Over the course of an hour, dozens of similar Facebook messages flooded in to Dylan Methot (Exhibit 1), the owner/operator of Mostly Mental Shuttles, a mountain bike shuttle company based in Kamloops, British Columbia, Canada. The summer of 2017 had not been kind to Dylans business, and the last thing he needed was more bad news, especially new wildfires in the region. Mostly Mental Shuttles had seen steady growth over its 7-year life, but 2017 was shaping up to be the companys first down year. Methots business provided shuttle rides to mountain bikers who wanted to use the trail networks at the Kamloops Bike Ranch, a mountain bike park. Due to the steep and challenging terrain, many mountain bikers used rugged, heavy, downhill mountain bikes, which, while excellent for going down the hills, were very difficult to pedal up, due to their weight and suspension. A long-time mountain bike enthusiast, Methot saw an opportunity in offering a shuttle service, transporting riders and their bikes the 2 kilometres up Highland Road to the top of the trail for $3 per trip. The company caught on immediately, and Methot knew that he was on to something after his first season in business in 2010. Unfortunately for Methot, summer of 2017 brought wildfires. It had been the worst wildfire season in British Columbias history1 . Although the fires hadnt reached Kamloops, the city was blanketed in a thick layer of smoke. Due to the smoke, citizens were being encouraged to stay inside and to avoid strenuous outdoor activities. Methots primary market was locals, aged 10- 16. In a normal summer, parents would encourage their kids to go outside and exercise, but this summer, it was the opposite young people were being told to stay inside. Because of the smoke, business had been steady, but slow. Methot found it hard to imagine that things could get worse for his mountain bike shuttle company, but on July 8, 2017, as he opened his Facebook messages, he realized things were about to get worse. Much worse. Methot clicked one of the half-dozen links that had been sent to him, and read the headline: Extreme Fire Risk Closes Kamloops Nature Parks2 . All city parks, including the Kamloops Bike Ranch, were closed until further notice. Business had been down in 2017, but the park closure would stop his shuttle company completely. With the fires still burning out of control, and no end in sight, Methot knew it could be weeks or even months without income. Methot had to act quickly or the summer would be lost. Mountain Biking and Kamloops The city of Kamloops was world renowned for mountain biking. The citys parks and trails featured steep, technical terrain, and the regions semi-arid, desert climate, meant trails were usually dry and in good condition. Because of Kamloops location in the central interior of British Columbia, the city had become a favorite spot for mountain bike filmmakers. Many mountain bike films featured shots from Whistler, a major mountain resort near the coastal British Columbia city of Vancouver. If a film was shot on Whistler mountain, it often made economic sense to expand filming to nearby Kamloops. While Whistler provided a lush, green, mountain setting, Kamloops provided major contrast with its dry, brown, desert terrain (Exhibit 2). Consequently, Kamloops was a mainstay in mountain bike films since their inception over thirty years ago, from the Kranked series in the late 1990s, to many recent Red Bull films, the small city was portrayed as a hotbed for mountain biking in hundreds of films. With the citys exposure came increased mountain bike tourism and local pride. At first an outlaw sport, the citizens of Kamloops quickly embraced mountain biking. The local government went as far as to build the Kamloops Bike Ranch, a mountain bike park featuring twelve runs and a dirt jump park for experts. It was this culture of mountain biking that made the city of Kamloops so attractive to Dylan Methot. Dylan Methot Dylan Methot loved mountain biking. After completing high school in the northern British Columbia town of Quesnel, he moved 400 kilometers south to Kamloops, where friends introduced him to the sport: On my first downhill ride, I fell about 50 times. I couldnt feel my hands; my legs were sore; my head was sore; and I was hooked! Methot went on to pursue a Practical Nursing diploma and worked for nearly a decade as a Licensed Practical Nurse, but stopped abruptly when he decided to begin his new business in 2010: My wife and I had just bought a second rental house that we could barely afford with both of our salaries. I came home after a day of work that I didnt particularly enjoy, and said Guess what I did today? She said, What? I said, I quit my job She said, What are you going to do? I said, Im gonna shuttle kids up and down the bike park for $3 a ride. She said, Youre mental and nearly divorced me, and I wouldnt blame her for it. This conversation marked the start of Methots business, and also served as inspiration for his companys name.Mostly Mental Shuttles Methot quickly realized there would be demand for his shuttle service, which ran during mountain bike season from April 1 to October 31 each year (occasionally Methot would extend service for a week or two depending on the weather). Parents found his service particularly attractive as Methots previous nursing experience meant that he had expertise and could provide first aid when accidents happened on the trails. The companys shuttle had capacity to carry a maximum of 14 passengers per trip, and usually completed an average of 30 trips each Saturday and Sunday operating 5 to 7 hours each day during mountain bike season the shuttle did not run Monday through Friday as Dylan dedicates his time to parenting while his spouse is employed full time. In 2015, Methot purchased and outfitted a new shuttle vehicle at a cost of $65,000 (Exhibit 3). The shuttle had an estimated useful life of 10 years and an estimated residual value of $5,000. The van was purchased with a loan and total monthly payments of principal and interest were $1,315. The shuttle was driven 40,000 kilometers each year and annual major maintenance and repair costs of $8,000. The company had annual vehicle insurance costs of $2,400 per year and business insurance cost $1,200 per year. Government and business licensing cost $100 per year. Because Methot provided only shuttle service, Mostly Mental Shuttles was insured as a transportation business only. If he offered guiding services, his business insurance would have been significantly more expensive. In addition, although he was not officially required to do it, Methot provided free shuttle service for Bike Ranch events like the Kids Camp and Legacy Games Race. He estimated that these services cost him $2,000 out of pocket each year, but believed it was worth the cost to give back to the community that supported him. In addition, Methots business cell phone cost $100/month. Mostly Mental had no out of pocket promotional costs as the company successfully leveraged social media platforms such as Facebook and Instagram. The companys only major variable costs were fuel and minor maintenance. Methot estimated a cost of $2.25 per trip. For a small business In British Columbia, income taxes would be 15% of pretax net income. On the revenue side, when operating in the Kamloops Bike Ranch, Methot charged $3 per customer per trip, and offered a loyalty punch card where patrons received six trips for $15. 95% of customers used punch cards, with the remaining 5% paying $3 per trip. Business in Kamloops had been brisk with the shuttle running at 90% capacity during April, May and June, and 70% of capacity during July, August, September and October, with many spring days being at 100% capacity. Before the park closure, the smoke had slowed business to 50% of normal. With the park closure, hed have no business for the foreseeable future. Methot was considering a big idea about how to proceed.Have Van Will Travel Methot racked his brain as to what to do, with local parks closed an option that kept popping into his mind was, Why not try some out-of-town trips? If Kamloops was too smoky for riders, why not take local riders somewhere else that wasnt so smoky? Methot made a plan. He would charge riders a flat fee to take them on day trips. There were several nearby cities that werent nearly as affected by the smoke. Methot believed it would be fair to charge riders the same price as a Greyhound bus ticket. He had heard that there was good mountain biking (and clear skies) in the city of Salmon Arm, 115 kilometers east of Kamloops. Greyhound charged $40 for a round trip ticket from Kamloops to Salmon Arm, and his operating costs would be $1 per kilometer. Methot planned to operate purely as a driver and not as a guide, simply dropping riders off at the trail head, and picking them up at the end of the day. Although he hadnt crunched all the numbers, Methot believed he could fill up his shuttle for a road trip with eager, stir-crazy Kamloops mountain bikers. Moving Forward While Methot was excited about the out-of-town trips to help save the summer of 2017, it caused him to think about the longer term financial plans for the shuttle operation. In previous years, there was always enough cash in the bank to make all loan and expense payments as they were due throughout the year. 2017 could be different. Methot wants your help going through the numbers for the out-of-town trips and on how he can better use financial data in helping him to make solid management decisions for Mostly Mental Shuttles into the future.Case Questions 1) Create a monthly contribution margin style income statement for Mostly Mental Shuttles business at Kamloops Bike Ranch based on the 2016 normal season of operations. 2) For 2016, what was Methots breakeven point in sales dollars? How many riders did it take for the company to break even and on what calendar day would this occur in this normal operating season? 3) Create a second monthly contribution margin style income statement for Methots 2017 operations up to Sunday, July 02, 2017. Use a 50% load factor for all months after May 2017. Provide your comments on Methots financial position when the Kamloops Bike Ranch closure was put into effect. 4) Proposed Out-of-Town Trips a) What is the minimum amount of tickets Methot should sell before considering going to Salmon Arm if he wishes to make money on a single trip during the Kamloops Bike Ranch closure? b) If Methot could fill all 14 seats in the van for 2 full day trips per weekend to Salmon Arm starting on Saturday, July 08, 2017 and these trips continued through to the end of the 2017 season, how would these trips compare to regular shuttle operations? c) What are qualitative advantages and disadvantages of shifting focus to the Salmon Arm area and other trips during the 2017 Kamloops park closure? 5) Are there any other short or long-term ideas Methot should consider for Mostly Mental Shuttles in 2017? In future years?