Business Plan

Business Plan: DanAir Flight Service Daniel Whitford Brandman University

DanAir Flight Service 1234 Airport Way AeroCity, Washington, 98332 Phone: (360) 867-5309 EMail: scenicairflight.com

Business Plan I. Table of Contents I. II. III. IV. V. VI. VII. VIII. IX. X. XI. Table of Contents..2 Executive Summary..3 General Company Description..6 Services.9 Marketing Plan....10 Operational Plan......16 Management and Organization...18 Startup Expenses and Capitalization......22 Financial Plan.....29 Appendices.....36 Alternative Strategy...37

Business Plan II. Executive Summary DanAir, founded in 2012 is an aerial sightseeing business providing scenic flights over city,

island, and mountainous landscapes. DanAirs principal office and flight origination is located in Aero City, Washington. Business Service Provides three daily sightseeing packages offering the following services: Package A: 30-minute flight to interest points over Aero City. Package B: 60-minute flight to include package A plus island hopping. Package C: 80-minute flight to include both A/B packages plus Mt. Baker fly-by.

Presently, DanAir is in the mature stage, with aerial routes established in northwest Washington State. DanAir competes primarily based on frequency of packages offered. Our plans include maintaining a 3-year period of stable growth. The Market Our market is centered on Canadian tourists, primarily males 35-55, who are well educated with higher than normal incomes. The total market size was approximately 2.4 million Canadian tourists visiting Aero City in the summer of 2012, a 4 percent increase from 2011. In identifying our demographic, we believe we can capture 0.1% of that market size which will satisfy breakeven analyses and cash flow projections.

Business Plan Competition DanAir competes directly with BLI Flight Services and WestAir. Alternatives to the service include Hasselgrave Bus Tours and Washington State Ferry system. Our service is unique because of our scheduled air packages. DanAir has a competitive advantage because no other aerial service currently offers scheduled tour routes. DanAir does not anticipate new companies to enter this market. Risk/Opportunity

The greatest internal and external risks associated with DanAir today are the intangible factors of sole proprietorship, and the possibility of incumbent price wars and matching services. Daniel Curtis believes he can overcome these risks because of the identified demographic, maturity of established routes, and newness of service. DanAirs biggest recognized opportunities include published aerial flights to fit a variety sightseeing tastes and budgets not currently available. Management The management and operator is Daniel Curtis who founded the company in 2012. With a wealth of flying experience in the area, a Masters degree in Aeronautical Science and an MBA, DanAir is well positioned for operational and business success. Operations The only office is located at the home of Daniel Curtis. He currently performs all reservations and related administrative tasks, while outsourcing the rental of aircraft and meeting clients at the local airport. DanAirs total full time staff during the tourist season is one person.

Business Plan Capital Requirements Daniel Curtis is seeking $71,410, which will enable him to commence start-up activities in November 2012 through August 2013. These funds will finance the seasonal requirements of aircraft rental, advertising, computer/IT, POS, and other new breakeven entrant costs. DanAir does not expect to provide a dividend of excess profits, recapitalization, sale of company, or public offering. Financial Snapshot DanAir projects first year sales of $89,700, and net income of $20,290. 2013 Units sold for package A Sub-total ($) Units sold for package B Sub-total ($) Units sold for package C Sub-total ($) Total Revenues ($) 390 11,700 130 7,800 780 70,200 89,700 2014 390 11,700 130 7,800 780 70,200 89,700 2015 390 11,700 130 7,800 780 70,200 89,700

Business Plan III. General Company Description

Noted by Berk & DeMarzo (2011), a sole proprietorship is a business owned and run by one person (p. 3). DanAir solely operated and piloted by Dan Whitford, is an airplane operating business, which is focused upon bringing the freedom and wonder of flight to sightseeing enthusiasts in the sky. This operation, utilizing one small Cessna-172 type aircraft shall embark during daylight hours, up to three passengers on daily regularly scheduled flights from AeroCity, Washington, flying over designated sightseeing spots and attractions, returning to the same airport. The aircraft chosen for this business will be a Cessna-172Skylane, capable of 145-knot cruise speed, a range of over 900 nautical miles, incurring an approximate operating cost (fuel/maintenance) of $149 per flying hour (Cessna Corporation, 2012). As the sole proprietor of DanAir, the pilot is fully licensed and current in all Federal Aviation Administration (FAA) regulations and guidelines to operate a Cessna Skylane. Although not all-inclusive, the target market for DanAir is those customers seeking a different perspective, approximately 3,000 feet above the natural beauty of the western sections Pacific Northwest. Operating over selected features of northwest Washington State, DanAir sightseeing shall include small islands, mountainsides, and farmlands. Targeted demographics for this service are photojournalists and tourists from Canada. In gaining a knowledge on how to gain a customer Marcus (2011), noted there are significant differences in customer wants and needs based on age, income, gender, and so on, further, a firm may use its data to figure out which groups of customers are profitable and which are not (p. 192). In utilizing data available through business prospectus and public records of other competitors, DanAir may pinpoint these data as a useful tool to separate blocks of potential customers from non-customers. Additionally, through contact information from various flying associations, aircraft rental companies, and

Business Plan impromptu canvassing of similar sightseeing companies, DanAir can solicit opinion, generate warm call contacts, and begin to place its brand to game-players in the industry and therefore advertise its services as economical as possible. Currently, there are two similar sightseeing flight services local at the airport in the medium sized city of Aero City Washington, population 60,000 (DEX , 2012). These flight services differ from DanAir size of aircraft, frequency of flights, non-published scenic routes, and stop at other airports. DanAir offers smaller aircraft for only 2 to 3 passengers, has a published scenic air route, operates on a daily basis, and returns to the same airport without any stops during the trip. In addition, the competition generally offers its services only on sunny weekends. Historically, the industry of scenic air travel in western Washington State is often

limited due to cloudy inclement weather, which substantially hampers business between October through March. Industry and historical precedent suggest a typical flight pattern of cityscapes, rural farmland, and lakes during peak hours of daylight, particularly in the summer months. DanAir expands that model with distinctive packages tailored to those traditional sightseeing spots often sought from raw data forecasting models. The principle motivation for DanAirs entrance into existing market of aerial sightseeing rests upon several factors. Noted in Harvard Business Essentials (2004), most of us are motivated by intrinsic rewards; interesting, challenging work and the opportunity to achieve and grow into greater responsibility (p. 134). This valuable intrinsic state of interesting and challenging work form the basis of why DanAir is in existence, and is interlaced with its mission and values; the love and science of flight coupled with visually stimulating sights above the ground. Noted further, these intrinsic factors answer peoples deep-seated need for growth and achievement (Harvard Business Essentials, 2004, pp. 134-135). This deep-seated need for

Business Plan achievement sprung from many hours of flight training and years of perfecting the craft, and the excitement of aerial flight. Mission and Vision Statement DanAirs mission is to maximize company profit by providing a stunning and unique perspective of the natural beauty of the Pacific Northwest that is not normally found at ground level. Designed for sightseeing enthusiasts and photo adventurers seeking to re-discover an alternative perception in imagination, DanAirs vision is to provide its customers with a distinctive ever-changing topside view of islands, hilltops, mountains and other notable characteristics of the local area Noted by Russo (2010), a mission-driven company seeks to simultaneously meet profit goals that reflect the values of its owners (p. 5). The values of DanAir exist for customers to

appreciate the love and science of flight, and to experience the freedom of blue-sky perspectives. In order to achieve both a values based organization and profit motive for DanAir, targeted customers sought include those who share this admiration of flight. Explained by Russo (2010), values constitute an organizational infrastructure that gives a company its distinctive character and ethos (p. 78). The values and vision of freedom of flight, the excitement of flying above ground, and the possibility of rekindled imagination are at the heart of DanAir. The vision, explained by Marcus (2011) is where they would like to go and what they would like to be good at in the future to achieve a comparative advantage (p. 185). In selecting a vision linked with the value of love of flight, DanAirs philosophy will be matched with its mission in providing the passion of its customers in seeking the distinctivness of aerial sightseeing.

Business Plan IV. Services Offered Noted by Marcus (2011), superior information is the basis for meeting customer needs effectively (p. 190).The service provided by DanAirs forecasting model is premised on past experience with friends and colleagues, word of mouth (WOM) aerial flight attractions, and traditional local area interest points not typically flown by competitors. Based on these data, DanAir will provide three separate packaged flights, offering specific aerial flights depending upon customer interest. Due to operating only in sunny weather, DanAir guarantees that all attractions listed in the packages will be visible, with an ample amount of photo opportunities. These packages, known as A, B, C simply fulfill the following services of DanAir. Package A: *30 minute flight from Aero City Washington to interest points over the city of AeroCity and farmlands and rivers to the east of the city. Package B:*60 minute flight from Aero City Washington to interest points noted in Package A plus hilltop and small island views to the west of the city.

Package C: *80 minute flight from Aero City Washington to interest points noted in Packages A and B, plus a fly-by to Mount Baker. *all flight times are approximate. By intertwining a new venture to success and commitment, Marcus (2011) noted, propelled by increases in sales, new ideas are supposed to evolve through stages of introduction, growth, and maturity (p. 152). DanAirs initial existence is to heighten the brands awareness through its targeted customers of photojournalists and those seeking alternative sightseeing services. The growth and maturity of DanAir is dependent upon factors such as increased awareness of company brand, high demand from targeted customers who value the aspect of love of flight, and customer interest from indirect, non-traditional customers, often found from other

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sightseeing sources that cannot be fulfilled (bus, train, auto). Along with a mission centered on the love of flight, and a value system that is predicated on a customer base who maintains the same admiration, the reputation of DanAirs ability to deliver a quality service is too paramount. Noted by Chen &Krakovsky (2010), reputation builds trust, helping people determine how trustworthy their would-be trading partners are (p. 120). In trading compensation for a quality service, it is hoped that DanAir delivers what is expected from a customer, as well as making a profit for increased upward mobility and future expansion. V. Marketing Plan DanAir Industry Breakdown: Currently, there are five sightseeing companies in the region, broken down by bus, ferry, and air services (Town of AeroCity, 2012). With the exception of the island ferry system, all services in the local industry offer similar packages as DanAir. The industry is further broken down by direct competitors of DanAir consisting of two existing air sightseeing rivals which are engaged in repeated and regular moves against each other, additionally, as a new entrant, DanAir must estimate the extent to which the incumbents will retaliate (Marcus, 2011, pp. 2728). Changing Their Services: Several sightseeing companies have made efforts to change their services in hopes of capturing a larger Canadian tourist and local leisure market share. The firms began expanding their services with increased tourist area visit frequencies and larger capacity modes of travel. Hasselgrave Bus Tour has modernized its bus fleet to incorporate both a visual and video

Business Plan representation, and WestAir Flight Service, a direct competitor, had recently increased the capacity of their aircraft to accommodate larger group of customers. Key Market Statistics:

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Key players are:

Tourists from Canada seeking sightseeing services Leisure customers from the local area Customers from Hasselgrave Bus Tours Customers from WestAir Flight Services Tourists travelling on the Washington State Ferry system

DanAir Related Statistics and Facts:

With a varied and competitive market, DanAir will thrive by advertising and finding a niche in the large Canadian tourist industry. The current goal is to provide a new and fun exploration of the local area.

DanAir, as a new sightseeing entrant, has a competitive advantage because other existing rivals do not provide the target market with aerial access identified in DanAir service packages. This will give DanAir a great advantage in providing a service that is currently unavailable to Canadian tourist and local leisure enthusiasts.

There is a demand in the current target market because the Canadian aerial tourist market has not been developed utilizing published aerial routes.

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As a new company, DanAir will have to face certain barriers for entry. Noted by Marcus (2011), some incumbents lash out at new entrants with price wars that dissuade potential entrants from moving into the industry (p. 28). Since DanAirs is targeting a niche market, competition and a flattening of sales are potential concerns for the future.

Service The services that DanAir offers are focused upon bringing the freedom and wonder of flight to sightseeing enthusiasts. Tours packaged to particular tastes, customers may choose sightseeing services ranging from cityscapes, islands, hilltops, and mountain areas.

Features and Benefits

DanAir is the exclusive provider of non-stop aerial sightseeing in the local area.

DanAir provides the sole flight sightseeing service with published flight schedule.

Customers The targeted markets are tourists from Canada and leisure sightseers from the local region. This demographic may not be concerned with weekend timeframes, yet places a premium on the value of this service. Demographic profile: According to U.S. Department of Commerce statistics, nearly 9 million Canadian visitors have visited the United States in 2012, a four percent increase from 2011. Canada also represents the largest generator of tourists visiting the U.S. among 20 other nations (U.S. Deparment of Commerce, 2012). Current customer demographic profile for DanAir:

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Age: The average age of a Canadian tourist visiting the local area is 49. The age group 35-65 represented 76% of Canadian travelers visiting Washington State. In 1970, the median age of the population was 28, in 2050 it will be 38 (Marcus, 2011).

Location: 30 minutes from the Canadian province of British Columbia Tourist income level: Average annual income is $55,000 per year. Leisure expenditure: Canadians spend $181 per person per trip, $369 per party per trip with an average party size 2.04.

Education: On average, Canadian tourists have completed some post-secondary education.

Other: Sixty one percent of overnight Canadian trips to Washington were made for pleasure or recreation purposes.

Other: Vacations remain the most frequently reported trip purpose among Canadian travelers to Washington, followed by visiting friends and relatives. (University of Minnesota, 2012) (Washington State Department of Community, 2007).

Competition Leading Air Sightseeing Services Rank 1 WestAir Flights 2 BLI Flight Service

Customers 2010 2,177 1,855

2011 %change 1,955 12.7 1,804 73.2

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Competitive Analysis Importance to Customer 5 2 4 5 5 5 2 4 5

FACTOR

DanAir

Competitor: Competitor: WestAir BLI

Competitor: Analysis Established Niche Higher priced Larger aircraft Non-established routes Stops at other airports Weekend operation only Established in area More pilots Certified by local BBB Established Website/Airport presence Referred by other customers

Service Price Quality Selection Service Reliability Stability Expertise Company Reputation

Weakness Strength Weakness Strength Weakness Strength Weakness Weakness Weakness

Strength Weakness Strength Weakness Strength Weakness Strength Strength Strength

Strength Weakness Strength Weakness Strength Weakness Strength Strength Strength

Advertising Weakness Weakness

Strength

Strength

Image Promotion

Strength

Strength

The overall concept and design of DanAir sets the stage for its promotion. Marketing will stress the fun you can have with us as the distinctiveness and quality of tours sets us apart from the rest. Strong public relations combined with well-placed, well-designed, and distinctive advertising will appeal directly to people who are our prospective customers, Specific Marketing:

Business Plan Web page based promotions Targeted print media in free trade, pilot and tourist magazines Networking through a membership with regions Business Association Networking through alliances with area Chambers of Commerce Networking social events with fellow pilots, friends and competitors Attend Vancouver trade shows that cater to targeted demographics and lifestyles Post locally produced flyers on public bulletin boards in areas near DanAirs airport, tourist hot spots, and Canadian border entry points Network through participation with Aircraft Owners and Pilots Association (AOPA)

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Establish a repeat customer database and incentive program for return and new customers

Pricing:

As a Follower in the aerial sightseeing business, DanAirs pricing is determined by our direct competition, fair profit margin, and perceived value to the customer (Wasserman, 2009). The competitions price of aerial sightseeing ranges between $80-150 per person depending on length of flight and destination. By setting our price at the level based on the individual cost of selected packages, we can appeal to the budget conscious traveler as well as those in which price is not an option. With a potential market of over 2.4 million people per year, we are basing our first year figures on servicing 1,500 customers per year or less than 0.1% of the potential tourist and local leisure residents in the area (Tourism Vancouver, 2012). DanAir will rent aircraft for

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its services at a rate of $85 per hour, therefore the profit margin will range from 52% for package A, to 66% for package C. *based on a capacity of three customers per trip.

Package A: $30 per person/Package B: $60 per person/Package C: $90 per person. These prices are within the noted $181 per tourist leisure dollar spent in AeroCity.

Proposed Location DanAir services are provided at the same airport as other flight sightseeing firms, therefore is able to observe their operations and take advantage of the advertising coattails of the leading two competitors. Web based operations and telephone reservations will be conducted from home, with no need for space leasing options at the airport. Customers simply meet a DanAir representative in the General Aviation section of the airport at the reserved scheduled published time.

VI. Operational Plan/Business Objectives DanAirs daily operation will consist of two blocked published timeframes during the day, one in the morning and one in the afternoon, March through August. Between the hours of 8am through 11am and 2pm through 5pm, DanAir will provide reserved customers a choice among packages (A/B/C). Created services

In an effort to understand the supply chain process of ideation to recycle, Dr. Helen Eckmann noted, who will manufacture, ship, package the new product or service (nd). As a business owned and run by one person, DanAir will coordinate all web and

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telephone reservation requests, aircraft rentals, schedules, and operate the aircraft during the published timeframes.

Quality control will consist of customer quality questionnaires and room for improvement/suggestion forms in order to gauge the attractiveness of future DanAir services.

Customer service will consist of meeting customer expectations by providing a unique and comfortable sightseeing experience while maintaining initial lower flight costs.

Inventory control: DanAir will lease its aircraft during sightseeing operations and will maintain lower overhead controls by scheduling services and making reservations from home. Business Objectives Expansion Noted by (Russo, 2010), growth all too often comes with problems (p. 96). With that

reference in mind, DanAir plans to maintain current its aircraft rental agreement, flight schedules, and sole proprietorship status for minimum of three years. Alliance Goals Noted by Marcus (2011), companies change position via mergers, acquisitions, divestitures, and alliances (p. 6). DanAir does not plan to change its initial position of providing scheduled packages and blocked two a day timeframes within the next three years. Operation rollout

Business Plan Promotional strategy outlined in the marketing section will commence December 2012 through April 2013, with reservations being accepted after the first of the year. Anticipate full

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flight schedule operation to commence March through August 2013, the traditional end of tourist season. Revenue Projection 2013 Units sold for package A Sub-total ($) Units sold for package B Sub-total ($) Units sold for package C Sub-total ($) Total Revenues ($) 390 11,700 130 7,800 780 70,200 89,700 2014 390 11,700 130 7,800 780 70,200 89,700 2015 390 11,700 130 7,800 780 70,200 89,700

VII. Management and Organization The management and day-to-day structure of DanAir will be organized by the owner Daniel Curtis, with no other employees or outsourced services, except rental of the sightseeing aircraft, which will be provided by a competitor, BLI Flight Service. With no immediate plans of expansion or other personnel intervention, the business and management lifecycle of DanAir will utilize the exclusive decision-making authority of the owner.

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This lifecycle, constructed within an organizational development structure, will utilize a short-term startup stage, applied to build a clientele base and weather volatile aspects of traditional startup issues. Secondly, the predictability phase, used as a catalyst in sustaining what was built and learned within the startup stage, and finally the declining phase of the business, seen as an overall and gradual ending to DanAir (Eckmann, Dr. Helen, nd). Included as a part of the process are capital for marketing, website upkeep, reservation database, operation of leased aircraft, and other incidentals. The overriding strength of DanAir is the operational portion of the owners 20 years of experience in flying the published aerial routes offered in DanAir packages. Daniel Curtis, who holds a Master of Aeronautical Science degree from Embry-Riddle Aeronautical University, is fully certified by the FAA to operate the three passenger Cessna Skylark aircraft. Daniel also anticipates completing a Master of Business degree from Brandman University by December 2012, and is gaining a business-like acumen in financial planning and reporting, data analysis, and organizational dynamics. Coupled with the operational experience and his advanced business knowledge, Daniel is well positioned as sole proprietor of DanAir. DanAirs leadership structure is modeled on an organic management contingency theory and less on a mechanical, hierarchical and centralized organizational standard, such as Daniels initial flight training school. Admired for its less ridged approach, culture of inclusion, and high value to the love of flight, DanAir is loosely modeled within this standard. Explained by Marcus (2011), an organic management contingency model is based where employee motivation is less dependent on economic rewards; it arises from employees sense of belonging and their identification with the organizations mission and values (p. 56). Additionally, the ethical standard of DanAir recognizes is a value system of love and excitement of flight and sharing it

Business Plan with those who appreciate an alternate sightseeing experience. DanAirs ethical structure is constructed on fairness of and value of services rendered at a competitive price. Backup plan As a potential weakness of the business, there are no contingencies or back-up plans in the event of not being able to provide DanAir services. If reservations were accepted, customers will receive their money back due to sickness, weather, other limiting factor, or default of business, which prevents the scheduled tour to occur. Customers, at their own discretion may reschedule a flight for a later date with no penalty. In the case of foreseeable default or bankruptcy of DanAir, future reservations will cease to be made and all monies owed to customers for services not rendered will be returned. Outsourcing The aircraft provided by DanAir will be outsourced utilizing rented equipment from a

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competitor, BLI Flight Services, piloted by Daniel Curtis. By renting an aircraft at a flat rate, mirroring the standard contractual agreement of renting a car, all damage insurance, aircraft storage fees, mechanical and preventive maintenance shall be borne by BLI Flight services, which is included as part of the rental fee.

Business Plan Professional and Advisory Support

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Legal advice will be provided by the owners personal attorney Liz Curtis free of charge. She will also assist in document preparation, such as state tax registration, general business license approval, occupational permit, business entry registration, business insurance forms, EIN identification, and annual federal income tax withholding preparation (U.S. Department of Labor, 2012).

QuickBooks Pro 2012 software accounting program will be installed to assist DanAir in monitoring transactional invoices, billing, excel customer worksheet information, receipts, and industry-specific report templates.

Banking will consist of a standard small business checking account, maintaining a minimum balance of $1500, monthly maintenance fee of $8.00, with 250 deposit and debit transactions free each month (Peoples Bank, 2012). First through third year DanAir revenue forecast is projected to sustain $7,475 average per month.

Mentors and key advisors consist of DanAirs personal attorney, aerial sightseeing colleagues and pilots from other competitors, and friends within the airport community and its hierarchy. DanAir Organizational Chart

Job Description: Proprietor Responsible for marketing, reservations, aircraft scheduling and availability, customer

database entry, billing, accounting, piloting packages per customer request, collecting payment and distributing applicable aircraft rental fees of DanAir. Additionally, responsible for timely

Business Plan submission and updating of various federal, state documentation, as well as consulting with an attorney in all aspects of DanAir business documents, licensing and permit updating, supplemental insurance, tax forms and deadlines, and other duties required.

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DanAir Sightseeing
Daniel Curtis Owner

*Liz Curtis Legal Advice

*Liz Curtis Document Preparation

*Services only required as necessary

VIII. Startup Expenses and Capitalization Elements of a business plan consist of several major sections, included among general company description, products and services, and marketing, a crucial component of the plan is its financial factors. Stated as a principal factor, Entrepreneur magazine, noted the importance of the capital needed to start a business and expand (nd). Entrepreneur (nd) also emphasized key areas in administrative, advertising, and other expenses for a start-up firm to capitalize upon and further mitigate the historical risks associated with a start-up organization. DanAir Start-up expenses:

Business Plan Business Permits/Licenses: DanAir is required to obtain an initial Washington State

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Seller of Travel License, at a cost of $217.00. In addition, a $15.00 processing fee for a state business license is also required (Washington State, 2012). Aircraft rental: DanAir will rent aircraft from an on-site competitor for the duration of the summer tourist season. Anticipate a monthly rental schedule to commence May 2013. The hourly flat rate of rental is $85.00 per flying hour. Operating 6 hours a day five times a week, totals $10,200.00 for a 20-day monthly schedule (BLI Flight Services, 2012). Information Technology (IT): It is essential that a fully integrated and functioning computer hardware and software system support expected larger storage capacities of customer databases, billing information, and marketing initiatives. An IT consultant will analyze current home hardware wiring elements and software information capacity. Cost: $600.00 (Beit Consulting, 2012). Computer security Software: Update home computer security system with an emphasis on protecting valuable customer data information. Cost: $125.00 (AVG Internet Security, 2012). Computer/Printer: A separate and dedicated and computer and printer system is required to store personal customer information and to print advertisements, flyers, brochures, and correspondence for DanAir. Cost: $1,429.00 (Dell Computers, 2012). Accounting software: An essential accounting system such as QuickBooks 2012 will be installed to assist in monitoring billing, transactional invoices, excel customer data worksheet information, receipts, and industry specific report templates. Cost: $232.00 (Amazon, 2012).

Business Plan Federal Aviation Administration (FAA) Medical License: Explained by the federal aviation governing body, a civilian pilot must hold at least a third-class medical certificatewhen exercising the privileges of a private pilot certificate (Federal Aviation Administration, 2012). Current medical certificate expires December 2012. Cost: $250.00 (Federal Aviation Administration, 2012).

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Banking Fees: A requirement for DanAir financial transactions is the establishment of a small business checking account, and the ability to debit and deposit cash or credit. Minimum monthly amount required is $1500.00 plus $8.00 monthly fee. Cost: $1508.00 (Peoples Bank, 2012).

Legal Fees: Required assistance in document preparation for business insurance forms, Employer Identification Number, federal income tax withholding forms. Estimated Cost: $55.00. Preparation assisted by Liz Whitford, DanAir personal attorney.

Business Organization fees: Recurring annual membership dues in Aircraft Owners and Pilots Association, (AOPA), Whatcom County business association, and the Chamber of Commerce. Networking with fellow pilots and businesses in the local area essential. Cost: $100.00.

Telephone expansion: A dedicated telephone line and number for exclusive use of DanAir will provide uninterrupted and professional assistance to its customers. Three hundred minutes per month with service to DanAir targeted Canadian customers are included. Cost: $33.00 (Vonage, 2012).

DanAir Logo design: DanAir will utilize a distinctive logo design to advertise and attract customers to its brand services, and capture wide recognition from business cards, stationery and DanAir polo shirts. Cost: $1199.00 (Logobee, 2012).

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Postage: Anticipate mailing 511 business letters detailing DanAir operations December through January to those customers in higher income Canadian neighborhoods, local businesses that cater to tourist, travel and tourism associations, and statewide competitors, prior to tourist season which begins in May. Cost: $225.00 (Stamps.com, 2012).

Brochures: As a requirement to reach as many targeted customers as possible, 500 trifold brochures, utilizing Logo Bees design and locally developed literature on DanAir facts and services will be placed (with permission) in tourist hotspots in the city, hotels, as well as the local airport and Canadian border outlet stores. Cost: $186.00 (Vista Print, 2012).

Flyers: Locally produced handouts with DanAir logo, website, phone number and services provided will be placed on bulletin boards at the local airport, train depot, ferry station for arriving Canadian visitors, the local university, and the local outlet store, which caters to Canadian shoppers. Estimated cost: $150.00.

Travel expenses: An essential element in garnering DanAir customers is face-to-face contact and networking with like businesses and organizations. Trade shows, business luncheons, and AOPA meetings often require attendance to validate any meaningful network and business card contacts. Anticipated fuel and auto maintenance costs for regional business travel expenses from November through February, $500.00.

Website development: As a requirement to broadly advertise and establish the DanAir brand and keep pace with local competitors, a user-friendly website will be launched in November 2012 to assist those seeking additional information on DanAir Packages, pricing, and scheduling times. Information on this website will be available through

Business Plan Word of Mouth (WOM) interactions at business meetings and trade shows, mailers and

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flyers, and carefully placed DanAir brochures. Cost: $635.00 (WebcreationsUS, 2012). Business Cards: A requirement at trade shows, meetings, business networking, and other professional social events, business cards provide a snapshot of information necessary to build a client and industry-networking database. Cost: $60.00 for 4,000 cards (Vista Print, 2012). Flight documents/equipment: Standard pilot items used by competitors needed for flight are updated area charts, aircraft performance checklists, headset, and pilot log. Anticipated cost: $100.00. Trade show events: Entrance fees for pilot seminars and conferences, aircraft symposiums, airport-sponsored events are a requirement for effective networking with like industry professionals in the aerial sightseeing business. Traditionally held January through March, these events are widely advertised and attended by competitors prior to the start of the summer tourist seasons. Anticipated costs: $150.00. DanAir shirts: To present a professional appearance while meeting customers at the airport for flight, trade show events, local business and tourism association meetings, DanAir will purchase 10 Khaki colored Arrow Classic Fit dress shirts with embedded logo. Cost: $250.00 (Kohl's, 2012). Point of Sale (POS) system: In order to facilitate the receipt of funds, it is essential for DanAir to accept both cash and credit as a form of payment. The handheld POS will be utilized prior to each scheduled flight, and a receipt will be available for both cash and credit card type payments. Cost: $1499.00 (EBay, 2012).

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Grand Opening Event: To capture a wide clientele and a like business-networking base, a one-day grand opening will be held at a nearby airport hotel conference ballroom approximately 30 days prior to commencement of operations. Info packets, brochures, refreshments and hors doeuvres, and an overview of each sightseeing package will be discussed. Cost: $2000.00 (Hotel Bellwether, 2012).

Business Liability Insurance: An essential element, business liability insurances helps defray costs of medical expenses, equipment damage, and attorney fees. Cost: $250.00 (Nationwide, 2012).

Contingencies: A rule of thumb noted by a like company recommends a 20% cash reserve to buffer unexpected or higher costs, such as fuel, associated with a start-up business. Cost: $2,196.00 (BLI Flight Services, 2012).

Capitalization DanAir fiscal year begins November 2012 with the majority of its startup costs occurring November through January, with operating costs beginning May 2013. Data such as revenue, cost of sales and expenses were utilized in the organizations 12 month Profit and Loss Projection, which showed specific timeframes of loss and profit for DanAir, Specifically: DanAir projects a $3,301 (cash-flow deficit) upon first fiscal year inception through April 2013. This is due to high typical start-up costs, and industry standards in travel for tourism conferences, membership in flying organizations, usually held in January. November 2012 sees the highest percentage of spending for the 12-month P&L period due to start-up costs (48%), followed by January and February with a large-scale grand opening social event and POS purchase.

Business Plan Dan air projects a $4,744 (cash-flow profit) beginning May 2013, which is the start of actual operations. Revenue projected May through August remains constant with all three aerial packages, and no remaining start-up costs. DanAir business practices mirrors like competitor BLI Flight Services in advertising,

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promotion, and ramp up of services November through March, with operations beginning May through August. However, large start-up costs place additional competitive burdens on DanAir through the remaining fiscal and operating year.

Startup Expenses Report Admin Expenses Aircraft rental IT Consultant Computer security software Computer/Printer Accounting fees FAA Medical License Banking fees Legal and other professional fees Total Admin Expenses Advertising and Promotional Expenses Business Organization fees Telephone networking Logo Design Postage Brochures Flyers/mailers Travel Expenses (clientele meetings) Website development Business Cards/Stationary Total Advertising/Promotional Expenses Other Expenses 232.00 61200.00 600.00 125.00 1429.00 232.00 250.00 1508.00 55.00 14631.00

100.00 33.00 1500.00 225.00 186.00 150.00 500.00 635.00 60.00 3088.00

Business Plan Flight documents Trade Show events DanAir Shirts Point of Sale system Grand opening/Social Event Business Liability Insurance Total Other Expenses Reserve for Contingencies SUMMARY STATEMENT Startup Expenses Administration expenses Opening inventory Advertising/promotional expenses Other expenses Contingency fund (20% of total) Working capital Total Startup Expenses 14631.00 0.00 3088.00 4249.00 2196.00 0.00 24164.00 100.00 150.00 250.00 1499.00 2000.00 250.00 4249.00 2196.00

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IX. Financial Plan Described by the Small Business Administration (SBA), breakeven analysis is used to determine when your business will be able to cover all its expenses and begin to make a profit (U.S. Small Business Administration, 2012). Based on this description, a firm must take into account its fixed and variable costs. For DanAir, the majority of its costs are fixed (i.e. aircraft rental, computer/printer, insurance), with little anticipated variable costs during first year of operation. Additionally, a breakeven analysis should also include assumptions such as monthly average per unit sales price and per unit costs. The anticipated amount required to recover 12-month costs for initial DanAir operations is $71,410. This breakeven amount was researched with the assistance of Cheryl Rabone, a manager of like-business, who specializes in aerial sightseeing trips. When asked about typical

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start-up costs, Rabone, noted the big costs for us was promotion, IT services, and of course the planes (2012). Further describing costs, of course rent on space at the airport, legal documents, insurance are also things to think about (Rabone, 2012). In review of DanAir Break-Even costs Rabone stated those look about right, the rental cost for the planes may go up later concluding, since youre on your own its nice that have no employee costs, but that can change if you expand (Rabone, 2012). Cost items previously detailed in section IX, the breakeven analysis assumptions are based upon research and interview of a like-business model, and are highlighted below:

Break-Even Analysis DanAir Cost Description Aircraft rental Advertising Computer/Printer IT Apparel Car and travel Accounting and legal Telephone Insurance POS Postage/Stationary Licenses Fixed Costs ($) $ 61,200 2,704 1,429 600 250 500 232 36 250 1,499 225 0.0 0.0 Variable Expenses (%)

Business Plan 250 Other (Organization Member dues) Other (Logo design) Other (website production) Miscellaneous expenses Owners draw Total Fixed Expenses Total Variable Expenses Breakeven Sales level = $ 71,410 100 1,500 635 $ 71,410 0.0 0.0 0.0

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Cash Flow Projection Particular to the life-blood of a start-up firm, cash flow is an essential management tool utilized to forecast if a business has enough currency to maintain operations, identify potential shortfalls in cash balances in advance, and used as a key indicator of vitality of the organization. Noted by Johns Hopkins University, a cash flow projection can demonstrate your ability to maintain a positive cash balance through the start-up phase of your business (2012). Queried on cash flow projections Rabone asserted, since were basically seasonal, we had a large shortfall of cash for 18 or so months, we didnt get back to breakeven till our third year, our positive cash flow usually follows our tourist season (2012). An important tool in a firms fiscal health management system, a cash flow projection identifies when expenditures are too high or when a firm may consider rearrangement of shortterm investments to deal with a cash flow deficits. As part of DanAirs business plan, a 12month Cash Flow Projection will give the firm a much better idea of how much capital

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investment our business idea requires and where monies may be better efficiently distributed. As a sole proprietorship, the key importance of a cash flow forecast is the ability to ensure DanAir can sustain its highest monthly expense; cost of sales. Further assumptions are based on current cost of operating at full passenger capacity per trip, specifically: Pre-Start cash flow from personal savings: $2,000 Estimated cash flow surplus: March through August Estimated cash flow deficits: November through April Estimated cash flow breakeven point: None during first year of operations End of year cash flow anticipated balance: $20,387 Funding Stated by Landes (2011), various methods such as private funds, small business credit cards, equity loans, traditional bank business loans, private venture capitalists and the federal government all provide an avenue for funding a start-up company. Factors including credit worthiness, assumed customer acquisition and sales rates, and the ability to pay back the loan are decision identifiers noted prior to negotiating further capital in reaching DanAirs breakeven point. Funding for a start-up, according to Rabone, included we got a traditional business loan and the owners put up some good collateral and they were also a good credit risk (2012). Explained further, this was hard to get, banks are tough when it comes to loans, it seems youve got to already have some capital to even be considered, as a [sole proprietor], maybe a loan through a federal program might work out (2012). With little collateral and unknown credit history, DanAir will apply for a business loan from the Small Business Administration (SBA), for the 12-month breakeven analysis amount of

Business Plan $71,410. The SBA, which is an Congressionally mandated agency of the Department of Commerce, currently provides 16 small business loan opportunities based on need and other specific demographics of the population (women, minorities, farmers, veterans) (U.S. Small Business Administration, 2012). Assuming the SBA fully backs DanAirs business plan, an

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appropriate funding program such as the SBA Patriot Express for small businesses for veterans will be utilized. Specific highlights of this loan program include: Less stringent credit requirements than traditional bank business loans Funds for start-up costs Funds to infuse working capital Workshops and training in managing your business

Further, Patriot Express loans feature the SBAs lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan (U.S. Small Business Administration, 2012). This is contrasted against the average interest rate for a traditional business loan, which is generally seven to eight percent interest (Bender, 2011). Therefore, if approved for the Patriot Express SBA loan, DanAir projects a savings of $4,106 in interest paid over a traditional bank business loan. Risk Management Stated by Hirai entrepreneurship is neither easy nor risk free, thats exactly why more than half of all startups fail within a few years (n.d). This sentiment reflects DanAirs risk management framework, which is to identify risk, uncertainty, and mitigate their effects. Companies bankrupt when cash flow and total current liabilities exceed total liquid assets, which further complicates a firms operating ability to achieve a breakeven equilibrium. Various

Business Plan internal and external factors accompany risk management for a start up firm, such as market change, competitor retaliation, financial predictions, and changing legal and regulatory matters (Hirai, n.d). A firm must engage in a common sense and honest approach in recognizing and mitigating the most obvious risks in a cost effective manner, as well as develop a culture of responding to unanticipated developments.

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Risk factors intertwined within breakeven analysis, cash flow, and funding assumptions are included in a risk management framework, specifically: Assumed Breakeven Analysis (Fixed Cost): The cost for aircraft rental is $61,200, which totals 85% of DanAir start-up costs. DanAir utilizes current rental rates as part of its current business plan. Therefore, if rental prices rise during the breakeven period, DanAir may institute higher rates for its customers to mitigate unforeseen higher rental costs. Cash Flow Projection (Personal Cash Investment): A $2,000 pre-start cash flow asset from personal savings may not be available due to unforeseen personal issues or other financial needs outside of DanAir. To mitigate this risk, a $2,000 escrow account may be established in the name of DanAir solely for the purpose of start-up cash flow infusion. Cash Flow Projection (Cash surplus): Assumed are positive cash flow receipts from capacity filled tour packages A/B/C during busy tourist months of March through August. Mitigating the risk of no-show customers, DanAir may institute a reduced flight rate for customers already at the airport and previous guests of DanAir; however, the firm does not have a viable contingency plan at this time for unfilled seats.

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Cash Flow Projection (end of year cash balance $20,387): Along with receipts from cash sales and payments for start-up operations, the largest financial risk assumption is placing a high amount of funds ($7,728) during the pre-operation phase of DanAir, November through February, where no positive funds are being collected. This risk may be spread more evenly through surplus months of operations (March through August), however high cost items such as advertising and computer costs cannot be rearranged from nonsurplus months.

Funding (satisfactory credit requirements): Obvious for a start-up firm seeking a business loan are stringent credit worthiness requirements such as sufficient income, income to debt ratio, credit score, and sound business plan. Prior to pre-operation phase startup in November, DanAir will obtain a free credit report to address any potential pitfalls in credit worthiness. If pitfalls do exist, DanAir may re-schedule both preoperation and operation dates to accommodate necessary banking credit alignment requirements.

Funding (fully backed business plan): Although prepared as a business oriented and sound financial document, if the SBA declines funding due to an array of business plan problems, such as the service offered, marketing/operating plan, management and organization, and finances, DanAir will reorganize the business plan for submission to a later date, and either reapply to the SBA, seek alternative financing (venture, personal investment) or shut down with an undetermined timeframe for revaluation.

Contingencies: (Tangible): As a sole proprietorship, DanAir relies on the health of its owner, Daniel Curtis, who must maintain FAA medical clearance to perform the duties as a licensed pilot. Therefore, if Daniel Curtis fails mandated FAA medical verification, he

Business Plan may be forced into an operating hiatus until the condition is resolved or waived by a medical professional. If unable to continue operations due to an expired or invalid medical certificate, DanAir will cease operations. X. Appendices 12 month Profit and Loss projection

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Cash Flow statement

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XI. Alternate Strategy In an attempt to understand the behavioral economics of a business plan forecast, Chen & Krakovsky (2010) noted in many situations, theres no historical data or the data contains no patterns useful for forecasting (p. 193). Therefore, variable forecasting methods described by Chen & Krakovsky such as guesstimation, number crunching, collective intelligence, utilized as a financial building block in the creation of business plan (2010). In the event the business plan is not accepted, an alternative strategy may be developed as a means to accommodate unexpected conditions or events, such as economic recessions or catastrophic events (Jeanty,

Business Plan 2012). Although not all-inclusive, DanAir alternative strategy rests upon three major areas of concern:

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Funds: In the event to secure alternate funding, DanAir may be infuse personal capital by securing monies from proceeds through refinancing current home mortgage, selling high-value assets, and early withdrawal of 401k account funds. Key rental provider: In the event the primary aircraft renter (BLI flight services) ceases operations, the secondary lessor (WestAir) shall become primary renter. If all aircraft rental operations cease, DanAir will suspend operations and undertake a cost benefit analysis (Berk & DeMarzo, 2011) of purchasing its own aircraft. General economic conditions: In the event of volatile economic conditions either cut or increase, passenger requests substantially, DanAir will add or decrease flight schedule frequency to reflect the current local economic climate. Financial adjustments will also be made breakeven analysis, Profit and Loss projections, and cash flow databases.

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