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Business Plan for New Brighton Council Bus Service (NBCB)

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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.

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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.

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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).

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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).

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SWOT Analysis

Strengths•Experienced employees

•Local community support

•Large market share

Opportunities• Increase in population• Improvements in technology features of buses

• Improvement in quality features of the bus

Weaknesses• Lack of managerial experience• Need for extended financial support• Competition with other public modes of transport

Threats•Increase in private transport

•Increase in cost of fare

•Increase in private operators entering the arena

SWOT

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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).

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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 Provide monthly pass for students.

Service for the elderly Provide special services which will have a greater number of stops for senior citizens.

Optimal modal mix 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.

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Channels

•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

Awareness

•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.

Evaluation

•Customer purchase of services is direct sales in buses. Indirect sales through monthly passes in bus depots are also seen.

Purchase

•Value is delivered by maintaining on time services and by ensuring quality of service.

Delivery

•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.

After Sales

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Revenue Streams

2009 2010 2011 2012 20130

500

1000

1500

2000

2500

3000

3500

Bus Operator Income in the UK

Government Support Passenger Receipt

Government support for public transport has reduced significantly over the last five years (Keynote, 2014).

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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.

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Customer Relationships

Customer Acquisition• The continued use of NBCB as a

result of the suspension of Brighton Council Bus services.

• Increase in customer use due to value propositions.

Customer Retention• Increasing accuracy of bus

timings and quality of services offered.

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Operations Management

Bus ownership

Bus management

Fare management

Depot

Bus maintenance

Governance

Proposed frequency and hours of operation

Fuel source

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Human Resource ManagementChief Executive Officer

Operations Head

Maintenance Manager

Employees (10)

Service Manager

Employees (4)

Operations Manager

Controllers (5)

Drivers (30)

Finance Manager

Employee (1)

Marketing Manager

Employees (2)

HR Manager

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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.

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Start Up CostsStart 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

buses

£100,000.00

Cyclist parking areas £50,000.00

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Operational Costs

Operational Costs £

Telephones and

broadband

£2,000.00

Fleet management and

maintenance

£7,000.00

Marketing £1,000.00

Wages £62,500.0

0

Training £1,000.00

Advertising £2,000.00

Office supplies £1,000.00

Security/health and

safety equipment

£500.00

Fuel £50,00.00

TOTAL £ 127,000.0

0

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Projected Profit and Loss for Six Months

Month

1

Month

2

Month

3

Month

4

Month

5

Month

6

Total sales 130,00

0

132,00

0

135,00

0

138,00

0

140,00

0

142,00

0

Less direct costs 127,00

0

128,00

0

129,00

0

129,00

0

133,00

0

140,00

0

Gross profit (sales less direct costs) 3000 4000 6000 9000 7000 2000

Gross profit margin (gross profit divided by

total sales x 100) (A)

2.31% 3.03% 4.44% 6.52% 5.00% 1.41%

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Capital Budgeting for New ProjectsSystem A- Wi-Fi buses B- Senior citizen bus stop

Cash Flow Discount

Factor

Discounted

Savings

Discount

Factor

Discounted

Savings

£ 10% £ 10% £

Cost Year 0 £100,000.00 £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 210,000 157,333 135,000 101,272

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 £201,272

Recommendation

Since the Net Present Value for System A is more than that of System B, it is recommended that System A be chosen.

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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/attachment_data/file/31883/12-689-government-response-competition-commission-local-bus-services-investigation.pdf[Accessed: 2 April, 2014].

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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_PDF_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_guides/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/attachment_data/file/9110/impact-assessment.pdf[Accessed: 31 March, 2014].

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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/article-2570718/Boom-free-bus-passes-no-buses-Pensioner-perk-popular-councils-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.