Julie Meyers’ father, the owner of a successful insurance company in St. John’s, took his family to Hawaii for a vacation in 2017. One of the tourist attractions on Maui was a bicycle ride down a long winding road from the top of the 10,000-foot Mount Haleakala. A van took the tourists to the top of the mountain and then a guide led everyone down on one of the bicycles provided by the tour. Nineteen- year old Julie thought this was the greatest tourist attraction, as did all the other people who took the tour -- from the 9-year-old boy to the 67-year-old woman. Even after Julie returned home she couldn’t stop talking about the bike tour. A few weeks later she had a great idea, she would set up a bike tour down Signal Hill. It wouldn’t be a long tour but it would be exciting and tourists could go home with a souvenir t-shirt and a picture of themselves in bike gear. Julie’s dad thought it was a great idea and agreed to bankroll the venture on the condition that Julie would pay him back at the end of the summer. Julie incorporated “Marconi Mountain Tours Ltd” and bought 12 high-quality bikes from Canary Cycles (@ $500 each). 

She worked out a deal to get the bikes at ½ price if she purchased all yellow bikes with the Canary Cycle logo on the crossbar. She worked out a lease (@$500monthly) on a 12-passenger mini-bus with a local Ford dealership on essentially the same basis-½ price for displaying their logo. Julie’s uncle, who owned a metalworking shop, let her borrow the big utility trailer that he used for his Skidoos in the winter. Her uncle also welded up a rack to carry the bikes on the trailer and he installed a flashing light bar system on the front of the bus and the rear of the trailer to warn motorists that the bikers were coming. Julie presented her idea to Parks Canada, the organization that controlled Signal Hill, which is a national park. Julie agreed to pay Parks Canada 10% of the revenue from the tour in return for an exclusive right to be the only bicycle tour allowed on Signal Hill. She also worked out a similar deal with Harvey’s which had an unused parking lot at the base of Signal Hill. Harvey’s didn’t want any revenue, they just wanted to ensure their brand name would figure prominently in the assemble and termination location (their unused lot). 

Through Canary Cycles, Julie got a list of cycling enthusiasts who were still in high school. She interviewed 20 people to get the two gregarious guides that she hired to accompany her clients down the hill. Each guide agreed to work 40 hours per week at $20/hour. Julie decided to drive the mini-bus herself - so she could talk to the tourists on the way up the hill, provide instructions to the group and then drive the van, with lights flashing, to blaze the trail down the hill and ensure other cars would not endanger the tourists. Julie’s partner agreed to staff the ticket booth and ensure liability waiver forms were signed. He would also run the T-Shirt operation and take souvenir photographs. Julie decided to charge $50 for a one-time tour. Julie figured 80% of the people would also want a T-Shirt that read “I biked Signal Hill”, which she could sell for $20, and 70% would want a souvenir photo, which could sell for $30. Julie produced a simple three-fold 8 by 11 brochure using her computer and she put them in all the hotel lobbies, in key restaurants, at the airport and ferries, at provincial tourist information chalets-anywhere she thought tourists would visit. A CBC reporter from the Morning Show asked Julie to come to the station and tape a short segment on his new business venture but Julie was busy setting up her operation and declined the offer. Julie also felt that the show would only reach local people and not tourists. Julie had read in the newspaper that 50,000 tourists had visited St. John’s last year and at $50 a pop plus T-shirt and photo sales, she figured she could generate millions in revenue. She started the business on the Thursday of the holiday weekend in May (May 20th). 

On the first day, she had 8 customers and the biggest group that came down the hill was comprised of 3 bikers. Two of her customers said they almost didn’t come because it seemed too expensive. But they, like the other 6 customers, said it was fabulous and they would tell all their friends about it. Five customers purchased the T-Shirt and 3 the photo package. As Julie locked up the parking lot for the night, she wasn’t so sure this was going to be the huge entrepreneurial success she had anticipated. However, on the way home, she found herself contemplating how she could expand and grow the business into a national or international enterprise.

Please read the Marconi Mountain (MM) case (Note: use the version of the case in this Session’s file folder, as it has more financial details) and answer the following questions: Please create a direct cash flow for the business for the first 8 months (i.e. from May to December) of operation. Make sure to include a detailed description of any assumptions, both revenues, and costs, you make (e.g. sale(s) assumptions, etc.).

Answer rating: 100% (QA)

May 8 customers x 50 400 5 customers x 20 100 3 customers x 30 90 Total revenue 590 Costs Bike rental 8 bikes x 25 200 Guide salary 2 guides x 20 x 40 ... View the full answer