1. The 7TH Branch
A business proposaloffered to the leadership team ofHolman Enterprises.
Kevin M. Moriarty
Greg Hink
Daniel Tedesco
Aimee Ybanez
Steve Nolan
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Executive Summary
In today’s ever changing business climate, it is important to
stay on the cutting edge of technology. It is also extremely
important to be the leader in your industry and remain relevant
by continuing to offer elite products and services.
There exists an opportunity within the scope of the Holman
Family of businesses that remains unexploited. Offering to bring
the rental vehicle process in house, while strategically
investing in our own units for our clients’ use is the
foundation of the business plan.
This proposal offers to detail the entire venture from planning
and implementation, to maintaining and growing, then eventually
expansion.
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Overview
In this proposal to you, the Executive Leadership Team, we will first outline why we
decided to take on this undertaking. We will clearly identify gaps in our service offerings and
the shortcomings related to them, the opportunities we feel are present, and the actionable
solutions that we believe are needed.
You will be presented with an overall background of a typical rental operation, what is
needed to begin operations at the minimal level and a plan for profit. We will provide support
with real data that will drive the message home.
Team Background and Experience
Among our team, we have over 17 years’ experience in operating a retail and wholesale
rental fleet. From a startup location with $0 in startup capital, to managing large rental branches
for large rental companies throughout the region. This experience, combined with the other
backgrounds in accounting, fleet sourcing and fleet remarketing, truck fleet management, and
customer relations, make The 7th Branch a dynamic and well qualified core with which to
establish the next successful branch of Holman businesses; Rental.
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The Business Plan: A Step-By-Step Process
There are three major steps comprised in this business plan. The first step is to state the
opportunity. The second, discuss the research undertaken to learn more about the opportunity
and the data that supports its’ implementation. Third, the components of the case that comprise
the entire plan. Finally, our conclusion and submission of our business plan to the leadership
team for their review.
Step One
1. The 7th Branch has decided to present this opportunity due to the realization that a
crucial piece to the ‘delivering the total client experience’ may be missing. That piece
was providing replacement rental units to our clients vs. outsourcing it to our vendors.
2. This opportunity lines up with ARI’s strategic business priorities mainly by stating one
important point: By outsourcing our rental business, we do not have total control over
the client experience. In order to Focus, Execute and Evolve, we here at ARI cannot be
totally convinced that the client has received the best possible experience unless it is
handled and controlled by the One Holman family of businesses.
3. I think we as a company are sacrificing and cutting corners in this area and the client
may not be receiving the highest total return on their investment with us. Secondly,
without having the data at my disposal at this point, I am aware that we outsource
somewhere in the neighborhood of $25M annually to our rental vendors. While there is
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a rebate associated with this, our team feels that with the company buying power with
the manufacturers and the captive audience that exists in our client base, we will be able
to show a significant cost savings along with an additional revenue stream for the
company. Much like the decision to embark on the retail insurance strategy with our
clients, the 7th branch team feels this strategy can be used to support a rental division
that could eventually develop into a retail operation in 3-5 years’ time by:
By establishing a successful rental division that satisfies our client needs and
generating positive cash flow that will assist the Holman Family of businesses in
other ventures.
By taking advantage of the buying power and depreciation opportunities, ARI
will be able to follow a model established by ERAC that would allow ARI to
invest in fleet units and cycle them out of service for profit. We will utilize
already established nation-wide sources of fleet acquisition and remarketing
outlets to handle the auction and disposal of units in a timely and cost effective
manner.
We will focus initial efforts on regional offices already in the One Holman family
to service a large strategic and geographically optimal market. This means
targeting an area that already has a large concentration of ARI clients that utilize
rentals.
With a number of Auto Truck facilities around the country and the recent
acquisition of the Kuni dealerships in the mid and far west, Holman now has a
nationwide presence that can be incorporated into the startup rental branch of
the company.
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Step Two
1. This opportunity will affect all departments within the organization. Certainly becoming
the 7th branch of the Holman Family of businesses in and of itself is a challenge requiring
resources throughout the company. VSC certainly will have its hands involved in
facilitating the proper fleet and its’ delivery to the client. Accounting & finance will be
busy handling the rental invoicing, billing and accounting for the clients, tracking
receivables and payables, etc. Of course FMS will be able to handle the issuance of
purchase order, tracking rental maintenance and related maintenance issues, as well as
contribute the expert knowledge needed to maintain a rental fleet. Human resources and
Global Service Excellence will be instrumental in seeing this venture through to
completion and eventual success by contributing the required resources in order for the
venture to have a chance to succeed.
2. I believe this solution can be applied globally, once we have proven it can be profitable
and successful in North America. We believe that in 3-5 years’ time, the North American
operation of the 7th branch will be able to prove itself profitable and also something
worth investing additional resources in to achieve future growth. Once the level is
determined and implemented, the rental branch will be able to implement additional
programs and commit to additional clients and vehicles. Only then will international
expansion be able to be looked at as a possibility. The global market is an entirely
different animal that we, the 7th branch, have limited knowledge of at this point in time
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and therefore cannot dive into further to explain its’ complexities and potential for
future rental division expansion.
3. We believe to begin to implement the pilot program, a specialized think-tank team must
be assembled that have prior experience in the industry along with the necessary skills
required to bring this idea to fruition. This team, once assembled, will then meet to
determine the necessary steps to move forward with implementation, what departments
will be involved, and in what capacity and order. We feel that at this time VSC, FMS,
and Accounting & finance will be essential at the outset. There are many issues and
knowledge banks that we need to tap into to progress forward with this venture that we
currently do not have access to at this point, therefore vital people with specialized roles
will need to be part of the team or at least be consulted.
4. The resources involved include:
Start-up fleet acquisition cost in the range of $3,000,000. We estimate this to
be roughly 60 trucks averaging $50,000.
Fleet rental insurance of at least $1M liability coverage with 100/300
comp/collision coverage as well. There should also be an umbrella policy
covering the Principals, as well as a policy leaving the other Holman entities
harmless in the event of legal action.
We anticipate the cooperation of the ATG locations in Colorado, Texas and
Maple Shade to offer a limited amount of dedicated parking lot spaces
adequate enough to locate the pilot fleet. We also hope to count on the
cooperation of an assigned staff member to assist in minor day-to-day tasks
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of the start-up operation. Once there is too much time being committed, we
will invest in dedicated employee(s)
It is difficult to determine without the knowledge of the ARI/Holman
resources for in house software and programming. However, we assume that
with what has been developed and accomplished thus far, we would be able
to implement software that would merge with the capabilities of Intellifleet
and other proprietary application. If that is not feasible, I have used outside
rental software developers that have created a very powerful product that I
used for many years. They housed the data offsite and warranted it against
loss. They also provided automatic updates and data backup services. They
are the leader providing solutions to companies wishing to begin a rental
operation. I can utilize existing relationships and knowledge in this area if a
3rd party resource is desired.
Startup materials will be kept at a minimum. There would need to be rental
agreement signed and filed, basic vehicle forms such as walk around forms,
check in/check out sheets, promotional materials, etc. Client certificates of
liability will need to be housed in house for reference much like they are
today.
We envision the communication between the new rental branch and existing
operations to be seamless and without distraction. Being the fact that we plan
to start small and establish a base, communications will be monitored and
adjusted to make it a smooth addition to daily intercompany interactions.
With the ‘rental team’ firmly established and introduced company wide,
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there will easy access to have questions answers and growing pains
addressed in a timely fashion. Due to our business strategy revolving around
long term rentals, we expect the issues upon start up to be minimal and
infrequent in nature.
5. The cost to implement this new branch of business can absolutely be measured both in
costs/expenses and in revenues. We expect the traditional models of accounting
principles will be followed unless otherwise informed by the executive team. I have
advanced knowledge of understanding and using QuickBooks applications for
accounting and record keeping. This knowledge certainly is transferrable to other
methods of tracking and record keeping currently employed by The Holman Group.
6. We anticipate the timeframe from acceptance of the proposal to implementation of the
pilot location(s) to take from 6-12 months. We understand many of the challenges ahead
and we also realize there are complexities for which we are not privy to at this time. We
hope to be able to take our front-end knowledge of the plan and industry and marry it to
our already established back end resources within the company to create a homogenous
and logical extension to the Holman family of businesses. Beyond implementation of the
pilot locations, we envision expansion into other areas of established Holman locations
using the accepted and successful model just created. As with anything, practice makes
perfect so the time frame on expansion should shrink with each new location added. In
3-5 years’ time, with anticipated revenues, further locations will be added strategically
and regionally based upon the greatest concentrations of our clients. Beyond the 5 years
of business operation of Holman Rental, we anticipate the investigation into expanding
into the retail/local market by establishing stand-alone locations.
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7. The risks and challenges we faced when considering this proposal were substantial. We
realized that we cannot attempt to pilot a program using cars in the fleet. Enterprise is a
three-headed monster that is best left alone in this area especially when considering a
start-up application. We know trucks. Further, I have rented trucks my life prior to ARI
and I am extremely comfortable in the process. We also know that utilizing existing
Holman operation to get started would be crucial to our success for two reasons. First
being that it will help mitigate start-up costs. Second, using ATG primarily adds the
opportunity of using them for fleet acquisitions, drop ships, up-fits, repairs, and the
parking space. The ability to secure insurance for the fleet obviously is critical to
beginning. Without fleet coverage, we are dead in the water so acquiring a policy is
essential. There are others worth mentioning but none more-so than the challenge of
overcoming the legacy of R & H leasing. I was a competitor of R & H back in the late
1990’s early 2000’s and even shared customers with them when my fleet was maxed out.
We realize that operation had good intentions but the business climate back then didn’t
warrant the risks involved. That was pre-internet days believe it or not and there are so
many more resources today for acquiring business, marketing, communicating globally,
communicating with vendors, etc. The possibilities of what a rental branch could
contribute are immeasurable when compared to the days of R & H Leasing. When you
factor in the buying power at the OEM’s which will provide fleet acquisition savings
and in turn profits upon disposal, the existing client base, the fact that rentals would
essentially act as another ‘hook’ in our clients, the benefits go on and on. We can take
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another step, like we did with the Insurance Branch, in the direction of becoming the
sole source and provider for EVERYTHING our clients require to operate their fleets.
Step 3
1. The Pros:
Eliminate the use of outside referral sources to handle OUR clients. We
should not trust the handling, care, and investment we have in our clients
to outside sources who may/may not adhere to our Focus, Execute, and
Evolve principles.
Bring the rental process in house will amount to a significant savings to
ARI by the elimination of a number of steps in the PO approval process.
This will also result in less downtime waiting for return messages, higher
vehicle turn around at shops, creating more Raving Fans with our clients.
The Holman Group can take advantage of fleet acquisition discounts
along with the depreciation factor on the balance sheets, creating positive
cash flows and positive tax implications.
The acceptance of the 7th Branch’s proposal will further exemplify the
health of the company overall, and it will send a message to our
competitors that we remain still the only fleet company that has
diversified so greatly and successfully. Accepting our proposal will not
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only be one of the greatest achievements we have experienced in our
careers, it will send a valuable message to the company as a whole that
there are success stories out there waiting to happen. Don’t be afraid to
speak up and take a chance! The 7th Branch can be an inspiration
company-wide! If we can achieve this, who knows what greatness lies in
all of us?
There is very little risk of bad debt or losses since we are targeting
existing clients who use rentals now anyway.
Further establishing the ‘Holman” name nationally and eventually
globally as the LEADER in fleet products and resources. We will further
strengthen our position with our clients by providing satisfying another
one of their fleet needs that we now risk by sending to outside vendors.
These outside vendors now are starting to rent their own trucks and
provide similar leasing services that we currently provide to our clients.
Do we want to continue to keep handing our hard earned client
relationships over to outside vendors who recently have established
conflicting business strategies?
Not dealing with general public, no need for counter qualifying measures
or risky credit card transactions.
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RENTAL
RATE
ESTIMATED
ANNUAL
INCOME
FROM RATE
TOTAL
MILES
PV
ESTIMATED
INCOME
FROM
MILEAGE
PV
ESTIMATED
INCOME
FROM
MILEAGE
REMARKETING
RETURNS
TOTAL
INCOME
YEAR
1
$1,325.30 $636,143.04 37,500 $5,625.00 $337,500.00 $973,643.04
YEAR
2
$1,325.30 $636,143.04 37,500 $5,625.00 $337,500.00 $973,643.04
YEAR
3
$1,325.30 $636,143.04 37,500 $5,625.00 $337,500.00 $973,643.04
YEAR
4
$1,325.30 $636,143.04 37,500 $5,625.00 $337,500.00 $1,320,000.00 $2,293,643.04
ROI CALCULATION
ROI
SUMMARY
ANNUAL
EXPENSE
TOTAL
INCOME PROFIT ROI%
YEAR 1 $869,410.35 $973,643.04 $104,232.69 5.66%
YEAR 2 $914,210.55 $973,643.04 $59,432.49 3.15%
YEAR 3 $925,473.46 $973,643.04 $48,169.58 2.54%
YEAR 4 $1,349,371.39 $2,293,643.04 $944,271.65 25.92%
AVERAGE
ROI $289,026.60 9.32%
2. Cons:
There would need to be a commitmentfrom leadership and an
investment as well. Wins in the rental business are counted in nickels and
dimes, not dollars. It is all about volume. It is a cash producing vehicle for
companies that have multiple revenue sources and branches. It allows for
depreciation of company owned units to be sold at a strategic point in the
future for profit, although market conditions apply.
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There could be a risk of losses, in the unlikely event that the client was
not properly underwritten and coverage proven for short and long term
rentals.
We would be starting out small and asking for a commitment from a
select target of clients in a target area. However, our name and reputation
means that it will be a service worth their risk.
3. Plan for Implementation:
Have The 7th Branch team party at TBD location and time to celebrate the
acceptance of proposal. Spare no expense!
Meet with team members to clearly define roles and tasks required of each
member. Establish deadlines and accountability.
Meet with prospective clients, in person, to discuss and explain the new venture
and how it will benefit them. Establish rates, policies, procedures, etc.
Once we have clients on board, meet with prospective locations (ATG) and
present the proposal and how they will be involved, with diminishing
responsibility over time.
Once locations have been locked down, determine & acquire initial fleet units
and acquire fleet insurance. Set depreciation/amortization schedule with residual
values on units. Formulate a general idea as to when to cycle out of units to
maximize remarketing values.
Produce & order print and marketing materials needed for start-up.
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Have hardware and software solutions in place by this time. Determine outside
marketing campaign needed?
Have ARI/Rental branch communications procedures established. Review and
revisit until perfection is achieved.
Once units have drop shipped, up-fit and decal as needed.
Deliver rental units to client.
Use existing software applications to track revenues and expenses, make regular
calls to client to check in on program satisfaction, issues, best practices, etc. Make
notes of regular contacts.
Rest easy knowing your all your hard work is paying off and the 7th Branch is
well on its’ way to becoming a prominent and valuable spoke in the Holman
Wheel of Businesses! Repeat this above process as needed until satisfied.
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Income Details
Rental rate
o Fixed vehicle cost PV + 30%
Estimated annual income from rental rate
o This is calculated at a 66.7% utilization rate (Assuming the
vehicles will be rented at least 8 out of 12 months)
Estimated income from Mileage
o Total miles PV * .15 cents per mile * 60 trucks
Remarketing Returns
o Estimated on cycling the vehicles at 48 MIS and 150,000
miles (22,000 per truck)
Expense Details
Inventory Cost
o Calculated based on monthly lease rate
Insurance Cost
o Estimated at 100 dollars per vehicle per month set aside for
insurance/damages
Employee (Department Manager)
o Estimated annual salary for the fleet manager
Registration
o Estimated annual registration renewal cost
Vehicle Maintenance Cost
o Average maintenance cost for the applicable months in service
o Maintenance calculations were based on like vehicles
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The implication that this venture can make on ARI are profound. We envision that one day,
with the resources available and the people involved, that there could be Holman Rental
locations throughout every state across the nation. Eventually, wherever we are located around
the globe. By focusing at the beginning on our existing corporate clients, utilizing medium and
heavy duty trucks, we will have established the fact that making money in the rental business is
possible. The key is growing the fleet as large as possible thus spreading out the operating
expenses and making each unit that much more profitable. A large fleet cures all rental ills.
Assuming a successful pilot rollout in the 1st year, the exposure in this area will open
doors to many more clients that we have currently been unable to reach. We will be
appearing in rental publications, websites, conventions and seminars. By offering this
missing piece, we will have closed the loop on the fleet product offering list. We will have
all pieces of the fleet management puzzle completed and in house. Our brand name
recognition will increase globally much the same as Enterprise. After we have covered our
existing client base with rental units, we can then begin to look into expanding into the retail
market or even the travel segment by venturing into airports. Diversifying our strategy and
product lineup can bring the Holman name to millions of more people across the country
and around the world, all with remaining locked in to our Focus, Execute and Evolve
strategy.
On a profit and loss side, the reduction in PO steps, man power with follow up calls,
elimination of the expense incurred by waiting for outside vendors to reply or handle, and
the untold cost to ARI in customer dissatisfaction with their rental experience add to the
cost savings. Adding in the additional revenues from rental and incremental product sales,
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additional exposure in previous markets we have not existed in prior and the resulting
revenues from that exposure. We will also be able to strategically take advantage of the
depreciation value of the owned fleet and the positive affects it will have on the balance
sheet. Not to mention the additional Revenue in turning over the fleet in strategic markets
around the country thereby maximizing profits.
4. This proposal will most definitely create raving fans both with our existing clients and
the ones we’ve yet to acquire. We will do this by providing that last spoke in the wheel
of fleet management products to our clients that they have been missing. Rental.
Holman has become a leader in all branches of business currently operating and we do
not see any reason why this cannot be one of them. It does not make sense to farm our
millions in rental revenues to third party vendors who may or may not share our same
values. Besides the money, we are handing over the most valued asset as a company
aside from our people; our clients, to be handled by some other procedures, rules, and
measures. The only way to ensure that our clients become raving fans is if WE make
them that way.
5. As touched on briefly prior in this proposal, the rental strategy will make ARI more
efficient. We will be able to eliminate a number of steps in the PO generation process.
We will be able to save countless man hours in follow up calls and emails. We will
establish a separate call center unit trained specifically in handling rental calls, thus
removing this from our already pressured technicians who do not specialize in this area.
This will create further efficiency in the main call center. As a result, the amount of calls
answered will increase and the average length of call with decrease without now having
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to deal with time consuming rental issues. The technicians will exude a greater sense of
satisfaction with their calls all resulting in untold cost savings and additional revenue
production. We will be able to eliminate unnecessary downtime waiting for
authorizations essentially saving the client time and money. We will establish rental-
centric technicians who will handle the rental split primarily with very little need for
backup.
6. This plan will also save ARI money by reducing costs of sending our clients outside of
ARI where they are not always handled as we would prefer. What is the cost of this
practice? Can a price be put on customer dissatisfaction? I suppose so, and do we want
to find out.
7. This entire document and proposal has been dedicated to premise that the rental
business can and will make money when the volume strategy is followed. There will be
growing pains and the business in the beginning will be in the red, maybe, but as the
fleet grows, the revenues grow with it YET NOT IN THE SAME PROPORTION THAT
VARIABLE EXPENSES GROW. This is the secret of rental. The fixed costs will grow in
proportion with the fleet size. They are what they are. Yet, by controlling the variable
overhead expenses and spreading them thinner and thinner over a growing fleet, each
unit will cost less to produce a profit, allowing us to be ever more competitive on rental
rates and make greater margins per unit.
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Conclusion
We hope you find our research, findings, and proposals engaging and informative. We
encourage and look forward to your questions and hope to have a vigorous discussion. We are
excited about this opportunity and stand behind our research and ideas. We firmly believe this
plan, as outlined therein and with your support, can become the next great venture in the One
Holman family of businesses. We look forward to your feedback and if accepted, will dedicate
ourselves and our futures to making the dream a reality not just for ourselves but for the entire
company.
We, the members of The 7th Branch have worked long and hard on this project and
firmly believe in its likelihood of success. We feel thankful to have been given the
opportunity to research this business proposal and present it to you, the leadership team.
We would like to thank you for the time you have given our proposal and welcome any
questions, follow up meetings, etc. if you so desire. The members of the 7th branch are
keenly aware of the level of dedication this project demands both financial and in overall
resources. However, we have proven that a pilot program, like the one outlined in this
document, can be a profitable venture. That aside, the assurance that our clients, who we as
a company hold so valuable, will be given the highest level of service that they have paid
for, expect, and so deserve. Our team believes that by bringing this segment of business in
house, to be handled by our people, is the only way to ensure our clients receive just that;
The Best.
