Vic Vacations
Vic, who graduated from college last year with a Bachelor of Business Administration
degree with a Marketing concentration, is at a career crossroad. Last year, after some job
hunting, Vic managed to get a job as a marketing assistant for a prominent realtor in the
area, Pooja. With a colourful, outgoing personality, Vic was a natural fit to host home
viewings and even going door-to-door talking to homeowners, brochures in hand.
Pooja quickly realized that Vic 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 agreed on about twenty-four hours a week, mostly on weekends). Vic
believes he can earn $50,000 a year working full-time in real estate, but that would be
long, slow climb up- perhaps over five years.
Pooja also reimburses Vic for his driving at the prescribed CRA rate (61¢ per kilometre
for the first 5,000 kilometres driven in 2022). While Vic has strictly tracked his
kilometres driven for work purposes in the past, he has been a bit concerned about the
rising fuel and vehicle maintenance costs. He is wondering if he should add some of his
personal driving to the weekly mileage totals he reports to Pooja- she doesn’t really ask
for details and he does tend to talk about her new listings quite a bit outside of work
hours. For instance, he discussed juicy details of specific buyers and sellers with his
friends at a busy birthday party last Tuesday.
Vic is considering taking a second job which would pay him $18 an hour for six hours
of work 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, Vic 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.
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Vic 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), Vic realized he had a natural knack for booking flights, applying for tourist visas,
researching the best resort deals, etc. He managed to negotiate his way to such a great
and affordable trip that his parents and sister insisted that he plan all their vacations
each year. Furthermore, his uncles and aunties also insisted on getting his help!
Vic believes he can finally monetize on his abilities. With $3,500 worth of one-time
advertising (brochures and social media ads), Vic estimates that he can book $200,000
worth 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 hours a week on the business, Vic 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-overgrowth for three years. After that, the fee would be raised to 7% at that point with flat
revenues for the following five years. He has run some rough numbers and believes
business expenses (mostly car-related) can be held to only 11% of business revenues
with this plan- he hasn’t considered borrowing costs yet, though. Luckily, Vic has no
student loan debt and pays a very low monthly rent to his parents. However, that could
change if he decides to start his own business- he has talked to his bank and was offered
a $15,000 line-of-credit at a 7.50% annual rate. He believes that, if needed, he can
renegotiate the line-of-credit to $25,000, but maybe with an 8% interest rate.
Another option is to advertise more aggressively. Vic is thinking about renting a
billboard for $500 per month at a busy corner in town (the initial sign would have a
$2,000 upfront cost). With the billboard, Vic anticipates his projections getting boosted
by 50% (same fee percentages) over the next decade. There is also the option of buying
the billboard outright for $22,000. Vic believes the billboard will last ten years with
yearly maintenance of $1,200- he isn’t sure how expensing an asset such as this works.
Vic 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 maintaining accurate records in general. He doesn’t really know much about
accounting, so he wants some quick advice on journal entries, T-accounts, and the like.
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Vic 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/finance tasks along with the billboard. Vic hasn’t mentioned
this idea to her yet- he wants your thoughts first.
Vic wants specific advice on what he should do. If it is a good idea to pursue the Vic
Vacations business, he wants detailed advice on business strategy, financing, ethical
considerations, etc. He is open to advice beyond what is discussed in this case, but it
should be relevant to his situation.
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