
Aims and Objectives
The main aims and objectives of the business are:
To survive and break even by the end of year 1.
To cut in to the market and build a good reputation by providing a reliable and efficient service by no later than the end of year 4.
To expand to a public limited company and widen the range of services in 10 years.
To be able to compete well with competition and own a large market share of the British market after 15 years.
To possibly expand to European markets e.g. set-up in Italy by the end of year 25.
Initially we would need one tour guide to help customers to cope with difficulties and show customers sites and instruct with shopping tours. They will also be required to serve refreshments on trips. The tour guides will have previous experience and preferably knowledge or qualifications in foreign languages and will also need 5 GCSE’s. They will need to be young and enthusiastic to portray the company’s image. The coach hire company provides the tour guide on hire contract and we will have to cover any additional training costs to make the guide familiar with foreign languages and cities and sites. Training would be off the job at a special training centre for 2 weeks. Ideally there would be an intensive training course for longer, but this would be hard to budget with limited finances. As the business progresses and expands more tour guides will be needed and eventually if the company expands and buys its own coaches, we will have to cover salaries and training.
Initially we will need two coach drivers to drive two coaches. According to european union regulations the driver can only drive for five hours at a time before a 45 minute break and would need a PSV licence. For this reason and for passenger comfort we will take breaks every two or three hours. The coach driver will require knowledge of European roads and will need previous experience and training in basic foreign languages if not already qualified. The coach driver will come as part of the tour with the coach hire company also, on hire contract. This will give an experienced driver with insurance cover provided by the hire company.
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Myself and my partner will operate the phones for telephone bookings as well as run the business, when trade increases we will be able to employ someone to operate the phones. Eventually my partner and I will not have to deal with bookings, we can concentrate on marketing and expansion. An electronic Central Reservation System will be required to record and arrange bookings efficiently.
Links with other businesses
Banks would give us advice on setting up and expanding the business, as well as other queries. Accounts would be with HSBC. They would provide a favourable loan as well as bank accounts to suit our needs as well as overdrafts.
Coach Hire companies
Initially we would establish links with Astra and Eagle Line Travel. They would provide a driver on their own insurance cover along with a luxury bus. Coach hire is expensive in the long-term compared to coach leasing, but no companies would lease out their coaches, which is a restraint as it would save money to lease. They would offer Europinia Tours the following services for £370 for each day of use:
55 seats (or more if required)
Washroom and toilet
Armchair recliner seats
Individual lighting and ventilation
Television and video
Low emission fuels
Transfer, toll and ferry costs covered
European union approved seat belts
We would begin by offering two destinations, summer and winter ones. To make life easier calculating costs and figures, I will concentrate on the summer destination, Paris. The Montolon hotel, Paris, offers double rooms (as with all travel companies, there is a supplement for single rooms) for a reduced rate of about £45 per day including breakfast, dinner, private bathroom, TV, telephone and mini bar. The guestroom also offers air conditioning, private safe, satellite television and a bar. Obviously as there is a different currency prices can fluctuate if the pound changes. If the pound gets stronger then prices will go down, if the pound gets weaker prices go up. To cater for this change we will have to increase the price slightly to allow for changing markets. When the Euro comes in to use eventually we will be able to set a price without allowing for changes in the pound, as there is no currency risk. With increased growth our business would look to expand to different levels of quality, offering better hotels and more luxury for a higher price as would we be offering basic rates for Bed and Breakfasts.
If you are operating as a sole trader, the benefits are that it is a simple form of business to establish and there are no formal legal restrictions. You can enjoy all the profits and there is no legal requirement to keep accounts other than to inform the tax inspector of the tax liability of the business (which will in fact be your personal in come tax liability). The Inland Revenue will require ...
We would establish links with various insurance companies. Northern Star would offer travel insurance for £7 per person if there were one person under the age of 16 and over 20 people. We could offer a slightly higher price to the public and gain some profits. They would also offer material damage and theft insurance for £120 p.a. Natwest would offer the compulsory employers liability insurance for £200 p.a.
Sources of Finance
A bank loan will be initially available to the business. This provides a lump sum that is repayable with monthly instalments, which would make setting up easier in the first two years. A fixed interest rate will be supplied making the repayments more costly in the long-term, but provides capital for start up costs and will help with the initial losses. HSBC would offer a loan of £10,000 at 11.9% APR over a period of 36 months at £328.80 a month. Total repayment would be £11,836.60 meaning a long-term loss of £1,837. This is quite substantial, but allows for the business to be able to set up and market adequately. Security would have to be provided against personal property such as a house, but if no security can be offered then the DTI can help if the loan request has failed due to no security, and they will, upon review, offer 70% security on the loan.
Companies providing links with our business may be able to give trade credit. This is a form of free credit which companies give to improve the flow of money for up to three months, if money is paid late suppliers may not be willing to supply goods in the future, or may insist on cash in advance. Astra and Eagle Line Travel will offer us 30 days free trade credit of £2,000. Considering that they are paid £1,850 for each 5 day journey, this is adequate to allow us to get money together for payments in times of hardship.
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Leasing provides a form of medium-term credit. The business will be able to rent out coaches as well as lease property. Coach prices are £370 for each day of use and property would be acquired in London for £542 a month. These costs are instead of costs like £100,000 for a coach and £60,000 for property.
Hire purchase is a form of medium-term finance. As the business grows we will want to buy our own coaches and we can obtain a form of credit by giving an initial down-payment and then paying in instalments over an amount of time. The cost is then spread out over a period of time and more manageable. Goods are our property once the final instalment is paid creating problems if any of the instalments aren’t paid causing companies to repossess their goods. This method of payment is also quite costly in the long-term, but offers an easier form of payment.
Personal savings would also be available for this business. Capital would be at risk causing more personal debt if the business fails. However, it also shows the bank that I am willing to invest in the idea, increasing chances of loans. I would be able to provide £1,500 while in the ratio 60:40, my partner could provide £1,000.
As the company begins to start earning profits, money can be reinvested after debts are paid off. This long-term finance is ongoing and continually funds business internal growth. This growth, however, will be quite slow and profits will be scarce in the first two years.
Government help may be available from local authorities, government enterprise agencies and regional selective assistance. The procedures take a long time and most of the assistance is only available for companies employing substantial numbers of people. Capital is available, however, for smaller businesses, especially from the Prince’s Youth Business Trust as well as local councils.
Interest can be earned for money paid by customers and from VAT which can be stored in a high interest bank account until the amount has to be paid.
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A £500 overdraft would be available from HSBC. This is a short-term form of finance, but it costs a lot due to high interest charges until the amount is paid back. The amount for overdraft may be negotiable in the future depending on Europinia Tour’s record.
The market is all over UK as it is too difficult to pick up customers from Ireland. We would therefore be required to begin picking up customers from the North, probably Yorkshire to start with. The company office has no particular location restrictions, as most bookings will be done through travel agents or by phone. Labour is not particularly skilled so location in business parks or close to universities is not required. The business would need to locate in an area with fairly cheap rents initially, but if possible have well presented offices to promote the company’s image. This way costs could be minimised and it will be easier to break even over the first two years. A small office would be necessary, as sales would be mainly by telephone so a publicly visible shop is not needed.
If the premises is well maintained and organised then any customers walking by would be attracted to the initial impact of the company image. Workspace offers the Alpha Business Centre, a ground floor unit with 76 metres squared at £542 per month including service charges. The site has 24 hour access, on-site parking, 24 hour security and CCTV, an onsite manager, a reception including message taking services and a conference room. It is located 30 minutes by bus /tram from central Leeds. It is located a couple of minutes from a train station and a main road access which will soon have a super tram built on it to give easier access to the customers. Being in the fastest growing city in the UK, it would give a good image and bring more business to Leeds.