Cost-Benefit Analysis For Starting A Travel Agency In Norman Gardens

With the help of cost benefit analysis organisation are able to understand the level of expenses and income, which could be generated from a particular investment or project. Moreover, cost benefit analysis is a globally used method, which compares cost of the project with its benefits. This allows the organisation to gauge into the financial viability of the project and make adequate investment decisions, which could increase their product in the long run. The main key components of the cost benefit analysis are list of alternative scenarios, identifying benefits & cost, comparison of alternatives, and sensitivity analysis, which allows the organisation to detect the financial viability of the selected project. Boardman et al. (2017) mentioned that with the help of cost benefit analysis organisations are mainly able to detect the relevant cash outflow and inflow, which can be conducted by the project.

The implementation of cost benefit analysis directly allows small business entrepreneurs to gauge into the risk and reward attributes of the project. This eventually helps small entrepreneurs to save the investment capital and detect investment opportunity, which could improve return from investment over the period of time. The use of cost benefit analysis directly allows the organisation to improve the level of income from investment, while detecting the actual expenses and benefits which could be generated from the investment (Johansson and Kristrom 2018).

Payback period is an investment appraisal technique, which allows the organisation to understand the number of years that could be taken by the project for returning the initial investment capital. The payback period is essentially calculated to be within the life of the project to make the investment option viable, where the investment will be collected as quickly as possible. From the calculation that is been conducted for Joey Tribbiani the initial investment will not be collected within the life of the project, as the cumulative expenses is higher than the cumulative income of the project. Hence, on the basis of payback period the overall investment does not indicate a profitable investment for Joey Tribbiani, as the payback period is greater than the project life. On the other hand, Jonker, Junginger and Faaij (2014) argued that payback period does not incorporate time value of money, which directly reduces the financial viability of the investment appraisal technique to detect the actual financial position of the project to generate higher returns from investment.

Business objective:

The main business objective is to attain higher sales of selling tickets, holiday travel packages and making hotel bookings, as it will positively affect income stratum of the travel agency. The further objective of the business is to improve the level of returns by reducing the level of expenses from operations.

Service and product description:

The travel agency will sell tickets, holiday travel packages and make hotel bookings, as it will be the main income stream for the organisation. In addition, the customized travel packages could eventually help the travel company to acquire the required level of income, which could raise their profits from operations.

Marketing strategy and target market:

With the implementation of marketing strategy, the travel business could flourish and built adequate customer base. In addition, the use of online marketing system with the television advertisements could eventually help in improving the level of marketing presence to generate adequate returns from investment (Solomon, et al. 2014). The main target market for travel business are households, businesses and experience seekers. The household is mainly targeted with holiday packages and hotel bookings, which eventually allow the organisation to acquire adequate revenue from selling packages. Moreover, the target of business can be conducted by selling tickets and holidays bookings, which are conducted by employees of the organisation. Lastly, the accommodation of individuals who seek experience could help in generating revenues by selling holiday packages for different exotic destinations.

Financial plan and requirements:

The financial plan prepared in the above table are accurate, while reduction in expenses of employees could eventually help in improving their income streams. This deduction in expenses from 72,000 per year to 60,000 would provide an immense boost on the financial stability of the project. Hence, the move will allow the organisation to reduce the payback period to 2 years, which might help in gathering the required investment funds. Therefore, decline in salary expenses will eventually allow Joey Tribbiani to conduct the business successfully and generate higher return on investment.

Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017. Cost-benefit analysis: concepts and practice. Cambridge University Press.

Johansson, P.O. and Kriström, B., 2018. Cost–Benefit Analysis. Cambridge University Press.

Jonker, J.G.G., Junginger, M. and Faaij, A., 2014. Carbon payback period and carbon offset parity point of wood pellet production in the South?eastern United States. Gcb Bioenergy, 6(4), pp.371-389.

Solomon, M.R., Dahl, D.W., White, K., Zaichkowsky, J.L. and Polegato, R., 2014. Consumer behavior: Buying, having, and being (Vol. 10). London: Pearson.