3 Year Business Plan & Forecast

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CTLV – Villa Secrets Cape Town Rentals

3 Year Business Plan

By Nick Ray Ball 16th October 2016

ctlv-villa-secrets-cape-town-rentals

In this edition of the Villa Secrets Cape Town Rentals business plan, a R1,500,000 investment buys www.Cape-Town-Luxury-Villas.com which in 2015 made a gross profit of ZAR 1,400,000 and R700,000 in shareholder profit. We add to this, a share of enquires from CapeTown.VillaSecrets.com and inclusion in the Villa Secrets mandate initiatives.

Index

In year one (2017) we see a lot of re-investment in the future, but still achieve R700,000 in shareholder profit. In year two we forecast R1,200,000 and in year three
the internal investment from years one and two pay of and R5,100,000 in shareholder profit is forecast.

One of the main ingredients in year 3 figures are the 12 exclusive mandates attained. For a long time, the acquisition of mandates was uncertain, however with our ZAR 1,000,000 in marketing commitment for each qualifying mandate, it is now far more likely than not, that this target be met or beaten.

The following three-year business plan is created from 3 spreadsheets which present a forecast. This forecast is a version of the business plan that can be reassessed month on month, and will in time be created as part of the TFBMS business and marketing software.

Month by Month Strengths & Weaknesses can be identified and addressed, spending decisions can be adapted according to income generated and the procurement of villa rental mandates.

Download Spreadsheets: 2017 | 2018 | 2019

This is the 5th version of this business plan, version 4 is presented in the following link Villa Secrets Cape Town Rentals 3 year plan. In both cases we present what we call a ‘Quantum Safe Forecast’ in which we use safe initial inputs. For example, in March 2014 we first launched Cape Town Luxury Villas.com website and in 2015 the team made ZAR1,400,000 in gross profit, but for the sake of caution when estimating 2017 figures we have lowered this figure to ZAR1,000,000. There are hundreds more examples of this principle found within the three spreadsheets.

One step at a time, from January 2017 to December 2019 this figure of ZAR1,000,000 increases due to the development of the TFBMS. In addition we add a percentage of the income from CapeTown.VillaSecrets.com. Lastly we add the income derived from the acquisition of 4 or 5 exclusive rental mandates each year. Each mandate acquired is part of our ZAR1,000,000 mandate marketing initiative. Which is in short Villa Secrets commitment to spend ZAR,1000,000 (or USD 100,000 if in the US, Caribbean or Europe) on web development, advertising, marketing and PR on the villa we represent, over a 3-year period.

This forecast assumes…

1. 2017 – 4 Mandates at average day rate of ZAR12,500 per night
2. 2018 – 5 Mandates at average day rate of ZAR15,000 per night
3. 2019 – 5 Mandates at average day rate of ZAR17,500 per night

Note; we work under the assumption that 1 villa is sold in 2018, and one is sold in 2019 and one mandate is lost. (For instance the owners wish to live in the house themselves).But one of the two properties sold continues to do rentals, as such we account for 4 mandates each year.

Inner network profit share…

lastly is the initiative for all Villa Secrets Cape Town Rental companies to share 25% of their shareholder profit. So if there were three companies, all would contribute 25% of their shareholder profit to a communal fund that would be divided into three and shared equally between the three.

This exercise is included to boost comradery, to make each booking or mandate acquired by any network company a bonus and in addition it becomes a safety net in the case of a poor run, plus for smaller companies that have essential services, such as concierge companies this revenue could become their main profit center.

This is a late entry to this forecast and has not been factored within the forecasts. To factor it in consider a potential 5% to 10% loss in shareholder profit in year 3.

 

Year 1. ‘2017’ Business Plan and Financial Forecast

In Year 1 we forecast a gross profit of ZAR 3,300,000, with costs of ZAR 2,600,000 and Shareholder profit of ZAR 700,000

Year one is a year of building for the future, websites, software, stock and mandates. One of the main differences between this plan and version 4, is that most operational costs including an office and all office related costs (except telephone bills), office management, admin and financial management. Plus content marketing costs such as a media manager, a photographer a video cameraman/editor, copywriters/live chat operators, local SEO and general SEO, a social networks manager, an awards managers and various staff working on print media. These costs are now absorbed by ‘Villa Secrets Africa,’ too which this franchisee (CTLV) contributes 20% of gross profit.

Note that in year 1 ZAR 500,000 of the ZAR 1,500,000 initial franchise commitment is allocated to this cost center.

Further note an initiative to employ all content marketing staff under the join role of hospitality reps & directors. To this end a lot of the staff will come from a film background.

As before ‘S-World Villa Secrets’ receives a 25% of gross profit contribution for the first three years which is allocated to mandate costs, software development, web development and more content marketing and SEO.

New in this edition is a 12.5% of rental commission + 25% of sales referrals commission for the recruitment of mandates in one of three ways…

1. A full time company director dedicated to getting more villas online and the acquisition of sole mandates.
2. An incentive presented to a limited group of individuals who earn passive income acquiring some mandates in exchange for 12.5% of rental commission & 25% of sales referrals.
In year 3 this adds up too over R2,000,000 in incentives
3. Recruiting one of Cape Town’s premier estate agents who have the rights too present and quire exclusive rental and sale mandates for one or more Villa Secrets Cape Town Rentals websites

Note; All our workings are created in gross profit. We create turnover by a simple calculation where turnover is 85% and gross profit (commissions) are 15%.

In year 1, income is divided into two categories…

  • Web Agency Income
    • Cape-Town-Luxury-Villas.com ZAR 1,375,000
    • CapeTown.VillaSecrets.com ZAR 530,000
  • Income derived from Rental Mandates
    • Exclusive Mandate Direct ZAR 750,000
    • Exclusive Mandate Residual ZAR 480,000
      (This is bookings made from enquiries for a mandated villa, that end up making bookings for other villas.)
    • HomeAway Subscriptions ZAR 90,000
    • Other Subscriptions ZAR 100,000

Expenses are broken into 7 categories

  • General Expenses ZAR 240,000
  • Staff & Office ZAR 0
  • Cape-Town-Luxury-Villas.com marketing ZAR 380,000
  • CapeTown.VillaSecrets.com marketing ZAR 110,000
  • Mandate Google Ads and Remarketing ZAR 295,000
  • Mandate Recruitment Commission/Salary ZAR 150,000
  • S-World Development and Marketing ZAR 833,000

Note that this expense is the S-World Villa Secrets development contribution: 25% of gross profit.

An alternate version of these results that adapts the forecast to zero mandates is found on the spreadsheet tab ‘No Mandates,’ in this scenario shareholder profit is reduced from R 700,000 to R 500,000

Note on the other additional tabs on the year 1 spreadsheet…

  • ‘VS-CTR 1st Year 2017 Complex’ – Offers a more in depth forecast, with every effect of the TFBMS (Total Financial, Business & Marketing Systems) itemized month by month.
  • ‘No Mandates’ – Offers a forecast that has no mandates
  • ‘Spending Allocations’ looks at the spending of ‘VS Africa’ and ‘S-World Villa Secrets.’ (Note for all sheets we currently only see the 2nd year allocations)
  • ‘Villa Mandate’ – The calculations for how much income mandates will generate.
  • ‘Mandate Costs + #Villas 4 Rent’ – The number of villas mandated and how much of the licence fee is spent on development and marketing.
  • ‘Villas Sold Referral Com’ – Referral income from property sales (not applicable in first year)

 

Year 2. ‘2018’ Business Plan and Financial Forecast

In Year 2 we forecast a gross profit of ZAR 7,400,000, with costs of ZAR 6,200,000 and Shareholder profit of ZAR 1,200,000

In year 2, income is divided into three categories…

  • Web Agency Income
    • Cape-Town-Luxury-Villas.com ZAR 2,000,000
    • CapeTown.VillaSecrets.com ZAR 800,000
  • Income derived from Rental Mandates
    • Exclusive Mandate Direct ZAR 2,250,000
    • Exclusive Mandate Residual ZAR 1,780,000
    • HomeAway Subscriptions ZAR 104,000
    • Other Subscriptions ZAR 121,000
  • Other Income
    • Sales Referrals ZAR 350,000

Expenses are broken into 7 categories

  • General Expenses ZAR 390,000
  • Staff & Office ZAR
  • Villa Secrets Africa ZAR 1,480,000
  • Cape-Town-Luxury-Villas.com marketing ZAR 490,000
  • CapeTown.VillaSecrets.com marketing ZAR 115,000
  • Mandate Google Ads and Remarketing ZAR 1,355,000
  • Mandate Recruitment Commission/Salary ZAR 591,000
  • S-World Development and Marketing ZAR 1,850,000

An alternate version of these results that adapts the forecast to zero mandates is found on the tab ‘No Mandates’ in this scenario shareholder profit is reduced from R 1,200,000 to R 990,000

 

Year 3. ‘2019’ Business Plan and Financial Forecast

In Year 1 we forecast a gross profit of ZAR 20,100,000, with costs of ZAR 16,250,000 and Shareholder profit of ZAR 5,100,000

Note on shareholder profit. This has been added to in ‘row 17’ by ZAR 1,280,000. This is the 2,560,000. of ‘S-World Villa Secrets’ (Additional Marketing & Development) which will generate at least an addition 50% (being ZAR 1,280,000) in shareholder profit. (It may well generate twice as much, indeed it should, however for simplicity and caution we work on a 1.1 ROI, with 45% of ROI destined for Villa Secrets Africa and S-World Villa Secrets and 5% destined for mandate recruitment costs.)

Note in the following year this bonus will not apply, however due to the TFBMS and an increasing property portfolio 2020 will still increase it shareholder profit, even without this profit centre.

In year 3, income is divided into three categories…

  • Web Agency Income
    • Cape-Town-Luxury-Villas.com ZAR 2,900,000
    • CapeTown.VillaSecrets.com ZAR 1,400,000
  • Income derived from Rental Mandates
    • Exclusive Mandate Direct ZAR 5,800,000
    • Exclusive Mandate Residual ZAR 8,870,000
    • HomeAway Subscriptions ZAR 128,000
    • Other Subscriptions ZAR 150,000
  • Other Income
    • Sales Referrals ZAR 800,000

Expenses are broken into 7 categories

  • General Expenses ZAR 540,000
  • Staff & Office
      ZAR
  • Villa Secrets Africa ZAR 4,000,000
  • Cape-Town-Luxury-Villas.com marketing ZAR 741,000
  • CapeTown.VillaSecrets.com marketing ZAR 185,000
  • Mandate Ads and Remarketing ZAR 3,830,000
  • Mandate Recruitment Commission/Salary ZAR 2,000,000
  • S-World Development and Marketing ZAR 5,000,000