Car rental agencies play a vital role for both tourist in business travel. These firms are able to cost-effectively provide access to vehicles spanning a wide range of makes and models. One of the common trends within this industry is to provide access to higher level automobiles as well as exotic sports cars. The primary reason for this trend has been that there are now a number of companies that specialize in providing the experience of driving a high-end vehicle, which would otherwise be unaffordable by most people. This has also been done for economic reasons as this allows for vehicle rentals to occur within a regional market among people that live there rather than people traveling there. One of the nice things about these businesses, is that they produce multiple streams of high margin revenue from their operations.
The development of a car rental agency business plan does have some modest degree of complexity. As such, we take a market research first approach when developing this type of document. First, we take a look at the population size, population density, median household income, as well as other common metrics that are used to examine any specific market. This is complemented with an overview of the number of tourists that come to the specific area in any given year. We also take a look at the geographic attributes of the target market area to understand how many hospitality businesses are in operation as well as its proximity to area airports.
Beyond examining the direct metrics of the target market, we also take a look at how the area is impacted due to varying economic conditions. This includes an analysis that is focused on changes in inflation, changes in GDP, interest rate fluctuations, as well as trends and consumer spending. This analysis allows us to create a sensitivity analysis that is specific for a car rental agency within the specific target market area. Among readers of business plans, this is highly important as it showcases the viability of the business even during a challenging economic climate.
By completing the market research first, we are able to effectively develop a car rental agency revenue profile that allows us to complete the rest of the financial model. As it relates to the car rental agency financial plan, we take a five-year approach to this aspect of the development. It includes a profit and loss statement, common size income statement, balance sheet, cash flow analysis, DSCR analysis, as well as applicable basis ratios to the car rental agency industry. We also complete a unit economics overview in order to ensure that the aggregate of the financial model is in line with individual rentals.
From here, we also develop a car rental agency marketing plan. Given that these businesses need to advertise on a local and regional basis, we take a substantial approach to using online marketing strategies in order to drive reservations. This includes a search engine optimized website as well as listing vehicles for rent on popular travel platforms. This ensures near 100% capacity usage of the fleet at any given time. The scope of the marketing plan also includes developing direct relationships with travel agents as well as hospitality businesses that are local to the business.
Now we move into the development of the car rental agency operations plan. Here, we discuss the fleet, the types of vehicles that will be acquired, pricing information, staffing overviews, as well as analysis of procedures and protocols that will guide the day-to-day operations of the business.
The foundation of the car rental agency business plan is now complete, and we move into the secondary chapters of business plan. This includes a risk analysis, key, strategic issues, overview, SWOT analysis, and the executive summary. As it relates to the SWOT analysis, we chart the strengths, weaknesses, opportunities, and threats that are associated with this type of enterprise. As it relates to strengths, these businesses are able to reduce predictable income, provided that they are able to receive an ongoing stream of bookings for vehicle rental rentals. As relates to weaknesses, these businesses can struggle during challenging economic climates. Sharp changes in the price of energy can have a negative impact on these businesses. For opportunities, these businesses can thrive by establishing additional locations, typically near major airports. For threats, this is a highly competitive industry, and there are numerous national level competitors that provide the same type of service.
Finally, we move into the executive summary. Here, we provide a full overview of the car rental agency, the way it will operate on a day-to-day basis, the location, information about the founder, and related pertinent facts about the business and how it will develop its operations.