MGT 3020 001 Entrepreneurs: Cases and Studies

Feasibility Study
Rocky Mountain Express Transportation Service, LLC

John Marshall, Nashion Harper, Justin Wall, Max Gordon 28 July 2010

The Business Idea Rocky Mountain Express Transportation Services, LLC When traveling, whether for business or leisure, travelers become concerned with making detailed arrangements for wherever their destination ends. Scheduling vehicle rental, using maps or interpreting directions to locations and many other transportation issues pose harrowing and sometimes embarrassing situations that detract from the experience and enjoyment of traveling. The Rocky Mountain Express Transportation Services (RMETS) business is to reduce those concerns and make the travelers visit more relaxing and satisfying by offering a custom transportation service to enhance their travel venture. Through offering a fleet of highly maintained vehicles, sharp and professional drivers and customized personal services RMETS clients will be guaranteed that they will be at their destination rested, refreshed and ready for their adventure. RMETS partners with the client to design the perfect experience, coordinating their transportation needs and outlining a detailed plan to ensure that they are on time to that important business meeting, headed to the right restaurant or enjoying the leisure to sit back and relax with friends, family or colleagues enroute to their destination. Maintaining and operating a fleet of multiple vehicles, initially starting with three vans and later expanding to include: buses, SUVs, luxury town cars and limousines we can be ready to provide and accommodate a clients needs tailored for their situation. RMETS drivers are highly trained, courteous, safe and knowledgeable. All vehicles are radio dispatched and GPS monitored. Refreshments will be provided, however alcoholic beverages will not be available; Champagne or sparkling wine will be allowed for special events or situations (birthday, wedding, etc.) Business Owners John Marshall Mr. Marshalls experience in the transportation industry includes operating Armored Transports, Military Police patrols, and Tow Truck operations. Employed by Loomis Armored, Mr. Marshall drove scheduled routes, delivering high value items to various clients and destinations. Serving 12 years in the United States Army, Mr. Marshall engaged in patrolling, public contact, and operating and maintaining multiple types of vehicles. Earning the Driver/Mechanics Badge with Wheeled Vehicle tab Mr. Marshall drove more than 12,000 miles without any accidents or prohibitive vehicle faults. He also conducted escort missions of dignitaries and executives, such as the Secretary of Defense and the XVIIIth Airborne Corps Commander while providing security, transportation and travel itinerary details. Mr. Marshall currently manages
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Java Caf, a coffee bar servicing customers with quality refreshment and beverage services through procuring inventory from vendors, operating and maintaining food service equipment and managing staff. Mr. Marshall intends to resign this position to further the startup and success of RMETS. Nashion Harper Mr. Harpers experience includes working for his father in a family run business and he currently is employed in the Day Care industry. Mr. Harper is now a director of Kids Adventure and has run the daycare program at 6th Avenue Elementary School for 2 years. Mr. Harper also does video coordinating work for the Denver Nuggets basketball team. He is experienced in computer software programs such as Microsoft Office. Justin Wall Mr. Wall currently works in the Retail Sales industry conducting sales of mobile communications. Mr. Wall has been in the sales industry for over four years and has established relationships within the marketing community throughout Colorado. Mr. Wall currently is pursuing a Juris Doctorate at the University of Colorado. Max Gordon Mr. Gordons experience includes working for a multinational company, Maxim Integrated Products. Mr. Gordon is currently employed at Mutual of Omaha as a marketing specialist. Maxim provided Mr. Gordon with first had experience overhauling the inventory information system from Legacy to cutting edge SAP. Now at Mutual of Omaha, Mr. Gordon is employed as a Marketing Specialist and has contributed to direct customer exposure to products. Mr. Gordon is completing his education at Metropolitan State College of Denver with a Baccalaureate Degree in Business Management. Providing a Service Benefits RMETS provides safe, reliable transportation to mountain resorts and tourist destinations throughout Colorado as well as local events and activities in the Denver Metro area that allow guests to sit back, relax and take in the breathtaking views of Colorado. Unlike other similar services, RMETS offers door-to-door, point-to-point transportation services from not only Denver International Airport, but also from within neighboring communities and from private residences to area hotels, businesses and mountain destinations.

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Limitations RMETS immediate limitations will include: fluctuations in fuel costs, which affect every service provider in the transportation industry, will be absorbed into the business profit margin to keep the marketing price consistently below the competition. Unexpected vehicle maintenance can occur due to mechanical failures or delimiting accident damage. RMETS liability insurance and leasing contracts will cover the maintenance and/or damage repair through a maintenance program with the leasing dealership and manufacturer warranties as well as a monthly stipend set aside in case of costs not covered under those programs. Seasonal conditions that include weather caused delays or closures of roadways are going to be unavoidable, however RMETS will have pre-planned rerouting and up to date weather forecasts available to drivers through dispatch operations to lessen the inconvenience upon the client. Stage of Development Rocky Mountain Express Transportation Service is currently in the idea stage. This feasibility study is being conducted to determine market potential and expectations in the Passenger Transportation Service industry. RMETS plans to be in full operation within six months. The following time frame is provided to advance the progress of the business actualization: Month 1: Feasibility Study and Business Plan completion; Open website Month 2-3: Pursue capital and investment strategies for start-up Month 4-5: Receive capital and secure location for office space; obtain appropriate permits; Lease vehicle fleet and network with vendors Month 6: Open marketing operations, print advertising flyers and circulate to partnering businesses; begin operations; contract for transportation services with resort and guide service providers Legal Restrictions and Rights Rocky Mountain Express Transportation Service will operate as a Limited Liability Company (LLC) to limit the personal liability of the four owners and provide for tax advantages. The structure of RMETS will be as a Partnership under Check the Box Taxation, this will allow each partner to hold 25% of interest in the business where 75% or majority vote is required to pass a decision concerning the business.

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Insurance Requirements Insurance will be necessary in operating motor vehicles upon local, state and federal byways to carry passengers. The Federal Motor Carrier Safety Administration (FMCSA) requires Passenger Carriers that have seating capacities of 15 passengers or less to hold $1.5 million in public liability insurance (bodily injury/property damage/environmental restoration). All drivers are required by 49 CFR 383.5 to possess a Commercial Drivers License (CDL) to operate a commercial vehicle and an alcohol and controlled substance test. Trends Related to the Product or Service According to BizStats.com, Other Transit and Ground Passenger transportation gross $2.9 million dollars annually; Charter Bus transportation gross over $2.3 million annually and Taxi and Limousine services gross over $5 million. The customized transportation service industry offers opportunities within the passenger transportation field that is competitive, yet there are only a handful of providers that the customer has to choose from, giving RMETS the opportunity to introduce the consumer to the level of exceptional service at an affordable price. Many contract or chartered services are located within major business hubs and provide multi-echelon services, from public access taxis to privately chartered limousines and buses. Some, such as The Pittsburgh Transportation group operates six companies, such as Yellow Cab, Peoples Cab and Embassy Coach/Limousine Service. Large transport groups such as this have been hit hard with rising fuel prices and have had to sell or merge to continue operation and also to expand their services. Pittsburgh Transportation Group was recently acquired by Veolia, Inc., a French firm that was looking to get into the American market. RMETS is an American grass roots business that looks to maintain American ownership and give back to the community we conduct business with. Independent owners and operators need to be creative to be persistent and become a brand product in the market. Colorado Mountain Express is one that has done that. Operating in the Denver, CO area, CME provides transportation from Denver International Airport and the Metro area to mountain resorts and tourist areas, as well as operating in the Eagle County Regional Airport area. Offering different styles and capacities of vehicles, the client can customize their trip and customer service that makes their experience memorable and enjoyable.

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Market Potential As gas prices are at an all-time high, Americans have curtailed their driving at a historic rate by not driving as much as they did a year ago as gas prices skyrocket. According to the U.S. Department of Transportation (www.dot.gov) in June 2008 Americans drove an estimated 4.7 percent less than the previous year. That's 12.2 billion fewer miles. The DOT's Federal Highway Administration (FHWA) called it "the sharpest yearly drop for any month in FHWA history." Records have been kept since 1942. According to the American Automobile Association (AAA), the national average price for a gallon of regular gas rose to a record $3.936. That compares with an average price per gallon of $3.23 Memorial Day, 2007. Some Americans have turned to public transportation. Ridership increased by 2.1 percent in 2007, in part because of rising gas prices, according to the American Public Transportation Association. Americans took 10.3 billion trips on public transportation in 2007, the highest level in 50 years, the group said. AAA Colorado projected the number of travelers in the Mountain region (which includes Colorado) Memorial Day weekend 2010 increased 7.6 percent over 2009 with approximately 2.5 million residents taking a trip away from home. Nationwide, 32.1 million Americans traveled over the Memorial Day weekend, a 5.4 percent increase over last year when 30.5 million Americans traveled during the same period. This is the first nationwide increase in Memorial Day travel since 2005. With gas prices still high, the increasing number of travelers provides an opportunity for growth in the Passenger Transportation industry that is very encouraging. The Competition There is an abundance of personal transportation services available in the Colorado area providing transportation to and from the mountain resorts from Denver and the surrounding areas. Many of them are headquartered in the Denver metropolitan area with others stationed in the various mountain towns. Each one has its own advantages and disadvantages ranging from price to type of vehicle and service area. A comparison is listed below: Colorado Mountain Express: Colorado Mountain Express (CME) provides transportation to and from Denver International Airport (DIA) and mountain resorts as well as Eagle County Regional Airport. Its primary target market is tourists arriving into Colorado to enjoy the high country. The company provides various options for various prices on types of vehicles. The options include: riding in a shuttle with up to nine others, chartering a van for up to ten people, a private Cadillac for up to three people, a private Suburban for up to five, and private executive van for up to eight. The Cadillac, Suburban, and executive van
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include complimentary water and movies. Rates are determined by the town or resort of destination, the further the travel distance, the higher the price. The main disadvantage of this service is how it limits the destination in Denver to DIA. This limits the opportunity to assist those who live in Denver in getting to the mountains. The company has advantages in its vehicle options with different price points depending on the passenger. (www.ridecme.com) CME offers an expanded fleet of vehicles, but at higher cost to the customer. Colorado Mountain Transportation: This company provides transportation from the Denver metropolitan area to mountain resorts. The focus of Colorado Mountain Transportation is providing luxury service to and from mountain towns. All passengers have private vehicles. The company provides a fleet of Lincoln Town Car sedans, limousines, limo buses and Suburbans to fit into the price range and party size of its passengers. The limousines and limo buses have a price per passenger and have a minimum/maximum number of passengers to set the price. The advantage that this company has is privatized luxury transport services. The disadvantage is limiting the passengers to set prices to private vehicles rather than give them the option of sharing a ride for a reduced price. This is a luxury service and is not a service that can be used by smaller groups of local residents. (www.coloradomountaintransportation.com) Colorado Mountain Shuttle/Trans Shuttle: This company offers private transportation to and from DIA, the Denver metropolitan area, and mountain towns across Colorado. The service includes passenger vans with private shuttle services to reach destinations around the state and to special events such as concerts. An advantage Colorado Mountain Shuttle has is a broader scope than the others by giving more options on destinations and services. The rates are tiered by the number of passengers and the distance to various locations. The company operates much like a taxi company by servicing the metropolitan area of Denver, but has personal chauffeurs to travel with the passengers. Much like the other companies, this one focuses on transporting tourists and travelers to various locales in Colorado; however the disadvantage to this is that it is a hired vehicle for private groups rather than a shuttle for paying customers. Customers Rocky Mountain Express Transportation Services will provide service to and from recreational locations in and around the Denver metropolitan area, as well as other destinations within Colorado. Our targeted customers will include Colorado residents as well as tourists and business travelers. According to the United States Census Bureau, Colorado Ski Facilities capture 32.74% of the US recreational ski market. This data indicates that Colorado is the number one destination for recreational skiing in the United States. From 1997 to 2002 there has been a rise of 34.3% in the profit Ski resorts take in each year for normal operations. According to the Bureau of Economic
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Analysis, the per capita personal disposable income of the Rocky Mountain region was $33,513 in 2009. The per capita personal disposable income of all US regions, except the Rocky Mountain region, was $36,243 in 2009. The convenience and price structure that Rocky Mountain Express Transportation Service offers is an appealing cost alternative to driving to and from recreational destinations using a personal vehicle. Local residents may be more inclined to travel in a ride share format. Market Penetration As a promotional strategy to make the target market aware of RMETS services, RMETS will provide promotional pricing to consumers who frequent outdoor recreational stores. Possible stores include, Dicks Sporting Goods, REI, Inc. and Bass Pro Shops. RMETS will provide a cost structure to allow stores to sell our service as a package with their merchandise, such as Skis, Snowboards and Kayaks. Rocky Mountain Express Transportation Services primary exposure during the normal course of business will be through our website. The website will allow browsing of our available vehicles, standard destinations and rates. Interested customers will also have the option to make a reservation for upcoming dates. Customers can view our availability and plan accordingly. RMETS website will also list policies and relevant information. RMETS will also provide a primary phone number for customers to contact to make reservations and customer service. RMETS will also contract with smaller tour companies who provide tours of the Mountains and other recreational areas. Smaller businesses unable to have and maintain a fleet of vehicles rely on other companies to provide transportation to target locations. This will be a good way to gain exposure in the community. Financials Pricing RMETS will pursue a cost leadership pricing strategy. The business offers pricing below competition allowing affordability to the customer and an acceptable profit margin for the business. Minimum cost for a one-way ticket to a Colorado resort location will be $75.00. Sales revenue forecasts RMETS forecasts are based upon 140 one-way transportation packages sold per month to break even. This equates to 7 customers served daily for 20 days out of the month. During the first year RMETS expects revenue to equal $217,817; in year two $260,510; and in year three $311,570.

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Cost Forecasts Based upon RMETS operational functions of business there are two major costs being observed: the cost of fuel and the cost of maintenance. RMETS plans to amortize the projected costs of fuel throughout the year. This will allow RMETS to absorb the cost for the customer when fuel is at a premium. RMETS maintenance needs will be met by reserving $500 per month to be allocated as needed in the event of unexpected circumstances. Gross Margin RMETS gross margin is the revenue less the cost of fuel and maintenance. This equates to $186,136 in the first year; $207,925 in the second year; and $223,928 in the third year. Operating expenses RMETS operating expenses pertain to both the direct and indirect costs of doing business in addition to team member salaries. The operating expenses are fixed from month to month and are included in the budget forecasts for the first three years. Operational expenses include rent, utilities, vehicle leasing, fuel and insurance. These operational costs are summarized in total operating expenses and are forecast as: $180,820 for the first year; $179,920 for the second year; and $199,220 for the third year. Profitability The expected net profits from RMETS in the first year are $5,316. In the second year the net profit more than triples to $28,005. The estimated net profit is forecasted to grow after the initial start-up costs are absorbed and as the customer base increases. Future Action Plan Start-up Capital Rocky Mountain Express Transportation Service, LLC will need to have enough Start-up capital to cover the initial operating expenses plus an additional $15,000 for any unexpected costs. It is estimated to be $50,000. Sources of Start-up Capital RMETS, LLC will obtain a start-up capital loan from the Bank of America for $50,000 at 6.5% variable interest for 7 years with initial payment deferred for 3 months. (www.bankofamerica.com/small_business/business_financing/index.cfm) RMETS intends to repay the loan in full in two years.

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