Automotive Fun and Service Company: Business Plan

Executive Summary

Automotive Fun and Service LLC is an innovator in the car industry. It not only offers spare parts for Toyota vehicles but also combines store, repairs, and information service. Creating a perception of a café’ and friendly atmosphere clearly differentiates the company from its competitors while the well-trained personnel attempts to increase the quality of the service. ‘Fairly rewarded employees guarantee higher retention rates of customers’ is its corporate mission.

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The main objectives are

  1. Establish a new business entity in winter 2016 with an opening event;
  2. Minimize costs and monitor changes in cash flow;
  3. Maintain spare parts and logistics at a low cost;
  4. Reach $3,000,000 in sales by the end of the third year (2018).

The key success factors are

  • Offering exclusive service to the customers to build the brand image;
  • Providing only excellent services;
  • Controlling the financial operations;
  • Monitoring the suppliers’ actions.
Financial highlights.
Figure 1. Financial highlights.

Company Summary

The company Automotive Fun and Service LLC focuses on the distribution of spare parts for Toyota vehicles and elementary repairs. It is one of the official representatives of Toyota in the area. Being a store and repair station shapes a company’s unique competitive advantage. The firm’s key features can be defined as:

    Competitive pricing: The firm offers a suitable price to quality ratio for both services and spare parts. The low costs are ensured by careful selection of the suppliers.

  1. Location: The firm wants to make sure that its customers have everyday access to the store and repair station. Locating the company close to the city center is comfortable for consumers, as it helps avoid traffic jams and does not require long-distance traveling.
  2. Exceptional service: To maintain the image of a high-quality service provider, the organization focuses on training of its staff while making the relationships with the customers client-centered. The personnel is friendly and can help consumers identify the problem and have a conversation with them about interesting topics related to innovations in Toyota.
  3. The unique design of the store: To assure that customers have an exceptional experience at the location, it is critical to focus on the inimitable design. Hanging pictures of Toyota cars on the walls, using some of the spare parts as furniture, and reflecting the company’s (Toyota) colors in the interior design create an exclusive experience and attract more customers to the location.

Company Ownership

The described company is a private business entity (LLC). The firm is divided between the three partners, J.V., M.J., and M.P. J.V. is the CEO of the firm, as the concept and the major idea belong to him. He has previous experience working as a sales manager in the automotive industry and has a clear understanding of financial markets due to having a Master in Management and Economics.

M.J. is another partner of the company with a degree in International Business with a specialization in marketing. She has previous experience as a marketing researcher, and her knowledge could be used to establish an effective marketing campaign.

M.P. has a Master Degree in Industrial Management and has extensive working experience in the automotive industry. M.P. has a clear understanding of financials. Lastly, due to the connection of new business with Toyota, the organization can consider Toyota as its potential partner and discover the benefits of this collaboration. Explaining the need for support might be a definer of cultivating additional revenues for both companies.

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Start-up Summary

As for the start-up, it is essential for the company to take a loan to establish a new project in the city. Collecting the required sum of money will assist in completing the proposed business plan. In this case, the company will need $425,000 as a start-up investment to design the space and purchase the basic equipment and inventory for the repairs (see Figures 2 and 3).

Start-up investment.
Figure 2. Start-up investment.
Accountant’s fees $30 000
Solicitor’s fees $10 000
Business registration $10 000
Domain name registration $300
Insurance premiums $10 000
Licenses $15 000
Workers compensation $200 000
Setting up the premises
Lease deposit and advance rent $15 000
Fit-out $2 000
Utility bonds and connection $4 000
Stationery $1 000
Plant and equipment
Equipment (basic machinery) $45 000
Vehicles $7 000
Telecommunications $300
Computers and software $300
Interior design $15 000
Exterior design $12 000
Restroom $1 000
Starting operations
Advertising and promotion $20 000
Raw materials and supplies $30 000
Working capital $25 000
Start-up capital
Equity investment (8-9 thousand per investor) $27 000
Borrowings $425 900
Total $452 900
The result
Total set-up costs $452 900
Surplus funds 0
Borrowings required 0

Figure 3. Start-up costs and investments.

Business Description

The rising percentage of cars in the area represents a unique opportunity for the distribution of spare parts and repair business. The current location lacks similar spare part stores, and offering a setting with a friendly atmosphere will attract Toyota owners in case of need or desire to learn something new about innovation in the company.

A new distribution of spare parts and repair business will not only provide exceptional quality of the service and original Toyota parts but also will focus on unique design and informational sessions. Simultaneously, the visitors will be offered tea or coffee to feel comfortable and enjoy their waiting time. The location is opened from 10-20 from Monday to Friday and works on days off (11-18). The company will face the competition, but its exclusive features will help differentiate it from the competitors.

Market Analysis Summary

Nowadays, Saudi Arabia experiences a positive trend in the automotive industry. For instance, the number of cars continues to increase from 562.9 thousand in 2005 to 830.3 thousand in 2015 (“Statista: Estimated Motor Vehicle Sales in Saudi Arabia” par. 1). This finding pertains to the fact that the number will continue to increase in the recent future. The shift in the car owner will have a positive influence on the supplemental services such as car repair, spare part stores, and information centers. Consequently, opening a location, which combines information centers and basic maintenance and retails spare parts, will be a profitable idea.

The store will be 750 square meters. This area will include the storage place (500 square meters), the client’s zone (200 square meters), and back-office (50 square meters). A maximum of 30 customers can be present in the store at the same time and feel comfortable. The unique design will provide clients with exceptional experience and differentiate it from the competitors. Establishing a partnership with Toyota and using its brand features to decorate the interior will create a direct association with the company and shape a positive image.

Market Segmentation

Alternatively, it is vital to understand the primary customers of the company, as depicting their main features will assist in defining marketing strategy (Weinstein 119). Due to the direct connection of the firm with Toyota, the owners of Toyota vehicles can be regarded as the primary segment of the target market. Typical Toyota’s consumers are families or individuals with a high or middle level of income (see Figure 4).

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Toyota aims at customers, who prefer high quality, style, and innovative solutions, and tries to interest them with their sports car product lines. These representatives of consumer groups are the main target audience of Automotive Fun and Service LLC. Simultaneously, the company can consider the potential customers of Toyota as its clients since the service offers information about the innovative initiatives.

Market segmentation.
Figure 4. Market segmentation.

Target Market Segment Strategy

The company pays equal attention to all customer groups such as families, individual users, and potential owners of Toyota. In this case, the market strategy has to emphasize the store’s unique features, increase the awareness of the customers about new services and pay vehement attention to the target audience. Consequently, the firm has to ensure that the person has the required set of knowledge and characteristics. Focusing on recruitment and training will have a positive impact on complying with the expectations of all customer groups.

Offering tea or coffee and a short presentation during the service will assist in creating a friendly atmosphere in the location. The families and individual owners will be able to experience exceptionality and reasonable price-to-quality ratio. Thus, the potential car buyers will receive additional information about new Toyota solutions and might be interested in buying them. In this case, a new business entity will have a unique set of features, which will increase not only Automotive Fun and Service LLC’s revenues but also will contribute to the positive changes in Toyota’s sales.

Business Analysis

Nowadays, automobiles are vital parts of our everyday activities, and one cannot underestimate the need for their maintenance including repair services and offering spare parts (Gilles 8). The automobile market experiences rapid growth. For instance, In Saudi Arabia, the car ownership increased by 300 thousand in 10 years (“Statista: Estimated Motor Vehicle Sales in Saudi Arabia” par. 1). Consequently, the supporting services will also increase in their popularity due to their direct connection to the car sector.

The global car market pertains to the intensive rivalry. Nowadays, the most well-known manufacturers are the car producers such as Mercedes, Toyota, KIA, BMW, and Skoda. Nonetheless, despite a high competition in the car segment, Toyota was able to gain and maintain its market share of 12% (“Statista: Toyota’s Share of Global Car Production” par. 1). A combination of these aspects underlines that Toyota has a well-developed brand image and customers’ base. Subsequently, building an association with this company will be beneficial for car maintenance and information service.

Lastly, the service quality contributes to a higher retention of the clients (Suphan 220). However, in the modern world, excellence in quality might not be enough to remain competitive, as customers are eager to discover exceptional and unique products (Suphan 220). Being customer-centered and combining the features of repair service, store, and information desk comply with the recent trends in the industry and gives Automotive Fun and Service LLC a chance to be successful.

Business Participants

The market related to Automotive Fun and Service LLC is represented by

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  1. Maintenance service: These service providers usually focus on repairs. The target market is dependent on their contracts with suppliers of spare parts.
  2. Spare parts store: This type of business sells the spare parts to the potential customers. Its customer base is also dependent on its suppliers.
  3. Dealerships: These selling points focus on delivering automobiles and their accessories to the customers. The target audience is dependent on the brand and its mission statement.
  4. Information Centers: These service providers deliver information about different features of the automobile industry and innovation and focus on the potential car buyers.

Main Competitors

Despite the prosperity of the automotive industry, the company has to consider the rival firms, as they have well-established images in the market. One of the major competitors is Abdul Latif Jammel. The company has an international presence with the main offices in Jeddah, Dubai, Tokyo, and Istanbul (“Abdul Latif Jammel: Our Locations” par. 1). It has extended coverage of operations while providing engineering and automotive assistance, energy generation, and advertisement (“Abdul Latif Jammel: Our Locations” par. 1).

Speaking of its automotive segment, it has a well-developed partnership with Toyota and dealerships around the world (“Abdul Latif Jammel: Automotive and Engineering” par. 1). Its target market is the same as in the case company. Nonetheless, Abdul Latif Jammel’s focus on different industrial segments contributes to the understanding that the case firm has a chance to attract the customers with the help of exceptional design and novelty. As for the other competitors, the rivalry is represented by local services and stores, but they are not directly connected to Toyota.

Strategy and Implementation Summary

The primary feature of the firm is its exceptional service. Devoting substantial attention to training will help supply the employees with the right set of skills and competences. The development program not only pays attention to the sales skills but also to the education of its employees about the recent trends and innovation in Toyota. It helps the workforce meet their personal and organizational goals and objectives.

Simultaneously, the company’s customer-centered and exceptional service strategy develops the desired atmosphere in the business entity. The autonomy and ability of the employees to resolve the arising issues will minimize the percentage of the conflicts at the workplace. Using interior decorations and design will create a unique experience and support the company’s objective of providing only exceptional service. Offering coffee and tea, having chairs and tables in the shape of car tires, and providing information about innovations in Toyota supports the company’s initial strategy and underlines its competitive edge. Consequently, the main goals of the company’s strategy are

  1. Underline the exceptionality of the service;
  2. Emphasize the customer-centered approach;
  3. Differentiate from the competitors and create competitive edge;
  4. Focus on target markets.

Marketing Strategy

The principal aim of the company is to provide its customers with the best price to quality ratio and offer exceptional services to its clients. Focusing on the unique design and creating a café-like cozy atmosphere in the store will assist in differentiating Automotive Fun and Service LLC from its competitors. In this case, the firm has to use different modes of communication to reach its target audience such as

  1. Social media advertising;
  2. Direct marketing: Advertising with the help of Toyota;
  3. Opening event.

The company organizes its opening event, where it will introduce its services, features, and design. The event will be held in the open doors day when the customers are able to ask their questions about the business. The clients can participate in the lottery and win prizes such as souvenirs with the company’s logo and discounts for services. The event can be advertised in the social media where the client is offered a free coffee for a repost.

Social media will be another approach to reach the target audience. Creating a store’s online profile on Facebook will help reach different target groups. The posts have to contain information about different educational sessions held at the store. Lastly, the company can advertise its services with the help of Toyota by delivering the information to its clients.

Sales Strategy

The subsequent sections of the business plan display detailed information about the potential sales and projections for the recent future.

Sales Forecast

Figure 5 illustrates the revenue acquired from services and spare parts during each year of operations.

Sales Forecast 2016 2017 2018
Service sales $ 300 000,00 $ 1 200 000,00 $ 1 500 000,00
Spare parts sales $ 200 000,00 $ 800 000,00 $ 1 500 000,00
Costs of sales $ 693 146,00 $ 655 346,00 $ 810 203,00

Figure 5. Sales forecast (2016-2018).

Monthly Revenue Forecast

Sales January February March April May June July August September October November December
Service 24 000 22 000 15 000 30 000 40 000 19 000 12 000 12 000 50 000 45 000 12000 19 000
Spare parts 10 000 10 000 10 000 20 000 30 000 10 000 10 000 10 000 40 000 30 000 10000 10 000
Total 34 000 32 000 25 000 50 000 70 000 29 000 22 000 22 000 90 000 75 000 22000 29 000

Figure 6. Monthly Revenue Forecast (year 2016) in USD.

Figure 6 displays a monthly revenue forecast. At the same time, it considers the seasonality of different months by reflecting changes in sales. In turn, Figure 7 portrays sales in each segment in the form of the diagram.

Figure 7. Monthly sales forecast.

Management Summary

The management team will be represented by six managers while the managers of the store will be hired during the establishment process.

Management Team

J.V., Co-founder, CEO: This manager has extended years of operation in the finances and automotive industry and is appointed as the CEO of the company.

M.J., Co-founder, Marketing Director: This manager will be appointed as a marketing director while focusing on advertising campaigns.

M.P., Co-founder, CFO: Having a Master’s Degree in Industrial Management and working experience in the automotive industry will help this manager optimize cash flows and increase the company’s sales and profitability.

Two managers of the store will be hired during the establishment process. The existent managers will ensure that the recruited candidates have a required set of skills and competences to support the company’s mission statement.

Management Team Gaps

Due to the gravity of the provided services, primary attention is paid to the training of the personnel and compliance of their goals with the company’s initial intentions. Simultaneously, finding an appropriate leadership style will help avoid the gaps between management and employees (Swindall 212). In turn, the lack of practical knowledge of entrepreneurship practices might be viewed as another gap when opening a store.

To avoid these adverse matters, the company will consult an industry professional or a representative of Toyota to minimize the gaps. The professional has to have extended years of operations in the automobile industry and has a clear understanding of the current trends in car service segment. In turn, the company will also contact an advertisement agency owned by Abdul Latif Jammel. It will help increase the effectiveness of advisement and will assist the company in reaching its target audience.

Personnel Plan

This section focuses on the number of personnel required for performing services and their scheduling. Simultaneously, offering information about their salary will assist in understanding one of the states of expenditure to be present in the income statement and balance sheet (see Figure 8).

Working hours
Monday Manager 1 9
Employee 1 9
Employee 2 9
Tuesday Manager 1 9
Employee 1 9
Employee 2 9 Monthly salary
Wednesday Manager 2 9 Manager 1 $ 75 000
Employee 3 9 Manager 2 $ 75 000
Employee 4 9 Employee 1 $ 37 500
Thursday Manager 2 9 Employee 2 $ 37 500
Employee 3 9 Employee 3 $ 37 500
Employee 4 9 Employee 4 $ 37 500
Friday Manager 1 9 Total $ 300 000
Employee 1 9
Employee 2 9
Saturday Manager 1 6
Employee 1 6
Employee 2 6
Sunday Manager 2 6
Employee 3 6
Employee 4 6

Figure 8. Personnel plan.

Financial Plan

The primary goal of this section is to provide the financial projections about the case company. It is critical to refer to break-even analysis, profit and loss statement, cash flow projections, and balance sheet.

Important Assumptions

It remains apparent that the financial plan is dependent on the external environment and the main assumptions:

  1. It is believed that the economy will offer favorable conditions for business development with a 5% annual growth. Simultaneously, no recession is expected.
  2. It is assumed that the company will have all the required resources to start its operations and establish a business entity.
  3. It is predicted that the popularity of Toyota cars will experience a shift due to its quality and innovative technological solutions. This aspect will have a positive impact on sales and attract more customers to the store.
  4. It is believed that the managerial team will enhance their skills leading to effective financial planning. This matter will help maximize cash flows and increase the company’s attractiveness to investments (Zhang 58).

Break-Even Analysis

Average selling price per unit $200
Average cost of each unit $100
Gross profit margin 50%
Fixed costs $2 168 695
Dollar sales to break even $4 337 390
Number of unit sales to break even 21 687

Figure 9. Break-even analysis.

The results of Figure 9 displays that the company is required to sell 21,687 units (services or spare parts) with an average price of $200 to break-even.

Projected Profit and Loss

In turn, the primary goal of Figure 10 is to present sales and expense projections for the case company. It will contribute to the understanding that the company can reach its financial goals and objectives with the volume of sales of $3,000,000 in 2018.

2016 2017 2018 Totals
Sales
Sales (invoiced) $500 000,00 $2 000 000,00 $3 000 000,00 $5 500 000,00
Cost of goods sold $693 146,00 $655 346,00 $810 203,14 $2 158 695,14
Gross profit -$193 146,00 $1 344 654,00 $2 189 796,86 $3 341 304,86
Expenses
Accounting fees $30 000,00 $20 000,00 $20 000,00 $70 000,00
Advertising $20 000,00 $10 000,00 $10 000,00 $40 000,00
Bank charges $5 000,00 $3 500,00 $3 500,00 $12 000,00
Bank interest (10%) $42 900,00 $42 900,00 $42 900,00 $128 700,00
Loan $141,967 $141,967 $141,967 $425 900,00
Depreciation $13 946,00 $13 946,00 $13 946,00 $41 838,00
Electricity and gas $12 000,00 $12 000,00 $12 000,00 $36 000,00
Equipment hire/lease $0,00 $0,00 $0,00 $0,00
Insurance $10 000,00 $10 000,00 $10 000,00 $30 000,00
Legal fees $35 000,00 $15 000,00 $10 000,00 $60 000,00
Motor vehicle expenses $7 000,00 $10 000,00 $7 000,00 $24 000,00
Postage, telephone and fax $1 300,00 $1 000,00 $1 000,00 $3 300,00
Stationery $1 000,00 $1 000,00 $1 000,00 $3 000,00
Rent $15 000,00 $15 000,00 $15 000,00 $45 000,00
Repairs and maintenance $0,00 $1 000,00 $1 000,00 $2 000,00
Superannuation $0,00
Transport/courier costs $10 000,00 $10 000,00 $10 000,00 $30 000,00
Wages $300 000,00 $300 000,00 $300 000,00 $900 000,00
Workers compensation $200 000,00 $200 000,00 $200 000,00 $600 000,00
$0,00
Tax Rate (5% from 2018) $142 857,14 $142 857,14
Total $703 146,00 $665 346,00 $800 203,14 $2 168 695,14
Result
Net profit -$896 292,00 $679 308,00 $1 389 593,72 $1 172 609,72
Gross profit margin -39% 67% 73% 61%
Net profit margin -179% 34% 46% 21%

Figure 10. The projected income statement for years 2016-2018.

Projected Cash Flow

Figure 11 tends to focus on the cash flow within the organization.

2016 2017 2018 Total
Starting cash position $25 000,00 -$178 146,00 $1 156 508,00
Incoming
Cash sales $500 000,00 $2 000 000,00 $3 000 000,00 $5 500 000,00
Collections from accounts receivable $0,00 $0,00 $0,00 $0,00
Other cash receipts $0,00 $0,00 $0,00 $0,00
Total $500 000,00 $2 000 000,00 $3 000 000,00 $5 500 000,00
Outgoing
Operations expenses $518 279,00 $480 479,00 $615 336,14 $1 614 094,14
Long-term debt $184 867,00 $184 867,00 $184 867,00 $554 601,00
Total $703 146,00 $665 346,00 $800 203,14 $2 168 695,14
Result
Change during month -$203 146,00 $1 334 654,00 $2 199 796,86
Closing cash position -$178 146,00 $1 156 508,00 $3 356 304,86

Figure 11. Projected cash flow statement for years 2016-2018.

Projected Balance Sheet

Figure 12 presents the balance sheet statements for three years (2016-2018).

Assets 2016 2017 2018
Current assets $607 000 $2 081 600 $3 083 280
Cash $500 000 $2 000 000 $3 000 000
Inventory $30 000 $40 000 $50 000
Equipment $52 000 $41 600 $33 280
Investment $25 000 $0 $0
Total assets $607 000 $2 081 600 $3 083 280
Liabilities
Current liabilities $42 900 $42 900 $185 757
Accounts payable
Interest payable $42 900 $42 900 $42 900
Income tax $0 $0 $142 857
Long-term liabilities $141,967 $141,967 $141,967
Loans $141,967 $141,967 $141,967
Total liabilities $184 869 $184 867 $327 724
Total Net Assets $422 131 $1 896 733 $2 755 556
Owner’s equity
Retained earnings $422 131 $1 896 733 $2 755 556
Total equity (should equal net assets) $422 131 $1 896 733 $2 755 556

Figure 12. Projected balance sheet.

Business Ratios

Focusing on growth profit margin is the most relevant approach, and Figure 11 displays a positive trend in its changes.

Result 2016 2017 2018
Net profit -$896 292,00 $679 308,00 $1 389 593,72 $1 172 609,72
Gross profit margin -39% 67% 73% 61%
Net profit margin -179% 34% 46% 21%

Figure 11. Net and gross profit margins.

Works Cited

Abdul Latif Jammel: Automotive and Engineering. 2016.

Abdul Latif Jammel: Our Locations. 2016.

Gilles, Tim. Automotive Service: Inspection, Maintenance, Repair. Boston: South-Western Cengage Learning, 2016. Print.

Statista: Estimated Motor Vehicle Sales in Saudi Arabia. 2015.

Statista: Toyota’s Share of Global Car Production. 2014.

Suphan, Nasir. Customer Relationship Management Strategies in the Digital Era. Hershey: Business Science Reference, 2015. Print.

Swindall, Clint. Engaged Leadership: Building a Culture to Overcome Employee Disengagement. Hoboken: John Wiley & Sons, 2011. Print.

Weinstein, Art. Handbook of Marketing Segmentation: Strategic Targeting for Business and Technology Firms. New York: Routledge, 2013. Print.

Zhang, Guochang. Accounting Information and Equity Valuation: Theory, Evidence, and Applications. New York: Springer Science+Business Media, 2014. Print.

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