Business Plan

Executive Summary Soapy Rides is a prominent hand car wash serving the Chennai & Banglore.. Soapy Rides will be run by Team 4. The Business Soapy Rides will be providing customers with three services: exterior car washing, , interior cleaning, and detailing. Soapy Rides has no true competitors that are trying to offer a high quality service for a reasonable rate. Most are trying to compete on price alone. Soapy Rides' ability to provide a high quality service, both in regards to the actual washing as well as customer service is all based on their ability to find the best employees. Hiring the best employees is cost effective because it decreases HR costs associated with turnover and other employee costs. Hiring the best employees and making sure that they are well taken care of ensures that they in turn take care of the customers. Study after study proves that a happy employee is far more likely to provide the highest level of customer service compared to an employee who is not happy and feels that they are being taken advantage of. The Customers Soapy Rides will target three main groups of customers: individual car owner and leasers, car dealerships, and local businesses. The surrounding area is quite affluent, 40% of the residents earn over Rs.70,00,000 a year. Consequently, they have nice cars and want them to look nice. There are five different car dealerships within a three-mile radius which will require car washing services for the various fleets. Lastly, there are many different local businesses that have company cars and that require clean appearances.

1. 2. 3. 4.

1.1 Objectives The objectives for Soapy Rides Car Wash and Detail Service are: To be viewed as a premium car wash and detail service in Chennai. Maintain a very high gross profit margin. Maintain a modest, steadily growing net profit margin. Expand to two locations after third year of operation. 1.2 Mission The mission of Soapy Ride is to provide top-quality washing and detail service for luxury car owners in Chennai. Soapy Rides will work to keep employees satisfied in order to maintain impeccable customer service. Services Soapy Rides will provide three services to its customers: Car washing (exterior) Car cleaning (interior) Car detailing Market Analysis Summary The car wash will be based in Chennai. This area has a number of benefits in terms of the market that it will provide for the business. Over 40% of households in the immediate neighborhood earn over Rs.70,00,000 annually. Many people in the neighborhood own and/or lease new cars and place great value on their cars and how they look. There are a large number of car dealerships in the area--five within three miles of the proposed location for Soapy Rides. 4.1 Market Segmentation Soapy Rides segments its customers by type of car ownership. We believe that the type of car that a person owns says volumes about their driving, and, therefore their car washing and detailing requirements.

1. New car owners: Owners of newer cars are most likely to use a hand car washing service. These owners take great pride in their cars and will bring them often to the wash and detail service. The goal with these customers is to promote regular use of the wash and detail service. The aim is to inform these customers that Soapy Rides will keep their car looking as good as it did the day they drove it off the lot. 2. Older luxury car owners: These people have either owned their high-end luxury cars for several years or are unable to afford the expense of a new luxury car but want the feel of relaxed driving. Both of these groups want to keep their cars in the best shape possible. Those who have bought second-hand cars will often spend

many hours in their cars and will place high importance on keeping their cars looking good. These owners will bring their cars in for regular washes and occasional details. 3. Sports car owners: These people are often younger or middle-aged men and will regard the look of their car as important. They will also pride themselves on the look of their car and will have their car hand washed (at least) weekly. These drivers will have an occasional detail, but will keep their cars so clean the detail will not be necessary very often.

4. Lifetime owners: Many of these people have owned their cars for more than five or six years, and are more likely to be women. They are attached to their cars as friends and though it may be more sensible for them to purchase a new car, they will bring their car in for a wash occassionally, just when the car is dirty. They like their cars to look presentable, and want to keep it in good shape but are not tied up in the look of their car. For this reason, they will not have a detail carried out on their car unless they are selling it. 5. Dealerships: There are five new and used car dealerships within three miles of the proposed location of Soapy Rides. These dealerships often use outside car wash services to detail their vehicles before they are put up for sale. In addition, there are fifteen other car dealerships within a seven mile radius of Soapy Rides. 6. Local businesses: Some local businesses have fleets of cars and small vans that must be kept clean to maintain their company image. These businesses will be looking for a cost effective, efficient car washing service to perform this service, and will prefer to use a car wash service during the week rather than during weekends, like the general public.

4.2 Target Market Segment Strategy The strategy behind Soapy Rides target segmentation is to attract customers who will be repeat users and will frequent the business in the typically quiet times for a car wash business. It will not be difficult to attract customers during the summer months and on the weekends, the weekdays however, especially in the winter, people will not think about having their cars washed. For this reason, Soapy Rides will target people who will tend not to be restricted to these busy times. Business owners (new car owners) tend to be very busy people, but are often able to make their own hours. Retired people (older luxury car owners) are not restricted by typical work schedules so will be able to frequent the car wash during the week. Dealerships will need cars detailed and washed regardless of the time of the day and week. This will supply a constant flow of traffic. Businesses will need their fleet cars washed during the week during regular business hours.

4.3 Service Business Analysis The hand car washing business in Chennai consists of many small competitors. Everything from local children raising money for their youth group on a Saturday by cleaning cars, to the automatic car wash machines, are competition for Soapy Rides. However, these two alternatives aim to meet the needs of the priceconscious individuals who are choosing the service simply so they do not have to clean the car themselves. Soapy Rides on the other hand, targets the qualityconscious individuals who value their car enough to spend Rs.10-Rs.15 per week to make it look good. 4.3.1 Competition and Buying Patterns There is one other hand car wash shop in Chennai. It is quite new and is trying to compete with automatic car washes by offering low prices. However, it is not targeting the customers who seek quality cleaning. The customers who Soapy Rides is targeting have their cars washed based on the quality of the job. They do not mind spending a little more each week to have their car washed and waxed in order to keep the paint work in excellent shape. The businesses that Soapy Rides targets will be more cost conscious, so prices will be approximately 30% less for these customers to promote volume usage. Strategy and Implementation Summary The key differentiator for Soapy Rides Car Wash is Team 4 and his business and personal connections within the Chennai neighborhood. For this reason, the sales

and marketing focus will be on a one-to-one basis, with the emphasis on gaining loyal and repeat customers as "friends" of the business. Soapy Rides, therefore, will depend on word-of-mouth advertising for the immediate community. 5.1 Competitive Edge Soapy Rides' competitive edge will be Team 4 and the quality of the family name in the Chennai area. As mentioned, the family has been in the car business for over 30 years, and has an excellent reputation and a myriad of both business and personal contacts. In addition, Mark has put a great deal of emphasis on creating a system that is both fast and efficient, which will keep costs, in terms of time spent per car, to a minimum. 5.2 Sales Strategy Sales strategy is on a one-to-one basis. All customers will feel they are a valued friend of Soapy Rides, and that all employees care about the care and upkeep of each vehicle. We must be aware that there are low switching costs in the car washing industry, so we have to work hard to develop and keep repeat customers. 5.2.1 Sales Forecast The following chart forecasts sales based upon the Market Segmentation Strategy. Sales are seasonal in this industry, tending to be higher in the warmer summer months, and to drop off in the winter. However, we will aim to flatten sales across the sales cycle by targeting segments that will want to keep their cars clean and looking good year round.

Sales Forecast ( Rs. In 00)

Year 1 Unit Sales Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Total Unit Sales Unit Prices Full Wash 1,760 2,050 770 129 615 494 5,818 Year 1 Rs.15.00 2,288 2,665 1,001 193 923 642 7,712 Year 2 Rs.15.00 2,974 3,465 1,301 290 1,384 963 10,376 Year 3 Rs.15.00 Year 2 Year 3

Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Sales Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Total Sales Direct Unit Costs Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Direct Cost of Sales Full Wash Exterior Wash Interior Clean

Rs.9.00 Rs.8.00 Rs.140.00 Rs.10.00 Rs.70.00

Rs.10.00 Rs.9.00 Rs.145.00 Rs.10.00 Rs.75.00

Rs.12.00 Rs.9.00 Rs.150.00 Rs.10.00 Rs.80.00

Rs.26,400 Rs.18,450 Rs.6,160 Rs.18,060 Rs.6,150 Rs.34,580 Rs.109,800 Year 1 Rs.0.70 Rs.0.40 Rs.0.30 Rs.3.00 Rs.0.70 Rs.3.00

Rs.34,320 Rs.26,650 Rs.9,009 Rs.27,985 Rs.9,225 Rs.48,150 Rs.155,339 Year 2 Rs.0.80 Rs.0.45 Rs.0.35 Rs.3.50 Rs.0.75 Rs.3.50

Rs.44,616 Rs.41,574 Rs.11,712 Rs.43,425 Rs.13,838 Rs.77,040 Rs.232,204 Year 3 Rs.0.90 Rs.0.50 Rs.0.40 Rs.4.00 Rs.0.80 Rs.4.00

Rs.1,232 Rs.820 Rs.231

Rs.1,830 Rs.1,199 Rs.350

Rs.2,677 Rs.1,732 Rs.521

End User Detail Business Fleet Washes Car Dealership Details Subtotal Direct Cost of Sales

Rs.387 Rs.431 Rs.1,482 Rs.4,583

Rs.676 Rs.692 Rs.2,247 Rs.6,994

Rs.1,158 Rs.1,107 Rs.3,852 Rs.11,047

5.3 Milestones The following table outlines the important milestones in the planning and implementation of Soapy Rides.

Milestones ( Rs. In 00)

Milestone Complete Business Plan Sign Rental Contract Convert Premises Hire Car Wash Staff Start Date End Date Budget Manager Department

2/1/2001

5/1/2001

Rs.0 Rs.475

ABC Department Mark Owner Contractors Owner

3/20/2001 3/20/2001 4/1/2001 4/30/2001 4/20/2001 4/20/2001

Rs.0 Contractors Rs.200 Mark

Hire Admin Staff Open for Business Distribute Flyers Press Release Follow-up on Press Release Totals

4/20/2001 4/20/2001 5/1/2001 4/28/2001 5/1/2001 5/5/2001

Rs.200 Rs.0 Rs.75 Rs.25

Mark Staff Friends Mark

Owner Staff Friends Owner

4/29/2001 4/29/2001

4/30/2001 4/30/2001

Rs.0 Rs.975

Mark

Owner

6.1 Personnel Plan Since car washing is a seasonal business, with business increasing in the warm summer months, and being busier on the weekends than during the week, Soapy Rides will rely on both temporary and part-time help. The company will hire one fulltime car wash/detail specialist and one full-time car wash specialist when it opens for business. Although it will rely on temporary and part-time help, quality will not be compromised, since all washers and detailers will receive thorough training. The company will also hire an administrative assistant who will assist Mark with paperwork and act as a receptionist.

Personnel Plan ( Rs. In 00)

Year 1 Owner Car Washers Admin/Sales Total People Total Payroll Rs.18,000 Rs.30,240 Rs.13,440 0 Rs.61,680 Year 2 Rs.30,000 Rs.43,312 Rs.15,000 0 Rs.88,312 Year 3 Rs.40,000 Rs.51,174 Rs.22,000 0 Rs.113,174

Financial Plan The following plan outlines the financial development of Soapy Rides. The business will be initially financed by a personal investment by Team 4 and will finance growth through cash flow. This will mean that the company will grow more slowly than it

could, but it will ensure that Mark retains control over the direction of the company. In year three, it is hoped that the company will be able to open a second location. It is envisioned that an outside loan or equity funding will be sought at that time. 7.1 Important Assumptions The financial projections for Soapy Rides are based on the following assumptions. These assumptions are thought to be quite conservative, as are the financial forecasts.

General Assumptions
Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other Year 1 1 10.00% 10.00% 25.42% 0 Year 2 2 10.00% 10.00% 25.00% 0 Year 3 3 10.00% 10.00% 25.42% 0

7.2 Break-even Analysis The table and chart below show the monthly break-even analysis calculations for Soapy Rides.

Break-even Analysis ( Rs. In 00)

Monthly Units Break-even Monthly Revenue Break-even 423 Rs.7,974

Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost

Rs.18.87 Rs.0.79 Rs.7,641

7.3 Projected Profit and Loss The following Profit and Loss table illustrates income and expenses monthly for the first year, and annually for the next two years.

Pro Forma Profit and Loss ( Rs. In 00)

Sales Direct Cost of Sales Other Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Sales and Marketing and Other Expenses Depreciation Leased Equipment Year 1 Rs.109,800 Rs.4,583 Rs.0 Rs.4,583 Rs.105,218 95.83% Rs.61,680 Rs.2,600 Rs.2,070 Rs.0 Year 2 Rs.155,339 Rs.6,994 Rs.0 Rs.6,994 Rs.148,345 95.50% Rs.88,312 Rs.1,550 Rs.2,070 Rs.0 Year 3 Rs.232,204 Rs.11,047 Rs.0 Rs.11,047 Rs.221,157 95.24% Rs.113,174 Rs.1,700 Rs.2,070 Rs.0

Utilities Insurance Rent Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales

Rs.3,325 Rs.1,800 Rs.4,800 Rs.15,420 Rs.0 Rs.91,695 Rs.13,523 Rs.15,592 Rs.0 Rs.3,204 Rs.10,318 9.40%

Rs.3,500 Rs.1,800 Rs.5,500 Rs.22,078 Rs.0 Rs.124,810 Rs.23,535 Rs.25,605 Rs.0 Rs.5,884 Rs.17,651 11.36%

Rs.3,750 Rs.1,800 Rs.6,000 Rs.28,294 Rs.0 Rs.156,788 Rs.64,370 Rs.66,440 Rs.0 Rs.16,361 Rs.48,009 20.68%

7.4 Projected Cash Flow The following Cash Flow table illustrates that if Soapy Rides meets projected sales, it will have positive cash flow after half a year of operations.

Pro Forma Cash Flow ( Rs. In 00)

Year 1 Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance Year 2 Year 3

Rs.93,330 Rs.13,097 Rs.106,427 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.106,427 Year 1 Rs.61,680 Rs.33,052 Rs.94,732 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.94,732 Rs.11,695 Rs.20,395

Rs.132,038 Rs.21,902 Rs.153,940 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.153,940 Year 2 Rs.88,312 Rs.46,837 Rs.135,149 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.135,149 Rs.18,791 Rs.39,186

Rs.197,374 Rs.32,470 Rs.229,843 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.229,843 Year 3 Rs.113,174 Rs.67,743 Rs.180,917 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.0 Rs.180,917 Rs.48,927 Rs.88,112

7.5 Projected Balance Sheet Soapy Rides' balance sheet illustrates a healthy financial position for this new company. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet ( Rs. In 00)

Year 1 Assets Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Year 2 Year 3

Rs.20,395 Rs.3,373 Rs.668 Rs.1,000 Rs.25,435 Rs.10,000 Rs.2,070 Rs.7,930 Rs.33,365 Year 1 Rs.3,097 Rs.0 Rs.0 Rs.3,097 Rs.0 Rs.3,097 Rs.30,000 (Rs.10,050) Rs.10,318 Rs.30,268 Rs.33,365 Rs.30,268

Rs.39,186 Rs.4,772 Rs.1,019 Rs.1,000 Rs.45,976 Rs.10,000 Rs.4,140 Rs.5,860 Rs.51,836 Year 2 Rs.3,917 Rs.0 Rs.0 Rs.3,917 Rs.0 Rs.3,917 Rs.30,000 Rs.268 Rs.17,651 Rs.47,919 Rs.51,836 Rs.47,919

Rs.88,112 Rs.7,133 Rs.1,609 Rs.1,000 Rs.97,854 Rs.10,000 Rs.6,210 Rs.3,790 Rs.101,644 Year 3 Rs.5,716 Rs.0 Rs.0 Rs.5,716 Rs.0 Rs.5,716 Rs.30,000 Rs.17,919 Rs.48,009 Rs.95,929 Rs.101,644 Rs.95,929

7.6 Business Ratios

The following table contains important ratios for the car wash industry, as determined by the Standard Industry Classification (SIC) code, 7542.

Ratio Analysis
Sales Growth Percent of Total Assets Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Percent of Sales Sales Gross Margin Selling, General & Administrative Expenses Advertising Expenses Profit Before Interest and Taxes Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets Additional Ratios Net Profit Margin Return on Equity Activity Ratios Accounts Receivable Turnover Collection Days Inventory Turnover Accounts Payable Turnover Payment Days Total Asset Turnover Debt Ratios Debt to Net Worth Current Liab. to Liab. Year 1 0.00% Year 2 41.47% Year 3 49.48% Industry Profile 3.00% 8.70% 9.50% 26.40% 44.60% 55.40% 100.00% 29.30% 27.80% 57.10% 42.90% 100.00% 0.00% 68.20% 1.50% 2.70% 1.53 0.88 57.10% 3.40% 8.00% n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a

10.11% 9.21% 7.02% 2.00% 1.97% 1.58% 3.00% 1.93% 0.98% 76.23% 88.69% 96.27% 23.77% 11.31% 3.73% 100.00% 100.00% 100.00% 9.28% 7.56% 5.62% 0.00% 0.00% 0.00% 9.28% 7.56% 5.62% 90.72% 92.44% 94.38% 100.00% 95.83% 86.59% 0.91% 12.32% 8.21 8.00 9.28% 44.68% 40.53% Year 1 9.40% 34.09% 4.88 57 5.45 11.67 27 3.29 0.10 1.00 100.00% 95.50% 84.13% 0.74% 15.15% 11.74 11.48 7.56% 49.11% 45.40% Year 2 11.36% 36.83% 4.88 64 8.30 12.17 27 3.00 0.08 1.00 100.00% 95.24% 74.45% 0.56% 27.72% 17.12 16.84 5.62% 67.10% 63.33% Year 3 20.68% 50.05% 4.88 62 8.41 12.17 25 2.28 0.06 1.00

Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth Dividend Payout

Rs.22,338 Rs.42,059 Rs.92,139 0.00 0.00 0.00 0.30 9% 6.91 3.63 0.00 0.33 8% 10.26 3.24 0.00 0.44 6% 15.59 2.42 0.00

n.a n.a n.a n.a n.a n.a n.a