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Online Travel Agency Business Plan

Business Plan for Northwind Traders
Executive Summary
Company: Northwind Traders, Inc. is a Washington-based agency providing travelplanning
services to individuals and businesses in the Greater Seattle area. Corporate
headquarters is located at 1234 Franklin Street, Seattle, Washington.
Current status: Northwind Traders started as a clothing store and, six months ago,
moved over into the travel agency business, with its focus on European adventure travel. Key
staff on board include President and CEO Heather Mitchell, Vice President of Sales and
Marketing Jim Kim, Office Manager Richard Bready, Sales Assistant Amy Egert, and Business
Consultant Jae Pak.
Products/Services: Northwind Traders offers a comprehensive range of services to
support the adventure traveler, including pre-and postvacation briefings, travel insurance, and a
directory of services specific to each destination and activity. With virtually no marketing effort,
Northwind Traders has sold some 200 adventure vacations in the past six months, netting
$66,800 in commissions. Sales of insurance policies and other services have added to this total
and could potentially add much more. Northwind Traders recently became appointed agents for
Margie’s Travel, one of the largest and most respected tour operators in the market.
Description of our market: Research indicates that Northwind Traders’ target market
finds it difficult to obtain reliable and authoritative advice on destinations and activities. Research
also suggests that the customers in this market are unlikely to purchase their vacations again
from the firm that provided their last vacation, due to a lack of informative sales personnel.
Northwind Traders will cater to these needs and develop a strong return-customer base. As for
market size, the Greater Seattle area is home to approximately 3 million people, half of whom fall
within our target market. The region’s job rate is climbing at a rate of 10 percent per year, and
new jobs and growth are anticipated through 2007.
Company objectives: The mission of Northwind Traders is to become the premiere
provider of adventure vacations for 25- to 35-year-old professionals. Northwind Traders is
dedicated to building long-term relationships with customers through quality training and
customer support, and wants to be recognized as the leading adventure vacation company in the
Greater Seattle area. The goal is steady expansion.
Financial: Selling between two and three vacations a day will allow the business to make
a modest profit in Year One while reaching cash flow break-even in Year Two. By Year Two
posttax profits should be $304,000 and posttax profits will increase to nearly $496,000 by Year
Funding plans: Ms. Mitchell plans to sell her shares in the clothing shop and invest the
proceeds in the new travel business, Northwind Traders. In addition, she will invest $41,750 of
her own money in the business and seek $83,500 from outside sources. Alternatively, Ms.
Mitchell is considering loan finance made up of a $41,750 two-year loan and a credit line of
$58,450. In total, about $125,250 will be needed to fund the business during the initial months,
primarily for Web site and database development and improvements to the premises.
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History and Position to Date
Introduction to Your Business
Background: The service industry, including travel agencies, is one of the fastest
growing areas of the economy. Northwind Traders intends to capitalize on the success of this
industry by taking advantage of opportunities in the Pacific Northwest region as a travel planning
company specializing in European adventures.
Why business will succeed: Northwind Traders believes that by concentrating on one
market segment and one geographic destination, it will be able to deliver a service that is superior
to anything currently on the market. Published research shows that tourism is a fast-growing
business sector, and Europe is the favored location for most travelers. Adventure vacations, while
a relatively new and small market, looks set for explosive growth.
Numbers that back up our business concept: “Internet Growth and the Sale of Travel
The world travel market is forecast to expand at a 4.1 percent average annual growth
rate until 2010. This is faster than the general economic growth rate, which is expected to be
around 2.4 percent per year. The European market, while not the fastest growing, will be the most
important destination, accounting for over 50 percent of all international arrivals. Travel service
sales is the fastest growing category of business to consumer activity on the Internet, and by the
year 2000, the value of this market is estimated to be $4.5 billion.
Last year's sales: Northwind Traders started as a clothing store, and six months ago
moved over into the travel agency business, with its focus on European adventure travel. Last
year, the Northwind Traders clothing store had $1,419,500 in total sales. The sales for the last six
months for the travel agency were $673,845.
Last year's net income: The Northwind Traders clothing store made $200,400 profit last
year. Profit figures for last year are not available for the travel agency, since it was not an
independent operation. Commissions for the travel agency for the last six months, however, were
Achievements to date: With virtually no marketing effort, Northwind Traders has sold
some 200 adventure vacations in the past six months, netting $66,800 in commissions.
Mission Statement
Company vision: Northwind Traders is positioned to take advantage of the significant
market opportunities available in the customized travel planning field. Through a professional
approach to marketing, experienced management, and an emphasis on outstanding customer
support and service, Northwind Traders can become the premier provider of European adventure
travel planning services in the Greater Seattle area.
Short-term goals: The goal is steady expansion, becoming profitable from the first year
of operations.
Company values: Northwind Traders is dedicated to building long-term relationships
with customers through quality training and customer support and wants to be recognized as the
leading European adventure vacation company in the Greater Seattle area.
Business Structure
Northwind Traders is incorporated under the laws of the state of Washington. Ten
thousand shares in the company have been authorized: President and CEO Heather Mitchell
owns 6000; Vice President of Sales and Marketing Jim Kim owns 1000; and 3000 shares are
retained by the company for future distribution.
Reason for this structure: This structure will clearly separate the travel business from
the clothing shop and make it possible to attract the risk capital that will be required when the
business starts to grow.
Management Team
My experience: Prior to starting the Northwind Traders travel agency, I cofounded, coowned,
and operated the Northwind Traders clothing store. Prior to that, I managed the Olympia
branch of one of the larger regional chains of general travel agencies operating throughout
western Washington, where I was responsible for managing the office systems and a staff of four.
I have a degree in travel and tourism from State University.
President/CEO: Heather Mitchell
Skills and experience: see above
Chief Financial Officer: Jae Pak
Skills and experience: With over 20 years of consulting experience in industries ranging
from aerospace to technology to retail, Mr. Pak’s knowledge and guidance will be instrumental to
the success of Northwind Traders.
Director of Marketing and Sales: Jim Kim
Skills and experience: Prior to joining Northwind Traders, Mr. Kim worked for the
marketing department of a major airline. His current responsibilities include the company’s direct
marketing campaign and all sales-related issues.
Other key personnel: Richard Bready, Office Manager. Twenty years as a travel agent
has given Mr. Bready the ideal background for Northwind Traders. A knowledgeable salesperson,
Mr. Bready’s expertise in the area of European travel enables him to entice the adventure
Amy Egert, Sales Assistant. After completing her undergraduate degree at the Institute of Art, Ms.
Egert spent a year traveling abroad and joined the staff at Northwind Traders recently as a sales
Products and Services
Northwind Traders offers a comprehensive range of services to support the adventurous
traveler, including pre- and postvacation briefings, travel insurance, and a directory of services
specific to each destination and activity.
Guarantees/warranties: Our clients will be protected financially against either our own
or our tour operator’s failure, by virtue of the ARC bonding held by our principals. We will only use
vacation providers who can provide 24-hour emergency support services for vacationing clients.
Benefits to company: Offering our customers this protection takes the burden off us in
the event that anything goes wrong during travel. This service will benefit us indirectly by making
our customers feel safer when planning vacations with us. This, in turn, will secure their initial and
repeat business.
Competitive advantages: The business will benefit both from its accessible location in
the heart of Seattle’s downtown shopping district, as well as from the clientele it will gain through
its proximity to the already established Northwind Traders clothing store.
Market differentiation: Northwind Traders maintains the following advantages over
existing competition: ongoing support to clients, extensive knowledge of the European adventure
vacation field, superior customer service, specialized training programs for staff, informative Web
site, and competitive rates.
Possible new or complementary products: At a later stage the business may wish to
sell and issue airline tickets and to create its own charter vacations.
Regulatory issues: In the period covered by this Business Plan, we intend to operate
only as the appointed agents for a number of tour operators. As such, we can “shelter” under their
licenses and bonds.
Market Research
Geographic scope: Northwind Traders operates in the Seattle, Washington, area,
targeting individuals interested in adventure vacations in Europe. The geographic area includes
the incorporated cities of Redmond, Bellevue, Tacoma, and the encompassing counties of King,
Snohomish, and Pierce.
Customer needs: From desk and field market research carried out on 300 clients, it is
clear that there is considerable potential in the adventure travel business. Research indicates that
Northwind Traders’ target market finds it difficult to obtain reliable and authoritative advice on
destinations and activities.
Market growth: Service industries represent the fastest growing sector of the national
economy, and travel and tourism agencies are poised to flourish in the midst of today’s economic
boom. These services are projected to grow at an average annual growth rate of 4.1 percent over
the period from 1990 to 2010. Tourism in general is on the rise, Europe looks like it will continue
to be the major destination, and the Internet will be an important channel into this market.
Growth relative to local economy: The Greater Seattle area—including all of King,
Pierce, and Snohomish counties—is home to approximately 3 million people (1994 figure), half of
whom fall within our target market. Seattle’s job rate is climbing at a rate of 10 percent each year,
and new jobs and growth are expected through the year 2007. Seattle has become a world-class
destination, and the downtown retail and shopping core has grown steadily over the last decade.
Also located in the Greater Seattle area are an international airport, a major medical center, a
state university, and four other colleges and universities. The breakdown of employment by
industry is approximately 28 percent services, 25 percent wholesale and retail, 16 percent
manufacturing, 14 percent government, 6 percent transportation and communication, 6 percent
finance and insurance, and 5 percent construction.
Demographics: Our target customers are professional individuals with incomes of
$40,000+ who are 25 to 35 years old, single or married, without children, and college educated.
Innovators: Affluent professionals whose specific needs are not currently being met; 65
percent of those planning vacations would not purchase them from the same source again. We
cater to the innovative traveler, offering adventure vacation packages throughout Europe. These
packages include horse trekking in Iceland; above-the-clouds trekking on islands and in remote
regions in such areas as Corsica and Norway; van-supported inn-to-inn bicycling; mountain biking
and hiking adventure tours throughout France, Germany, Italy, and Austria; and ballooning across
the Alps.
Product Features
Feature: Northwind Traders, Inc. is a Washington-based company providing European
adventure travel planning services to individuals in the Greater Seattle area.
Benefit to customer: Northwind Traders believes that by concentrating on one market
segment and one geographic destination, it will be able to deliver a service that is superior to
anything currently on the market.
Proof: Currently, the level of service in the travel industry is broadly uneven, and
providers enter and leave the field rapidly. Our competitive edge will be in attracting and retaining
our customers with the most highly trained and well-informed individuals we can recruit. With our
expertise in European adventure vacations, we will be able to provide the most accurate, up-todate
information possible.
Feature: Our emphasis will be on providing a complete specialized service based on
having a detailed knowledge of the vacation destination and adventure activities being offered.
Benefit to customer: Our specialized knowledge of Europe and adventure travel will
allow us both to satisfy our customers and to surpass the services offered by our competitors.
Proof: Our market study shows that our customers want their travel agent to have
comprehensive knowledge of the destination (87 percent) and an efficient administration system
in which they can have confidence (84 percent). They want to go on vacation with similar
professional people (81 percent) and to be offered useful advice and ancillary services such as
insurance (79 percent). In order to ensure that we are able to offer comprehensive and useful
advice, all staff at Northwind Traders will undergo full product training and will spend at least four
weeks a year on-site at key travel destinations.
Feature: We will offer a comprehensive range of complementary services to support the
adventurous traveler, ensuring that he or she will have a safe, enjoyable, and memorable
Benefit to customer: These services will include insurance, pre- and postvacation
briefing packs, and a directory of advice and information services particular to each destination
and adventure activity. By capitalizing on our experience in the Northwind Traders clothing shop,
we will be able to both advise and direct our clients to the type of travel equipment they will need
to get the very best out of their vacation.
Proof: We have thoroughly researched all of the above services and are already offering
these benefits to our customers.
Customer Sensitivities
Quality, Customer service, Location and facilities, Reputation, Method(s) of selling, Hours
of business, delivery times, etc., Advertising and promotion, Employee attitude or appearance
Northwind Traders is the only European adventure vacation travel agency located in the
Seattle area. However, there are many adventure travel agents in capital and secondary cities
such as Redmond, Bellevue, and Tacoma competing with Northwind Traders to provide
adventure vacation packages. These include general travel agents, adventure tour operators,
Internet providers, and specialist adventure travel agencies.
Competitors' products: General Travel Agents have added adventure vacations to their
services, and often have little or no knowledge of adventure destinations or activities. They sell
literally from the page, offering limited advice, information, and support. According to our market
study, 40 percent of adventure vacations are booked through these general travel agents, but
only a third of clients would use them again.
Adventure Tour Operators who advertise their vacations in the press attract about a quarter of all
adventure vacation clients. However, clients have to shop around to several tour operators to find
what they want, and they cannot get unbiased advice or much help with information. Only 45
percent would go back to a tour operator for their next vacation.
Internet Providers sell only 5 percent of adventure travel vacations. However 70 percent of
travelers would buy their next vacation via the Internet. There is plenty of scope to offer a superior
Web site. We believe that by having daily face-to-face contact with clients we will be better able to
manage a fresh, vital, and relevant Web site aimed at the specific needs of our market segment.
Specialist Adventure Travel Agencies only sell about 15 percent of travel packages at present,
but we feel this is partially due to a lack of client awareness and to the comparative rarity of such
outlets. We will differentiate ourselves from our competitors by offering the most extensive
materials available from the most up-to-date, well-informed staff. Clients will return for our
service, knowledge, and competitive prices.
Strengths and weaknesses, relative to us: This is how Northwind Traders ranks the
strengths and weaknesses of two of its main competitors:
Ferguson and Bardell is positioned to be the strongest competitor, due to its current client base
and the personality and skills of its owner. However, its press releases are of a very low quality,
and its location is undesirable, with difficult parking and limited customer service space. In
addition, Ferguson and Bardell lacks the knowledge and expertise in the field of European
adventure travel that are valued so highly by the clientele of Northwind Traders.
Lakes & Sons will be a formidable competitor for Northwind Traders because of its prime location,
well-established business, and extensive training program.
Strengths and weaknesses, relative to each other: Ferguson and Bardell has the
advantage of a stronger client base and charismatic owner, while Lakes & Sons is better
organized, has a more knowledgeable staff, and has a better location.
Critical factors for success: Exceptional knowledge of the adventure travel industry,
location, a strong customer base, and competitive prices.
Business Strategy
Pricing Policy
Pricing factors: Consumer Perceptions, Competition, Business Conditions
Advertising and Promotion
Long-term promotional goals: We will put considerable effort into preparing and
disseminating a regular flow of press releases. These will be based on stories about our
destinations, activities, corporate clients, and our staff. We will use a public relations adviser to
help us write copy and locate publication editors. We also will keep records of every sales
contact. Data such as source of inquiry, client needs, previous vacation, job, and income will be
included. We will use this data to encourage our satisfied customers to recommend our services
to friends, relatives, colleagues, and employers. By having superior information on our clients and
prospects, we intend to offer a truly personalized service.
Short-term promotional goals: The first priority is to hire a competent public relations
consultant. This individual will be the key to producing state-of-the-art publicity materials and
determining where these materials should be placed for optimum visibility.
Marketing message: The message is that Northwind Traders distinguishes itself from its
competitors by better understanding the needs of its customers. With our expertise in European
adventure travel, we can create customized travel itineraries for our clients, and provide the most
thorough and informative adventure travel service available.
Media: The Internet is fast becoming a major promotional channel and we believe it will
increase in importance over time. Also, it is the most convenient way for us to have a global
presence at the outset. In addition, we will undertake a small amount of specialist press
advertising in order to enhance our public relations activity.
Monitoring marketing effectiveness: We plan to use a “contact management” system
that will allow us to monitor the effectiveness of different promotional strategies and of different
marketing messages.
Promotional budget: We’ve budgeted $40,000 for marketing and advertising for the first
year, with an additional $41,325 for the development of a Web site and database.
Factors in choosing location: We intend to locate within the existing Northwind Traders
shop, as this is close to the city center, which has a high density of both residential and business
premises. The pavement is wide, so people can stand and look in the window without being in the
way of other pedestrians.
Competitive advantages: It is vital that the travel business has both a storefront facing
onto the main street and a visible separate entrance. The goal is for clothing shop clients to be
able to move between the premises without going outside.
Sales and Sales Management
Who will conduct sales: Excellent selling skills are vital in our type of business.
Therefore everyone will be fully trained in sales.
Training: All staff will undergo full product training and will spend at least four weeks a
year on-site at key travel destinations.
Sales methods employed: We will develop outline scripts to help the sales staff manage
inquiries. This will ensure that all incoming phone calls are dealt with in the same way and meet a
high standard.
Sales monitoring: Every month we will “audit” each other by observing half a day’s
selling activity and giving feedback on strengths and weaknesses in skills.
Incentives: We will have a bonus system in which staff members earn “points” toward
cash or travel.
Customer complaints: Complaints will be referred to the manager and, if necessary, to
the company president.
Staffing Issues
Key positions: The key job descriptions include President and CEO (Heather Mitchell),
Vice President of Sales and Marketing (Jim Kim), Office Manager (Richard Bready), Sales
Assistant (Amy Egert), and Business Consultant (Jae Pak).
Dress code: Our dress code will require us to look as though we are on our way to one
of our adventure vacations.
Other staffing issues: New staff will take the travel agency Psychometric Aptitude Test
and then spend time with each member of the Northwind Traders team.
Past sales: In our first six months we’ve sold 200 adventure vacations, earning $66,800
in commissions.
Market research: According to a survey of customers, while general travel agents may
be the most likely resource for those taking an adventure vacation, they are in fact the least likely
place those clients will return to. And though specialist adventure travel agents, such as the
business we are setting up, only account for 15 percent of the market, 65 percent of clients would
use them again. We aim to increase this percentage through our superior service.
Assumptions: Our inquiry to sales conversion rate on the adventure travel vacations
sold to date, while operating within the outdoor clothing shop, has been one in three. For the
purposes of our sales forecast we are assuming that only one in five inquiries will actually result
in an adventure vacation being booked. This is a very conservative estimate.
Projected market share: Northwind Traders plans to grow steadily over the next five
years, becoming the premier provider of European adventure vacations in Greater Seattle.
Financial Statements
Assets and liabilities: Our assets include $19,935 cash; $45,818 in accounts
receivable; $20,040 in furniture; and $835 in prepaid expenses—a total of $86,628. Liabilities
include $9142 for taxes payable; and $835 for accounts payable—a total of $9977.
Gross profit: For Year One: $268,783; Year Two: $624,318; Year Three: $986,846.
Key ratios: With the stabilization and maturity of the business over the next five years,
the profitability ratios will improve, leveling out at a profit margin of 7 percent. The leverage and
liquidity ratios will begin to improve in Year Two when the company operates with a positive cash
Cash flow: Operationally, we are forecasting a year-end cash deficit of $21,390 for the
first year. The $83,500 in requested funding covers the business’s monthly operational cash
variances during this first year with repayments beginning in Year Two. The business is
forecasted to show positive operational cash flows after the first year.
Break-even point: We estimate a break-even point at around $2,320,000 in sales.
Break-even assumptions: To break even we will need to sell between 2 and 3
vacations per day. This compares with our present sales of 1.3 vacations per day, based on our
part-time effort out of the clothing shop. So we feel confident that break-even can be attained
within a reasonable period.
Sensitivity Analysis
Financing Requirements
Funds required: We’re projecting needing $90,000 during Year One.
Use of funds: The two major investments we plan to make are for
Web site and database development. This will cost $41,325. The database system is one of our
key differentiators. It will allow us to offer superior service and ensure a high level of repeat
business and referrals.
Shop premises development. This will cost us $29,225. We have to look professional and have
an efficient work environment.
Both of these investments need to be made at the outset to ensure the business creates the right
first impression. We have decided to lease our telephone and computer systems as this is a
rapidly changing area and we need to have access to the very latest technology. Financing
packages from equipment suppliers are currently very attractive.
Money from partners, investors: The owner plans to invest $41,750 of her own money
(the proceeds of the sale of her share of the clothing shop).
Percent of equity that is borrowed: Currently, none of the business’s equity is
Desired funding sources: We are currently seeking investors for our company, but we
are also considering the following two options for raising the funds we need.
Option 1: The sale of equity, perhaps to the original shop partners, between $41,750 and
$167,000. This would provide some capital to allow for growth. Any shortfall could be funded
either by a line of credit or a bank loan.
Option 2: Approach our bank with a view to raising a medium-term loan of $41,750 and a line of
credit of $58,450.
When needed: Within the first few months.
Offer to investors: Return on shareholders’ capital by Year Three is projected to be
close to 100 percent.
Equity company is prepared to sell: As much as $175,000.
Exit routes: Given the forecasted profitability and anticipated strong regional reputation,
Heather Mitchell plans to take the company public after three years. Since this is generally the
least likely route for businesses, she also plans to seek a similar business to buy the company.
Business Controls
Accounting System: We will be using a computer-based financial management system.
Reason for choice: We have chosen this system because it will allow us to analyze the
profitability of sales of different vacations through each tour operator.
Auditors: We plan to contract with a major accounting firm.
Sales monitoring: Sales activity will be monitored manually using a spreadsheet
program until the development of the database, which will allow flexibility in tracking sales by
various product and customer categories.
Marketing records: We will monitor the success of our promotional and marketing
strategies through our “contact management” system.
Customer feedback/complaints: We will encourage customers to give us feedback on
our ability to handle their inquiry, the amount of time from the client’s first inquiry to the date of
actual travel, and the client’s reactions to the vacation in terms of whether it meets his or her
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