Saskatchewan Pioneer Challenge

Table of Contents Executive Summary______i Vision______i Mission Statement______i Operations______i Human Resources______iii Marketing______iv Financial______v Summary______vii Main Report______1 Introduction______2 Historical Background______3 Objective for the Business Plan______4 Industry Overview______4 Operations Plan______5 Location______5 Package Pricing______7 Arrival to Saskatoon______9 Arrival at Site______9 Departure from Site______10 Typical Site Operations______10 Additional Events______11 End-of-Season______11 Human Resources Plan______13 The Organizational Structure______13 Job Descriptions______13 Owner/ General Manager______13 Administrative Manager______14 Summer Student______14 Cost of Employees______14 Human Resources Strategy______15 Marketing Plan______15 Marketing Objectives______15 The Market______16 Competition______16 Customers______17 Target markets______18 Service Features______18 The Opportunity______19 Marketing Strategy and Plan______19 Profit Objectives______20 Channels of Distribution______20 Pricing Policy______21 Markets/ Product/ Service Mix______21 Selling and advertising______21 Marketing Plan Budget______22 SWOT Analysis______22 Financial Plan______23 Dividend Policy______24 Economic Forecast______24 Ratio Analysis______24 Financial Analysis______25 Sensitivity Analysis______25 i

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Break Even Analysis______27 Scenario Analysis______29 Summary______31 Future Considerations______31

List of Figures

Figure A Organizational Chart______iv Figure B Effect of Varying Price as a Percent of the Base Price at Base Capacity______vi Figure C Effect of Varying Average Quantity of Sales, with 100% Representing Full Capacity______vi Figure D Break-even Price and Capacity______vii Figure 1 Schedule of Orientation (AM)______13 Figure 2 Organizational Chart______13 Figure 3 Effect of Varying Price as a Percent of the Base Price at Base Capacity______26 Figure 4 Effect of Varying Average Quantity of Sales , with 100% Representing Full Capacity______27 Figure 5 Average Break Even Price______28 Figure 6 Average Break Even % Capacity______29 Figure 7 Performance of Base, Best, and Worst Case Scenarios______30

List of Tables

Table A Capital Costs______iii Table B Personnel Costs______iii Table C Projected Sales Volumes and Revenues in Year 1______iv Table D Financing______v Table E Financial Ratios______v Table F Financial Results within Base, Best, and Worst Case Scenarios.______vi Table 1 Land and Office Costs______6 Table 2 Vehicle Costs______6 Table 3 Equipment Costs______6 Table 4 Livestock Costs______6 Table 5 Multimedia Display Costs______7 Table 6 Initial Capital Budget Summary______7 Table 7 Operating Expenses including fixed and variable costs______8 Table 8 Food supplies, livestock, and equipment allocated to each team______9 Table 9 Salary Projections for Years 1 – 10______15 Table 10 Competitors______16 Table 11 Sales & Revenue Objectives at 60% capacity (Year 1)______20 Table 12 Sales & Revenue Objectives at 100% capacity (Year 6)______20 Table 13 Marketing budget______22 Table 14 Financing______23 Table 15 Amortization Schedule______23 Table 16 Dividends Paid______24 Table 17 Ratio Analysis Summary______24 Table 18 Required % Capacity for Break Even of Net Income, Cash Flow and Economic (15% IRR)__28 Table 19 Required Break Even Price as a Percentage of Base Price at Base Capacity______29 Table 20 Yearly Percentage Capacity for Base, Worst and Best Scenarios______30 Table 21 Performance of Base, Best and Worst Cases______30

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

List of Appendices

Appendix 1 – Base Financial Statements______32 Appendix 2 – Sensitivity Analysis______45 Appendix 3 – Scenarios______47 Appendix 4 – Break Even Analysis______49

iii

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Executive Summary

Introduction Saskatchewan Pioneer Challenge is a different attraction, which will promote Saskatchewan’s heritage as well as its tourism industry. This business endeavor will bring almost 100 mainly international visitors to northern Saskatchewan every summer to experience an extreme vacation adventure. The main document represents a business plan for Saskatchewan Pioneer Challenge Corporation.

This study is an independent project aimed at increasing interest in Saskatchewan’s heritage. Saskatchewan’s history is vibrant but unfortunately becoming lost in the technological advances of the modern way of life. Re-living local history will be an educational and personal challenge.

Our attraction will allow each person to be fully immersed in building a homestead on unbroken land and natural forest as pioneers did over 100 years ago. As settlers arrived from Europe they built a life for themselves, breaking farmland and growing their own food. Our customers will live that same challenge being completely isolated from the modern world with only equipment and animals provided and the diary of the first settler.

Vision The Vision of the company is to increase understanding of Saskatchewan’s heritage and pioneer life in the early 1900’s.

Mission Statement The mission of the Saskatchewan Pioneer Challenge is to offer international tourists an authentic pioneer adventure in North Eastern Saskatchewan. We will offer a unique service to a rapidly expanding market focused on creating new attractions for adventure-seekers and for making a profit.

Operations

The challenge takes the guests back in time to the pioneer era by leaving them at a site sheltered from any reminder of modern life. The site is entirely uninhabited for miles around, full of thick forest and unbroken prairie. The first guests are split into two teams

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge who must each settle on a different area of the site and establish a homestead. As the season progresses and new teams arrive, the tasks required will depend on the progress of the previous teams. Good spirited competition between the teams will be encouraged as they build up their homesteads.

The guests will be transported to a drop-off point approximately one half mile from the actual site. At the drop-off point, each team will be given a team of horses and a wagon. Supplies such as food, tents for temporary shelter, blankets, some tools, and cooking utensils will also be provided. All supplies and equipment will be of the pioneer era thus, the lifestyle will be labor intensive. As the pioneers head out in their wagons a rifle shot will begin the guests’ pioneer adventure as they race for their land.

Once the pioneers have chosen a site, heavy equipment including a plow, hay cutter, and animals will be provided. To perform other tasks to build up the settlement, additional tools and materials such as lumber and vegetable seeds will need to be purchased. Therefore, each team will also be given $500 in 1890’s currency that they can use but they must manage it to last throughout the season for succeeding teams.

The homesteads require basic daily chores such as feeding and watering animals, milking cows, hauling water, and cooking. In addition, trees will need to be cleared, land should be broken, and a crop must be seeded. The pioneers will need to build a durable shelter as well as protection for their animals. As the growing season progresses, hay will need to be cut and stacked, and vegetables will need to be harvested.

To experience a true pioneer adventure, local tribal leaders will visit the site to trade crafts and furs, offer advice, and teach various skills. An authentic Powwow will celebrate the new friendship.

As each team builds on the homesteads, progress will be slow and the challenges will be discouraging, but the memories will be unforgettable.

Saskatchewan Pioneer Challenge has estimated an initial capital costs as summarized in Table A.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Table A Capital Costs Capital Budget Land $35,000 Livestock $14,500 Equipment $16,500 Office furniture $4,650 Multimedia display $6,500 Vehicles $59,650 Working capital $63,200 Total Capital Cost $200,000

The critical factors for the success of Saskatchewan Pioneer Challenge are the number of sales per season. Saskatchewan Pioneer Challenge will need a minimum of 35 two-week packages and 12 four-week packages sold every season to break even.

Human Resources The Saskatchewan Pioneer Challenge will employ a owner/general manager, an administrative manager, and a summer student. The salaries and benefits paid out will cost Saskatchewan Pioneer Challenge $98,537 per year. Benefits for all employees include the Canada Pension Plan, Employment Insurance, Worker’s Compensation, and a Health Plan. Table B Personnel Costs Years 2002 2003 2004 2005 2006 Director/ General Manager $40,000 $40,800 $41,616 $42,448 $43,297 Administrative Manager $40,000 $40,800 $41,616 $42,448 $43,297 Summer Student $10,000 $10,200 $10,404 $10,612 $10,824 Total Benefits $8,537 $8,708 $8,882 $9,060 $9,241 Total Salaries and Benefits $98,537 $100,508 $102,518 $104,568 $106,660

Years 2007 2008 2009 2010 2011 Director/ General Manager $44,163 $45,046 $45,947 $46,866 $47,804 Administrative Manager $44,163 $45,046 $45,947 $46,866 $47,804 Summer Student $11,041 $11,262 $11,487 $11,717 $11,951 Total Benefits $9,426 $9,614 $9,806 $10,002 $10,203 Total Salaries and Benefits $108,793 $110,969 $113,188 $115,452 $117,761

Figure A illustrates the overall structure of the organization.

iii

Commerce 492.3 College of Commerce, Agribusiness Venture Management Director/General Manager

Saskatchewan Pioneer Challenge

Board Administrativeof Directors Manager

Summer Student Owner/General Manager

Administrative Manager

Summer Student

Figure A Organizational Chart

Marketing Saskatchewan Pioneer Challenge will specifically target a niche market, the expanding extreme adventure industry. Packages will be pre-sold to customers at trade shows in Europe. Main marketing objectives are as follows:  Achieve a viable level of sales  Achieve financial sustainability  Acquire new customers from a narrowly defined target market  Provide a hassle free vacation experience  Provide high levels of customer service to gain and maintain customers  Extensive advertising and promotion of a unique endeavor

Saskatchewan Pioneer Challenge will offer two packages: a two-week package for $3000 and a month package for $5000. Table C presents the projected volumes, selling prices and revenues for these packages. Table C Projected Sales Volumes and Revenues in Year 1 Volume Price Revenue Month package 14 people $5000 $72,000 2 week package 43 people $3000 $129,600 Total $201,600

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Financial Financing required for Saskatchewan Pioneer Challenge is $200,000 and will come from sources outlined in Table D. Table D Financing Bank Debt $100,000 Equity $100,000 Total Financing $200,000

Saskatchewan Pioneer Challenge expects to be a profitable venture according to financial ratios outlined in Table E. Table E Financial Ratios Investment Utilization Ratios 2002 2003 2004 2005 2006 Total Asset Turnover 1.12 1.34 1.37 1.27 1.12 Fixed Asset Turnover 1 1.75 2.32 3.02 3.95

Leverage Ratios Debt Ratio 0.51 0.46 0.36 0.25 0.17 Debt to Equity Ratio 1.02 0.85 0.56 0.34 0.20

Profitability Ratios Net Profit Margin -5% 3% 12% 18% 23% Return on Assets -6% 4% 17% 23% 25% Return on Equity -12% 8% 26% 31% 30%

Investment Utilization Ratios 2007 2008 2009 2010 2011 Total Asset Turnover 1.20 1.30 1.40 1.48 1.59 Fixed Asset Turnover 5.41 7.84 11.78 18.86 77.86

Leverage Ratios Debt Ratio 0.14 0.11 0.08 0.04 0.00 Debt to Equity Ratio 0.16 0.13 0.09 0.04 0.00

Profitability Ratios Net Profit Margin 21% 22% 23% 24% 23% Return on Assets 25% 28% 32% 35% 37% Return on Equity 29% 32% 35% 37% 37%

The internal rate of return (IRR) for the base case is 42.6% and the net present value (NPV) is $196,759. The most critical variables for Saskatchewan Pioneer Challenge, according to sensitivity analysis are: 1. Quantity of sales 2. Selling price per package

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Figures B and C show the sensitivity of price and quantity of packages sold and their effects on Internal Rate of Return (IRR) and Net Present Value (NPV).

IRR Net Present Value

20% 74.9% 20% 446,954

10% 59.0% 10% 322,006

Base 42.6% Base196,759

-10% 25.2% 979 -10%

-20% 5.5% -60,410-20%

Figure B Effect of Varying Price as a Percent of the Base Price at Base Capacity

IRR Net Present Value

130% 162.5% 130% 698,451

115% 113.5% 115% 387,626

100% 95.8% 100% 360,225

85% 60.9% 85% 190,866

70% 70% 21.2% 21,507

Figure C Effect of Varying Average Quantity of Sales, with 100% Representing Full Capacity

Table F shows the financial results for Saskatchewan Pioneer Challenge. This table shows that this venture would be profitable in all except the worst case scenario.

Table F Financial Results within Base, Best, and Worst Case Scenarios. Base Case Best Case Worst Case Net Present Value 196,759 360,225 (93,984) Average Annual Cash 19,727 24,739 9,461 Average Net Income 18,888 81,960 57 IRR 42.6% 96.0% 0%

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Figure D shows the break-even levels changing price at base capacity and the changing capacity at the base price

Price Break Even as Percentage of Base Case Average Break Even Capacity

90% 100% 80% 85% 72% 76% 64% 61%

base case net income cash Flow Economic Base Case Net Income Cash Flow Economic

Figure D Break-even Price and Capacity

The price breakeven analysis shows that prices could fall to 80%, 76%, and 85% of projected levels before reaching zero net income, zero cash flow, and a 15% IRR, respectively. The capacity break even shows that package sales could fall to 64%, 61%, and 72% of full capacity before reaching zero net income, zero cash flow, and a 15% IRR, respectively. Break-even analysis shows that the conservative base case projections are significantly higher than the required break even levels. This break-even analysis is calculated using 10-year averages for capacity and price. In 2002, the average break-even capacity is higher than the base case, resulting in a loss of net income and a decrease in cash.

Summary

Based on the financial projections in the base case scenario and using a 15% discount rate, the Saskatchewan Pioneer Challenge would be a profitable venture. Estimates underlying the base case are reasonable, conservative estimates of current market conditions. This venture’s ability to be successful depends on marketing and the continuing popularity of the adventure tourism industry.

vii

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Main Report

Introduction The challenge takes the guests back in time to the pioneer era by leaving them at a site sheltered from any reminder of modern life. The site is entirely uninhabited for miles around, full of thick forest and unbroken prairie. The first guests are split into two teams who must each settle on a 2

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge different area of the site and establish a homestead. As the season progresses and new teams arrive, the tasks required will depend on the progress of the previous teams. Good spirited competition between the teams will be encouraged as they build up their homesteads.

As each team builds on the homesteads, progress will be slow and the challenges will be discouraging, but the memories will be unforgettable.

Historical Background

The building of the railway by CPR opened up the prairies for pioneers to settle. CPR, who gained income from the sale of the land, was instrumental in recruiting settlers. The railway

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge became a lifeline for pioneers, carrying passengers, freight, mail and hauled grain and livestock to port.

European settlers adapted North American crops and brought familiar crops such as wheat, barley, and oats. Disasters such as hail, grasshoppers, and typhus were continuous challenges. One of the greatest obstacles facing pioneer farmers was the short growing season coupled with undeveloped crop varieties. The 1870 Homestead Act offered free land to male settlers in Western Canada. Upon registration, a ten-dollar fee, residing there for 3 years, the settler could own the land. There wasn’t the sudden rush that was expected. Before the railroad, transportation was by cart or boat, and was difficult and expensive. As CPR expanded westward, homesteaders began to take advantage of free land.

Settlers that came to the prairies were required to develop agricultural techniques that would benefit the operation of their homestead. The railway allowed agricultural implements and supplies to be shipped to the west. The expansion in rail-line and the offer of free land resulted in a number of group settlements that became farming communities. The essence of agriculture at this time was planting and harvesting wheat.

Indians were also involved in developing agriculture. There were many individual Indian farmers and some Indian bands that were highly successful at farming.

The railway was also instrumental in helping farmers get their crops off. Stooking and threshing required a lot of manpower, which was in short supply on the Prairies. CPR offered cheap fares to men who were willing to help harvest the wheat crop. In 1908, more than 14,000 men made the trip west.

Pioneers involved in establishing villages and towns had to consider ground level, water supply, price of land, and if the land was available. Some land was reserved for schools and Indian reserves or owned by the railway.

Problems in farming then were similar to the problems of today; early frost, drought, management decisions, and marketing techniques. In pioneer days, isolation was a factor. Neighbors were far away and the speed of transportation was slow.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

The Prairie was once a variety of wilderness, with native grasses and flowers highlighting the horizon. The West opened up new opportunities, but not without its costs. Land was cheap but life was hard. Pioneers of that day built the foundation and livelihood that we know as Saskatchewan.

Objective for the Business Plan

The main objective of our business plan is to provide an entrepreneur a business plan. Saskatchewan Pioneer Challenge will provide income to an entrepreneur in the Melfort area.

Aims:  To determine the feasibility of an immersion pioneer tourist site located near Melfort, Saskatchewan  To develop a complete business plan for Saskatchewan Pioneer Challenge  To establish an operations plan for daily and seasonal duties for a tourist business  To establish a human resources plan for staff  To establish a complete marketing plan with respect to pricing, advertising, competition and characterization of the market  To establish a financial plan based upon price estimates, economic forecasts, scenario analysis, and sensitivity tests

Industry Overview

Worldwide Adventures, World Tourism organization, Adventure Travel Society, Canadian Tourism Commission, Statistics Canada all offer information on adventure tourism. Statistics Canada estimates that tourists from the United Kingdom, France, and Germany made 1655 trips, spent 19,254 nights and spent $184 M in Canada in the year 2000.1

Peter William, director of Simon Fraser’s center for tourism policy and research, says that there is a growing demand for more immersion travel opportunities, as reflected in current trends. 2 His study shows ¾ of 1200 European travelers surveyed would take in Western Canadian aboriginal

1 http://www.statcan.ca/english/public/atozindex.htm#T 2 http://www.sfu.ca/mediapr/sfnews/1997/May8/tourism.html Accessed September 16, 2001

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge sites and culture as part of their vacations. William identifies another trend as people are showing an increased desire to get back to the country. He also adds that tourism is being re-invented because of people’s changing values. After decades of being a materialistic society, the service sector is about to experience some changes. People are becoming less focused on material objects and instead focusing on experiences instead. The consumer is willing to pay for the experience of a lifetime.

Operations Plan

Location The site is located on one quarter of land approximately 50 minutes from Melfort and one hour from Prince Albert, by car. The drop-off point is one kilometer from the main site and is easily accessed by highway and grid. The area is bordered by the North Saskatchewan River as well as surrounded by the Forte à la Corne Forest. The river provides adequate water for animals and cooking while the forest provides shelter from wind and natural wildlife refuge. The location was chosen based on its close proximity to Saskatoon, which is where the majority of guests will be arriving. The site is secluded but not isolated which sets the scene for the historic era before modern technology, while still being easily accessed. Based on the R.M. of Kinistino 459 the estimated capital cost of the land will be $35,000. Other capital costs are provided in the following tables.

Table 1 Land and Office Costs Land $35,000 Office Costs: Filing Cabinets x2 $500 Chair $150 Desk x2 $400 Computer $1,500 6

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Scanner $100 Printer/fax machine $300 Laptop $1,700 Total Office Costs $4,650

Table 2 Vehicle Costs Van $44,650 Truck $5,000 Tractor $10,000 Total Vehicle $59,650

Table 3 Equipment Costs Horse mower $500 Rake $500 Cultivator $500 Plow (x2) $1,000 Tools $4,000 Wagon (2x1000) $2,000 Harness and tack (2x1200) $2,400 Tent (8x200) $1,600 Muzzleloader rifle (2x500) $1,000 Enclosed trailer $3,000 Total Equipment $16,500

Table 4 Livestock Costs Percheron horses x4 $11,000 Milk cows x2 $3,000 Pigs x2 $500 Total livestock $14,500

Table 5 Multimedia Display Costs Laptop $2,500 Booth Display $1,000 Display monitor $3,000 Total Multimedia Display $6,500

Table 6 Initial Capital Budget Summary Land $35,000 Office Furniture $4,650 Vehicles $59,650 Livestock $14,500 Equipment $16,500 7

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Multimedia display $ 6,500 Working capital $63,200 Total Capital Costs $200,000

Approximately 100 visitors will take part in the adventure each season. The season will begin in mid May and end in mid September inferring that the settlers arrived in the spring ready to erect an operating farm by the fall harvest. Each successive group will build on the progress of the previous groups in order to accomplish the required objectives.

Activities will be similar to the challenges faced by early settlers who first homesteaded in the area. As the season progresses, different tasks will be necessary for the visitors (i.e. clearing trees, seeding, building cabin etc.).

Scheduling will begin in late January and finish no later than March 31. Two packages will be offered; the two-week package costing $3,000 and a four-week package at a price of $5,000. Depending on quantity of sales, all of the four-week packages will be scheduled for the same period. Similarly, guests staying for two weeks will be coordinated with others staying two weeks to ensure minimal disruption of teams.

Package Pricing At any one time during the operating season a maximum of 12 people will be on site, therefore 24 four-week packages and 72 two-week packages could be scheduled each season. After scheduled slots are filled, applicants will be divided into two teams. To encourage correspondence with team members, e-mail addresses and telephone numbers will be exchanged (with permission from applicants) through our office. Regular follow-up phone calls will be made by the administrative manager confirming travel accommodations and to answer any questions about the upcoming challenge. When the package is purchased, customers will be required to sign a contract concerning liability insurance.

All fees will be pre-paid by March 31. Both packages include two night’s accommodations at the Delta Bessborough Hotel prior to the challenge and two nights at the Saskatoon Inn after the challenge complete with transportation, meals, and entertainment in Saskatoon. For international visitors flight arrangements will be provided and the airfare added to the cost of the package. Table 7 provides the estimated annual operating expenses for Saskatchewan Pioneer Challenge. 8

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Table 7 Operating Expenses including fixed and variable costs Fixed Costs Depreciation $12,628 Office utilities $960 Phone $5,300 Land taxes $582 Accounting $5,000 Insurance $4,500 Vehicle maintenance and repair $3,600 Fuel $2,440 Animal maintenance $1,000 Interest $3,000 Marketing $38,600 Salaries $98,537 Total Fixed Costs $166,610

Variable Costs Food and Supplies $10,356 Aboriginal demonstration $3,000 Hotel and entertainment $32,400 Total Variable Costs $45,756

Total Operating Expenses $212,366

Transportation will be provided with a 15-passenger van and enclosed trailer for luggage with an estimated capital cost of $44,650. The van will be used for trips to and from the airport as well as taking guests to the site.

Arrival to Saskatoon  Guests will arrive at the airport where they will be met and transported to the Delta Bessborough Hotel for check-in before dinner at the Samurai Restaurant.  Guests will enjoy their meal while discussing the challenge and getting to know other guests.  The meal will be followed by a riverboat tour before retiring to rooms for the night.  Orientation will begin at 9:00am the following morning in an executive room with a continental breakfast provided (Figure 1).  After orientation, guests are free to tour and shop on their own and transportation to Wanuskewin will be provided if requested.  Guests will meet back at hotel for final dinner.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

 Guests will leave for drop-off point at 6:00am the following morning.** Arrival at Site  Arrival at drop-off point at approximately 8:00am where equipment, animals and supplies are allocated between teams and $500 in 1892 currency is given to each team. (Table 8).  A map to the site is provided to each team followed by an old-fashioned land race.  General Manager departs. Table 8 Food supplies, livestock, and equipment allocated to each team Hoe Groceries Rake Tarpaulins Shovel Percheron horses (2) Fork milk cow Axe pig Scythe Horse mower Feed Rake Chickens Cultivator Blankets Plow Rope Tools Rifle accessories Wagon Gloves Harness and tack Knives Tents (4) Saws and blades Muzzleloader rifle Lanterns Departure from Site  Guests will leave all equipment and pack only their belongings in each wagon and meet the van at the drop-off point.  Van will take guests back to Saskatoon for two night’s stay at the Saskatoon Inn where they can wash and relax.  Meals will be provided as well as additional free time for sightseeing.  Guests depart (transportation to the airport is provided).  New guests arrive at Saskatoon.

Typical Site Operations Site operations are extremely dependent on weather patterns. Depending on spring thaw, rain, and growing season, activities may be hastened or delayed in any given year. All operations will be performed with equipment and tools of the pioneer era therefore extensive manual labor is required for all tasks. Succeeding pioneer group activities are also dependent on the progress of previous groups.

* ** Drop-off point is located approximately 1km from the main site. 10

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Mid May  Set up camp at selected location ensuring adequate shelter from wind, source of feed for animals, plenty of water. Tents will be provided for initial shelter until a more durable shelter is completed.  Clear trees (if necessary for one acre of cropland).  Build cabin and fence for animals.  Break land with plow to prepare for seeding.  Leisure activities (if time permits) such as playing cards, hike, etc.  Daily chores3 June  Broadcast wheat seed by hand and plant garden vegetables.  Continue building cabin.  Dig underground cold storage.  Daily chores. July  Cut and stack hay.  Continue building cabin if necessary.  Maintain vegetable garden.  Pick berries and gather vegetables.  Daily chores. August  Harvest vegetables and put in storage.  Prepare for harvest by servicing equipment if necessary.  Daily activities. September  Harvest wheat crop.  Daily chores.

3 Including gathering firewood, hauling and boiling water, gathering eggs, feeding animals, milking cows, preparing meals and repair machinery.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Additional Events  Once every two weeks local aboriginals in full dress will visit the homestead to trade and correspond with the teams. An authentic Powwow demonstration will conclude each visit.  Daily check-ins by the owner will be made to ensure safety of the pioneers and provide limited assistance. The owner will also evaluate each team’s progress and grant the most productive team their choice of luxury (i.e. hot showers or meal).  Summer Student will be in charge of providing videos of progress and activities as well as brief interviews which will be documented and posted on the Saskatchewan Pioneer Challenge web site for family, friends, and future groups to view.

End-of-Season At the conclusion of the operating season, site clean up will be organized by the General Manager. Materials and lumber that can be salvaged will be sold. Equipment will be moved off site by rental of flatbed or contract mover and stored over winter in General Manager’s storage shed. The animals will be sheltered and fed over winter by the General Manager. Land that had been cultivated will be worked under and planted to natural perennials before winter.

Operations following cleanup will be concentrated towards marketing for the next season. Phone contacts and preparations for upcoming trade shows will be made. The owner and assistant will enter one tradeshow in March in Berlin, Germany and one in Rochester, New York in January. The tradeshow demonstration will include a multi-media presentation performed by the General Manager as well as informative pamphlets and sign up sheets for potential customers.

9:00 – Continental Breakfast and Video presentation of typical pioneer tasks

9:45 – Explanation of objectives for establishing a homestead 1. Find a site that will offer protection from weather, is near a water source, provides feed for animals, and has breakable land for cropping 2. Build durable shelter, cut continuous supply of firewood, and manage food storage 3. Break land for crop and vegetable garden 4. Cut and stack hay for winter reserve for animals 5. Harvest vegetables and wheat crop. 6. Prepare for winter.

10:30 - Teams are provided with the diary of the first settler for reference and a list of additional supplies they can purchase throughout season. Owner can offer suggestions but the teams are free to purchase whatever they wish

11:00 – Safety Measures 12

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

1. Drinking and potting water 2. Fire hazards and safety 3. Cooking 4. Operation of equipment and tools 5. Severe weather cautions 6. Poisonous plant and berry identification

12:00 – Discussion of Contract Agreement 1. Terms and Conditions of risks and liabilities 2. Signing

12:30 – Teams can discuss plans and other details pertaining to the challenge

Figure 1 Schedule of Orientation (AM)

Human Resources Plan

The Organizational Structure Saskatchewan Pioneer Challenge will be a private corporation. The funding will come from bank debt and shareholder equity. The Owner/General manager of the Saskatchewan Pioneer Challenge will hold 51% of the shares while the remaining 49% will be offered to relatives and close friends. A lawyer will prepare the shareholders agreement. The organizational structure of the company is shown in Figure 2.

Board of Directors

Owner/General Manager

Administrative Manager

13 Summer Student Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Figure 2 Organizational Chart

Job Descriptions Owner/ General Manager

The Owner/ General Manager will oversee operations for Saskatchewan Pioneer Challenge. These operations include such duties as driving guests around Saskatoon and to the site location, buying supplies for guests and daily visits to the site. This person will also be required to make trips to trade shows in Berlin, Germany and Rochester, New York to sign-up guests. The Director/ General Manager will be in charge of hiring the summer student. This person will have management experience, excellent verbal and written communication skills, business training and a strong knowledge and appreciation for Saskatchewan Pioneer life. Excellent marketing skills are a must to be able to effectively sell packages for Saskatchewan Pioneer Challenge.

Administrative Manager

The Administrative Manager will be responsible for managerial duties for Saskatchewan Pioneer Challenge. This person will answer phone calls, complete the payroll, send out information to customers and bookkeeping. The Administrative Manager will accompany the Director/ General Manager to the two tradeshows. This person will have general accounting experience, excellent verbal and written communication skills and business training.

Summer Student

The Summer Student will be responsible for creating and maintaining a webpage with daily updates on the ‘pioneers’. This person will accompany the Director/ General Manager to pickup guests as well as any other duties that need to be done. The Summer Student will be a computer science student with a strong knowledge in webpage design and video recording. This person will have to have excellent written and verbal communication skills.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Cost of Employees

All employees will receive benefits, paid entirely by the Director/ General Manager. Salaries and benefits will be paid to all employees. All salaries will increase at the rate of 2% per year, in accordance with inflation.

Employment Insurance – 3.15% Canada Pension Plan – 4.3% Worker’s Compensation – 1.0% Health Care Benefits – $400/person

Table 9 Salary Projections for Years 1 – 10 Years 2002 2003 2004 2005 2006 Director/ General Manager $40,000 $40,800 $41,616 $42,448 $43,297 Administrative Manager $40,000 $40,800 $41,616 $42,448 $43,297 Summer Student $10,000 $10,200 $10,404 $10,612 $10,824 Total Benefits $8,537 $8,708 $8,882 $9,060 $9,241 Total Salaries and Benefits $98,537 $100,508 $102,518 $104,568 $106,660

Human Resources Strategy

The Human Resources Strategy will be based on teamwork. Personnel will be required to work together, help each other, and depend upon each other. Personnel will have to communicate with each other frequently. Since there is a small number of employees, daily communication will be ensured. It is anticipated that the General Manager and Administrative Manager will also be shareholders and will have an invested interest to work hard for the success of the company. Employees will be required to be enthusiastic and accommodating in order for our guests to have an enjoyable time at Saskatchewan Pioneer Challenge.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Marketing Plan

Marketing Objectives  To achieve a viable level of sales  To achieve financial sustainability  To acquire new customers from a narrowly defined target market  To provide a hassle free vacation experience  To provide high levels of customer service to gain and maintain customers  To provide extensive advertising and promotion of a unique endeavor

The Market

Future trends will impact the market for Saskatchewan Pioneer Challenge. As urbanization increases, more people will desire the experience of rural life. Fast paced changes in technology can only help to broaden the market and the ability to reach people. Also, people may desire to experience an environment where there is no technology, as pioneers experienced. Information overload, cell phones and the vast amount of technology available will create a sense longing for people to get away from their technological lives. Saskatchewan Pioneer Challenge offers an environmentally friendly holiday that is combined with all the elements of nature. This feature will only be beneficial as the global population is becoming more concerned with environmentally friendly practices. Economic slow down will affect our industry just as it affects all others. With a lower disposable income people will spend less on holidays and leisure activities. On the other hand, in times of economic growth, people will be more willing to spend.

Competition Competitors are described in Table 10. There are no options in Saskatchewan similar to Saskatchewan Pioneer Challenge. The competitors listed in Table 10 are other adventure type vacations, which Saskatchewan Pioneer Challenge is competing with.

Table 10 Competitors Location Attraction Price (Cdn $) Great Escape - Scavenger Sacred sties, best cities, ancient souks, NA Hunt* room service Colorado Hut to Hut Llama Llama trekking, mountain biking and NA 16

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge trekking* backcountry skiing Outback Australia* Four wheel drive outback adventure $715/person per day Historic Reesor Ranch Western adventure $150/person per day (Cypress Hills)** Torch River Ranch** Horseback riding, canoeing, $950-1100/person/week powwows, rodeos Sawyer Lake adventures** Canoeing, hiking, horse-back riding NA Jack Pine Stables** Overnight camp out $150/person per day Eagle Point Resort, La Houseboat charters, golf, marina, $140/person per day Ronge*** fishing and water-sport rentals House-boating the Fishing, cruise, captain of own house $1800/person per week Precambrian shield*** boat Follow the Trail of the Fur Live history lesson, canoe and camp $1000/person per five days Trader*** out

*Men’s Journal, September 2001 ** Saskatchewan 2001 Accommodation, Resort & Campground Guide *** Saskatchewan Tourism web site

The Great Escape offers tourists a global scavenger hunt featured to those with travel savvy. The Colorado Hut to Hut Llama trekking adventure markets to families and offers high quality backcountry trips. The Outback Australia trips focus on 18-35 year olds and offer helicopters, Harley motorcycles or camel. The historic Reesor Ranch offers western adventures, Cypress Hills adventures, barn function rental and cabin rental. Jack Pine Stables is a bed and breakfast with a vacation guest ranch that offers horse drawn wagon rides or horseback riding. Sawyer Lake Adventures offers canoeing, hiking or horseback riding. Eagle Point Resort is in La Ronge and offers fishing and water-sport rentals, outpost camp, houseboat charters and rental cottages. House-boating the Precambrian shield offers tourists a chance to be the captain of their own boat. Follow the Trail of the Fur Trader gives tourist a live history lesson with canoeing and a camp out. These competitors have various adventurous features but none offer the excitement and challenge of being a Saskatchewan Pioneer.

Customers Potential customers for Saskatchewan Pioneer Challenge will have a desire for true adventure. Customers will be strong people who continually seek challenges. Customers who experience this program will be compelled to return and experience different aspects of pioneer life as the season progresses. Customers will be able to buy packages (2 weeks or a month) through 17

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Saskatchewan Tourism, a web site or tourism trades shows. Guests will need to register before the season starts as all packages will be pre-sold and prepaid. Customers will be thrill seekers that want to face a life changing experience. Saskatchewan Pioneer Challenge will meet the needs of our customers by offering a real pioneer experience.

Target markets Saskatchewan Pioneer Challenge will target a niche market based on age, education, demographics, and income. Adventurous people who want to try something new and exciting will naturally be attracted to Saskatchewan Pioneer Challenge. Our typical customer will be an urban dweller, European, wealthy, highly educated, and likely between 40 and 50 years of age. Couples between the ages of 20-60 who fit the characteristics described above will also be targeted. There are no similar programs in Saskatchewan. Saskatchewan Pioneer Challenge is based on survival in typical early 1900 conditions. This target market offers the greatest sales and profit potential, but likely a great amount of risk. Trends as described above and other unnatural events will likely have more of an impact on an international market as compared to a domestic market. Saskatchewan Pioneer Challenge will outdo all other competitors in customer service by offering a hassle free, exhilarating holiday. By offering a high quality prestigious package, customers will accept the challenge of a Saskatchewan Pioneer. Saskatchewan Pioneer Challenge will be positioned with a bold image and high quality programming.

Service Features Saskatchewan Pioneer Challenge will have a capacity of 12 people per session. Guests will be picked up from the Saskatoon airport as soon as they arrive. Guests will stay 2 nights at the Delta Bessborough Hotel in Saskatoon. Depending on arrival time, guests will be entertained at various locations in Saskatoon and dine at local establishments. Depending upon the time of year, guest will be treated to a tour of Saskatoon, Shakespeare on the Saskatchewan, River Roar, Saskatoon Exhibition, a riverboat tour, or the Saskatoon Berry barn. Guests will also experience the fine dining opportunities of Saskatoon including the Granary, the Samurai Japanese Restaurant, Earls or many others. On the second night in Saskatoon, guests will attend an orientation session where a video presentation will explain the events of the next phase in this experience. The acts of clearing land, plowing, and seeding with 1900’s technology, and caring for animals will be presented. Other essential tips such as fire making and meal ideas will be explained. This session will also provide guests with an opportunity to meet the other people in their group. After two days of rest and relaxation, guests will be transported via a 15-passenger van to the site, 40 18

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge minutes north of the city of Melfort. After drop off guests will be provided with ‘1900’ money to buy equipment or food during their challenge. Guests will be divided into equal teams and provided with some essential elements such as food, supplies, animals, tents and other staples. Each team will be responsible to secure a site and set up camp. The activities of each day will vary as the season progresses. Each day a the general manager will visit to answer questions and check on progress.

Aboriginal people will visit the site and converse with the ‘pioneers’ once a week. This will give guests a chance to visit with Aboriginals and provide Aboriginals an opportunity to share some of their culture. As well, settlers will be able to trade with the Aboriginals. Local aboriginal people will also perform an authentic Powwow for the settlers.

On the last day of the challenge, settlers will be required to return their wagons to the initial drop off site. They will be picked up and taken back to Saskatoon to stay at the Saskatoon Inn for two nights. Guests will be able to enjoy a night of relaxation and storytelling. Their stay will end when they are dropped off at the Saskatoon Airport.

This experience will offer guests a chance to get back to their roots without modern technology and experience the same experiences as their ancestors. No other site in Saskatchewan offers as much practical and hands on experience as in the life of a pioneer settler. This will be a first hand experience of a Saskatchewan pioneer. As well, Saskatchewan Pioneer Challenge will be a holiday away from crowds of people and ringing phones. Saskatchewan Pioneer challenge meets the needs of tourists who are looking for an adventurous, interactive holiday.

The Opportunity The competitive strategy of Saskatchewan Pioneer Challenge will focus on the marketing the package on its attributes considered important to the customer and its differences from competition. Pioneer agriculture, animal husbandry, and food production will be important facets of this endeavor. As well, key attributes are the authentic 1900’s setting, a secluded but not remote site, excellent quality service, and a scenic setting. This business will appeal to our target market. Because there are a smaller number of potential customers it will be essential to serve customers needs extremely well.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Marketing Strategy and Plan To acquire new customers, the goal is to serve a narrowly defined target market. Pre-packaged or standardized services will offer the customer a hassle free experience. Excellent customer service will be a key to gaining and keeping customers. Advertising and promotion will be of great importance. Prestige pricing will ensure the customer that this is a worthy and premium endeavor.

Profit Objectives The overall aim is to generate a profit that is comparable to making alternative investments; approximately IRR = 15%.

Table 11 Sales & Revenue Objectives at 60% capacity (Year 1) Volume Price Revenue Month package 14 people $5000 $72,000 2 week package 43 people $3000 $129,600 Total $201,600

These profit objectives are based on a 60% rate of capacity for our first year. This is the base case used in the financial model. By 2006, capacity is expected to be at 100%. Table 12 shows our sales and revenue objectives for 2006.

Table 12 Sales & Revenue Objectives at 100% capacity (Year 6) Volume Price Revenue Month package 24 people $5000 $120,000 2 week package 72 people $3000 $216,000 Total $336,000

Channels of Distribution Tourism trade shows, a web site, and Tourism Saskatchewan will be our main methods of distribution. The trade shows that we will be attending are Berlin, Germany and Rochester, New York. The fee to participate in these shows is $1000 each. Although travel to these trade shows is a major expense, it will be the primary and crucial form of advertising and the best method of

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge effectively reaching the target market. A web site will also be an effective and low cost method of reaching an international, as well as domestic market. The web site will be created and maintained primarily by the owner/general manager and summer student.

The International Tourism Exchange ITB Berlin 2002 occurs March 16-20. 4 The actual show is open to visitors on March 18 & 19 from 10 am to 6pm daily. This show is known throughout the world as the leading trade fair for the global tourism industry. More than three-quarters of the exhibitors and 70% of trade visitors come from outside Germany. It is the main forum for communication and marketing for the worldwide tourism sector. It is an ideal opportunity for Saskatchewan Pioneer Challenge to debut and display its attributes. There are approximately 10,149 exhibitors, 123,400 visitors and 179 countries represented. The trade show in Rochester, New York offers similar opportunities to a North American market.

Pricing Policy Saskatchewan Pioneer Challenge will take a market-based approach for their pricing policy. This policy is based on what the market will bear and is substantially above the minimum profit requirements. The price level is set where a customer perceives the package having substantial value. There is only one price for everyone. Discounts may be used to generate interest and awareness at trade shows. Prices in the future will depend on demand and costs. Our current prices are shown in Table 11.

Markets/ Product/ Service Mix Although Saskatchewan Pioneer Challenge is a small factor in the market, it will be important. Others could easily copy the attributes of this business. To combat this risk, Saskatchewan Pioneer Challenge will continually have to improve and serve customers needs efficiently to create customer loyalty.

Selling and advertising Marketing objectives will determine the selling and advertising plan of Saskatchewan Pioneer Challenge. As previously mentioned, the main methods of selling will be through tourism trade shows, a web site and Saskatchewan tourism links. Staff attending the trade shows and

4 http:www.fair.itb-berlin.com 21

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge maintaining the web site will play a crucial role in advertising. Staff will require excellent training in sales and people skills.

Marketing Plan Budget The marketing budget will determine overall project costs and forms an important part of the financial model.

Table 13 Marketing budget Advertising Magazine Advertising $13,000 Brochures/Business cards $600 Total Advertising $13,600

Promotion & Development Web page $3,000 Travel expenses $20,000 Trade shows $2,000 Total Promotion $25,000

Total Marketing Expenses $38,600

SWOT Analysis Strengths  Clearly defined target market  Relatively low capital costs  Little site set up involved  All packages are pre-sold

Weaknesses  Innovative venture – not tested and tried  Must penetrate market  Language barriers

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Opportunities  Opportunity for growth  People are looking to buy ‘experiences’  Culture and history of Saskatchewan pioneer is a good feature  Exchange rate  Global markets, easy access

Threats  Easy for other competitors to join market  Market trends may play a large role  International conflict and government stability

Financial Plan In order for the Saskatchewan Pioneer Challenge to meet all financial obligations and maintain a positive cash flow, a total of $200,000 of long term debt and owner equity will be required.

Table 14 Financing Long Term Debt $100,000 Equity $100,000 Total Financing $ 200,000

Long Term Debt will be financed through a bank loan:  Amortized over 10 years  Negotiated with an average interest rate of 3%. ( Low because the van purchased for $44,650 was financed for 0%)  Yearly payments of $11,723

Table 15 Amortization Schedule Year 2002 2003 2004 2005 2006

Debt Rate 3.0% 3.0% 3.0% 3.0% 3.0%

Beginning Balance - 91,277 82,292 73,038 63,506 Addition 100,000 - - - - Payment 11,723 11,723 11,723 11,723 11,723

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Interest 3,000 2,738 2,469 2,191 1,905 Principal 8,723 8,985 9,254 9,532 9,818

Ending Balance 91,277 82,292 73,038 63,506 53,688

Year 2007 2008 2009 2010 2011

Debt Rate 3.0% 3.0% 3.0% 3.0% 3.0%

Beginning Balance 53,688 43,576 33,160 22,432 11,382 Addition - - - - - Payment 11,723 11,723 11,723 11,723 11,382 Interest 1,611 1,307 995 673 341 Principal 10,112 10,416 10,728 11,050 11,040

Ending Balance 43,576 33,160 22,432 11,382 341

Dividend Policy

The policy is set up to pay cash in excess of $150,000 in the following year. Dividends will not be paid until 2007, according to the conservative base case scenario.

Table 16 Dividends Paid

2007 2008 2009 2010 2011

83,009 90,726 92,019 93,020 94,306

Economic Forecast

A 10-year average inflation rate of 2% has been used. This is based on the current rate in Canada and future projections. This rate has been applied to all wages, supplies, expenses and package prices. Because the majority of target customers are foreign, the low value of the Canadian dollar will be attractive and it may be possible to increase package prices.

Ratio Analysis Applicable performance ratios are included in Table 17.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Table 17 Ratio Analysis Summary 2002 2003 2004 2005 2006 Investment Total AssetUtilizati 1.12 1.34 1.37 1.27 1.12 Turnover Fixed onAsset 1 1.75 2.32 3.02 3.95 Turnover Leverage Ratios Debt Ratio 0.51 0.46 0.36 0.25 0.17 Debt to 1.02 0.85 0.56 0.34 0.2 Equity Profitability Ratio Ratios Net Profit -5% 3% 12% 18% 23% Margin Return on -6% 4% 17% 23% 25% Assets Return on -12% 8% 26% 31% 30%

2007 2008 2009 2010 2011 Investment Total AssetUtilizati 1.2 1.3 1.4 1.48 1.59 Turnover Fixed onAsset 5.41 7.84 11.78 18.86 77.86 Turnover Leverage Ratios Debt Ratio 0.14 0.11 0.08 0.04 0 Debt to 0.16 0.13 0.09 0.04 0 Equity Ratio Profitability Ratios Net Profit 21% 22% 23% 24% 23% Margin Return on 25% 28% 32% 35% 37% Assets Return on 29% 32% 35% 37% 37%

Financial Analysis

Variables that have the largest impact on the success of this venture are:  Quantity of sales  Selling price per package

Sensitivity Analysis

Figure 3 shows the sensitivity of Net Present Value, Internal Rate of Return (IRR), Average Cash Flow and Average Net Income to the above critical variables. Changes in price are given as a percent in relation to the base price of $3000 for two-week and $5000 for one month packages. Effects of varying capacity are based on averages over 10 years and are not based on the base scenario. 25

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

IRR Net Present Value

20% 74.9% 130% 698,451 10% 59.0% 115% 387,626

Base 42.6% 100% 360,225

-10% 25.2% 85% 190,866

70% -20% 5.5% 21,507

Average Annual Cash Average Net Income

114,497 130% 32,172 20%

115% 24,739 10% 87,512

100% 24,738 Base 60,528

85% 20,973 -10% 33,544

70% 17,206 -20% 6,560

Figure 3 Effect of Varying Price as a Percent of the Base Price at Base Capacity

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

IRR Net Present Value

130% 162.5 20% 446954

10% 322006 115% 113.5 196759 100% 95.8 Base 979 -10% 85% 60.9 -60410-20% 70% 21.2

Average Annual Cash Average Net Income

20% 31,234 130% 150,783

10% 27,986 115% 85,112

Base 24,738 100% 81,960

-10% 21,491 85% 47,456

-20% 16,078 70% 12,952

Figure 4 Effect of Varying Average Quantity of Sales , with 100% Representing Full Capacity

Break Even Analysis

Tables 18 and Table 19 show the quantity of packages that must be sold in each year at the Base Price to break even in terms of Net Income, Cash Flow, and Economics.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Table 18 Required % Capacity for Break Even of Net Income, Cash Flow and Economic (15% IRR) 2002 2003 2004 2005 2006 Base Case 60% 70% 80% 90% 100% 64% 67% 65% 64% 64% 52% 62% 62% 62% 62% 48% 56% 64% 72% 80%

2007 2008 2009 2010 2011 Base Case 100% 100% 100% 100% 100% % Capacity break- 67% 65% 63% 62% 63% % Capacity break- 62% 62% 62% 62% 62% even % Capacity Cash Flow break- 80% 80% 80% 80% 80% Figure 5: Average Break Even Price Price Break Even as Percentage of Base Case

100% 80% 85% 76%

base case net income cash Flow Economic

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Average Break Even Capacity

90%

72% 64% 61%

Base Case Net Income Cash Flow Economic

Figure 6 Average Break Even % Capacity

For example, in 2002, to achieve zero net income, the average price must be 105% of the expected price. Numbers lower than 100% represent a lower price than the base price. Base prices in 2002 are $3000 and $5000 for two-week and month packages, respectively, and increase with inflation.

Table 19 Required Break Even Price as a Percentage of Base Price at Base Capacity

2002 2003 2004 2005 2006 price at base capacity 100% 100% 100% 100% 100% price break even net income 105% 97% 85% 78% 72% price break even cash Flow 89% 92% 83% 76% 71% price break even Economic 85% 85% 85% 85% 85%

2007 2008 2009 2010 2011 price at base capacity 100% 100% 100% 100% 100% price break even net income 74% 73% 72% 71% 71% price break even cash Flow 71% 71% 70% 70% 70% price break even Economic 85% 85% 85% 85% 85%

Scenario Analysis

Scenarios were created based on the percentage of total capacity. Tables 20 and 21 show the percent of total capacities over 10 years and the effects on NPV, average annual cash, average net income, and IRR.

The best case scenario is based on maximum capacity of 72 two week packages and 24 month packages 29

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Table 20 Yearly Percentage Capacity for Base, Worst and Best Scenarios 2002 2003 2004 2005 2006 Base Case 60% 70% 80% 91% 100% Worst case 43% 50% 57% 64% 71% Best case 100% 100% 100% 100% 100%

2007 2008 2009 2010 2011 Base Case 100% 100% 100% 100% 100% Worst case 71% 71% 71% 71% 71% Best case 100% 100% 100% 100% 100%

Table 21. Performance of Base, Best and Worst Cases Base Case Best Case Worst Case Net Present Value 196,759 360,225 (93,984) Average Annual Cash 19,727 24,738 9,461 Average Net Income 18,888 81,960 57 IRR 42% 96% 0%

Net Present Value Average Annual Cash

Worst Case (93,984) Worst Case 9,461

360,225 24,738

Best Case Best Case

Base Case 196,759 Base Case 19,727

Average Net Income IRR

Worst Case 57 Worst0% Case 81,960 Best Case Best 96% Case

Base Case 18,888 Base 42% Case

Figure 7 Performance of Base, Best, and Worst Case Scenarios

Summary

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

The financial analysis that has been done for Saskatchewan Pioneer Challenge has been based on a discount rate of 15 percent. The results of this analysis show that Saskatchewan Pioneer Challenge is a feasible venture. The numbers that were used for the base case scenarios are conservative and reasonable estimates. Saskatchewan Pioneer Challenge would like to note that although these financial results are very positive, we realize our dependence on the market demand.

Future Considerations

Shifting demographics and consumer trends show expansion possibilities for the outdoor adventurer tourism industry. The recent trend of ‘Reality based’ activities becoming more popular may increase the popularity of this type of experience and increase markets. This concept has the ability to expand to other historical simulations as well, including the fur trade era.

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Appendix 1 – Base Financial Statements

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Appendix 2 – Sensitivity Analysis

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Appendix 3 – Scenarios

Commerce 492.3 College of Commerce, Agribusiness Venture Management Saskatchewan Pioneer Challenge

Appendix 4 – Break Even Analysis

Commerce 492.3 College of Commerce, Agribusiness Venture Management