Transcript Business Plan for New Brighton Council Bus Service (NBCB)

Business Plan for New Brighton
Council Bus Service (NBCB)
Business Plan Overview

This plan will highlight the business plan of the New Brighton Council
Bus Service (NBCB).

Brighton Local Council has decided to suspend the Brighton Council
bus operations.

Therefore, there is a market for local bus services.
Macro Environmental Analysis

Political factors

Kick-start funding to help subsidise bus services where commercial routes
were not viable was reduced to 15 million pounds (Butcher, 2013).

Rural Bus challenge where local authorities bid for funding for schemes
based on innovation was completely scrapped (Department for
Transport, 2012).

Better Bus Areas Fund was launched to foster partnerships between local
authorities and bus operators aimed at reducing congestion and
providing better information to passengers. The funding would be
increased to 5 million GBP in 2014, giving local transport authorities up to
5 million to spend in 2014-15 (Department for Transport, 2012).

Possible lack of support from the council to launch bus services.
Macro Environmental Analysis

Economic factors

The Department of Transport presents a new National Bus Model which
will promote a 20% reduction in subsidy (Department for Transport,
2012).

The reduction in subsidy will impact services in Brighton’s urban areas by
-1% and rural areas by -2% (Butcher, 2013).

There is an increase in fares in the urban and rural areas by 2%, leading
to a reduction in patronage by 1-3%, which will impact income of NBCB
(Butcher, 2013).

Operating revenue of buses in metropolitan areas of the UK increased
by 2% in 2012 and only by 0.8% in 2013, indicating a possible reduction in
overall income (Keynote, 2014).
Macro Environmental Analysis

Social and technological factors

More than one third of the families in Brighton do not own a private
vehicle, which may translate to more people using NBCB.

BHLIS (2014a) reports that many people prefer to walk or cycle to work
as they are conscious of ecological impact. These people can be
targeted.

Monitoring of bus routes and real time update of bus locations will help
improve efficacy of operations (BIS, 2012).
SWOT Analysis
Strengths
Opportunities
•Experienced employees
•Local community support
•Large market share
•Increase in population
•Improvements in technology features of
buses
•Improvement in quality features of the bus
SWOT
Weaknesses
Threats
•Lack of managerial experience
•Need for extended financial support
•Competition with other public modes of
transport
•Increase in private transport
•Increase in cost of fare
•Increase in private operators entering the
arena
Customer Segmentation

More than a third of the households in Brighton are one person
households (36.4%).

One in five people is from the BME (Black and Minority Community)
(BHLIS, 2014).

When compared to South East regions (60.8%), only 37.2% of people
travel to work by private transport.

38.2% of households do not have a car or a van.

13.6% of residents use buses (BHLIS, 2014a).
Value Proposition


Technology provisions

Increase in number of services during the office hours (mornings 8-10am and evenings
5-7pm) (BHLIS, 2014a).

Providing Wi-Fi services on certain routes.
Student concessions


Service for the elderly


Provide special services which will have a greater number of stops for senior citizens.
Optimal modal mix


Provide monthly pass for students.
Provide cycle stands in specific NBCB bus stops to help increase the number of people
who may prefer to travel part way using bicycles (Redman et al., 2013).
Increasing non-fare revenue

Use the bus as an advertising medium to generate additional revenue streams.
Channels
Awareness
• To raise awareness of the new services of the NBCB, advertising on some
of the buses, bus stops and local newspapers is to be carried out
Evaluation
• To help increase customer value and interest in service, unique services
like those for students and senior citizens are promoted. Use of technology
and optimal modal mix helps generate value.
Purchase
• Customer purchase of services is direct sales in buses. Indirect sales
through monthly passes in bus depots are also seen.
Delivery
• Value is delivered by maintaining on time services and by ensuring quality
of service.
After Sales
• Customer feedback is welcome with feedback forms on every bus route
and bus depot. The website which is to be launched will have a feedback
column for passengers to raise complaints or suggestions.
Bus Operator Income in the UK
Government Support
Passenger Receipt
3500
3000
2500
2000
1500
1000
500
0
2009
2010
2011
2012
2013
Revenue Streams
Government support for public transport has reduced significantly over the last five
years (Keynote, 2014).
Revenue Streams

Fare paying passengers



60% of the income generated is from fare paying passengers who directly
contribute to the success of the business.
Government reimbursements

Government policy clearly identifies that the members who are of
pensionable age are allowed travel for free on the local bus services in
England (Massey, 2014).

This will contribute10% of the total income.
Tendered contracts

The organisation will operate commercial contracts for universities and
schools. Some of the rural routes and school buses which are not
commercially viable are tendered by the government (CFBT, 2014).

This will contribute 20% of the total income.
Customer Relationships
Customer
Acquisition
Customer
Retention
•The continued
use of NBCB as a
result of the
suspension of
Brighton Council
Bus services.
•Increase in
customer use
due to value
propositions.
•Increasing
accuracy of bus
timings and quality
of services offered.
Operations Management
Bus ownership
Bus management
Fare management
Depot
Bus maintenance
Governance
Proposed frequency and hours of operation
Fuel source
Human Resource Management
Operations
Head
Maintenance
Manager
Employees
(10)
Service
Manager
Employees (4)
Controllers (5)
Operations
Manager
Drivers (30)
Chief
Executive
Officer
Finance
Manager
Marketing
Manager
HR Manager
Employees (2)
Employee (1)
Pricing Management

The prices of the NBCB will be the same as the ones previously
promoted in the region (BCB, 2014).

The tickets can be bought using mobile phones, smart cards or by
using cash.

The mobile phone/internet tickets can be purchased using the
website and the smart cards are topped up at the depots and
select locations around the city.

Apart from the tickets which are issued for regular buses, special
buses fares are also developed.
Start Up Costs
Start Up Costs
£
IT and computers
£5,000.00
Telephones and broadband
£2,000.00
Buses x eight (purchase)
£300,000.00
Professional fees
£1,000.00
Insurance
£30,000.00
Maintenance related equipment
£30,000.00
Marketing
£3,000.00
Licenses
£10,000.00
Training
£1,000.00
Advertising
£2,000.00
Buses x eight (rental)
£100,000.00
Wages/recruitment
£10,000.00
Security/health and safety equipment
£3,000.00
Market research costs
£1,000.00
TOTAL £
498,000.00
Wi-Fi enabled buses
£100,000.00
Establishment of stops for senior citizen
£100,000.00
buses
Cyclist parking areas
£50,000.00
Operational Costs
Operational Costs
£
Telephones and broadband
£2,000.00
Fleet management and
£7,000.00
maintenance
Marketing
£1,000.00
Wages
£62,500.00
Training
£1,000.00
Advertising
£2,000.00
Office supplies
£1,000.00
Security/health and safety
£500.00
equipment
Fuel
£50,00.00
TOTAL £
127,000.00
Projected Profit and Loss for Six
Months
Month
Month
Month
Month
Month
Month
1
2
3
4
5
6
Total sales
130,000 132,000 135,000 138,000 140,000 142,000
Less direct costs
127,000 128,000 129,000 129,000 133,000 140,000
Gross profit (sales less direct costs)
Gross profit margin (gross profit divided by total
sales x 100) (A)
3000
4000
6000
9000
7000
2000
2.31%
3.03%
4.44%
6.52%
5.00%
1.41%
Capital Budgeting for New Projects
System
A- Wi-Fi buses
Cash Flow
£
B- Senior citizen bus stop
Discount
Discounted
Discount
Discounted
Factor
Savings
Factor
Savings
10%
£
10%
£
Cost
Year 0
£100,000.00
Inflow
Year 1
£35,000.00
0.909
£31,818.00
£25,000.00
0.909
£22,727.00
Year 2
£40,000.00
0.826
£33,040.00
£25,000.00
0.826
£20,650.00
Year 3
£45,000.00
0.751
£33,795.00
£25,000.00
0.751
£18,775.00
Year 4
£45,000.00
0.683
£30,735.00
£30,000.00
0.683
£20,490.00
Year 5
£45,000.00
0.621
£27,945.00
£30,000.00
0.621
£18,630.00
Total of Inflow
210,000
£100,000.00
157,333
135,000
101,272
Formula
NPV= Discounted Savings - Initial Cost
Calculation
Discounted Savings
157,333
101,272
Cost
-100,000
-100,000
Net Present Value
257,333
201,272
Net Present Value
£Z57,333
Recommendation
Since the Net Present Value for System A is more than that of System B, it is recommended that System A be chosen.
£201,272
References

BHB 2014. Bus fares. [online] Available at: http://www.buses.co.uk/
[Accessed: 31 March, 2014].

BHLIS 2014. CENSUS BRIEFINGS- City Profile . [online] Available
at: http://www.bhlis.org/census2011 [Accessed: 31 March, 2014].

BHLIS 2014a. CENSUS BRIEFINGS- Transport . [online] Available
at: http://www.bhlis.org/census2011 [Accessed: 1 April, 2014].

BIS 2012. Government Response to the Competition Commission’s
report “Local bus services market investigation. [online] Available
at: https://www.gov.uk/government/uploads/system/uploads/atta
chment_data/file/31883/12-689-government-response-competitioncommission-local-bus-services-investigation.pdf[Accessed: 2 April,
2014].
References
Butcher 2013. Buses: grants and subsidies. Business and Transport.
London. HMSO
 Campaign for Better Transport 2013. Buses in crisis A report on bus
funding across England and Wales . [online] Available
at: http://www.bettertransport.org.uk/files/Buses_In_Crisis_Report_AW_P
DF_09.12.13.pdf [Accessed: 1 April, 2014].
 CFBT 2014. Understand the processes How buses are funded. [online]
Available
at: http://www.bettertransport.org.uk/local_campaigning/online_guide
s/better_buses/understand_processes/bus_funding[Accessed: 2 April ,
2014].
 Department for Transport 2012. Reforming bus subsidy in England.
[online] Available
at: https://www.gov.uk/government/uploads/system/uploads/attachm
ent_data/file/9110/impact-assessment.pdf[Accessed: 31 March, 2014].

References

Keynote 2014. Bus Operators in UK. 12th ed. London.

Massey 2014. Boom in free bus passes... but no buses: Pensioner perk
so popular councils forced to axe services to pay for it. [online]
Available at: http://www.dailymail.co.uk/news/article2570718/Boom-free-bus-passes-no-buses-Pensioner-perk-popularcouncils-forced-axe-services-pay-it.html[Accessed: 30 March, 2014].

Redman, L., Friman, M., Gärling, T. and Hartig, T. 2013. Quality
attributes of public transport that attract car users: A research
review. Transport Policy, 25, pp.119-127.