Bus and Motor Coach Library

Writing a Business Plan

Author – Glenn Lowes (2003)

The bus industry is going through difficult times and so are the commercial lenders who have specialized in the financing of the bus industry.  These financial institutions have tightened the reins and bus operators will have to be much more organized in their approach in obtaining satisfactory financing.

This is not a negative aspect, but in fact a positive one that will provide a strong foundation for your company's future success and profitability. Secondly, it will result in the inability of fly-by-night operators who are not competent, capable, or trustworthy to obtain the necessary financing to be able to continue in the industry.  Additionally this will give the more professional and competent bus operators in the industry an opportunity to educate and to develop the needed knowledge for the lenders.

The purpose of this article is simple: to provide the necessary guidance and the needed steps to determine or solidify the focus of your business, and with that information to create an effective "Business Plan".  The process of creating a business plan may appear to be overwhelming for many.  However, if approached on a step-by-step basis, it will pay great dividends for you in the future, by creating a plan that will better focus your business activities, create firmer and more detailed business objectives, and result in a more efficient operation.  A business without plan is like a ship without a rudder.  And like a ship, it will drift as the wind takes it, surely into oblivion!

A Good Accountant is Critical to your Success 
Critical to any bus operator's success is a good accountant.  Timely up-to-date financial statements are most important in any request for credit.  Provide your accountant with all the information he requests as quickly as possible, and insist that he or she provides you with a full and complete financial statement in a timely manner.  After all, you are paying for quality service, and this also includes promptness.  In-house interim financial statements can easily be prepared utilizing the many software programs specifically designed for the bus industry.

Producing the actual numbers is really a secondary issue.  What is most important is your ability to analyze and understand your revenue and cost trends.  You want to be able to immediately identify any changes and take corrective action in order to maintain a healthy bottom line.  Good interim financials provides that ability to know your financial position at any given time.

We are all in business to make a profit and the sooner we know where we stand the sooner we can control and plan our future.  Immediately upon completion of your year-end financial statements, take the time to prepare a business plan and up-date it annually.

A Business Plan
Most of you already have some sort of "Business Plan" in your head - now you need to put it on paper!  You know your business best - just put it in writing!  I recommend that you have a formal written business plan when you next approach your sources of financing for the acquisition of a new bus or coach, a refinancing package, or to establish or increase your operating line of credit with your bank. A "Business Plan" will outline your plans to develop a financially successful business. 
And if you should think a "Business Plan" is merely a useless exercise in paperwork then you may have a rather rude surprise coming the next time you visit a financial institution.  

- Preparing a "Business Plan" forces you to think through every aspect of your business.
- As you work through each topic in the plan you will be able to more easily assess and reaffirm the viability of your ideas.
- A "Business Plan" will keep you focused as you grow.
- A "Business Plan" should be organized and structured with subtitles to cover key areas of your business.  Start with an introduction describing the nature of your business.

Nature of Your Business
Give a detailed description of your business; the services you provide and the area you service.  For example a revenue breakdown may look something like this:
- 50 to 60 percent charter bus operation
- 10 percent packaged tours
- 10 percent school bus contracts
- 10 percent shuttle service
- 10 percent scheduled line service

Background History
Give the highlights of your historical background, date business came into existence and date incorporated.  Record by year the progress and accomplishments achieved - your corporate milestones so to speak.  A historical look at your company will often enable you to more easily see where you're going.

Comments on your fleet are appropriate as to condition and utilization, and what vehicles you plan to trade or are up for sale. 

You may wish to comment on new replacement engines or transmissions.

A detailed equipment list should be attached to your "Business Plan" showing year, make and model, fleet number, date of acquisition, original cost, who financed by, monthly payment, balance owing or date paid, and present market value (be realistic).

Develop a short statement on the key people in your business; their title or area of responsibility; name, age, experience, skills and accomplishments.  Do you have a job breakdown to demonstrate how individuals complement each other as a team?

Service and maintenance facilities are important ingredients in keeping your buses on the road and fully utilized.  What are your mechanical facilities?  Do you have office and administrative premises well laid out and functional?  A good intuitive finance person can assess the success of an operation and its potential by the cleanliness and organization of the premises, the condition of the shop, and such things as the dispatch board, driver’s room, and so on.                                           

Established Credit
Compile a list of equipment financing and leasing references.  Make sure to provide contact names with phone and fax number.  Also date account opened; highest credit extended; current outstanding and monthly payment; balance owing and nature of financing.

Key Points
The following points are suggestions to assist you in the development of your "Business Plan".  Remember, it's your business plan and you're in business to make a profit.  Let the information assist you in outlining key points on your path to a more successful business.

1. How long have you been dealing with your present bank?
2. What is your operating credit line? 
3. What is the highest amount of credit extended? 
4. What kind of security is held and balance outstanding?
5. What is the name and phone number of your account manager? 

Banking people are loath to convey any information; therefore you must be able to provide the necessary detailed facts.
Source of Business
1. Indicate the names and addresses of your major customers.
2. Indicate the length of time of your relationships with these customers.
3. Indicate sales volume/revenues for each over the previous year. 
4. Indicate the forecasted volumes for each this year.

Marketing and Consumer Base
1. What is your marketing strategy and your future focus?
2. Clearly define your ideas and the direction of where you're going.
3. Identify your market, its size and location.
4. Explain how you plan to market and reach your customers.
5. Outline the advantages your business plan has over your competitors.
6. Explain your pricing strategy and again remember, you're in business to make a profit. 
Make sure your pricing has taken every expense and cost into consideration.  Business failure is often the result of trying to compete on the basis of price alone.

1. Who are your competitors?
2. What are their strengths and weaknesses?

Strengths and Weaknesses
1. List your company strengths.
2. List your company weaknesses.
Note that strengths can include: your telephone being answered with a smiling welcoming voice; courteous drivers dressed according to company dress code; driving clean and fresh looking buses.  In real estate it is location, location, location…in buses it is appearance, appearance, appearance!

Financial Review
A good management tool for a small bus operation is to have their accountant put a percentage figure of the total revenue beside each expense item on the profit and loss statement. It is then very easy to track any changes and immediately review any individual cost factor.

Cash flow is a determining factor in the acquisition of additional equipment, and you may wish to discuss your cash flow position with your accountant prior to approaching your funding sources. 
If your cash flow position is inadequate based on your year-end financials, then you should do a forecasted profit and loss statement based on the new business projected (be conservative and realistic).

Your financial sources will no doubt want to review and create spread sheets on your last three year-end financial statements.  They will be looking over the trend of growth, profitability, or a financial downturn.  You should prepare a written summary to explain such trends in your financial performance and how you propose to improve upon them.

All the major sources of bus financing have had unprecedented numbers of bus repossessions in the last year, and have witnessed many bus industry failures.  

The major cause of ninety percent of these business failures has been the inability of their owners to accurately assess the cost of operating a bus. In addition, most were unable to provide a quality product or service sufficient to generate the necessary price per day to profitably put a bus on the road. 

There will continue to be a shakedown in the charter bus and coach business until it again becomes a healthy and profitable industry and until all operators achieve proper pricing levels.

It should be noted that almost a generation ago the cost of a new coach was half as much as they are today, yet operators at that time were generating basically the same rate per day as most operators are receiving today.  As well almost every operational cost factor has seen significant increases over the last two decades.  Recent industry cost analysis reveals that in today's marketplace a realistic price per day for a motorcoach should be in a range of $800.00 to $1,000.00 in order to maintain a reasonable profit margin.

In summary, you should develop a full and complete business financial package on behalf of your company. 

It should state your goals and objectives and express your dedication and commitment to the success of your business.  It should include a "Business Plan" and the financial statements for the last three years, including any recent interim statements. 

By investing the necessary time and effort to develop a solid business plan, you will undoubtedly be rewarded with a new and clearer vision of where you are going with your company.  Because you will have a tighter rein on your revenues and costs you will more likely experience a healthier and more profitable bottom line.

And armed with a more complete "Business Plan", you will likely find financial lenders to be more interested in participating in your business enterprise. 

A quality financial lender also has the financial expertise to assist you in guiding your enterprise so that it remains on a solid financial footing.

A Business Plan is really A Road Map
A business plan is a road map of where you've been and where you were going.  It is not a question of working harder, but of working smarter!                                   

Glenn Lowes has specialized in bus financing since 1962.  In fact early in his career he financed a Prevost motorcoach for his great-grandfather.  As a financial consultant to the bus industry, Glenn has been instrumental in structuring financing and leasing packages for hundreds of bus companies.  He has earned the respect and trust of the industry with his good business advice and counsel throughout his 40-year career.