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Adventure Vacations Travel Agency
Marketing Plan
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| 4.0 Financials, Budgets, and Forecasts | [back to top] |
ATI's marketing budget for year one of operations is taken from the start-up investment and is equivalent to approximately 6% of anticipated first-year revenues. The marketing budget will be evaluated quarterly, and at the end of year one, adjustments will be made to advertising schedules, media vehicles, effective frequency, etc. as necessary.
The following issues are relevant to ATI's marketing efforts:
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As a start-up, ATI has no baseline by which it can determine the effects of its marketing efforts on sales. Year two marketing activities will benefit from the financial results of year one operations.
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The marketing budget has been established based on anticipated revenues. ATI plans to employ the use of more sophisticated budgeting methods as a baseline is established.
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Much of ATI's marketing efforts will involve personal interaction with customers in the Woodville area. ATI must attempt to conserve resources when possible, especially in the early stages of operation. Sweat equity in marketing and other activities will be critical to ATI's success.
| 4.1 Break-even Analysis | [back to top] |
ATI's break-even analysis, including monthly sales break-even points, are located in the following table. Break-even calculations assume a 20% gross margin. ATI plans to improve its margin by year three or four. The improved margin will come as the result of economies of scale, strategic alliances, and ATI's position as a premier service provider. ATI will be able to raise prices without affecting demand. Fixed costs may increase slightly over the next two years.
Break-even Analysis
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| Break-even Analysis | |
| Monthly Revenue Break-even | $1,501 |
| Assumptions: | |
| Average Percent Variable Cost | 80% |
| Estimated Monthly Fixed Cost | $1,500 |
| 4.2 Sales Forecast | [back to top] |
Detailed projections are located in the sales forecast table. ATI expects sales to be slow in the first, and possibly second quarter of operation. Sales growth is estimated at 10% annually through year three.
Sales Monthly
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| Sales Forecast | |||||
| FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 | |
| Sales | |||||
| Woodville Market (Individual) | $427,685 | $382,245 | $258,751 | $284,626 | $313,089 |
| National Market | $42,768 | $70,568 | $97,032 | $106,735 | $117,409 |
| Total Sales | $470,453 | $452,813 | $355,783 | $391,361 | $430,497 |
| Direct Cost of Sales | FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 |
| Woodville Market (Individual) | $342,148 | $301,974 | $199,238 | $219,162 | $241,078 |
| National Market | $34,214 | $55,749 | $74,715 | $82,186 | $90,405 |
| Subtotal Direct Cost of Sales | $376,362 | $357,722 | $273,953 | $301,348 | $331,483 |
| 4.2.1 Sales by Manager | [back to top] |
ATI anticipates that the majority of revenues, 75-80% will come from individual customers in the Woodville area. This is especially true in the first two years of operation. The remainder of revenues will come from corporate clients and national customers who purchase via the Internet. By year three, ATI hopes to capture more sales from corporate and national customers, thus reducing its reliance on the Woodville area. Preliminary goals for year three are:
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Woodville customers: 40%.
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Corporate customers: 30%.
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National Customers: 15%.
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Internet: 15%.
Sales Breakdown by Manager Monthly
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| Sales by: Manager | |||||
| FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 | |
| Sales | |||||
| Jordan Barnes | $320,763 | $352,841 | $388,127 | $426,940 | $469,633 |
| Shea Delaney | $160,383 | $176,421 | $194,063 | $213,470 | $234,817 |
| Other | ($10,693) | ($76,449) | ($226,407) | ($249,049) | ($273,953) |
| Total | $470,453 | $452,813 | $355,783 | $391,361 | $430,497 |
| Average | $156,818 | $150,938 | $118,594 | $130,454 | $143,499 |
| 4.3 Expense Forecast | [back to top] |
The marketing budget is between 5% to 6% of revenues. ATI's marketing director will assume responsibility for everything except the website development budget. All ATI staff are salaried, so labor hours, other than those included in the directors salary, are not included in the budget. They will, however, play a key role in many of the planned promotional activities. All members are expected to take part in the promotion of ATI. There are no 9-5 positions.
Monthly Expense Budget
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| Marketing Expense Budget | |||||
| FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 | |
| Print and Radio Advertising | $15,000 | $18,750 | $20,625 | $22,688 | $27,225 |
| Personal Selling and Promotion | $8,500 | $10,625 | $11,688 | $12,856 | $15,428 |
| Other | $5,000 | $2,500 | $3,000 | $3,000 | $3,000 |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Total Sales and Marketing Expenses | $28,500 | $31,875 | $35,313 | $38,544 | $45,653 |
| Percent of Sales | 6.06% | 7.04% | 9.93% | 9.85% | 10.60% |
| 4.3.1 Expense by Manager | [back to top] |
The following chart details ATI's primary marketing. Jordan Barnes is responsible for the success of the programs and the proper management of the budget. Year two expenditures could easily double if ATI generates sufficient revenues. As efforts to communicate with the national and global markets increase, ATI expects to use several national publications for advertising. Doing so will be costly.
Expense Breakdown by Manager Monthly
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| Expenses by Manager | |||||
| FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 | |
| Expenses | |||||
| J. Barnes | $23,496 | $25,846 | $28,430 | $31,273 | $34,400 |
| S. Delaney | $5,004 | $2,500 | $2,500 | $2,500 | $2,500 |
| Other | $0 | $3,529 | $4,382 | $4,771 | $8,752 |
| Total | $28,500 | $31,875 | $35,313 | $38,544 | $45,653 |
| Average | $9,500 | $10,625 | $11,771 | $12,848 | $15,218 |
| 4.4 Linking Sales and Expenses to Strategy | [back to top] |
ATI's marketing efforts have been designed to improve sales. ATI's director of marketing will be responsible for tracking the various programs. If measurable results are not realized, changes will be made to the marketing mix. Other factors, such as economic recession, sales below estimates, high costs associated with the use of certain media, and others may influence ATI's marketing budget and mix.
Sales vs. Expenses Monthly
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| 4.5 Contribution Margin | [back to top] |
ATI anticipates that contribution margin will improve beginning in year three. By then, ATI will have developed a better mixture of revenue sources, strategic alliances, and brand equity. Corporate accounts will bring higher contribution margins, as will other group trips. Suppliers tend to give price breaks if the agency can book larger groups. In addition, ATI plans to charge as much as 5% over the industry standard by the end of year three, as it will be recognized as an industry leader.
Contribution Margin Monthly
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| Contribution Margin | |||||
| FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 | |
| Sales | $470,453 | $452,813 | $355,783 | $391,361 | $430,497 |
| Direct Cost of Sales | $376,362 | $357,722 | $273,953 | $301,348 | $331,483 |
| Other Variable Costs of Sales | $0 | $0 | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Total Cost of Sales | $376,362 | $357,722 | $273,953 | $301,348 | $331,483 |
| Gross Margin | $94,091 | $95,091 | $81,830 | $90,013 | $99,014 |
| Gross Margin % | 20.00% | 21.00% | 23.00% | 23.00% | 23.00% |
| Marketing Expense Budget | FY 2002 | FY 2003 | FY 2004 | FY 2005 | FY 2006 |
| Print and Radio Advertising | $15,000 | $18,750 | $20,625 | $22,688 | $27,225 |
| Personal Selling and Promotion | $8,500 | $10,625 | $11,688 | $12,856 | $15,428 |
| Other | $5,000 | $2,500 | $3,000 | $3,000 | $3,000 |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Total Sales and Marketing Expenses | $28,500 | $31,875 | $35,313 | $38,544 | $45,653 |
| Percent of Sales | 6.06% | 7.04% | 9.93% | 9.85% | 10.60% |
| Contribution Margin | $65,591 | $63,216 | $46,518 | $51,469 | $53,362 |
| Contribution Margin / Sales | 13.94% | 13.96% | 13.07% | 13.15% | 12.40% |
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