Villa Secrets & CTLV V6.01 – Memo Summary
By Nick Ray Ball 13th December 2016
Welcome to Villa Secrets & CTLV, (Villa Secrets Cape Town Rentals)
I have created a simple version of a complex business plan based on previous financial results from CTLV, expected results from CapeTown.VillaSecrets, and importantly winning four or five exclusive property mandates each year, for which we have a strong initiative.
1. Sole Mandates
In the current mandate acquisition plan as applied to the financial forecast , we have allocated 10% of Gross Profit be paid to either a dedicated staff member, or shared between freelance recruiters. We have 19 different ways that we can attract sole mandates. And the cherry on the top is our development and marketing initiative for each property. Which sees us to spend as much as $75,000 (ZAR 1,000,000) over three years developing awesome websites and marketing them. And in so doing, we would likely double the amount of income generated as each website becomes a new source of enquires, great for the owner of the villa. But in addition, the website will create many enquires for popular dates. Which once the particular villa is booked, can be used to book other villas.
As each individual villa website has a strong content marketing plan (the only SEO Google approves) each villa website will act as a kind of gravity. Boosting the ranking of the parent agency, pushing its main websites up in the search engine rankings.
Over the years that the property is marketed. A special marketing pack for estate agents will be created for use if/when the owner wishes to sell. Wherever possible, we would try to secure the first option for sale mandate alongside the villa rental mandate. This would make a sense for villa owners, as the use of the ‘marketing pack’ created can only assist the sale process, and in some cases the right marketing could literally add 50% to the value of the home. If say it became an exclusive Villa Hotel, known to be frequented by celebrates and or prominent business persons. And on a lessor scale being seen in the right magazines like Conde Nast Vouge and Traveller, and having had exclusive brands shoot their adverted at the property. Villa Secrets will make this happen and create 100 packs of magazine and DVD’s showing designer adds and other TV coverage. Add to that a website way beyond any competitor, imagery to due for and our estate affiliated agents will have significant ammunition.
It is our desire to have one of Cape Town’s top 4 realtors within the network in early 2017. If so, all for-sale mandates created by any Villa Secrets network company would be in the name of the Villa Secrets realtor. Who would pay a 25% referral fee to the referrer (Note: currently between Cape Town estate agents the referral fee is usually 50%).
2. Three-year Financial Forecast
There are many variables to consider within any financial forecast, not least the quality and strength of the team running the business. The business requires a good sales person and a good networking sales person. It also needs a copywriter/sales person. And between these three directors/staff the property portfolio needs great attention.
Given we have the above staff and 12 sole mandates are won over 3 years’ the financial forecast is:
1. Year one: Shareholder Profit = $67,000 (R925,000) 4 mandates (TFBMS Boosting not included)
2. Year two: Shareholder Profit = $141,000 (R1,950,000) 8 mandates (TFBMS Boosting not included)
3. Year two: Shareholder Profit = $218,000 (R3,000,000) 12 mandate (TFBMS Boosting not included)
Note: Shareholder profit, or shareholder discretionary profit is the revenue after all costs except corporation tax and the owner’s salaries. Gross Profit is the revenue after the cost of the villa has been paid to the owner. Franchise fees/contributions are turnover, what registers in the tills and enters the bank account
The math is very simple. The more mandates one can sign, the great profit one will make. And in general, one should expect to make 25% of gross profit as shareholder profit.
Unlike the previous two projections: 3 year plan V4 & 3 year plan V5 we have not included the effects of the TFBMS software. As this added a layer of uncertainty for the licensee, now the only significant variable or point of uncertainty is in the acquisition of mandates. Which puts the fortunes of the company firmly in the hands of the operator.
Download the Spreadsheets…
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Important points to note are:
1. 20% of gross profit has been allocated to running expenses, such as an office and support staff. This can either be the company spending this money directly, or a contribution to a collective, which is more efficient, but can only be actions when there is a collective.
2. 25% of gross profit is assigned to S-World Villa Secrets for mandate costs, guest gifts, print media, video production, web development, content marketing, print media, advertising, SEO, software, and systems development.
It is important to note that after three years this income becomes discretionary income to Villa Secrets, the equivalent of a +/-4.5% franchise fee.
3. 10% of gross profit is assigned to mandate recruitment.
4. Strong Google Awards and remarketing campaigns for the primary websites and all individual villa websites are included in the calculations.
3. Value & Cost of the CTLV & Villa Secrets Opportunity
Based on the 2015 figures, Alders Atlantic business brokers valued CTLV at $230,000 (ZAR 3,200,000). If CTLV is worth ZAR $230,000 with three years more work and a far more sophisticated look and better systems Villa Secrets Cape Town is worth more.
However, as we are keen to create a working model/prototype that we can show internationally we are very flexible on cost. Our first concern is not the price we receive, rather the commitment to staff and marketing and in general we are looking for individuals or a team who are enthusiastic and excited by this project.
A lot depends on the individuals who would be directors and the team they would create. Here are some scenario’s
1. If Managed by one of Cape Town’s leading real estate companies
Most real estate companies do not have winning vacation rentals departments, and would welcome the opportunity to generate an income, and offer this service to their clients. However, it is the magic mandates initiative that will mostly excite the higher echelons of such companies.
Working with a real estate company is desirable. As the first phase of international opportunities is planned to roll out via real estate companies and we wish a working prototype. And in addition, we are on a different platform working on a big idea for a series of resort developments. We desire to create a network of top end estate agents who, given a good or great product have the contacts to sell such a development off plan.
The advantages of working with a real estate company are:
a. They already have quality staff skilled in securing mandates and a big pool of owner contacts.
b. As all Villa Secrets companies in Cape Town will seek to create ‘first right of sale’ extension to their rental mandates for the Villa Secrets Realtor. The Realtor will see all other Villa Secrets Cape Town Villa rental companies as contributors not competitors.
c. In addition to the rentals, we can create various ‘for sale’ website and connect to the realtor’s database to display their most expensive properties on Villa Secrets.
d. Access to clients who would be interested in investing into an attractive resort development prospect, if it was a good or great deal.
e. Real Estate companies already have offices in different locations in Cape Town. Which is very useful for Local SEO and in general having a place to kick off from.
Cost from $100,000 to $350,000 (R1,400,000 to R4,800,000) depending on the commitment in staff, adverting, the amount of Camps Bay and surrounds sales they made in 2016 and if their high profile sales staff and directors are motivated to recruit Villa Secrets magic mandates.
In addition, we would be looking at the opportunity for the realtor to expand out into South Africa, Africa and Beyond.
2. Managed by an existing small villa agency or set of individuals
Whilst the realtor option is desirable from an international model perspective, we are also keen to talk with individuals that are in the industry: property owners, property managers and/or small niche villa agencies.
In this plan we desire a merger of sorts with the current ‘bookings’ business of the small agency or individual to become a part of the new CTLV Villa Secrets company. A company that will be fully owned by the individual or small agency.
The value of the existing business will be considered as part or full payment for the Villa Secrets CTLV opportunity.
In this scenario profits increase as the business from the licensor’s original business are added to the profits made from Villa Secrets CTLV.
In some cases, it would make sense to split this opportunity between two individuals, an individual with strong sales skills and an individual with strong mandate recruiting and portfolio management skills.
Cost depends on the value or potential of the parties existing business, be it rental, property management or other
3. Managed by a big villa rental company
The one problem with this scenario is the conflict over villa rental mandates. If this conflict can be worked around, then there is good reason to work with a big villa rental company. As such a company, it would be well positioned to follow the Villa Secrets International growth model and create their own international villas network, maybe… www.VillasCafe.com.
The start-up costs in this scenario would depending on what staff are assigned to the venture and what agreement was made over mandates.
Cost from $150,000 to $350,000 (R2,000,000 to R4,800,000) depending on the commitment in staff, adverting and if their high profile sales staff and directors are motivated to recruit Villa Secrets magic mandates.
In addition, we would be looking at the opportunity for the company to expand out into South Africa, Africa and Beyond.
4. Managed by an existing Cape Town tour operator & safari specialist
The advantage in this scenario is that such an operator will already have a client base, and an affluent one. Plus, adequate office space and experienced management and admin.
One would need to add a mandate recruiter and assign at least one sales staff to the venture.
In addition, unless there is already a contact in place, we would like to see whatever villa rental division the company already has integrated into their new Villa Secrets venture.
As well as the CTLV and Villa Secrets opportunities, such a company could attain the rights for Villa Secrets Africa bookings. So long as they were willing to do the desired advertising.
Cost depends on the value or potential of the parties existing villa trade, and if the Tour Operator would be keen to be more proactive in presenting villas to their current clients, after we contract.
Important to consider is that we would be talking about Villa Secrets Africa bookings as well as Cape Town, and in terms of Villa Secrets Africa we desire a $250,000 (R3,400,000) budget, ring fenced for Google Ads (for keywords not in Cape Town ) spent over 24 month. A budget that we are confident will lead to a good amount of big bookings.
5. Manged by an individual with strong sales or networking skills who does not knows the industry
Cost from $150,000 to $350,000 (R2,000,000 to R4,800,000)depending on the commitment in staff, adverting and if their directors are motivated to recruit Villa Secrets magic mandates.
6. Bought by an investor
The investor option is for 50% of the company, where after the other 50% is assigned to management.
This option costsstart at $250,000
4. Other Opportunities
1. 50% of Kapstadtvillas.com
One has the opportunity to invest into and own 50% of Kapstadtvillas.com, the balance being owned by the operations staff and management, who will deal with enquiries.
This website and the addition of a German speaking department who can also deal with German speaking clients from CTLV and Villa Secrets has the potential to make a far greater income than CTLV. Plus, it’s another great way to attract mandates as a German property owner would much prefer a German property manager.
For 50% of this opportunity, we are only looking to cover the costs. Being staff/directors salary for 6 months, the website development cost and the translating. $55,000 (R 750,000) buys 50% of this opportunity and one would expect to recoup all to this investment in the forecast 2017/2018 season.
2. 25% of Cape Villas.com
Cape Villas.com was created by myself between 2000 and 2002. From 2005 to 2010 under my leadership it was the market leader and it is still well respected today. 25% is available for $150,000 (R 2,000,000).
This cost includes upgrading the Cape Villas.com website to our new Villa Secrets web framework.
3. 50% to 100% of VillasInCampsBay.com
Currently this website is online, but its only there to show a presence to Google. The actual website will be very similar to Villa Secrets.
Like Kapstadtvillas.com, there are strategic reasons why this particular website will do well. And in particular, we expect this website to do well on Google, Bing organic and local search results.
This opportunity is negotiable, depending on what staff and team becomes available. But in general we would accept 50% for $36,500 (ZAR 500,000) or 100% for $90,000 (R 1,250,000)
Note: this website was featured in version 4 of this business plan
4. South African and International websites
We are preparing templates for many international villa websites in 2017. It makes a lot of sense for someone who knows the Villa Secrets systems to invest the start-up costs and own 25% of several international websites. If one has Villa Secrets websites in 8 different locations, one qualifies for an international master website, a lucrative opportunity.
5. The Villa Secrets TFBMS
Total Financial Business & Marketing Software
The TFBMS becomes a powerful profit multiplier, increasing enquires, increasing conversion rates, and saving money on administration. In the previous two financial forecasts, the effects were included into the forecast and profits nearly doubled, See Plan 4 and Plan 5
However, in this forecast we have not included its effects. They are to be considered a bonus. But if the effects are as predicted, a larger Google AdWords spend is required
6. SWOT Analyses
(Strengths, Weaknesses, Opportunities & Threats)
a. Beautiful Villa Secrets: Villa Secrets is a notch above its competitors, from the homepage to the search pages, and in particular the induvial villas pages. In an industry where in 99% of cases the client purchases from the look and description as presented on a website, looks count.
b. Super Simple CMS pages: The advanced pages you see in the links above can be made by any staff, intern, or if one happens to have a bored seven-year-old at home…
c. Expert Google AdWords campaigns: In general, for every dollar we spend on Google AdWords we return three or four dollars. I have 14 years’ experience with Google AdWords and will personally make each campaign.
d. SEO: Whilst it’s been a long time coming, we are now starting to see some good SEO results. Nowadays in the UK, local results show before organic results. By my recent efforts, Cape Villas has recently climbed to number 2 in Google UK for the keyword ‘Cape Town Villas.’ And CTLV has done the same for the keyword Cape Town Luxury Villas. Plus, it is at number 2 in organic results.
Given an intern to follow my general SEO instructions, we could do a lot more.
e. Years of Experience: I have been creating winning websites and mentoring sales staff in the Cape Town Villa industry for over 16 years.
f. Online booking and live availability: In 2014 we connected to Cape Town’s largest villas database ‘Razor’. We are currently doing some maintenance, as currently we can’t search by date. But in the not too distant future this system will be working
and will be a great asset. We have also just started to integrate into the Nox Rentals Nitro System and plan to integrate to Nightsbridge in 2017.
a. Poorly Organised Property Portfolio: Whilst there is a wealth of villas on the site, the portfolio is not well managed. However, this weakness can be turned into a strength given a dedicated portfolio manager.
We recently appointed a great photographer who is going through the contacts list. We need to add a copywriter and a villa networker.
b. No Villa Mandates: There are currently no exclusive mandates, as the current team have not applied themselves in this area.
However, as we have read above we have a strong mandate initiative ready for the new team. In addition, we have the 10% of gross profit incentive for recruiting mandates. In further addition is the strong desire for Villa Secrets to have a networking mandate recruiter as one of the key players in the new company.
c. Poor Financial System. Currently we work on Pastel accounting and spreadsheets, which is not a great system. However, a tailor-made financial system is in the development que and can be prioritised, which would again turn this weakness into a strength.
d. No Office: This weakness is easily address and the money for same is included within the start-up funding and the 20% of Gross Profit assigned for such expenses.
a. State of the Art Mobile Website: Whilst it will not be ready before the end of January 2017, one can already see the mobile site of Villa Secrets and appreciate that its well on its way. Mobile is not only the future, it is the right now, with over half of all users looking via portable devices.
The opportunities are two-fold: Firstly, we can advertise on Google Mobile. Secondly, our clients will likely look at our site on mobile at some point and where most others fall flat on their face, we shall excel
b. The TFBMS: As presented earlier this software in development can double the profit.
c. International Opportunities: No matter which type of business owner comes on board, after he/she has settled and become comfortable with our systems; they have the opportunity to create international companies and eventually run their own international villa rental agency.
d. The Villas Cloud: The Villas Cloud is the name for our second generation booking system. We created one in 2005 and it served us well. However now, in the days of many different property managers and property management databases, a more sophisticated system is required. Including linking with many (and in time all) other bookings systems. Plus, it will assist in the recruitment and management of mandates as well as connect villas we manage to booking channels.
e. The Property Managers and other Networks: We are developing a S-CMS (Simple Content Management Suite) for property managers to add their services, which will create a great landing page for anyone searching for property managers. The deal with property managers is that we will not change a referral fee if they get a property manager’s contract. But we will manage the bookings calendar and marketing.
Alongside property managers we shall be creating another CMS for other syngeneic companies and individuals, from architects to concierge companies.
In general, we like to turn each treat we find into an opportunity by careful planning…
a. Airbnb: Everyone is talking about the threat of AirBnb, and rightly so…
However, on our current network VillaSecrets.com homepage, which will soon be moved to the ‘S-Web’ menu, we present good reasons for Airbnb being an opportunity. In particular, as it is introducing many new villa owners to short term letting.
b. Other companies like Airbnb: One can never rule out other new companies in any web based industry coming into play and disrupting the market. Indeed, you are reading the business plan of a company that intends to do just that. However, this threat applies to every online industry, and to decide not to do business for this reason would be to decide not to do any business that is internet driven.
As for the current market players, HomeAway, Booking.com and others; whatever damage there is to do has already been done. And like Airbnb, used it the right way, such competitors can become opportunities. We are talking to HomeAway about integration and will be creating Villas Cloud in a compatible language and in time we shall also talk with Booking.com and most others.
c. Market Share 1. Local competition: Given that CTLV and Cape Villas only have about 3% of market share, whatever threat there is from local competitors has already manifested. The big company Nox Rentals who we estimate has about 40% of the market will of course continue to develop and continue to prosper, and we wish them well, indeed they are invited to this opportunity. However, the rest of the competition have few plans and use old technology. As such there is a lot of room in the market for CTLV Cape Villas and Villa Secrets to grow.