SunnyVacations

Sunny,whograduatedfromcollegelastyearwithaBachelorofBusinessAdministrationdegree with a Marketing concentration, is at a career crossroad. Last year, after some job hunting, Sunnymanagedto get ajob asa marketingassistantforaprominent realtor inthe area,Diane. With a colourful, outgoing personality,Sunny was a natural fit to host home viewings and even going door-to-door talking to homeowners, brochures in hand.

Diane quickly realized that Sunny was a bigger help to her than anyone she had hired before and bumped up his compensation from an hourly minimum wage to $28,000 a year (they agreedonabouttwenty-fourhoursaweek,mostlyonweekends). Sunnybelieveshecanearn

$50,000ayearworkingfull-timeinrealestate,butthatwouldbelong,slowclimbup-perhaps over five years.

Diane also reimburses Sunny for his driving at the prescribed CRA rate (61 per kilometre for thefirst5,000kilometresdriven in2022).WhileSunnyhasstrictlytrackedhiskilometresdriven for work purposes in the past, he has been a bit concerned about the rising fuel and vehicle maintenancecosts.Heiswonderingifheshouldaddsomeofhispersonaldrivingtotheweekly mileage totals he reports to Diane- she doesn't really ask for details and he does tend to talk abouthernew listingsquiteabitoutsideof workhours. Forinstance,hediscussed juicy details of specific buyers and sellers with his friends at a busy birthday party last Tuesday.

Sunnyisconsideringtakingasecondjobwhichwould payhim$17anhourforsixhoursofwork per day, four weekdays per week. While this would mean immediate cash in his pocket (he is currently living paycheck to paycheck), the job doesn't really relate to his career, nor does it have potential for promotion in the field (waste management). Due to his tight cash situation, Sunny was about to accept the job on the spot after calling the number his friend had given him. However, he decided to hold off for a bit as the manager wanted him to start this week, which would conflict with his scheduled hangout with friends.

Sunny is also considering his own start-up, a travel agency business. While scheduling a family vacation at age 15 (his parents were swamped with their bakery business at the time), Sunny realized he had a natural knack for booking flights, applying for tourist visas, researching the best resort deals, etc. Hemanaged to negotiate his wayto such agreat and affordable trip that hisparentsandsisterinsistedthatheplanalltheirvacationseachyear.Furthermore,hisuncles and aunties also insisted on getting his help!

Sunny believes he can finally monetize on his abilities. With $3,000 worth of one-time advertising(brochuresandsocialmediaads),Sunny estimatesthathecanbook$200,000worth of vacation activity in his first year. From this, he can charge a fee of 5%. While this wouldn't mean much money immediately, especially considering he would be spending about ten hoursa week on the business, Sunny does believe he can double the $200,000 number in the second year once word-of-mouth really kicks in.

Then, he would be in a position to raise the fee to 6% and benefit from 10% year-over-growth forthreeyears.Afterthat, thefeewouldberaisedto7%atthatpointwithflatrevenues forthe following five years. He has run some rough numbers and believes business expenses (mostly car-related) can be held to only 12% of business revenues with this plan- he hasn't considered borrowing costs yet, though. Luckily, Sunny has no student loan debt and pays a very low monthlyrenttohisparents.However,thatcouldchangeifhedecidestostarthisownbusiness- he has talked to his bank and was offered a $15,000 line-of-credit at a 7.05% annual rate. He believesthat,ifneeded,he canrenegotiatethe line-of-creditto$25,000,butmaybewithan8% interest rate.

Anotheroptionistoadvertisemoreaggressively.Sunnyisthinkingaboutrentingabillboardfor

$500 per month at a busy corner in town (the initial sign would have a $2,000 upfront cost). With the billboard, Sunny anticipates his projections getting boosted by 50% (same fee percentages)overthenextdecade. Thereisalsotheoptionofbuyingthebillboardoutrightfor

$20,000.Sunnybelievesthebillboardwilllast tenyearswithyearlymaintenanceof$1,000-he

isn'tsurehowexpensinganassetsuchasthis works.

Sunny isn't great with projections and numbers, so he is asking you for help in deciding if this business is lucrative enough to pursue. He is also wondering about the importance about maintainingaccuraterecords ingeneral.Hedoesn'treallyknowmuchaboutaccounting,sohe wants some quick advice on journal entries, T-accounts, and the like.

Sunny is thinking of one final consideration- bringing in a business partner who is willing to cover the costs of the billboard in exchange for a 25% share in his business. His friend, Nina studied accounting and he would be willing to give her a 33.3% share if she took care of all accounting/financetasksalongwiththebillboard.Sunnyhasn'tmentionedthisideatoheryet- he wants your thoughts first.

Sunny wants specific advice on what he should do. If it is a good idea to pursue the Sunny Vacations business, he wants detailed advice on business strategy, financing, ethical considerations,etc.Heisopentoadvicebeyondwhatisdiscussedinthiscase,butitshouldbe relevant to his situation.

Q1. Is this business lucrative enough?

Q2. What are the importances of maintaining accurate records in general?

Q3. Give some advice on Journal entries, T-accounts for this business.

Q4. Give advice on business strategy, financing and ethical considerations.