Villa Secrets Cape Town – Executive Summary
Villa Secrets Cape Town – Executive Summary
Luxury Villa Rentals division
By Nick Ray Ball 09th September 2016
Villa Secrets.com (VS)
Villas in Camps Bay.com (VICB)
Cape Town Luxury Villas.com (CTLV)
To paraphrase Einstein ‘a plan should be simple, but not simpler,’ his equation E=MC2 was simple, however the detail was complex.
Under the hood, the Villa Secrets plan is also complex and has been described by a business development expert as visionary. However, on the surface it is actually very simple.
There are 5 basic components (4 profit centres and an overall profit multiplier),
1. The tried and twice tested ‘Cape Town Luxury Villas.com’ which in 2015 was managed by ‘team 1.’ Who (on a shoestring budget) generated ZAR 1,400,000, making ZAR 1,000,000 in shareholder profit. And then in 2016 it was managed by ‘team 2’ who (also on a shoestring budget) generated similar numbers
As a stand-alone business for sale, Aldes Atlantic (Africa’s most trusted business brokers) valued the company (website) at ZAR 3,300,000.
This website/profit centre is added to by the following…
2. Villa Secrets.com, luxury villa rentals in the Atlantic Seaboard of Cape Town, which will use a similar but improved marketing strategy with a greatly improved website. Doubling the potential to ZAR 2,800,000 in gross profit.
3. Villas in Camps Bay.com, which by Jan 2017 will be of a similar standard as Villa Secrets. Again using a similar strategy on a greatly improved website, tripling the potential to ZAR 4,200,000 in gross profit.
4. Villas Secrets Rentals Mandates, a 19-point strong plan to gain exclusive rental mandates, which includes a 3 year ZAR 400,000 per villa marketing budget, which is exactly ZAR 400,000 more than any other agency offers.
Based on recruiting 8 mid-to high end villas in three years, we see in year 3 this profit centre increases total Gross Profit by 39%.
5. Lastly comes what we call the TFBMS, which stands for ‘Total Financial Business and Marketing Software,’ in two sections Total Marketing Software, and Total Financial and Business Software.
Alongside taking care of the management accounts and organizing hospitality and service functions, this software steadily increases the profitability of all profit centres, and turns every Villa Rental Mandate into an independent profit centre, with its own website and marketing plan.
Considering the above, a simple way to cautiously evaluate the value of the company would be to use the ZAR 3,300,000 evaluation for Cape Town Luxury Villas.com. And triple it to include the Villa Secrets and Villas in Camps Bay profit centres making ZAR 9,900,000, Adding whatever one feels appropriate for the mandate’s income stream and the continuous improvement provided by the TFBMS.
How much is the initial investment?
We are not looking for a figure of ZAR9,900,000 and above. We are looking for ZAR 3,200,000 be it by one individual, or split between a couple or a few individuals. (Note that over 75% of this investment is spent on TFBMS & the ‘Villas in Camps Bay’ website development and CTLV and Villa Secrets Cape Town operations).
Why ZAR 3.2m not ZAR 10m plus?
Well firstly is that we want this model to be successfully at a start-up costs that is not prohibitive. Hence we are looking for the right investor for the business, someone who will get involved and grow the business. Villa Secrets intends to copy this model in many different countries, and the key ingredient in each location is the owner/CEO and his/her key staff.
Secondly, this model is closer to a franchise than the purchase of a business outright. In that there are a few necessary staffing appointments and a marketing and development contribution of about 4.5% of turnover.
However, unlike a typical franchise, the mother company ‘Villa Secrets Ltd’ acts as a marketing and development company. Turning that 4.5% of turnover into more than a 4.5% increase for the business owners.
The result of the above two points drops the estimated shareholder profit in the first year, down to not much more than that was made on the ‘shoestring’ budget approach on 2015/16. However, the investment pays off big in the years that follow.
In a forecast made recently, using what we call ‘Quantum Safe Forecasting,’ which uses the lowest probability applied to all income streams and multipliers we forecast:
Year 1, ZAR 1,000,000 shareholder profit
Year 2, ZAR 2,000,000 shareholder profit
Year 3, ZAR 4,000,000 shareholder profit
You can see the particulars, spreadsheets, and some videos here. However, this is a little out of date as the Villa Secrets income stream was set to be split with Villa Secrets Africa (who will deal with multi leg villa holidays, safaris and flights) 50/50, and now the split is 75/25 in favour of Villa Secrets Cape Town.
In addition, there was a limit on the amount of property mandates of 8 villas. This has now been changed to at least 16. The result, if Villa Secrets Cape Town can achieve 5 mandates by the end of 2017 and 16 by the end of 2019 is:
Year 1, ZAR 1,300,000 plus.
Year 3, ZAR 7,000,000 plus.
We have been asked how we can be so certain of these figures. However, for the answer one needs to look at the detail. In particular the spreadsheets which are complex and are actually a part of the design of the TFBMS software with over 4,000 different variables. All of which have been set to the lowest reasonable probability.
If one wishes to examine, the detail is found at Network.VillaSecrets.com and in particular within the ‘VS Cape Town’ Section.
Villa Secrets Network
One strong reason for not achieving such results but achieving more, lies in the concept that Villa Secrets is a network of businesses that work together, and within Cape Town there will be a number of different businesses.
This concept has been confusing for some. But consider ‘Villa Secrets’ like Hatton Garden, the street that attracts many customers to many jewellery businesses. Or Harley Street for doctors, or Wall Street for bankers…
There are many benefits to working within The S-World Villa Secrets network and few downsides. We are currently focusing on 3 Villa Secrets companies.
1. Villa Secrets – Luxury Villa Rentals – Cape Town
2. Villa Secrets – Real Estate – Cape Town
3. Villa Secrets Africa
One immediate advantage of the network is a large additional marketing and development pool, paying for luxuries from full page ads in Conde Nast Traveller to bidding at position 1 for generic (not in a specific locations) keywords such as ‘Luxury Villas’ in Google & Bing. Not to mention the TFBMS will be developed faster and as a result all profit centres will boosted.
The above points (and others) will increase the amount of bookings that are made on the Villa Secrets website, and so the profit of its rental company.
Where the ‘Hatton Garden Effect comes into play strongest is in Property Mandates. With the power to show clients villas on full page Conde Nast Ads and over ZAR 400,000 budget on other direct marketing, mandates will be easier to attain (a lot easier). In addition, when securing a mandate if one can present a network of companies working together as opposed to an individual, they become easier still.
As for the competition, well yes, there will be competition for mandates. But seeing the brand is ‘Villa Secrets,’ for rental mandates many would wish to be with the company that handles the Villa Secrets bookings, which is this company.
There is another component to mandates. And that is that in each case we only offer the max marketing budget if the owner also agrees the Villa Secrets Real Estate company be given the first shot at the ‘for sale’ mandate when they wish to sell. However, this is moving into the territory of the real estate presentation…
Market Share
What is important is market share, for which we use the symbol ‘ϻ’ within our equations. When including all Cape Town’s holiday villas, luxury villas, and apartments the total value of the market is about ZAR 957,885,420. Which leads to about 143,000,000 in commission. By the end of 2019, in part due to the global marketing Villa Secrets will perform, and the properties we wish to mandate, we expect the marketplace to be ZAR 1,475,560,019 and the commission kitty to be about ZAR 221,334,025
In 2015 CTLV’s gross profit was ZAR 1,400,000, which is close to 1% of the market. However, in year 3 we have a ‘Quantum Safe’ forecast between 14 and 19 million ZAR, a 6.4% to 8.7% share of the commission available.
|
Villa Secrets |
Gross Profit |
% of MS |
Market (com) |
Mandates |
Mandates |
Bookings |
Bookings |
| VS CT Luxury Rentals |
14,221,196 |
6% |
221,334,025 |
20% |
2,844,239 |
80% |
11,376,957 |
| VS CT Real Estate Co. |
23,160,796 |
7% |
221,334,025 |
34% |
7,874,670 |
35% |
8,106,279 |
| Villa Secrets Africa |
8,000,000 |
4% |
221,334,025 |
20% |
1,600,000 |
80% |
6,400,000 |
| Cape Villas.com |
4,000,000 |
2% |
221,334,025 |
15% |
600,000 |
85% |
3,400,000 |
|
49,381,992 |
19% |
89% |
12,918,910 |
280% |
29,283,235 |
The way ‘ϻ’ works in our equation is limited to the growth forecast of any network to a maximum 10% of market share, and the Villa Secret network of companies to 50%. As we can see, currently projections are below this threshold.
There are other companies into consideration which focuses on mandates and other niches (such as apartments in the city, property development and architecture). However, the combined total is 34% of market share. And most of these companies are recruiting new villas which in itself is to increase the market share, as currently there is four or five times the demand for Villas in peak periods than are available, hence each new villa that chooses to let short term as opposed to long term increases the market share for vacation rentals.
Lastly, and whilst this is a complex system, seen here if VS CT Luxury Rentals were to underperform and others over performed, significant additional marketing will be used to boost the company back on target. Not only does the network create new opportunities it also guarantees the success of every company in it.
