Bussiness Plan 01

This is what Ive come up with to earn a bit of money down here. Sad and pathetic as it may be, This is what passes for my current business plan!!

There is a steady flow of tourists in this town. Most of the tourists are young travelers (in their 20s). They come here to visit lake Atitlan on their way through Central America and they usually stay here longer than expected - The locals call it “Quick-San Pedro” ‘cos people tend to get stuck here!… just like me :) 
People like to “do something” every few days even when they are on holidays and there are various activities like hiking and zip lining and bike rentals etc already happily running in the town.
There is a small motorbike rental outfit that is run by locals. It used to get quite a lot of activity (according to my friends who live here) but the bikes have become old and ratty and are terribly maintained (as I said, run by locals) and it is no longer very popular, even though the tourist traffic is still good (and I think improving).
My plan is to buy a couple of new small rugged motorbikes and go into "competition"!

Probable bikes are the "Honda CGL125TP", which is old and reliable technology but the bikes are still made new. The TP version has large crash bars to protect the engine and handlebars, and different gear ratios for slow speeds. It comes with off-road tires and costs about 10 000Q new which is about $1500 (basically a small Agricultural bike). I would also purchase 4x open face helmets to go with the bikes. The bikes are small (125cc) so that the riders can’t get them selves into too much trouble. They also evoke that wonderful feeling the moment you sit on them of “Im on holiday in a cheap developing world country” – great fun :))

The initial plan is to get two of these bikes and advertise them in a very popular local Israeli restaurant (I have friends there) since this will immediately be visible to a large percentage of the available market.
The bikes would for the time being be stored where I am currently living (Ive worked this out with Joel).
Services and maintenance I would do myself. Any significant mechanical work on the bikes would be done by my mechanic friend Indy (and I could watch/do/learn).
Business registration, insurance and other “formalities” are rather negligible here in Guatemala. I am sure that the locals run these activities with no “formal constraints” (Ive never seen them fill in liability waivers or take credit cards/ drivers licenses) – its all cash in hand, below the tax radar stuff…, but I will set about investigating what would officially be required just because I cant help myself :)
My plan is to hold a passport as security on the rented bikes, have a formal waiver document as well as a safety instruction session and require them to show me they know how to ride.

Stuff Needed…
Bikes x2 - $3500
Licence plates/rego - $400
Helmets (2xL, 2xM) - $200
Fuel drum - $10
Lock Cable - $10
Garage Space
Passport Lock Box
Log Book
Town Map
Lake Map
Safety Instructions Sheet
Advertising Notices
Disclaimer Form

Costing/ROI
Guess that 20% of income goes to running costs, 40% goes to recovery of capital, and 40% is "profit".

Capital Costs
Total Capital Costs Approx $3600
Assume bikes and helmets last for 3-5 years before needing to be replaced.
Therefore need to clear $1200 per year for capital replacement.

Operating Costs
Gas - For day rentals, they get 1 tank of gas free.
Tank of gas is about 45Q (use 50Q for calculations)
Oil/plugs/filters/tires/brakes etc. – negligible – assume 50Q per month
This should fit in the planned 20% easily.

Usage Rate/ Pricing Structure???
Lets be quite pessimistic and guess at an average usage of say 1 hour per day for each bike (two bikes in fleet) as a start point. So, 14 hours per week.
Guess at 40 active weeks per year. 40x14 = 560 hours.
Based on 550 hours, and total income required of $3600 gives 3000/550 = 6.5$/hr
This seems about right at 40Q per hour.

So, on an hourly basis, charge 70Q per hour ($10).
For a half day say 210Q ($30)
For a whole day, say 350Q ($50)

Profit/Cost of Living.
I need between 150Q (tight) and 200Q (easy) per day to cover my living costs.
So if each bike truly is rented on average 1 hour per day – at an averaged 50Q per hour rate. That’s 100Q per day coming in from 2 bikes which is only 40Q of profit.
At this rate I need 8 bikes to rent out! :(

But I think the rent out frequency will be higher than my initial pessimistic estimate and if it rises to two hours per bike per day (half day every other day) that’s only 4 bikes required ( This should be possible I think!).
Also, if, I plan to recover say half the capital costs when the bikes get sold after three years (They will have been well maintained so, again I think its reasonable), then profit from two bikes goes to 60Q per day for the one hour model and I only need three bikes to rent on the two hour per day model. :)

Bail-Out Options
Now all those numbers are just guess work and Ive watched myself “adjust the numbers” when I don’t like the result I get to be something that I do like…
This is incredibly bad business management! … Very much like I have constantly seen my former employers management do when it comes to schedules and sales models – They have been doing it for years and it runs throughout the company from executive level to the junior managers. In all the time I was there, I NEVER saw a single schedule/resource plan that was even close to the actual results! (or even the constantly revamped estimates throughout the project for that matter!)... so endeth the "rant"!

So I know self delusion when I see it, and my numbers may turn out to be Self Delusion :) …

And what then?
Well, If it turns out that Im wrong I’ll have invested about $3000 in a couple of new motorbikes. There are lots and lots of them here and the locals use them, abuse them and replace them when they eventually die. I am good friends with the local bike mechanic and he knows who wants what and when so my “sales channel” is already in place. I can accept a loss of say 30% and just sell them if it really comes down to it. It may take a month or two to do it but I have a month or two available. So I think I have an exit strategy if needed...
And realistically, its only a few thousand dollars all up, so if I really had to I could just walk away and take a total loss... Though thats clearly not the "primary" plan.



And so, We are thus resolved…
A motorbike renting we shall go! :)))