+ Tourism business planning online course in responsible tourism development session #05 Gerardine Parisi
+ Agenda 1. From business idea to business plan 2. What is a business plan 3. How to write a business plan 4. Create your own business plan 5. A practical example
+ From business idea to business plan How to start up your own business Create a successful business is a very difficult task. You have to be strong motivated and very oriented to planning and scheduling. Principal steps of an aware process:
+ From business idea to business plan The business idea Your business idea can be based on a dream or an aspiration but you have to translate it in something of concrete
+ From business idea to business plan The importance of planning Planning and scheduling are key successful factors Most common reasons of failure: Lack or inadequacy of planning Lack of market research Overestimation of demand LACK OR Poor quality in the management of the business POORNESS Error in determining the selling price OF Little attention to costs and expenses BUSINESS Poor financial management PLAN Insufficient sales Startup capital deficient
+ What is a business plan? Business plan Business plan allows to verify: Market feasibility TO SELL Organizational and technical feasibility TO MANAGE Financial and economic feasibility TO EARN
+ What is a business plan? Aim of business plan
+ Create your own business plan 1. Market feasibility
+ Create your own business plan 2. Marketing mix
+ Create your own business plan 3. Organizational and technical feasibility Most important point to evaluate: Special permissions to start up Investment necessary to start the business Most appropriate legal form to manage the business
+ Create your own business plan 4. Financial and economic feasibility Year 1 Year 2 Year 3 Year …… Investment cost Operating Operating Operating Operating cost cost cost cost
+ Create your own business plan 4.1 Initial investment cost Initial investment cost are all the expenses you will need to start up your business such as: Immaterial expenses to start up the business, such as permission; Material needs: • location or office; • special machine; • basic equipment.
+ Create your own business plan 4.1 Initial investment cost How can I get the money I need to start up my own business?
+ Create your own business plan 4.2 Break even point BREAK EVEN POINT NO PROFITS NO LOSES
+ Create your own business plan 4.3 Operating cost To calculate the break even point it is necessary to know which kind of costs are related to your business. Costs can be divided into four main categories: Fixed cost Variable cost Financial cost Taxes
+ Create your own business plan 4.3.1 Fixed cost Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. $ FIXED COST UNIT OF PRODUCTION
+ Create your own business plan 4.3.2 Variable cost Variable costs, instead, are volume-related. The sum of fixed cost and variable cost represent the total cost that is the total economic cost of production. $ TOTAL COST VARIABLE COST FIXED COST UNIT OF PRODUCTIO N
+ Create your own business plan 4.3.3 Financial cost and taxes Financial cost consists in interests which the entrepreneur have to pay to banks for loans Taxes are calculated on the taxable income and differ from country to country
+ Create your own business plan 4.4 Pricing strategy The other main point to calculate the break even is to define the price of product or service. Price is influenced by internal and external factors
+ Create your own business plan 4.4 Pricing strategy There are some criteria used to define the price. The principal are: Cost plus pricing: the price is fixed calculating the cost of production and adding to it a percentage Competition-based pricing: the price is decided taking into account the price adopted by competitors Objective profit pricing: the price is set at a level that allows to gain a certain level of expected profit.
+ Create your own business plan 4.4 Pricing strategy: 9 laws of price sensitivity & consumer psychology
+ Create your own business plan 4.5 Turnover and net profit
+ A practical example Gerardine bed and breakfast
+ Gerardine bed and breakfast Business idea WHAT: Boutique, charming, eco bed and breakfast, 5 rooms, high level of standard. Special offer for people interested in enogastronomy, tradition and mountain. WHERE: Abandoned house of my grandmother in a rural area of Trentino, tourism not well developed WHO: I will be the enterpreneur, this will be a second work
+ Gerardine bed and breakfast Market feasibility
+ Gerardine bed and breakfast INITIAL INVESTMENT COSTS MATERIAL EXPENSESRefurbishment of the house 100.000€Purchasing furniture 50.000€ IMMATERIAL EXPENSESPermission and certification 3.000€Marketing and communication (website, brochure…) 7.000€TOTALE 160.000€
+ Gerardine bed and breakfast How can I get the money I need to start up my own business?
+ Gerardine bed and breakfastEvery year I have to sustain this cost: Fixed cost: 5.000€ Variable cost: 30.000 (40€ for every host 750 arrivals foryear) Financial cost: 5.000€ Taxes: 6.000 (10% of 60.000€ that is the foreseen turnover)
+ Gerardine bed and breakfastBreak even point: Cost/price = number of host 26.000€ / 80€ = 325 arrivalsProvisional net profit:Turnover-costs = net profit 60.000€ - 46.000€ = 14.000€
+ Thank you very much! Gerardine Parisi mail: email@example.com skype: