Water-Based Recreation Business at Sheffield Basin - Example

Water-Based recreation Business at Sheffield Basin Executive summary Feasibility studies are commonly used in project management or business inception decisions to give the review of positive and negative aspects of the projects. The aim of the study is to make a decision on the suitability of a project in terms of the costs that they are likely to incur. In a case where the costs or disadvantages are more than the advantages the project is likely to be dropped or modified accordingly. This paper looks at the various aspects of a feasibility study outline in relation to establishing a water-based sport at Victoria quays. It finds out that the establishment is viable and worth investing in or implementing. Table of contents Contents Executive summary 2 Contents 3 Introduction 4 The proposed idea 4 Key persons 5 Market gap 6 Future 7 External factors of the business 9 Investment considerations 10 Performance indicators 11 Estimates 11 Challenges and risks 13 Evaluation of the feasibility 14 Bibliography 15 Introduction Before taking on an investment, undertaking a feasibility study is necessary with the main of reducing the failure of the enterprise (Munsaka 2013). This statement underpins the importance of the feasibility study at the inception of a business venture that is; to reduce the potential of failure resulting from viability. The legal, social, and economical perspectives of an enterprise are taken into consideration during the study. All these aim at reducing the impact of each of these factors on the model of business adopted for the venture. To successfully conduct a feasibility study, the details of the business plan of the venture is needed and examined against a number of possible factors that might work against it. In the event that the advantages or the outcome that is desired is obtained, the venture is adopted or otherwise dropped. Fercher (2006) looks at the concept of the feasibility study in relation to the hospitality industry and asserts that many hotels have become insolvent due to the lack of a proper feasibility study. Within this statement is an implication of the fact that the use of feasibility study is applicable to a broad array of business ventures and projects. This paper looks at the possibility of developing a Water-Based Recreation Business at Sheffield Basin. It will review the economic, social, and financial perspectives of the business and its impact to the environment of the Sheffield basin. The proposed idea The water-based recreation business that is proposed for the Sheffield basin will be a Jet Ski rental service. This service will give visitors a chance to hire and use the same within the basin for touring the waterway around the region and for racing. The business will have its headquarters at one of the empty facilities in Victoria Quays arches and operate its entire fleet of Jet Skis at the Sheffield basin. The main intention of this investment is to offer the tourists hosted at the available tourist destination with an opportunity to enjoy their stay with a relaxing ski racing. Apart from the tourist from different locations, members of the public will have the opportunity to hire the services of the jet skis for personal racing that is billed per hour. The service will be age restricted for purposes of safety within the waterway. The main stream of generating revenue will be through the lease of the jet skis. However, additional revenue (CIRP IPS2 CONFERENCE, & Meier 2013) will be derived from the hiring of safety materials in the waterway. The company will also consider providing safety services for other related services in the region. Key persons To operate a skiing business, it is essential for the company to recruit a number of staffs that can manage the business towards its profitability in a professional way. In this case, it is essential for the company to take into account the safety of the members of the public that will be hiring the services as it is for the company to make a profit. Therefore, the key persons that will be involved in this business is the overall director with a vast amount of experience in the entertainment sector especially the tourism and hospitality department. The director will also serve as the founder of this investment and may opt to sell out to a third party as an exit strategy. The consideration for the people involved in the business is as a result of the fact that the business needs to be properly managed and natured. The management of this kind of investment will require a high level of specialised expertise that is specific to this type of business venture and passion in order to succeed. Market gap The Sheffield basin is fallow and full of potential for water-based sport or tourism. The waterway has several qualities that can enable it becomes a prime destination in the provision of water-based sporting activities. The destination is a vibrant location of business travels. From its construction at about 200 years ago, the hub has thrived as one of the top inland business ports in Britain (Power, PlöGer, & Winkler, 2010). Despite a decline in the level of activity in the last century, the port has slowly regained its reputation to become a leading business destination. It is for this reason that the port receives a large number of visitors for business purposes. To the many visitors, the facilities offered are limited to the accommodation in hotels and other hospitality support services. Little attention is given to the entertainment capability of the water-based sport like jet skiing. Apart from the vibrant business taking place in the area, it can also be noticed that the hospitality services attract a huge market of local and international tourists. For the local tourists, the main source of attraction is the rich cultural heritage that the region possesses. The heritage is given in the ancient buildings that have a high aesthetic and ancient architectural merit (Mollona 2009). The region being a former industrial town, the warehouses that were used over 200 years ago offer a rich cultural heritage viewing sites. To most of the inbound or international facilities, the tourism support services are available and within reach due to their large number within the region. The access to the region is also marvellous and varied; that is through road or the waterway. For the tourists who would like to take accommodation and tour the area for a longer period, there is a wide range of accommodation establishments in the region with a well built hospitality support services. On the entertainment front, the availability of sport especially water based sport is minimal. Water-based sport can be touted as limited in the region because the main resource in the region is the canal. The Ponds Forge International Sports Centre offers artificial water-based sporting activities like swimming (Pennine water ways, N.d). The complex is however too small to host a full-scale Jet Ski racing. As a result, the only best alternative is to develop the sport on the cool waters of the canal. Future The evolution of water sport and the affiliate services that it can offer are possible. In the future, the industry could grow from the provision of racing and nature tours to the provision of floating hotels and dinners. This growth implies that the company would now seek for better vessels and boats that can offer clients with the much-desired diners in the canal as they take their leisure tours. This expansion would imply that the visitors both international and inbound have the capability of touring the whole canal length while receiving full board treatment. During the day, the expansion ensures that the hotels and restaurants tap into the potential of the company to amazing their guests with the marvels of natural beauty along the water way. A partnership between the company and its closest allies in the hospitality industry is possible to generate value (Enz 2010) for both of their clients. Business model and target market A business model is a simple description of how the company intends to generate its revenue (Harvard Business School Pub 2010; Kaplan 2012). The business will be keen at value proposition in order to attract more sales. In skiing as a sport, safety is an important aspect that will drive the urge of customers to try the services. The business will ensure that the jet skis are safe, efficient and easy to use. This will aim at even attracting novice users to the venture. Apart from the safety, the pricing mechanism will be varied to accommodate a broad number of consumers of different financial capability (Hess 2012). This variation and flexibility will be accompanied by a discount to the loyal customers who will be entered into a promotion database for rewards. On holiday, the pricing will be reduced by a percentage to attract more customers (Finne, & Sivonen 2009). The business premise will be located at one of the empty facilities in the arches at Victoria Quays. This location has a high accessibility and an ample and secure parking for the customers. Apart from the parking facilities and accessibility, we will offer a comfortable changing room for our customers with safe boxes to keep personal belongings while they are out skiing. A dedicated personal assistance will also be offered to the customers in case of any mishap. A website will be developed that handles automatic reservation to customers who would want to book in advance. This is specifically with the aim of coping with the changes in technology and marketing requirements. Most of the marketing requirements will be undertaken in a targeted manner to increase its efficiency. After identifying the target market for the college going students, platforms such as internet and other social media will be used to pass the marketing communication effectively. This business will mainly target tourist and couples who come to take a holiday at the common restaurants and the hospitality services around. The intention of this targeting and customization of services aims at creating value and making the customers agents of marketing to the company. The big hotels like the Hilton hotel and holiday in that are present in the area are an added advantage to the business. These hotels host a wide variety of individuals looking for fun and can be a potential market for the business. Sea skiing is quite different from inland skiing. The difference is a fact that can lead to attraction of more customers. The inland water bodies offer a calm and conducive environment for both novice and experienced riders to undertake their racing (Buckley 2004). As compared to the turbulent racing at the sea, inland jet skiing will attract more customers of both novice and experience and even the local population that cannot have time for the beaches. The market segment for this business can be divided into two: that is the locals from the locals who live around Victoria Quays and tourists that are taking a vacation in the hospitality facilities around. The locals provide a huge potential. As noted, jet skiing is common among individuals whose age is between sixteen to forty years. The presence of a students residence in the area implies that the market of the business is increased by a high concentration of young people. This group of students despite having a low level of income ranging between £10,000 and £16000 could still be willing to pay up to £30 per hour to hire the services of a jet ski. The students also form the bulk of the customers targeted and should not be driven away by charges. For the other segment of tourists both local and international, the rate is a constant £35 per hour for the service. External factors of the business The external factors of a business are related to a wide variety of conditions that cannot be controlled by the business itself (Pison 2008). The external factors of a business are related to the socio-economic factors that a business enterprise has to deal with in order to become profitable. The environmental factors are also related to the legal factors that a business has to fulfil. Competition is one factor that cannot be left out in the business environment (Burnet 2007). The main competitor for this business will be Shropshire tourism. This is a company that offers both accommodation and boat services for the tourists who wish to tour the canal. Competition can also arise from other destinations that offer alternative sporting activities as the Cotswolds. Other factors are related to the opinion of people regarding the level of pollution of skiing in terms of noise and emissions. For businesses that would require a serene environment in the Sheffield basin this business would be a challenge. Opposition might also arise from the environmentalists who wish to reduce the level of carbon emissions into the atmosphere. The demographics of the region is varied with a presence of the students residence in the region pointing to highly youthful generation. The youthful population also indicates the likelihood of the high use of technology. Investment considerations An investment consideration is a thing of value given in an investment for a particular promise (Eccles & Viviers 2011) that could be the ownership rights of a business. For the effective running of this business, expertise in terms of managing water security is a prerequisite. For citification, the business must show the authorities that it can safely provide the services of renting the jet skis to the public safely. The maintenance of the equipment that will be leased out must also be at its best. Therefore, the capitalization required is extensive aside from the technical knowhow that is required. To reduce the amount of capital requirement, the business will be operated as a partnership between an entity that can offer the required security support within the canal and the main investors. The Sabrina boat services have been identified as the most appropriate partner for this consideration. For security and rescue services or emergencies, the boats crew will be contracted or deployed to assist the clients in distress or provide first aid services and towing. This consideration will take up a total of 25% of the entire ownership of the venture and will last for a period of one year with the option of exiting or renewal. The jet skis will not also be fully owned by the business. Instead, a number of vendors will be approached to provide the entire inventory of the jet skis and the safety equipment that is required for the operation of the business. There will be no business ownership rights issued in this case, but the inventory will be paid for under a hire purchase arrangement that offers 9% interest. Performance indicators The business will be evaluated based on the operational goal of safety and customer security. One characteristic of performance evaluation is based on time (Muchiri, Pintelon, Gelders, & Martin, 2011). The evaluation will focus on the level of customer satisfaction over time base on the number of security incidences. This evaluation targets the overall evaluation of the long-term strategy which is to be the most secure organization in offering water-based sport like skiing. The aim of this evaluation will be to determine whether the business is moving towards its desired brand image (Chien, Cornwell & Pappu 2011) which is based on trust and security in the water sport. Estimates The major spending for this business relates mainly to the inventory and the main factors of its production. The initial capital will cover an operating capital of up to three months, labour, licensing, rent, and any other contingencies that arise in the course of developing the enterprise. The table bellow gives a breakdown of the expenditure on the project after settling the initial deposit on inventory.     Break-Even Analysis     Period in Months 3         Sales projected £90,000     Less Variable Expenses   Materials For office construction £5,000 Labor £2,000 Variable overhead £3,000 Contribution Margin £80,000     Contribution Margin Ratio 89%     CALCULATE YOUR FIXED EXPENSES       Fixed Expenses   Salaries and wages £30,000 Rent £6,000 Utilities - fixed portion £4,000 Repairs and maintenance £3,000 Insurance £1,000 Travel £1,000 Telephone and postage £900 Printing £400 Advertising/ Marketing £1,500 Marketing/promotion £1,000 Bank charges £1,400 Depreciation £7,200 Interest on inventory £14,000 Total Fixed Expenses £70,400     Break-Even Sales £79,200     Monthly Break-Even Sales £26,400     Profit During Period £9,600 Challenges and risks The Economic downturn in the country has the potential of lowering the revenues of the business. the business is likely to be hit hard by the recession due to two reasons. Firstly, the business is in the entertainment industry (von Rimscha 2013). It would be difficult to have locals spare some money for leisure at the harsh economic times. Secondly, the business is still in its formative stages, and the ability to achieve a level of sustainability would be difficult. The chances of failure in a recession for a small and relatively young business are, therefore, higher than that of an established business with more than one revenue streams. The management of the Victoria Quays posits a challenge to the smooth running of the business. This challenge is mainly derived from the fact that the body in charge of managing Victoria Quays is different from the authority that issues legalization of any activity in the region. In the case of an expansion requirement, the business will be faced with a bureaucratic process in order to receive the authorisation to run new projects related to its operation. For instance, while aspiring to develop a new sport like angling as part of the enterprise, the business has to convince both the Victoria Quays Management Services Ltd and the Canal and River Trust. This is in addition to receiving a legal authority from the Sheffield City Council that is not directly involved in the management of the Sheffield basin. This could in any case be costly or can be refuted based on different reasons and could impede the growth of the venture. As part of the conservation efforts of the government, it is probable that legislation can be passed at some point to designate the region as a location or site of special scientific interest (GREAT BRITAIN. 2008). Due to this, it is possible that such businesses like jet skiing can be disallowed in the location leading to a total termination of the main stream of revenue for the enterprise. If this happens, the sustainability of the remaining revenue streams will be the determining factor on the ability to continue doing the same business or not. Evaluation of the feasibility A feasibility study is supposed to generate grounds to either go through with a business project or reject it in totality. The grounds is attained after a special review of the pros and cons or challenges that the project are likely to run into and the resultant costs or implication. This feasibility study looked at the possibility of an inception of a hospitality based or related business the Sheffield basin. The project proposed is a water-based sport which is skiing. The project is a good business venture that if should be followed through as a viable investment. This is mainly from the fact that the benefits outweigh the challenges that it is likely to run through. The possible challenges and problems can be mitigated in one way or another and at a substantially low cost to the business. Therefore, the investors should go ahead and implement the business project as there is no project without a level of challenge. Bibliography BUCKLEY, R. (2004). Environmental impacts of ecotourism. Wallingford, Oxfordshire, UK, CABI Pub BURNETT, J. J. (2007). Nonprofit marketing best practices. Hoboken, NJ [u.a.], Wiley. CHIEN, P. M., CORNWELL, T. B., & PAPPU, R. (2011). Sponsorship portfolio as a brand- image creation strategy. Journal of Business Research, 64(2), 142-149. CIRP IPS2 CONFERENCE, & MEIER, H. (2013). Product-service integration for sustainable solutions proceedings of the 5th CIRP International Conference on Industrial Product- Service Systems, Bochum, Germany, March 14th-15th, 2013. Berlin, Springer. ECCLES, N. S., & VIVIERS, S. (2011). The origins and meanings of names describing investment practices that integrate a consideration of ESG issues in the academic literature. Journal of Business Ethics, 104(3), 389-402. ENZ, C. A. (2010). Hospitality strategic management: concepts and cases. Hoboken, N.J., John Wiley & Sons. FERCHER, W. (2006). Feasibility studies for hotels: an analysis of essential elements in the preparation process of feasibilitry studies for hotel projects. Hamburg, Diplomica. FINNE, S., & SIVONEN, H. (2009). The retail value chain how to gain competitive advantage through Efficient Consumer Response (ECR) strategies. London, Kogan Page GREAT BRITAIN. (2008). Natural Englands role in improving sites of special scientific interest: report. London, TSO. HARVARD BUSINESS SCHOOL PUB (2010). Harvard business review on business model innovation. Boston, MA, Harvard Business School Pub. HESS, E. (2012). Grow to Greatness Smart Growth for Entrepreneurial Businesses. Palo Alto, Stanford University Press. KAPLAN, S. (2012). The business model innovation factory: how to stay relevant when the world is changing. Hoboken, New Jersey, Wiley. MOLLONA, M. (2009). Made in Sheffield an Ethnography of Industrial Work and Politics. New York, Berghahn Books, Inc MUCHIRI, P., PINTELON, L., GELDERS, L., & MARTIN, H. (2011). Development of maintenance function performance measurement framework and indicators. International Journal of Production Economics, 131(1), 295-302. MUNSAKA, T. (2013). The Importance of Project Feasibility Study. PENNINE WATER WAYS: Photographic highlights of the Shefield and south Yorkshire (N.d). available at: http://www.penninewaterways.co.uk/sheffield/sy1.htm PINSON, L. (2008). Anatomy of a business plan: a step-by-step guide to building the business and securing your companys future. Tustin, CA, Out of Your Mind & into the Marketplace. POWER, A., PLÖGER, J., & WINKLER, A. (2010). Phoenix cities: the fall and rise of great industrial cities. Bristol, UK, Policy Press. VON RIMSCHA, M. B. (2013). It’s not the economy, stupid! External effects on the supply and demand of cinema entertainment. Journal of Cultural Economics, 37(4), 433-455. Read More