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Lindsey Sweeney. Mountain Taxi Need/Problem. Compelling Need

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mountain taxi need problem

Lindsey Sweeney

Mountain TaxiNeed/Problem
  • Compelling Need
    • Transportation possibilities are limited to Summit county, Colorado ski areas. Private transportation is the main source, but the problem of traffic and road conditions makes for a stressful drive. Mountain taxi alleviates these problems.
  • Needs for the Product/Service
    • This bus service to the mountains satisfies a number of needs: physical (warmth, shelter, sleep), physiological (comfort, cleanliness), emotional (relieve stress from driving, relieve stress from any hassles along the way), social (can ride with friends, family), and economic (moderate prices, don’t have to pay for gas etc.).
  • Opportunity
    • There is an opportunity because the market demand is strong for a moderately priced bus service to the mountains. The market is accessible as well. The profit potential is moderate, but has potential to grow as the company becomes more well known. The current competition is not satisfying the need the the market sufficiently, so a definite opportunity is presented here.
  • Problem Solved
    • Mountain Taxi will solve the problem of transportation to ski areas for people who do not want to drive, cannot drive, or just want a relaxing, stress free, ride to a fun day of skiing.
mountain taxi features
Mountain Taxi Features
  • Range of services
    • A variety of stops in Denver and one in the foothills will pick everyone up so it is convenient. Different busses go to different ski areas (Breckenridge, Vail, and Keystone will be serviced). The cost is $20 per ticket. Tickets can be purchased via phone or online up until midnight the night before the trip.
  • Environment
    • Luxury busses will be rented during the winter to take people to the mountains in. The busses will have TVs (with DVD players) and bathrooms. There will be under bus storage for equipment. The location of the headquarters of the company will be out of the owner’s house.
  • Employees
    • There will 3 bus drivers who will stay up at the resort until it is time to pick-up and go back to Denver. The owner will be the manager of them (4 employees total). The drivers will wear Mountain Taxi polo shirts and khakis. The qualifications for drivers are: a commercial driver’s license and completion of a defensive driver/snow driving course.
  • Key attributes: Service, Cost, Social, Environment
    • Service: on-time pick-up, and amiable drivers
    • Cost: reasonable prices, operating costs (kept low because owner is very involved)
    • Social: people can ride to the mountains and back relaxed and able to talk to their friends and family without being stressed out by traffic or road conditions
    • Environment: relaxing atmosphere
  • Limitations
    • Limitations include: only one time for pick-up per day, only servicing 3 ski areas, having to charge $20 instead of the originally estimated $15 (to be able to cover costs and make venture feasible), and only being able to transport up to 80 people per ski area.
mountain taxi unique benefits
Mountain TaxiUnique Benefits
  • Major Benefit of service
    • Comfortable, stress-free ride to the slopes and back.
  • Benefits of the features
    • Environment: relaxing, fun, stimulating (movies)
    • Convenience: multiple stops makes it easy to get to (foothills and Denver), different areas keeps people happy
    • Social: friends and family onboard make it a social atmosphere which is an emotional benefit
    • Reliability: people can count on on-time pick-up and a qualified driver
  • Benefits satisfying Needs
    • Bus provides physical, physiological, emotional, social, entertainment and economic needs. These needs are satisfied by luxury busses, with bathrooms, friends & family onboard, and movies playing all for a reasonable (determined by interviews) price.
  • Benefits that affect feelings or pocketbooks
    • Easy on the pocketbook (don’t have to pay for gas, parking, etc.) because $20 is a reasonable price for this target market.
    • The emotional benefit is the lack of stress on the body, and the fun you have during the day because you aren’t stressed about getting back home. Also, the lack of stress from traffic and snowy/icy roads is a huge relief.
  • These benefits are unique at the current time, but it is unclear of whether they can be sustained when others get into the business (other businesses may be cheaper so they would be easier on people’s pocketbooks).

Mountain Taxi Target Market

  • There are a few target markets. The target market segments are definitely large enough to be worthwhile entering.
  • Demographics
      • Kids 12-18, male and female, predominantly white and from middle to upper class families in the front range or foothills areas.
      • Adults 25-60, male and female, predominantly white, have professional level occupations, well educated, and have disposable income in the front range or foothills areas.
      • Seniors 60-75, male and female, white, upper incomes, retired, cannot drive anymore for health reasons in the front range or foothills areas.
  • Psychographics
      • People who enjoy skiing, snowboarding, or telemarking and who hate the I-70 ski traffic. Also, people who don’t want to waste resources and want help the environment. People who are not experienced driving in snowy/icy conditions are also a target.
  • Social Status
      • Families will be an important part of business. This encompasses two target markets (kids and adults), plus younger children (aged 3-12). Families will be middle to upper class, and the parents will probably be educated. Patrons of Mountain Taxi in general are well educated and have disposable income to spend on skiing. Skiing is an expensive sport so people in the target market will have enough money to ride a bus up to the area.
  • Buying Decisions
      • The buying decisions are made mainly by the person with the money (parents buying tickets for their kids to go up for example). The decision can also be made by the person who would otherwise have to drive if they didn’t take a bus. The target market is not currently satisfied with what is offered in the current market (judging from my interviews). The decision of whether or not to try the competition depends on how much money the customer wants to spend (all the options are much more expensive or only have limited service). Repeat customer business will be key to this venture being successful.

Mountain TaxiCompetitive Advantage

  • Market opportunity

--The market is very accessible at the current time. There are not many direct competitors (and none exactly offering what our company is), there are not many barriers to entry, most costs are not upfront, and the target market is excited about the opportunity.

  • Competitors
    • Direct: Polar Carrier, CU Alumni Association
    • Indirect: ski & snowboard clubs, race teams, private transportation, rent-a-bus
    • Future Comp.: RTD, rental bus companies
  • Competitors competition basis
    • Direct competition uses cost as its competition tool
    • Indirect competition uses convenience as its basis for competition
    • Future competition from RTD is very possible if this proves to be a profitable opportunity, also other companies do not have many barriers to entry if they see this as a good opportunity
  • Customer Issues
    • Customers want convenience and low cost, but the current situation does not offer both
    • Customer loyalty is significant. We have to keep repeat customers. The first season of operation has to go smoothly.
    • We have to convince people that this is the best option to avoid driving to the mountains. Many people like the convenience of their own car, so we have to convert them.
  • Resources and Capabilities

--Resources: Financial resources for funding the company are available (I could get $80,00 the first year from family); physical assets will be rented not bought; and human assets will be the drivers (and their qualifications) and me (and my knowledge and experience).

--Capabilities: Contacts that have been made, marketing (value prop),and service features/benefits. The contacts and possible negotiations with them over rental prices are the key here.

  • Competitive Advantage
    • The main competitive advantage seems to be operating on a low cost basis as well as on a convenience basis. This competitive advantage cannot be sustainable for too long however because of the lack of barriers to entry.
mountain taxi profitability
Mountain TaxiProfitability
  • Revenues
    • sales volume=(70customers/bus)($20/ticket)(3 busses/day)(32 days op/yr)= $134,440
    • cost per ticket=$20
  • Cost of Revenues
    • Direct labor cost=(3 bus drivers/day)($18 hour)(32 days op/year)(10hrs/day)= $17,280
    • Insurance costs=$14,000
    • Gas=($2/gallon)(30 gallons/trip)(3 busses/day)(32 days op/year)= $5,760
    • Bus Rental=(3 busses)(32 days/yr)($400/day)=$38,400
  • Operating Expenses
    • Sales & Marketing: community advertising, radio, newspaper=$1500
    • R&D: $0
    • G&A: office supplies= $500
  • Fixed Costs=direct labor costs, insurance costs, bus rental fee, G&A
  • Variable Costs=Gas, Sales & Marketing, My salary
  • Revenue – Costs = EBIT
    • $134,440-75,440=59,000
  • Break-Even Point = FC/(1-VC/Rev)
    • $70,180/(1-(7,260/134,440))= $74,186 = BEP
    • BEP = $74,186

Operating Income Statement

mountain taxi conclusions
Mountain TaxiConclusions
  • Compelling Need
    • The need definitely seems to be in place for Mountain Taxi to be successful with the combination of more people getting tired of driving to the mountains, and a lack of alternative forms of transportation.
  • Service Features
    • The service is clearly defined. Luxury busses that pick people up at a variety of locations every weekend for a variety of ski areas is what will be offered.
  • Target Market Interest
    • The target market seems to be very interested. Interviews were conducted with the various target markets and the different segments seem to be very excited about this potential service.
  • Unique Benefits
    • The benefits are unique to the current market situation. These benefits may not stay unique because the market does not have many barriers to entry. Overall, the benefits to the pocketbook are significant, but the main benefit is the emotional one. The reduction of stress from traffic and bad road conditions is the most important emotional benefit.
  • Sustainable Competitive Advantage
    • There is not sustainable competitive advantage. The lack of barriers to entry that makes it possible for me to pursue this opportunity also makes it possible for others to pursue it. The competitive advantage will last as long as others do not recognize how good of an opportunity is present.
  • Profit
    • It is possible to make a profit in this venture. The break-even point was calculated without my salary as part of it. After $74,000 the rest is my profit. I have no partners, so it is mine. The $57,000 EBIT will be taxed, but that amount after taxes is my salary. This seems like a decent salary for 4 months of full time work.
mountain taxi recommendations
Mountain TaxiRecommendations
  • In conclusion, this venture does seem feasible if my assumptions are accurate. The numbers were making things not look profitable enough until I decided not to have 2 pickups per day. This does reduce the service, but overall, makes the business profitable enough to pursue.
  • Action Plan
    • The next step in this process would be to go more in depth into the field. I think that there needs to be much more market research (over the 15 people interviewed) to understand the target market. This could be accomplished over the summer. I think there needs to be some randomized sampling of the target market (instead of interviewing people I know) to understand the need and prices they are willing to pay.
    • After that, more research has to be done on the profitability analysis. The numbers seem accurate now, but there are probably other costs I haven’t uncovered yet. To understand these costs, more interviews from business people need to be conducted. I want to completely know how much the venture will cost before I even think about pursuing it.
    • After more in depth research, the business plan can be started. I think it could be started as early as next fall/early winter. I don’t want to rush into it, so I feel that after all of my extended research I will be ready to start it. It may also be helpful to be taking the business plan course during the time I am writing it.
    • I think as far as funding goes, my best source is my family. I do not need a large amount to get started and I do not need it all up front. My up front costs include insurance and SG&A. All the rest are to paid along the way as they are used. The BEP is at $74,000, which is not unreasonable to get from family.
      • I could get about $50,000 from my parents and $30,000 from my grandma.
      • There are other family sources past this, but $80,000 would be plenty for the first year.
    • I would need to find people to help me start the business. My best friend will be finishing law school about the time that I will be starting my business. She could be my lawyer. I have another lawyer friend that could consult (that has been involved start-ups for about 5 years).
    • I think it could be possible to start the business in the winter of 2004. That would give me plenty of time to do more market research and complete the business plan.