Travel Agency Marketing Plan

Adventure Travel International (ATI)

Financials, Budgets, and Forecasts

4.0 Financials, Budgets, and Forecasts

ATI's marketing budget for year one of operations is taken from the start-up investment and is equivalent to approximately 6% of anticipated first-year revenues. The marketing budget will be evaluated quarterly, and at the end of year one, adjustments will be made to advertising schedules, media vehicles, effective frequency, etc. as necessary.

The following issues are relevant to ATI's marketing efforts:

• As a start-up, ATI has no baseline by which it can determine the effects of its marketing efforts on sales. Year two marketing activities will benefit from the financial results of year one operations.
• The marketing budget has been established based on anticipated revenues. ATI plans to employ the use of more sophisticated budgeting methods as a baseline is established.
• Much of ATI's marketing efforts will involve personal interaction with customers in the Woodville area. ATI must attempt to conserve resources when possible, especially in the early stages of operation. Sweat equity in marketing and other activities will be critical to ATI's success.

4.1 Break-even Analysis

ATI's break-even analysis, including monthly sales break-even points, are located in the following table. Break-even calculations assume a 20% gross margin. ATI plans to improve its margin by year three or four. The improved margin will come as the result of economies of scale, strategic alliances, and ATI's position as a premier service provider. ATI will be able to raise prices without affecting demand. Fixed costs may increase slightly over the next two years.

Break-even Analysis



Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even	$1,501
Assumptions:
Average Percent Variable Cost	80%
Estimated Monthly Fixed Cost	$1,500

4.2 Sales Forecast

Detailed projections are located in the sales forecast table. ATI expects sales to be slow in the first, and possibly second quarter of operation. Sales growth is estimated at 10% annually through year three.

Sales Monthly



Sales Forecast

Sales Forecast
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Sales
Woodville Market (Individual)	$427,685	$382,245	$258,751	$284,626	$313,089
National Market	$42,768	$70,568	$97,032	$106,735	$117,409
Total Sales	$470,453	$452,813	$355,783	$391,361	$430,497
Direct Cost of Sales	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Woodville Market (Individual)	$342,148	$301,974	$199,238	$219,162	$241,078
National Market	$34,214	$55,749	$74,715	$82,186	$90,405
Subtotal Direct Cost of Sales	$376,362	$357,722	$273,953	$301,348	$331,483

4.2.1 Sales by Manager

ATI anticipates that the majority of revenues, 75-80% will come from individual customers in the Woodville area. This is especially true in the first two years of operation. The remainder of revenues will come from corporate clients and national customers who purchase via the Internet. By year three, ATI hopes to capture more sales from corporate and national customers, thus reducing its reliance on the Woodville area. Preliminary goals for year three are:

• Woodville customers: 40%.
• Corporate customers: 30%.
• National Customers: 15%.
• Internet: 15%.

Sales Breakdown by Manager Monthly



Sales Breakdown by Manager

Sales by: Manager
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Sales
Jordan Barnes	$320,763	$352,841	$388,127	$426,940	$469,633
Shea Delaney	$160,383	$176,421	$194,063	$213,470	$234,817
Other	($10,693)	($76,449)	($226,407)	($249,049)	($273,953)
Total	$470,453	$452,813	$355,783	$391,361	$430,497
Average	$156,818	$150,938	$118,594	$130,454	$143,499

4.3 Expense Forecast

The marketing budget is between 5% to 6% of revenues. ATI's marketing director will assume responsibility for everything except the website development budget. All ATI staff are salaried, so labor hours, other than those included in the directors salary, are not included in the budget. They will, however, play a key role in many of the planned promotional activities. All members are expected to take part in the promotion of ATI. There are no 9-5 positions.

Monthly Expense Budget



Marketing Expense Budget

Marketing Expense Budget
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Print and Radio Advertising	$15,000	$18,750	$20,625	$22,688	$27,225
Personal Selling and Promotion	$8,500	$10,625	$11,688	$12,856	$15,428
Other	$5,000	$2,500	$3,000	$3,000	$3,000
	------------	------------	------------	------------	------------
Total Sales and Marketing Expenses	$28,500	$31,875	$35,313	$38,544	$45,653
Percent of Sales	6.06%	7.04%	9.93%	9.85%	10.60%

4.3.1 Expense by Manager

The following chart details ATI's primary marketing. Jordan Barnes is responsible for the success of the programs and the proper management of the budget. Year two expenditures could easily double if ATI generates sufficient revenues. As efforts to communicate with the national and global markets increase, ATI expects to use several national publications for advertising. Doing so will be costly.

Expense Breakdown by Manager Monthly



Expense Breakdown by Manager

Expenses by Manager
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Expenses
J. Barnes	$23,496	$25,846	$28,430	$31,273	$34,400
S. Delaney	$5,004	$2,500	$2,500	$2,500	$2,500
Other	$0	$3,529	$4,382	$4,771	$8,752
Total	$28,500	$31,875	$35,313	$38,544	$45,653
Average	$9,500	$10,625	$11,771	$12,848	$15,218

4.4 Linking Sales and Expenses to Strategy

ATI's marketing efforts have been designed to improve sales. ATI's director of marketing will be responsible for tracking the various programs. If measurable results are not realized, changes will be made to the marketing mix. Other factors, such as economic recession, sales below estimates, high costs associated with the use of certain media, and others may influence ATI's marketing budget and mix.

Sales vs. Expenses Monthly



4.5 Contribution Margin

ATI anticipates that contribution margin will improve beginning in year three. By then, ATI will have developed a better mixture of revenue sources, strategic alliances, and brand equity. Corporate accounts will bring higher contribution margins, as will other group trips. Suppliers tend to give price breaks if the agency can book larger groups. In addition, ATI plans to charge as much as 5% over the industry standard by the end of year three, as it will be recognized as an industry leader.

Contribution Margin Monthly



Contribution Margin

Contribution Margin
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Sales	$470,453	$452,813	$355,783	$391,361	$430,497
Direct Cost of Sales	$376,362	$357,722	$273,953	$301,348	$331,483
Other Variable Costs of Sales	$0	$0	$0	$0	$0
	------------	------------	------------	------------	------------
Total Cost of Sales	$376,362	$357,722	$273,953	$301,348	$331,483
Gross Margin	$94,091	$95,091	$81,830	$90,013	$99,014
Gross Margin %	20.00%	21.00%	23.00%	23.00%	23.00%
Marketing Expense Budget	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Print and Radio Advertising	$15,000	$18,750	$20,625	$22,688	$27,225
Personal Selling and Promotion	$8,500	$10,625	$11,688	$12,856	$15,428
Other	$5,000	$2,500	$3,000	$3,000	$3,000
	------------	------------	------------	------------	------------
Total Sales and Marketing Expenses	$28,500	$31,875	$35,313	$38,544	$45,653
Percent of Sales	6.06%	7.04%	9.93%	9.85%	10.60%
Contribution Margin	$65,591	$63,216	$46,518	$51,469	$53,362
Contribution Margin / Sales	13.94%	13.96%	13.07%	13.15%	12.40%