Business Plan

APPENDIX
business plan based upon an acquisition
Rockwood Lodge &

Canoe Outfitters
a business plan
Prepared by Jason B. Correll

Executive Summary 753
rockwood lodge & canoe outfitters
I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .754

II. BUSINESS DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .755
A. GENERAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .755
B. INDUSTRY BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .756
C. POTENTIAL OF THE VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .759
D. UNIQUENESS OF THE PRODUCT AND SERVICE . . . . . . . . . . . . . . . . . . .760
III. THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .761
A. KEY QUESTIONS REGARDING THE ACQUISITION . . . . . . . . . . . . . . . . .761
B. ASSESSING THE VALUE OF THE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . .764
IV. MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .768
A. RESEARCH AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .768
B. MARKETING PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .776
V. LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .786
A. LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .786
B. PROXIMITY TO SUPPLIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .787
C. ACCESS TO TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .787
VI. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .788
A. MANAGEMENT TEAM—KEY PERSONNEL . . . . . . . . . . . . . . . . . . . . . . . .788
B. LEGAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .790
C. BOARD OF ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .791
VII. FINANCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .791
A. FINANCIAL ASSUMPTIONS AND METHODOLOGY . . . . . . . . . . . . . . . .791
B. RATIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .798
C. BREAK-EVEN ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .798
VIII. CRITICAL RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811
A. FOREST FIRES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811
B. WEATHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811
C. CANCELLATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811
D. THE BOUNDARY WATERS CANOE AREA WILDERNESS (BWCAW) . . . .811
E. ENVIRONMENTAL AND ECOLOGICAL . . . . . . . . . . . . . . . . . . . . . . . . . . .812
IX. MILESTONE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .812
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .813
754 appendix Rockwood Lodge & Canoe Outfitters
I. executive summary
Business Description
Rockwood Lodge & Canoe Outfitters is an existing lake resort with 76 years of heritage,
and is currently on the market. This resort provides lodging in the form of housekeeping
cabins. This seasonal resort is open May through October. The cabins and business itself
are centered around a historic 76-year-old hand-built log lodge. This lodge houses a small
restaurant and bar, gift shop, and check-in desk. The business also has canoe outfitting,
which is essentially the service of providing outdoor enthusiasts with all of their needs (ca-
noes, tents, food, orientation, etc.) to journey into the Boundary Waters Canoe Area
Wilderness. The CCC Group will form a Limited Liability Corporation and purchase
Rockwood Lodge & Canoe Outfitters. This will be a family business run by the Corrells.
The Corrells will drive this business 24/7 and their primary focus will be to build this busi-
ness into a premier resort along the Gunflint Trail.
Location
Located just south of the Canadian border along the famed Gunflint Trail, Rockwood Lodge
& Canoe Outfitters is in a unique part of Northeastern Minnesota. Located deep inside Su-
perior National Forest and surrounded by the Boundary Waters Canoe Area Wilderness, the
Gunflint Trail is a favorite destination for many outdoor enthusiasts. This region is one of
the few remaining true wilderness areas in the United States. Hiking, canoeing, fishing, and
general relaxation are among some of the favorite activities to be enjoyed here.
Marketing
After conducting both primary and secondary research, which is presented later in this
plan, the CCC Group has determined a marketing strategy that will set Rockwood Lodge
& Canoe Outfitters apart from the competition. This strategy incorporates both lodging
and meals in the form of all-inclusive packages. The CCC Group has determined that only
a small number of their competitors in this region offer such packages. The business will
grow, not in physical size, but rather by offering several different packages that have been
developed for specific target markets. These targeted customers are active outdoor enthu-
siasts, nature lovers, and traditionalists. In addition to the packages, the CCC Group will
focus on creating an atmosphere that guests will enjoy and want to come back to every
year. These guests will be reached through numerous marketing avenues.
One of the most important facets of the CCC Group’s marketing plan is the use of
the Gunflint Trail Association. This organization markets the Gunflint Trail as a major
tourist destination. It has its own Web site with pictures and descriptions of the area, but
more importantly, it has a link to the Web site for Rockwood Lodge & Canoe Outfitters.
This is probably the most important way for the CCC Group to reach its potential cus-
tomers; the Internet is a very important tool to use when people decide where they should
go on vacation. In addition to Rockwood Lodge & Canoe Outfitters’ Web site, various
other methods will be used to reach customers, including sport shows, color brochures,
newsletters, and the company’s sign.
Financial Requirements
As previously mentioned, Rockwood Lodge & Canoe Outfitters is an existing business, and
this business will be purchased by the CCC Group. The CCC Group will be contributing
a total of $270,000 in capital for the purchase of this business. Additionally, debt financing
will contribute $1,080,000 in the form of two separate loans, real estate and equipment.
Business Description 755
The real estate loan will be financed at a rate of 7.5 percent for 20 years, while the equip-
ment loan will be financed at 6 percent for 6 years. Together, the CCC Group’s contributed
capital and the debt financing will make up the $1.35 million purchase price. In addition
to this, a $200,000 line of credit will be established in order to help the business meet its
seasonal cash flow needs. The CCC Group will service this debt while growing the business
into one of the premier resorts along the Gunflint Trail.
II. business description

A. General Description
Rockwood Lodge & Canoe Outfitters, or just Rockwood, is an existing lake resort business
that will be purchased by the CCC Group, LLC. For more information regarding this pur-
chase, please reference the Acquisition Section of this plan. The CCC Group gets its name
from the first letter of each of the three main partners’ last names. This will be a family
business run by the Corrells. It is located 30 miles north of Grand Marais, Minnesota, in
a town located on the North Shore of Lake Superior. Rockwood is located halfway up the
famous Gunflint Trail in Superior National Forest and is surrounded by the vast wilder-
ness of the Boundary Waters Canoe Area Wilderness (BWCAW). Rockwood is located on
the beautiful, island-filled Poplar Lake with access to the BWCAW. The business is centered
around a historic, hand-built log lodge that was completed in 1926. This lodge has a din-
ing room, kitchen, small bar, gift shop, and a store. Rockwood will have several profit cen-
ters: cabin rental, canoe outfitting, dining, and store and gift shop sales.
Cabins
Rockwood will provide lodging accommodations in the “North Country” of Northern
Minnesota in the form of modern but rustic housekeeping cabins seated just a few feet
from the shore of beautiful Poplar Lake. There will be a total of 8 cabins for weekly and 4-
day rental. Depending on the particular cabin, they will sleep anywhere from 2 to 10 per-
sons. They will be completely furnished with all the comforts of home. In addition to
linens and towels, the full kitchen is equipped with utensils, coffee makers, microwave
ovens, and even popcorn poppers. All the cabins have their own deck, BBQ grill, picnic
area, and private dock. A boat or aluminum canoe is included with the cabin rental.
Canoe Outfitting
Canoe outfitting is essentially the service of providing individuals with all the necessities
required to navigate the backwoods of the BWCAW. This function of the business provides
canoeists with the proper equipment (canoes, tents, stoves, drypacks, food, etc.) and plan-
ning needed for their journey into the BWCAW. Rockwood offers the finest, high-quality
lightweight adventure gear in order to make portaging easier and fun. Additionally, Rock-
wood offers several packages for the customer to choose from. Rockwood will cater to both
the experienced and novice canoeists. For the novice, the outfitting service will also pro-
vide an orientation before they depart on their journey.
Dining
Located in the historic Rockwood Lodge, the small dining facility will offer meals in the
form of family-style dining. There will be a different meal offered each day. This restaurant
will only be open limited hours for breakfast, lunch, and dinner. After dinner, the bar will
remain open to serve the guests as they relax inside the lodge and reflect upon their day.
This dining facility will cater to guests who purchase all-inclusive packages, canoeists who
purchase complete outfitting packages, and anyone else who wants to dine there. There is a
total dining capacity of 60 persons.
Store and Gift Shop

Located inside Rockwood Lodge, the store and gift shop will also be a main profit center.
The gift shop carries a wide variety of souvenirs for guests to purchase. The “store,” is com-
prised of two categories, convenience items and fishing gear. The convenience items are
sold out of the gift shop, while the fishing gear is sold out of the outfitting building. The
store carries many convenience items for purchase that will be available for guests, and
even those who pass by along the trail. These items range from film to cigarettes to aspirin
to charcoal. The fishing gear sold out of the outfitting building includes a wide range of
tackle, gear, and even some live bait. With Rockwood located 30 miles from the nearest
town, the store will carry many essentials for the guests to purchase.
Company History
The history of Rockwood Lodge goes back to the early days of the Gunflint Trail, long be-
fore there was a paved road. This trail was used by trappers, prospectors, and miners all
seeking their fortune in the North Country. It was during this time that Rockwood Lodge
was built. Rockwood Lodge, an original landmark of the Gunflint Trail, is a log structure
and was hand-built in the 1920s. This log lodge was an outpost and provided shelter from
the harsh winters and the long summer journeys for the people who traveled the trail.
Today, over 75 years later, Rockwood Lodge still sits beside the trail and caters to the visi-
tors offering cabin-lodging accommodations, outfitting services, and dining.
B. Industry Background
National Level
The travel and tourism industry has always commanded attention in the United States.
Every year, millions of people travel either on business or vacation, and every year these in-
dividuals spend billions of dollars while traveling. For example, “in 2000, the U.S. travel in-
dustry received $584.3 billion, including international passenger fares, from domestic and
international travelers. These travel expenditures, in turn, generated 7.8 million jobs for
Americans, with $173.7 billion in payroll income, and $100 billion tax revenues for federal,
state, and local government.”1 Of the 997.6 million person-trips for the year 2000, 75 per-
cent were for leisure travel. A person-trip is defined as “one person traveling 50 miles or
more away from home and/or overnight. A trip is one or more persons from the same
household traveling together.”2 More specifically, the primary purposes of these trips are
broken down into percentages of person-trips in Chart 1. Notice that Outdoor is the sec-
ond most popular with 17 percent and that National/state park is 10 percent of all the per-
son-trips taken in a year. Combined, these two categories command 27 percent of all per-
son-trips. That is approximately 269.4 million person-trips to the outdoors.
Since September 11, 2001, many experts have forecasted a gloomy picture for a whole
slew of businesses in the travel or travel-related industries. Particularly, airliners and the
destinations that often require airlines to get there have been hurt. For example, airliners
and major destinations like Disneyland have been devastated. According to http://www.
callwva.com, tourism industry losses since September 11th are greatest in larger destina-
tions and properties, urban areas, airlines, tour operators, travel agencies, Northeast and
1. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.

2. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/tvt.asp.
Chart 1
Domestic Trip Activity Participation by U.S. Travelers
(% of person-trips)
Golf/Tennis/Skiing 4%
Sports Events 6%
Nightlife/Dancing 7%
Gambling 8%
Theme/Amusement Park 9%
National/State Park 10%

Cultural Events/Festivals 10%
Beaches 10%
Historical/Museums 14%
Outdoor 17%
Shopping 33%
0% 5% 10% 15% 20% 25% 30% 35%
Source: Study of Current Area Tourists: Customer Profiles—Overview (Minneapolis/St. Paul: University of Minnesota, Extension Service,
Tourism Center, 2001), 4.
Southern regions, and anyone catering to international travelers. Additionally, a recent ar-
ticle found that more travelers are choosing solitude and seclusion over big-city hot spots.3
With this kind of atmosphere in the travel and tourism industry, it is safe to say that this
business located in the remote area of Northern Minnesota will be little affected.
Regional Level
On the regional level, Northern Minnesota should not be too affected by the new atmos-
phere regarding air travel. This is partly because 61.3 percent of travelers to Minnesota are
residents of the state. Wisconsin, North Dakota, and Iowa make up 38.4 percent of out-of-
state visitors. Additionally, “other states in the Midwest comprise an additional 30.9 per-
cent of out-of-state visitors.”4 Therefore, for the vast majority of travelers to Minnesota, air
travel is not necessary.
In general, Minnesota is a promising state to be located in for operating a business
in the tourism industry. “In 1999, 23.6 million total domestic and international person-
trips to Minnesota were recorded. This figure . . . can be broken down to pleasure travel-
ers (18.8 million), business travelers (4.0 million), and international travelers (0.7 mil-
lion).”5 Overall, gross sales generated by the Minnesota tourism industry grew 21 percent
from 1996 to 1999. Adjusted for inflation, this represents a real average annual growth
rate of 4.3 percent.6
3. “Tourism after Sept. 11,” Tourism News 2(7) (November 2001). http://www.callwva.com.
4. Study of Current Area Tourists: Customer Profiles—Overview (Minneapolis/St. Paul: University of Minnesota, Extension
Service, Tourism Center, 2001), 4.
5. Travel and Tourism Trends (February 13, 2002) http://www.dted.state.mn.us/TravelTrends.asp.
6. Economic Impact (February 13, 2002) http://www.dted.state.mn.us/04x03x01.asp.
Specifically in the outdoor recreation aspect of the industry, it is important to point

out that over one-third of travelers to Minnesota participate in outdoor recreation.7 See
Chart 2 for a detailed breakdown of primary travel-related activities. Note that the per-
centage of outdoor trips at the state level (32.6 percent) is almost twice that of the national
figure from Chart 1 (17 percent).
Chart 2
Minnesota Domestic Trip Activity Participation by U. S. Travelers
(% of person-trips)
Golf/Tennis/Skiing 5.4%
Sports Events 6.0%
Nightlife/Dancing 6.8%
Gambling 10.2%
Theme/Amusement Park 7.8%
National/State Park 7.7%
Cultural Events/Festivals 9.6%
Beaches 4.5%
Historical/Museums 9.7%
Outdoor 32.6%
Shopping 49.0%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Source: “Travel and Tourism Trends,” Facts and Figures—Industry Statistics—Industry Reports (February 13, 2002) http://www.dted.state.
mn.us/TravelTrends.asp.
In the specific region of the Gunflint Trail, a trend in the lodging industry can be seen
through the Cook County Lodging Tax Report. This report shows the amount of taxes col-
lected from overnight lodging on a monthly and annual basis. From 1993 to 1997, these
tax revenues grew 20.9 percent. Additionally, from 1998 to 2001, the Gunflint Trail lodg-
ing tax revenue has shown an overall growth of 7.3 percent.8
In Superior National Forest, there were 2.4 million visits during the 2000 calendar
year. Additionally, “there were 4.3 million site visits, an average of 1.8 site visits per national
forest visit. Included in this number were 282,043 wilderness visits.”9
Minnesota government takes an active role to promote this industry. “The mission of
the Minnesota Office of Tourism (MOT) is to market Minnesota as a travel destination,
sustain and increase tourism revenues, and lead tourism policy and product develop-
ment.”10 Currently, the MOT is running an advertising theme called “Explore Min-
nesota—Take Home a Story.” The objective is to brand Minnesota as a place to create last-
7. Tourism Highlights (February 13, 2002) http://www.dted.state.mn.us/04x03x05.asp.

8. Cook County Lodging Tax Report (Cook County, Minneapolis, MN: County Auditor-Treasurer, 2002).
9. Dave Tucci, Summary of National Visitor Use Monitoring Results for the Superior National Forest (Minneapolis, MN:
Forest Service, 2001).
10. Marketing Goals & Strategies 2001(February 13, 2002) http://www.dted.state.mn.us/04x04.asp.
ing memories. The fruits from the state’s diligent effort can already be seen by the prelim-
inary 2000 TravelScope survey data, which indicates “that total travel to Minnesota grew
by almost 13 percent over 1999. This increase was the third highest in the country.”11
C. Potential of the Venture

The opportunity here is to buy a piece of history that is the Rockwood Lodge and the busi-
ness that goes with it. The current owners have only had the place for three years and dur-
ing that time, it appears that they have focused on the lifestyle change of running the busi-
ness instead of focusing on the more important business first aspect. The result is that they
have discovered they are not cut out for the hard work that is required to manage/market
the business correctly. As a result, the sales haven’t grown like they should have, given the
potential and history of performance prior to their arrival as owner-operators, and they
are ready to get out. Despite this, the CCC Group sees many potential bright areas for this
business.
The first area of the business that the CCC Group is going to focus on is the opera-
tions and management of the resort while cutting expenses. It takes a lot of work and desire
to run a resort of this caliber, and the CCC Group has the passion for this type of business,
along with the business background, to take on the challenge. With a good management
team in position, along with its central location, modern cabins, and quality outfitting, the
business has the potential to become a premier lodge and outfitter on the Gunflint Trail.
Another opportunity that the CCC Group sees in this investment is the possibility of
having the lodge listed with the historic register. The CCC Group has contacted Susan Roth
of the Minnesota State Historic Preservation Program to inquire about this. She stated that
“a resort built in the 1920s could conceivably be eligible for nomination to the National
Register of Historic Places provided that it was significant and retained sufficient historic
physical integrity to evoke that significance.”12 She went further to state that the process of
nomination is very rigorous and may take as long as six months to a year. The broker who
is the sales agent representing the current owners was also asked about whether or not the
lodge could be of such significance. His thoughts were that the current owners never pur-
sued having it listed. Also, he seemed to remember that the windows on the building were
not original and needed to be restored to the original type and condition in order to be
listed on the historic register. Due to this, the CCC Group does not plan to pursue this in
the initial years. However, further down the road, after positive growth of the business, the
CCC Group may decide to dedicate some capital investment to pursuing this possibility.
This possibility of being on the historic register could add important marketing, tax, and
deep-discounted loan advantages.
The next area of potential the CCC Group will focus on is the lodge itself. Currently,
the lodge is used as a check-in for guests and as a gift shop. The lodge was used as a restau-
rant for years and has a full commercial kitchen, but the current owners closed it when
they bought Rockwood. However, the current owners do use the dining room, which has
12 tables and seating for 60, as a place to feed the canoeists a hot breakfast the morning of
their departure. The CCC Group plans to continue this service, but will add lunch and din-
ner and offer dining to all the guests of the resort as well. This will be done by offering
all-inclusive packages that include housekeeping cabins and meals. Additionally, even

12. Personal communication with Susan Roth, March 13, 2002.
guests that do not opt for the all-inclusive plans or complete outfitting will be able to dine
there. This restaurant will also be open for the public. It will offer family-style dining with
a different meal served each day. Due to their religious beliefs, the current owners discon-
tinued the sale of beer when they purchased Rockwood. The CCC Group plans to re-es-
tablish the lodge as a place for the guests to relax and enjoy a beer at the end of their day
fishing on the lake, etc. This lodge is on the water’s edge and has an excellent view over-
looking the lake. This will certainly provide a nice rustic dining opportunity for the guests
and others who want to dine there.
One of the most interesting areas of opportunity is the property itself. In this area of
the state where the national forest and the Boundary Water Canoe Area Wilderness dom-
inate the landscape, there is not much land left for development. The government owns
and protects most all of the land that isn’t currently developed, and the result is that the
price of lake-front property has skyrocketed over the last decade. When existing property
comes up for sale, they now say that the land is not priced by the acre, but rather by the
foot. In fact, the property in the area has risen in value by 80 percent from 1990 to 1998.13
This trend means that the value of the property itself can double every 10 years. This will
provide an excellent return for the CCC Group, should it sell the resort years from now.
The CCC Group sees another area for potential in winter business. The Gunflint Trail
is abundant with activities in the winter months. In fact, the two strongest seasons are
summer and winter, followed by late spring and early fall. Several resorts on the Gunflint
are open year-round and do decent business as the area boasts world-class, cross-country
skiing, snowmobiling, and ice fishing. Currently, Rockwood is not open in the winter
months and is missing out on this potential. With the correct management of the opera-
tions, the CCC Group feels that this resort could make money year-round. During the first
three years as owners, the CCC Group will focus on improving the biggest seasons, late
spring, summer, and early fall, but will keep an eye on the possibility of opening the resort
for the winter season after that.
D. Uniqueness of the Product and Service
Product and Service

Service is what sets Rockwood apart from its competition. With the CCC Group manag-
ing, Rockwood will be one of the best-staffed resorts on the Gunflint Trail! Premier serv-
ice, combined with deluxe cabins, direct access into the BWCAW from Poplar Lake, expe-
rienced outfitting, and the heritage of 76 years of operation makes it unique! Rockwood
specializes in ultra-lightweight equipment and canoes to minimize the weight and bulk in
portaging. From feather-light tents and sleeping bags to the lightest Kevlar canoes avail-
able, Rockwood Outfitters offers the highest quality products available that provide com-
fort while meeting the demands of the rugged wilderness.
Lodge
Rockwood Lodge is a log structure that was hand-built in the 1920s. At that time, lodges
of this sort sprang up along the Gunflint Trail. However, since then many of the lodges
have crumbled or burnt down, and only a few of these original log lodges remain. Out of
the 23 lodging establishments along the 60-mile Gunflint Trail, there are only 5 of these
13. Northeast Minnesota Initiative Region 2000 (February 13, 2002) http://www.dted.state.mn.us/PDFs/econ-nrtheast.PDF.
The Acquisition 761
historic lodges, and today, Rockwood Lodge is still in excellent condition. Rockwood
Lodge sits right on and overlooks beautiful Poplar Lake. It is furnished with much of the
original handmade wooden furniture, many trophy mounts, and other northwoods décor.
Rising from the floor in the heart of the lodge is a majestic stone fireplace that warms the
lodge and the soul. The ambiance of Rockwood Lodge is unforgettable.
Location
Rockwood is in a unique location halfway up the Gunflint Trail with direct access to the
BWCAW. This strategic location enables Rockwood to provide access, via a short van shut-
tle, to any BWCAW entry point along the Gunflint.
Located inside Superior National Forest and surrounded by the BWCAW, Rockwood
is on prime real estate. The federal government protects all of the surrounding area and
there is no further development allowed. This means that the existing resorts and busi-
nesses are in a niche market being the only ones able to cater to the traveler seeking a
“northwoods” vacation along the Gunflint Trail. Any future resorts will have to be devel-
oped further away from the BWCAW leaving the existing resorts closest to the BWCAW.
This kind of atmosphere leaves little room for new competition to come into the market
on the Gunflint Trail.
III. the acquisition

A. Key Questions Regarding the Acquisition
Why Is the Business Being Sold?

The opportunity to purchase Rockwood by the CCC Group, LLC is a combination of many
factors. Upon meeting and conversing with the current owners, it is the CCC Group’s im-
pression that the most obvious reason the business is for sale is because the current own-
ers are not cut out for this business. It can be seen in the long look on their faces. In 1998,
the current owners, inspired by their oldest son who had worked several summers at an-
other resort along the Gunflint Trail, bought Rockwood with the idea of running it as a
family business. The next year, that son got married and he and his new wife moved out of
state. Loosing this key person who was passionate about the business and got them to go
into it in the first place was a major blow. Following this, the current owners started to
struggle with the operations. This can be seen in the financials that they have provided the
CCC Group with. Even though the business was still drawing healthy revenue, the growth
was not there. Last year, a partner took a job in the Twin Cities and his presence at the re-
sort was nonexistent. This left only one partner and her youngest son, age 19, to run the
business. They did hire two part-time international students to help them, but all the work
that it takes to run a resort of this caliber started to take its toll on the divided family.
The CCC Group has also determined that another very important reason why the
level of business has not grown is because of the current owners’ lack of marketing skills.
Currently, Rockwood’s business brochures and Web site advertising does not have any
packages that are specific to its target markets. They simply have rates on their lodging.
This lack of business skill, along with the division of the family, is the main reasons why
the resort is currently for sale.
Despite these apparent problems, the CCC Group sees great potential to rebuild
Rockwood into one of the premier resorts in the area. In 1998, the business and property
were appraised by Nordic Appraisal Service Inc., to be worth $1.75 million. This is the
same value of the purchasing price that the current owners are asking. However, the CCC
Group plans to have the business and property re-appraised during their due diligence.
Also, the fact that the current owners have driven down the net income during their tenure
will also play a part in lowering the purchase price. In spite of this information, the CCC
Group feels that if the current owners will agree to a reasonable purchase price that is less
than what they are asking, Rockwood will be an excellent investment to grow into a lucra-
tive business.
What Is the Current Physical Condition of the Business?

Upon the CCC Group’s first inspection of the business, it has been determined that all
structures and the property have been kept in excellent repair. There are a total of 19 struc-
tures on the property. These buildings are broken down as follows:
• Lodge
• Shelter
• Eight cabins
• Bunkhouse
• Sauna/shower house
• Boat house
• Outfitting building
• Employee house
• Owner’s residence
• Garage
• Laundry building with attached apartment
• Pump house containing pumps and water treatment
All of these structures are modern buildings with the exception of the outfitting building
and the lodge. The outfitting building is actually an old log structure, but is in good con-
dition, perfect for the home base of the outfitting operations. The lodge is also a log struc-
ture and was completed in 1926. Even with its age, this lodge is in impeccable condition,
possibly the nicest along the Gunflint Trail. There is also a nice wooden sign located right
along the roadside indicating the turnoff for Rockwood. This sign is in excellent condition.
According to the Cook County assessor, the current value of the property and buildings is
$577,100.14 In order to separate the value of the buildings and property, the CCC Group
researched 10 different properties for sale with similar characteristics. It took the cost per
acre of these properties and averaged them together to arrive at a land value of $22,600 per
acre. This cost per acre was then applied to Rockwood’s 11.26 acres. This yielded a land
value of $254,476 for Rockwood, which means the remainder of the $577,100, or $322,624,
is the value of the buildings. Going back to the appraisal record done in 1998, the value of
all the furniture, fixtures, and equipment was valued at $213,000.15 Conservatively ad-
justed for an estimated 5 percent depreciation over the last four years, this value is now an
estimated $202,350. After a careful evaluation of all the outfitting equipment, the CCC
Group has determined a total current value of $100,159.16 This figure includes all canoes,
14. Personal communication with Carol Pratt, March 13, 2002.

15. Real Estate Appraisal, Nordic Appraisal Service, Inc. (November 18, 1998).
16. See Outfitting Equipment Values spreadsheet located in the Acquisition Appendix.
The Acquisition 763
boats, tents, canoe trailers, Chevy Suburban, etc. All together, the total assumed value of all
the long-term assets of the business (land, buildings, furniture, fixtures, equipment, and
outfitting equipment) comes to $879,609.
What Is the Condition of the Inventory?

The inventory of Rockwood is broken down into four categories. They are outfitting, gift
shop, store, and dining. Outfitting includes freeze-dried food and fuel. The gift shop includes
many items that are for sale, such as sweatshirts, coffee mugs, etc. The store contains con-
venience items and fishing tackle that are available for purchase. The dining inventory con-
sists of food. At the time of the acquisition, there will be no dining food inventory because it
is perishable. Also, the store items have been depleted and will therefore have to be restocked
by the CCC Group. The CCC Group has estimated the value of this inventory as follows:
Outfitting $2,000.00
Gift Shop 5,000.00
Store 0.00
Dining 0.00
Total $7,000.00
How Many Personnel Will Remain?

Currently, there are only two people working at Rockwood, a partner and her son. Both of
these individuals will no longer work at Rockwood after the acquisition. The current own-
ers also employ students during the summer, but the CCC Group has enough people to
run the business without this summer help. Therefore, none of the personnel will remain
after the acquisition.
What Type of Competition Does the Business Face?

Rockwood is involved in the tourism industry and therefore competes with all forms of
tourism choices that vacationers have to choose from. Potential customers have the option
of choosing to go to the Gunflint Trail or to some other destination to spend their vaca-
tion. For example, Disneyland, Las Vegas, and cruise lines all compete with Rockwood and
the Gunflint Trail for vacationer’s interest.
On a more local level, once a potential customer has chosen the Gunflint Trail as their
destination, including Rockwood there are a total of 23 lodging establishments spread out
along the 60-mile Gunflint Trail. These businesses all work together as a network to build
the area as a major draw. If one resort is booked, they send people to another resort that
they recommend. This is why it is important for the CCC Group to build and maintain
good relationships with the tourism industry there on the Gunflint Trail. The attitude and
atmosphere that the CCC Group has run into when talking with other resort owners is that
they don’t see one another as competition, but rather allies to create a better tourism des-
tination. Even with this cooperation between resorters, once a potential customer decides
on visiting the Gunflint Trail, these resorts do compete with each other for the customer’s
vacation dollars. Please refer to the Marketing Section of this plan for more information
about the competition facing Rockwood.
What Does the Firm’s Financial Picture Look Like?

The only financial statement that the current owners were able to provide for the CCC
Group was an income statement. From this, the CCC Group ran both vertical and hori-
zontal analysis, as well as some key financial ratios. However, without the other two finan-
cial statements, the ratios examined were limited to income statement items. These ratios
are listed in Table 1. A copy of the vertical and horizontal analysis is located in Acquisition
Appendix. Of the ratios run on Rockwood, total asset turnover fell just below the industry
average. Also, the ratio of EBIT to interest was right on par with the industry average until
2000 when the current owers took a second loan and the amount of interest went up by 52
percent. This drastically effected the ratio and thus fell below that of the industry. The
other ratios the CCC Group was able to calculate were not available in RMA for industry
comparison.
Table 1
Ratio Rockwood 1999 Rockwood 2000 Industry*
Total Asset Turnover .31 .25 .5
Gross Profit Margin Ratio .83 .89 N/A
Net Profit Margin Ratio .20 –.11 N/A
Operating Profit Margin Ratio .66 .66 N/A
EBIT/Interest 1.75 .87** 1.7
*SIC 7011 Hotels and Motels—Restaurant/Lodging (sales volume less than $1 million)
**Owners took second loan in 2000 (they will assume that loan after the acquisition)
The vertical analysis performed yielded a couple of points worth noting. First, the
outfitting business went from being 29 percent of sales in 2000 to 40 percent in 2001. Sec-
ond, repairs and maintenance quadrupled from 1 percent to just over 4 percent of sales.
However, this is not necessarily bad. It represents a one-time expense and leaves the prop-
erty in better condition. Third, the amount of interest went up drastically due to the cur-
rent owners second loan. Overall, the vertical analysis seemed to be pretty much in check.
The horizontal analysis was able to show several important issues. First, cabin rental
sales have continued to decline, not too much, but definitely not growing since the current
owners purchased Rockwood. Second, the gift shop sales have also dropped. Third, the cat-
egory listed as supplies dropped drastically over the three-year period, possibly due to
overstocking the first year as owners. On the bright side, as previously noted, the outfitting
business has prospered quite well, rebounding 50 percent in 2001 after dropping 36 per-
cent in 2000. Also, the sales of fishing licenses have continued to rise during this period.
All the other changes appear to be in check.
After examining the income statements provided, the CCC Group has determined
that the current owners are not doing an adequate job of accounting. From vague accounts
to not keeping a balance sheet or statement of owner’s equity, the owners appear to not
care about the financial picture of Rockwood. This is definitely an area that the CCC
Group feels is essential and should be improved to help control costs of the business.
B. Assessing the Value of the Business

Starting in July 2002, the CCC Group plans to spend a due diligence period of two months
in order to gather data that will be needed to accurately arrive at an offer to buy the busi-
ness. The CCC Group plans on bringing in a commercial real estate appraiser to have an
appraisal done. Also, several experts will be brought in to inspect the water system, septic
system, and integrity of the buildings. In addition, all of the assets will be gone through to
check if they are obsolete or not, and to determine exactly what useful life they have and
The Acquisition 765
what their current or liquidation value is. It is at the end of this due diligence period that
the CCC Group will come to what it feels will be a realistic offer and from there start ne-
gotiations with the current owners for a fair purchase price.
For the purposes of this business plan, the CCC Group has put together as much in-
formation as possible. Additionally, the CCC Group has been unable to communicate with
the current owners until a purchase agreement is signed. The CCC Group was able to ob-
tain some key information from the seller’s broker.
In order to assess the value and determine the fair purchase price for Rockwood, the
CCC Group has identified several different business valuation methods. These methods
are presented on the following pages and then followed by an average of the results from
the different formulas to arrive at the initial offer price. In the following methods, the val-
ues that were discussed previously under the physical condition of the business were used.
Again, these values are summarized:
Property $254,476
Buildings $322,624
Furniture, Fixtures, & Equipment $202,350
Outfitting Equipment $100,159
Inventory $7,000
Valuation Method #1: Valuation of Hotels and Motels17

Two methods were used to arrive at a good estimate of what the business is worth. The first
method is to use a multiplier of 7.5 times the average net operating income. The second
method is to use a capitalization rate of 13 percent. Both of these formulas should be used
together and should be in general agreement with one another. For these formulas, the
CCC Group took the recast income for the three years of financials provided and averaged
them to arrive at $148,224. This is applied to Rockwood in Figure 1.
Valuation Method #2: Formula from “How to Buy or Sell a Business”18

The formula to arrive at a value for a business was derived from the Small Business Reporter
and adapted to Rockwood in Figure 2.
Figure 1
Part 1:
Average Net Operating Income $ 148,224
Multiplier 7.5
Total Value of Rockwood $ 1,111,680
Part 2:
Average Net Operating Income $ 148,224
Capitalization Rate (divided by) 13%
Total Value of Rockwood $1,140,185
17. Calvin G. Schoene, Valuation of Hotels and Motels (Toronto, Canada: John Wiley & Sons, Inc., 1992).
18. Adapted from “How to Buy or Sell a Business,” Small Business Reporter 8(11) (San Francisco: Bank of America, 1982):
11.
Figure 2
Step 1
Market Value of Assets Less Liabilities
Inventory $ 7,000
Furniture, Fixtures, and Equipment 202,350
Land and Buildings 577,100
Outfitting Equipment 100,159
Total Asset Market Value $ 886,609
Less Liabilities 0
Market Value of Business $ 886,609
Step 2
Earning Power = 886,609 10% $ 88,661
Step 3
Salary for Owner-Manager $ 20,000
Earnings of Investment and Owner-Manager $ 108,661
Step 4
Average Annual Recast Earnings 148,224
Step 5
Extra Earning Power of Business (Step 4 minus 3) 39,563
Step 6
Value of Intangibles (Step 5 5) 197,815
Step 7
Value of Intangibles + Market Value $1,084,424
Total Valuation of Rockwood $1,084,424
Valuation Method #3: From “Business Management”19

This formula was found in an article on the Internet and appears to be simple and straight-
forward. The formula is:
Net assets + property + 1X to 2X owner’s salary and perks = value
The last part of the equation is used to determine the value of intangibles such as
goodwill and customer lists. It not only includes the owner’s salary, but also the retained
earnings of the business. This formula is applied to Rockwood in Figure 3.
Figure 3
Net Assets (Furniture, fixtures, and equipment; Inventory; Outfitting equipment) $ 309,509
Add: Property (including buildings) 577,100
Add: Two times Average Recast Earnings 296,448
Total Value of Rockwood $1,183,057
19. Mark E. Battersby, Business Management: Putting a Value on the Business (April 7, 2002) http://www.dwcdesignet.
com/DWC/Feb’99/bus.html.
The Acquisition 767
Valuation Method #4: The Excess Earnings Method20

The excess earnings method is applied to Rockwood in Figure 4.
Figure 4
Representative Operating Profit $ 148,224
Allocations:
Return on Working Capital
($7,000 10%) (700)
Return on Fixed Assets
($879,609 15%) (131,941)
Excess Earnings $ 15,583
Capitalization Rate (divided by) 13%
Intangible Value (Goodwill) $ 119,869
Net Tangible Asset Value 886,609
Total Fair Market Value of Rockwood $1,006,478
Valuation Method #5: The Sum of the Assets Approach to Value21

This method is very straightforward and is displayed in Figure 5.
Figure 5
Value of Capital Assets $ 879,609
Value of Working Capital 7,000
Value of Intangible Assets (taken from Figure 3) 296,448
Less: Long-term and Contingent Liabilities 0
Going Concern Value of Rockwood $1,183,057
Average of Valuation Methods

By averaging the valuations yielded, the CCC Group has been able to determine a fair offer
for Rockwood. The results of the previous five methods are summarized in Figure 6.
Figure 6
Method 1 (part 1) $ 1,111,680
Method 1 (part 2) 1,140,185
Method 2 1,084,424
Method 3 1,183,057
Method 4 1,006,478
Method 5 1,183,057
Average Valuation $1,118,147
20. S. Chris Summers, The Excess Earnings Method (Toronto, Canada: John Wiley & Sons, Inc., 1992).
21. Lloyd R. Manning, What’s It Worth?: A Guide to Valuing a Small Business (Portland, Oregon: The Oasis Press, 2000).
As a result of the different valuation methods used and their average, the CCC Group
has been able to determine that a fair offer for the business will be $1,118,147. However,
this figure is almost $650,000 less than the asking price. It is expected that there will be a
good amount of flex during the negotiations and therefore, the CCC Group has deter-
mined that for the purposes of this plan, financing should be secured for $1,350,000, since
that is the maximum value it is willing to pay.
In addition to the purchase price, the CCC Group will obtain a line of credit of
$200,000, secured by Rockwood’s assets, to cover the cycles of cash flow that are inherent
in this seasonal business.
To confirm the feasibility, Mr. Correll met with Steve Moore, the Senior Vice Presi-
dent of Star Financial Bank, to go over ways to finance the business. Mr. Moore agreed that
these methods would be excellent to argue the purchase price. Additionally, it was dis-
cussed that the bank financing this purchase would have a market appraisal done and that
the collateral considerations would be based off those figures. This way, it would benefit
the CCC Group since a market appraisal would most likely value the business at a higher
price.
IV. marketing
A. Research and Analysis
Target Markets
Rockwood will provide vacationers with cabin accommodations in the “North Country”
destination known as the historic Gunflint Trail located in Northern Minnesota. The out-
fitting part of the business will provide high-adventure wilderness excursions via canoes
into the legendary “Boundary Waters Canoe Area Wilderness” (BWCAW). The targeted
markets here are not just tourists, but rather several categories of outdoor enthusiasts.
More specifically, the target markets are tourists who are nature lovers, active outdoor ad-
venturers, and traditionalists. Nature lovers are those who place heavy emphasis on the
natural environment. The activities they engage in include bird watching, hiking, scenic
drives, and relaxing in the great outdoors. Active outdoor adventurers consist of both sum-
mer and winter outdoor recreation groups. Among their favorite activities, these folks
enjoy fishing and boating in the summer and snowmobiling and cross-country skiing in
the winter. The third target market may comprise one or both of the previous two but is
differentiated in one respect. Traditionalists are those who are “attracted to a specific place
for recreation (i.e., lake or stream) and accommodation. . . . They are repeat visitors with a
strong affinity for a particular place to stay and participate in their recreation activity.”22
These target markets comprise a wide variety of age groups, mainly adults ages 18 to 55
years old. According to the CCC Group’s survey, those most likely to stay in the cabins at
Rockwood are 25 to 54 years old and have incomes in excess of $30,000. The same survey
also indicated that the strongest target market for those most likely to canoe into the
BWCAW are 25 to 34 years of age and have incomes ranging from $20,000 to $60,000. Fur-
thermore, the majority who indicated an interest in fishing ranged from 25 to 54 years old
with the biggest proportion of these people having incomes of $100,000 or more. Addi-
tionally, the strongest target market for the people indicating they would like to travel to
22. Visitor Profiles: Ely (Minneapolis/St. Paul: University of Minnesota, Extension Service, Tourism Center, 2001), 4.
Marketing 769
Northern Minnesota were either 25 to 34 or 45 to 54 years old and on average had incomes
of all levels. As far as outfitting goes, those most likely to use the services of an outfitter
were 25 to 34 years old and had incomes of all levels.
Market Size and Trends

Macro
“In 2000, the U.S. travel industry received $584.3 billion, including international passenger
fares, from domestic and international travelers. These travel expenditures, in turn, gener-
ated 7.8 million jobs for Americans, with $173.7 billion in payroll income, and $100 billion
tax revenues for federal state and local government.”23 Over the past decade, this industry
has shown a positive growth rate of 62 percent as displayed in Chart 3. Travel Industry As-
Chart 3
Travel Expenditures in the U.S. (in $ Billions)
$584.3
$600.0
$546.1
$500.1 $516.7
$500.0 $475.6
$441.9
$397.1 $414.8
$400.0 $359.8 $376.7
$300.0
$200.0
$100.0
$0.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: Travel Industry Association of America.
sociation of America forecasts that for the year 2001, total travel expenditures will dip to
$520.7 billion before beginning to rise again. Forecasted for 2002 is a figure of $531.9 billion,
and for the year 2003, an impressive $575.7 billion. Chart 4 shows the trend of total U.S. do-
mestic travel volume from 1994 to 2000. Worth mentioning is that out of the 997.6 million
domestic U.S. person-trips in 2000, 75 percent were for the purpose of leisure travel. Addi-
tionally, 77 percent of these trips were taken via auto, truck, or RV. Furthermore, out of the
top activities for domestic travelers, outdoor activities were second behind that of shopping.
Micro
On a more local level, in 1999 there were an estimated 23.6 million person-trips to Min-
nesota. Of these, 18.8 million, or 80 percent, were for the purpose of pleasure.24 In all, there
23. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.

Chart 4
Total U.S. Domestic Travel Volume
in Millions of Person-Trips
1010 1004
999 998
1000
987
990
980
966 967
970
960
950 941
940
930
920
910
900
1994 1995 1996 1997 1998 1999 2000
Source: Travel Industry Association of America.
was total revenue of $8.3 billion resulting from the tourism industry. This in turn helped
maintain 126,360 tourism jobs with a payroll of $3.3 billion and $939 million in state and
local taxes. The trend in this industry, relative to Minnesota, is also showing positive
growth. “Gross sales generated by the Minnesota tourism industry grew 21% from 1996 to
1999. Adjusted for inflation, this represents a real average annual growth rate of 4.3%.”25
This trend is illustrated in Chart 5.
Chart 5
Tourism-Related Gross Receipts/Sales in Billions
$8.3
$9.0 $8.0
$8.0 $7.2
$6.9
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
1996 1997 1998 1999
Source: Minnesota DTED.

Marketing 771
According to Tim Cambell of the Minnesota Office of Tourism, the following are
some predictions about future trends for Minnesota’s tourism industry.26
1. Memorial Day through Labor Day will continue to be the strongest months, deep win-
ter the next strongest, and late fall and early spring will continue to be weak.
2. Growth will not come with more development, but with getting more out of each cus-
tomer.
3. The BWCAW will take on more and more value to outfitters and the resorts on the edge
of the wilderness area.
4. As baby boomers age, they will look for less strenuous, but still interesting outdoor ac-
tivities.
These predictions about future events for Minnesota’s tourism industry hold important
implications for the CCC Group and Rockwood. The first statement indicates that the
group’s main focus should be on the mid-summer season, but with consideration of the
winter business. The second statement supports the purpose of the group’s marketing plan
to grow the business, discussed later in this section, by the importance of getting more out
of each customer rather than by physical expansion of the assets. The third statement sup-
ports the uniqueness and value of Rockwood’s location and proximity to the BWCAW. The
last statement is an important demographic consideration that the CCC Group must con-
sider as the business grows along with the baby boomers.
The majority of those who travel to Minnesota for pleasure elect to drive. Looking at
the origin of pleasure travelers supports this fact. Of travelers from Minnesota, 43.8 per-
cent travel for pleasure, while an additional 30.8 percent originate from Wisconsin, Iowa,
Illinois, South Dakota, or North Dakota. This makes a combined total of 74.6 percent of
all pleasure travelers who will most likely drive due to their close proximity to the state. Of
the top activities travelers to Minnesota partake in, behind shopping, outdoor activities
rank second garnishing one-third of all activities. Additionally, national and state parks
consume another 7.7 percent.27 Outdoor activities and parks combined represent over 40
percent of all pleasure trips in Minnesota.
Along the Gunflint Trail specifically, a trend can be seen from the results of the lodg-
ing tax that is collected on all lodging provided by businesses located on the Gunflint Trail.
Before 1998, the lodging tax was only 2 percent and from 1993 to 1997, the lodging tax rev-
enues for this area grew 20.9 percent.28 After 1997 this tax went up to 3 percent and since
1998, the lodging tax revenues for this area have grown 7.3 percent.29 This growth does not
come from the entry of new businesses, but rather represents how the businesses along the
Gunflint Trail have prospered over the last decade.
Boundary Waters Canoe Area Wilderness (BWCAW)

In order to analyze the picture for the outfitting business, it was important for the CCC
Group to investigate the number of people that travel into the BWCAW annually. To do
this, the most recent data compiled by the government was collected. This data is the 1998
BWCAW Year End Report.30 During the summer season, the overnight use permits for
26. Personal communication with Tim Cambell, March 18, 2002.

27. Minnesota Department of Trade and Economic Development, OPCIT.
28. Cook County Lodging Tax Report (Cook County, MN: County Auditor-Treasurer, 2002).
29. Ibid.
30. 1998 BWCAW Year End Report.
1998 was 26,140. Chart 6 shows the trend in overnight permits issued from 1982 through
1998. Over 90 percent of the time, the mode of travel in the BWCAW is by paddle versus
only 10 percent by motor. The residences of the group leaders for these trips were 61 per-
cent of the time from Minnesota.
Chart 6
Overnight BWCAW Permits
30,000
25,000
20,000
15,000
10,000
5,000
0
82 84 86 88 90 92 94 96 98
19 19 19 19 19 19 19 19 19
Source: 1998 BWCAW Year End Report.
Restaurant/Dining
According to the Minnesota Department of Trade and Economic Development, there
were a total of $8.3 billion dollars in gross receipts/sales for the tourism industry in
1999.31 Out of this, the majority (30.4 percent) was spent on lodging. The next biggest
chunk of money spent was toward food (21.4 percent). These figures indicate that in the
tourism sector, $2,523,200,000 was spent on lodging and $1,776,200,000 was spent on
food during 1999.32
Summary of Primary Research

The CCC Group conducted a survey during the Indianapolis Boat, Sport, & Travel Show.
The survey netted 112 successful respondents. Out of these, 69 percent were female and 31
percent were male. The most common age group surveyed was between the ages of 25 and
34, followed by 35 to 44. The rest of the age groups were evenly distributed. The most
common personal income range for those surveyed was $30,001 to $40,000. Approxi-
mately 52 percent vacation one to two weeks a year. Additionally, 37 percent actually va-
cation three to four weeks a year. Just over 97 percent of those surveyed take vacations to
the “great outdoors.” When asked about whom they vacation with, 76 percent responded

32. Tourism Expenditures (February 13, 2002) http://www.dted.state.mn.us/04x03x03.asp.
Marketing 773
that they vacation with friends. A close second were those who vacation with relatives
(64 percent). Finally, 46 percent indicated they vacation with children. Among recreational
activities enjoyed while on vacation, the most popular were camping, fishing, swimming,
boating, hiking/climbing, sunbathing, shopping, and canoeing. The majority (49 percent)
of respondents indicated they get away to the “great outdoors” one to three times a year. A
close second were those who get away 10 or more times (27 percent). The majority of those
surveyed fish 10 or more times a year. When asked about canoeing, 43 percent indicated
one to three canoe trips a year.
The remainder of the survey questions reflected whether or not people agreed with
certain statements. This was based on a scale 1 to 5, with 5 being that they strongly agree.
The majority (59 percent) indicated a 5 that they would enjoy staying in the “great out-
doors.” Additionally, most (31 percent) responded with a 5 that they would be willing to
travel to Northern Minnesota for this type of vacation. Further, 50 percent indicated a 5
that they would stay in a modern, but rustic cabin. Also, 56 percent indicated a 5 that they
would go boating while staying there. Thirty-eight percent indicated a 5 that they were in-
terested in exploring the BWCAW. Thirty percent of those asked indicated a 5 that they
would be interested in using an outfitting service for this. Most respondents (42 percent)
indicated a 5 that they would be interested in driving up the North Shore Scenic Route that
runs along Lake Superior in order to get to this destination. The last question was open
ended and asked for additional thoughts about staying at a cabin resort on a lake in North-
ern Minnesota. Some of their comments were: “it’s wonderful,” “I love Northern Min-
nesota and Thunder Bay,” “owner’s personalities,” and “I have been, it’s wonderful.” These
survey results are positive and indicate that the majority of those surveyed would in fact
like to visit a resort like that of Rockwood.
Competition
Macro View
Rockwood is involved in the tourism industry and therefore competes with all forms of
tourism choices that vacationers have to choose from. To spend their vacation, potential
customers have the option of choosing to go to the Gunflint Trail or to some other desti-
nation. For example, Disneyland, Las Vegas, and cruise lines all compete with Rockwood
and the Gunflint Trail for the vacationer’s dollars. Therefore, Rockwood will compete with
these other destinations by advertising with a Web site, newsletters, and by attending sport
shows. Additionally, the primary purpose of the Gunflint Trail Association is to use the
lodging tax revenues to market the area as a major tourism destination. It advertises in nu-
merous state and national travel and tourism outlets.
Lodging—Micro View
On a more local level, once a potential customer has chosen the Gunflint Trail as their des-
tination, including Rockwood, there are a total of 23 lodging establishments along the 60-
mile Gunflint Trail. Some of these businesses have as few as 1 cabin and one has as many
as 24. These businesses all work together as a network to build the area into a strong des-
tination point. There are only so many cabins at this destination point, and if one resort is
booked, they send people to another resort that they recommend. This is one reason why
it is important for the CCC Group to build and maintain good relationships with the
tourism industry there on the Gunflint Trail. The attitude and atmosphere that the CCC
Group has run into when talking with industry professionals and other resort owners is
that they don’t see one another as competition, but rather allies to create a better tourism
destination. Even with this mind-set, once tourists decide on the Gunflint area, these re-
sorts do actually compete with each other for the money spent there.
As previously mentioned, there are a total of 23 resorts along the Gunflint Trail of-
fering lodging accommodations. These resorts offer lodging accommodations in the form
of cabins. Some important summary information about these competing resorts is located
in Table 1.
Table 1
Type of Amenity Number of Resorts That Offer It Does Rockwood Currently?
Housekeeping Cabins 23 Yes
Bed & Breakfast Rooms 1 No
Housekeeping Suites 2 No
American Plan Cabins 6 No
Private Docks with Cabins 8 Yes
Private Decks on Cabins 15 Yes
Private BBQ Grill with Cabins 7 Yes
A Main Lodge 14 Yes
Main Lodge Is a Historic One 5 Yes
Free Boat with Cabin Rental 5 Yes
Dining Facilities 9 Yes
Fireplaces in Cabins 17 Yes
Beach at the Resort 16 Yes
Complete Outfitting 10 Yes
Bunkhouses 11 Yes
Resorts with Campsites 8 No
Sauna/Spa 17 Yes
To estimate how these businesses have prospered over the last several years, the lodg-
ing tax revenues are once again referenced. From 1993 to 1997, these revenues grew 20.9
percent. Since 1998, the revenues have increased by 7.3 percent.34 This growth is a good in-
dicator of how the lodging businesses along the Gunflint have been doing over the last
decade.
Outfitting
Along the Gunflint Trail there are 10 different canoe-outfitting companies that active out-
door adventurers have to choose from. All of these businesses offer different packages to
entice the interested vacationer. All boast that they have top quality, lightweight equip-
ment to make trips into the BWCAW more pleasant. Most offer lodging accommodations
in the form of bunkhouses the night before the departure into the BWCAW along with a
hot breakfast the morning of departure. Additionally, most outfitters provide access to
several entry points into the BWCAW. Table 2 provides information about each specific
outfitter.
34. Cook County Lodging Tax Report (Cook County, MN: County Auditor-Treasurer, 2002).
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Table 2
Cost of
Bunk- Hot Multiple Kevlar Kevlar Packages
Name of Outfitter houses Breakfast Entry Points Canoes (7 Days)
Boundary Country Trekking No No Yes No N/A
Clearwater Yes Yes Yes Yes $565
Gunflint Northwoods Yes Yes Yes Yes $581
Hungry Jack Yes Yes Yes Yes $505
Nor’Wester Yes Yes Yes Yes $441
Old Northwoods No No Yes No N/A
Rockwood Yes Yes Yes Yes $555
Superior-North Yes Yes Yes Yes $484
Voyageur Yes Yes Yes Yes $390
Way of the Wilderness Yes No No Yes $399
Estimated Market Share
Lodging
In this micro picture of the competition facing Rockwood, there are 22 other resorts offer-
ing cabin accommodations. The total number of cabins located along the Gunflint Trail is
154. There are very few other lodging options other than cabins (3 B&B rooms), but the
targeted customers will be those that will stay in cabins since that is all Rockwood offers in
the form of lodging. Of these 154 cabins, Rockwood has 8 for rental, or roughly 5.2 per-
cent of the entire lodging facilities. This is the estimated market share for Rockwood’s
lodging aspect of the business.
To estimate the dollar value on the entire market size for the lodging businesses along
the Gunflint Trail, the total lodging tax revenues for the most recent year with complete in-
formation (2000) was taken and divided by 3 percent to arrive back at the total sales for
lodging. To explain, the formula the lodging tax district uses to get the tax revenue figure is:
Total Lodging Sales .03 = Lodging Tax Revenue
Therefore, the CCC Group reversed this tax revenue back into the total lodging sales with
the following formula:
Lodging Tax Revenue / .03 = Total Lodging Sales
This figure came to $2,954,781 for the entire Gunflint Trail lodging sales. However, this fig-
ure includes businesses that are open year round. In order to figure the sales generated
from May through October, the revenues for these months for the year 2001 were added
and then divided by the 3 percent rate. This adjusted figure came to $2,222,396. Estimat-
ing that the CCC Group can capture the above-mentioned 5.2 percent market share, this
represents $115,565 in projected lodging sales for Rockwood.
Dining
To estimate the market share for Rockwood’s dining sales, the CCC Group found that there
was a total of $8.3 billion in gross sales for the tourism industry in 1999.35 Out of this, the

majority (30.4 percent) was spent on lodging. The next biggest chunk of money spent
was toward food (21.4 percent). These figures indicate that in the tourism sector,
$2,523,200,000 was spent on lodging and $1,776,200,000 was spent on dining during
1999.36 The CCC Group developed a formula to project annual sales for the dining aspect
of Rockwood by taking the previously mentioned $115,565 in projected lodging sales for
Rockwood and dividing it into the total lodging for the state for a six-month period. This
yielded the percentage of lodging out of the entire state that Rockwood actually captures
during its open season:
$115,565 / ($2,523,200,000 / 2) = .000091601
Next, this percentage was applied to the six-month figure for statewide tourism dining
mentioned above:
($1,776,200,000 / 2) .000091601 = $81,351
This figure represents the total projected sales that the dining aspect will add to Rock-
wood’s seasonal revenue.
Outfitting
For the outfitting aspect, there are a total of 10 outfitters offering pretty much the same
services and will compete on the same level, distinguished only by marketing and adver-
tising. This means that with equivalent marketing, Rockwood should be able to attain at
least 10 percent of the outfitting market along the Gunflint Trail. Historically, Rockwood
has averaged $84,108 over the last three seasons. Assuming that is 10 percent of the outfit-
ting market along the Gunflint Trail, the projected market size comes to $841,080.
B. Marketing Plan
Marketing Strategy
The Atmosphere
The marketing plan for Rockwood has been carefully thought out to target those specific
customers who will be interested in pursuing a wilderness vacation. There are two cate-
gories specifically, those interested in high adventure wilderness trips, such as canoe ex-
cursions into the Boundary Waters, and those who enjoy the wilderness but prefer to stay
in accommodations that offer the creature comforts of home.
The main focus for Rockwood’s marketing strategy will be to reach those potential
targeted customers before they make their vacation decisions. This will allow Rockwood to
inform them about a vacation on the Gunflint Trail and specifically at Rockwood. The goal
is to persuade these potential customers to visit and stay at Rockwood versus going to some
other wilderness destination or staying at another resort along the Gunflint Trail. This will
be accomplished by demonstrating through the Gunflint Trail Association’s advertising
that the Gunflint Trail is one of the last remaining true wilderness areas that isn’t overrun
with tourists, pollution, or billboards. Also, this will be complemented by the fact that
Rockwood is located in the heart of Superior National Forest and surrounded by the
“Boundary Waters Canoe Area Wilderness” (BWCAW). Given this, Rockwood is the ideal
wilderness getaway along the Gunflint Trail, providing luxurious cabin rentals and offer-
ing the finest canoe outfitting and access into the BWCAW.

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Rockwood will inform potential customers of the relaxing atmosphere located there.
Many vacationers who opt to stay in the great outdoors usually end up in crowded camp-
grounds or state parks and have very close neighbors and a busy highway not too far away.
Rockwood will be on the other end of the spectrum providing customers with true relax-
ation in the great outdoors. This will be complemented by the plethora of activities to en-
gage in while staying there. From hiking and bird watching to fishing and canoeing, visi-
tors will find themselves having fun in the true great outdoors.
Rockwood is also very appealing due to its rich history in the northwoods. Estab-
lished in 1926, Rockwood takes visitors back in time to when things were simpler and less
chaotic, escaping the hustle and bustle of today’s climate. The main lodge at Rockwood is
one of only five remaining original hand-built log lodges located along the Gunflint Trail.
Inside the lodge, visitors step into a relaxing atmosphere and will enjoy the original furni-
ture and northwoods décor. This lodge is right on the water’s edge and has large windows
that overlook Poplar Lake. The cabins at Rockwood provide customers with the creature
comforts of home while staying in the great outdoors. These cabins are also furnished with
northwoods décor providing an atmosphere that is appealing to guests.
The outfitting side of the business will provide the very best to those looking to ex-
plore the BWCAW. Catering to both the experienced canoeist and the novice, Rockwood
will accommodate wilderness adventurers with all their needs. From top-of-the-line gear
to expert advice and training, Rockwood outfitters will provide its customers with friendly
service that they can depend on.
The CCC Group will ensure its guests and outfitting customers of superior quality
accommodations and services by providing the very best there is to offer and personal at-
tention to all their needs. The CCC Group will live on the property and be available to its
guests at any time of the day for help, comments, questions, conversation, etc. The CCC
Group will also provide a survey in every cabin for customers to complete. These surveys
will be compiled and evaluated for any future changes in the business. Also, there will be
repair cards located in each cabin in order to find out from customers if there are any
problems that need attended to. The CCC Group will take pride in the location, activities
to be enjoyed there, and the family business itself. These types of things will help the guests
feel comfortable and enjoy their time spent at Rockwood.
Another advantage that Rockwood will promote through its various forms of adver-
tising is that “half the fun is getting there.” This is because of the beautiful drive that
tourists encounter on their way up the Scenic Route of the North Shore of Lake Superior
and then followed by the dense forest of the Gunflint Trail, where they will likely encounter
moose and other wildlife.
The marketing approach the CCC Group will take comes from a careful analysis of
the competition. After reviewing what the competition offers, it was concluded that very
few resorts actually offer all-inclusive packages that include meals with their lodging. The
one resort that offers several packages of this type is the most successful along the Gunflint
Trail. Therefore, this approach was taken in order to get more out of each customer. This
“getting more out of each customer” was explained earlier as the way that the CCC Group
was going to grow Rockwood. By adding the dining aspect, which the current owners don’t
provide, it will increase the average customer’s inclination to stay at Rockwood. In fact, an
article written by someone who stayed there indicated that because the resort didn’t serve
food, they left to eat at another resort.37 With the CCC Group now offering dining, more
37. Daisann McLane, In Minnesota, Due North (September 6, 1998) http://www.nytimes.com/library/travel/frugal/

ft980906.html.
guests will opt for the packages that follow or just enjoy the dining while passing through.
As a result, they will spend their money on food at Rockwood, rather than at the compe-
tition. This idea of providing everything the customer needs is the very basis for the pro-
jected growth seen later in the financials.
To help exploit this dining aspect, Rockwood will provide several different packages
tailored to different targeted customers. By offering different packages, customers will be
able to choose the options they want while staying at Rockwood and/or using the canoe
outfitting services. These packages are explained in detail in the pricing subsection.
Pricing
Cabins
Careful consideration has been given to the pricing strategy that Rockwood will approach.
After a diligent evaluation of the competition’s pricing, the CCC Group has determined
what they feel is a very competitive pricing strategy. After the acquisition of Rockwood, the
CCC Group plans to honor the former owner’s pricing strategy for the first year for those
customers who have already made reservations at this price. This is because the CCC
Group does not want to come across as rate-raising new owners to any repeat customers.
However, the previous owners did not offer the benefits of all-inclusive packages and it
may be appealing to these repeat customers to change their reservations to one of these.
For any other customers who make reservations following the acquisition, they will have
the option to choose from any of the following packages. The prices for these packages are
located in the Marketing Appendix.
American Plan (All Meals)

This plan includes a waterfront cabin of the customer’s choice (subject to availability),
breakfasts, lunches (with the option of packed lunches to go), dinners, linen and maid
service on Wednesdays, boat or aluminum canoe, and use of all resort facilities. A boat
motor can be reserved for $25 per day. The pricing for this plan varies per amount of peo-
ple and the particular cabin chosen. Please refer to the Marketing Appendix for complete
information on pricing for this plan.
Modified Plan (with Dinners)

This plan includes a waterfront cabin of the customer’s choice (subject to availability), din-
ners in the lodge, linen and maid service on Wednesdays, boat or aluminum canoe, and use
of all resort facilities. A boat motor can be reserved for $25 per day. The pricing for this
plan varies per amount of people and the particular cabin chosen. Please refer to the Mar-
keting Appendix for complete information on pricing for this plan.
Housekeeping Plan (No Meals)

This plan includes a waterfront cabin of the customer’s choice (subject to availability),
linen and maid service on Wednesdays, boat or aluminum canoe, and use of all resort fa-
cilities. A boat motor can be reserved for $25 per day. The pricing for this plan varies per
amount of people and the particular cabin chosen. Please refer to the Marketing Appendix
for complete information on pricing for this plan.
Honeymoon Packages
A honeymoon at Rockwood is very special. The CCC Group will do everything within its
means to make this experience for newlyweds one to remember always. Rockwood will
Marketing 779
provide lodging in the honeymoon cabin (subject to availability), breakfasts, lunches (with
the option of packed lunches to go), dinners, linen and maid service on Wednesdays, boat
or aluminum canoe, use of all resort facilities, and all the privacy the newlyweds need. A
boat motor can be reserved for $25 per day. Additionally, a complimentary bottle of cham-
pagne will be provided for the first night at Rockwood. Instead of having to dine in the
lodge for breakfast, the newlyweds will have the option to have it delivered to the cabin in
a covered basket at a time they specify. There will also be wine and appetizers delivered to
the cabin before dinner. This package is offered in four- or seven-night versions. The four-
night version includes the first night’s stay in a bed & breakfast located in either Duluth or
the Twin Cities followed by three nights at Rockwood. The seven-night version includes
the first night’s stay in a bed & breakfast located in either Duluth or the Twin Cities fol-
lowed by five nights at Rockwood and then one more night at a bed & breakfast on your
way back south. The CCC Group has made arrangements with several B&Bs in Duluth and
the Twin Cities for this package. Information on these particular B&Bs is located in the
Marketing Appendix. The pricing for this plan is subject to availability of the honeymoon
cabin. Please refer to the Marketing Appendix for complete information on pricing for this
package.
Anniversary Package
Rockwood’s Anniversary Package offers couples the chance to get away from the distrac-
tions of home and celebrate their anniversary, milestone, or other special accomplish-
ments. This all-inclusive deal includes lodging in the honeymoon cabin (subject to avail-
ability), breakfast delivered to the cabin (if they wish), lunches (with the option of packed
lunches to go), dinners, linen and maid service on Wednesdays, boat or aluminum canoe,
and use of all resort facilities. A boat motor can be reserved for $25 per day. Please refer to
the Marketing Appendix for complete information on pricing for this package.
Family Package
Rockwood’s Family Package offers the family a chance to get away to the wilderness and
enjoy each other’s company. With the Family Package, the family cook gets a treat, as all the
meals are included in this package. The family has their choice of cabin (subject to avail-
ability), breakfasts, lunches (with the option of packed lunches to go), dinners, linen and
maid service on Wednesdays, boat or aluminum canoes, and use of all resort facilities. A
boat motor can be reserved for $25 per day. There is also a special guided fishing trip on
Wednesday, just for the kids, which allows some time for the parents to spend by themselves.
The cost of this package varies per amount of people and the particular cabin chosen. Please
refer to the Marketing Appendix for complete information on pricing for this package.
Fishing Packages
There is excellent fishing on Poplar Lake. Guests can take advantage of this by selecting
from one of Rockwood’s fishing packages. There are two different fishing packages avail-
able, Deluxe and Standard.
The Deluxe Fishing Package includes a waterfront cabin of the customer’s choice
(subject to availability), breakfasts, lunches (with the option of packed lunches to go), din-
ners, linen and maid service on Wednesdays, aluminum canoe, and use of all resort facili-
ties. In addition, a deluxe 16' fishing boat and motor (trolling motor, too) with upholstered
seats and live well will be provided. The cost of this package varies per amount of people
and the particular cabin chosen. Please refer to the Marketing Appendix for complete in-
formation on pricing for this package.
The Standard Fishing Package includes all of the same features as the Deluxe Fishing
Package with the exception of meals. The cost of this package varies per amount of people
and the particular cabin chosen. Please refer to the Marketing Appendix for complete in-
formation on pricing for this package.
Seasonal Discounts
At Rockwood, there are seasonal discounts available on the American Plan, Modified Plan,
and the Housekeeping Plan for those choosing to vacation in early spring or late fall. For
the month of May, a 15 percent discount is applied, and for the month of October, a 10
percent discount is applied. These discounts are figured in on the price sheets located in
the Marketing Appendix.
Deposit Policy
A deposit in the amount of 25 percent of the total cost of lodging package is required for
each reservation. Reservations may be made using a credit card to hold the reservation for
10 days. If a personal check is preferred to hold the reservation, it must be received within
10 days after a phone reservation has been made. If a customer must cancel and a 60-day
notice in writing is received prior to the scheduled arrival date, the deposit minus a $50
service charge will be refunded. Otherwise a refund, minus the $50 service charge, will only
be issued if Rockwood is able to fill the entire reservation with another guest.
Canoe Outfitting
In order for Rockwood to compete with the other nine canoe outfitters along the Gunflint
Trail, the CCC Group has carefully evaluated the services and prices of the competition in
order to arrive at a competitive pricing strategy for the outfitting side of the business.
There are several packages to choose from including complete and partial outfitting. For
complete information about the pricing, please refer to the Marketing Appendix.
Rockwood Kevlar Plus Package

This is the finest equipment package available. This package includes:
• 38 lb. Wenonah Kevlar Canoe
• Bent shaft paddles
• Stearns vests
• Ultra-light Eureka nylon tent
• Wiggy’s Lamalite sleeping bags
• Ultra-light Therm-a-rest
• Nylon rain ponchos
• Granite Gear packs
• Cascade Designs baja bags
• Stainless cook kit
• Lexan utensils & utensil roll
• Folding saw, folding water jug
• Single burner stove and fuel
• Choice of meals from deluxe menu
• Tarp and rope
• First aid kit
Marketing 781
• Showers and sauna after your trip

• One night’s stay in priv. bunkhouse
• Breakfast in lodge
• Free use of all facilities
• Personalized routing
• Complete orientation
• Transportation to and from any entry point along the Gunflint
• Canoe seat back rests
• Water purifier
• Canoe camping journal
Please see the Marketing Appendix for complete information about the pricing.
Complete Deluxe Outfitting Package

This is an excellent outfitting package—better than most ultra-light outfitting packages.
This package includes:
• 55 lb. Wenonah Royalex canoe and paddles
• Stearns vests
• Ultra-light Eureka nylon tent
• Hollofill sleeping bags
• Therm-a-rest mattress
• Lightweight Cordura packs
• Waterproof bags
• Aluminum cook kit
• Utensils & utensil roll
• Folding saw, folding water jug
• Single burner stove and fuel
• Rain poncho
• Choice of meals from deluxe menu
• Tarp & rope
• First aid kit
• Showers and sauna after your trip
• One night’s stay in priv. bunkhouse
• Breakfast in lodge
• Free use of all facilities
• Personalized routing
• Complete orientation
• Transportation to and from any entry point along the Gunflint
Please see the Marketing Appendix for complete information about the pricing.
Kevlar Plus Equipment Package

This package is essentially the Rockwood Kevlar Plus Package with the exception of food and
lodging. Please see the Marketing Appendix for complete information about the pricing.
Deluxe Equipment Package

This package is essentially the Complete Deluxe Outfitting Package with the exception of
food and lodging. Please see the Marketing Appendix for complete information about the
pricing.
Food Package
This package includes food from the deluxe menu. This is an option for those enthusiasts
who come prepared with their own equipment but need the lightweight freeze-dried food
for their journey. Please see the Marketing Appendix for complete information about the
pricing for this package.
Food and Canoe Packages

These packages offer only the canoe and food. This is a popular option for those who have
their own equipment with the exception of the canoe and food. There are three different
packages to choose from, specified by canoe type. They are aluminum, Royalex, and Kevlar.
Please see the Marketing Appendix for complete information about the pricing for these
packages.
Partial Outfitting
For those adventurers who only need a certain item(s). Any of Rockwood’s equipment may
be rented individually. For complete information on the rates for specific items, please
refer to the Marketing Appendix.
Lakeside Terrace Bunk Room

Rockwood offers accommodations for a good night’s sleep before or after canoe trips. This
comfortable, private room is fully carpeted with each room having its own bathroom and
shower, and a great view of Poplar Lake. A deposit of $20 per night per room is applied.
Discounts and Other Points

All rates are based on calendar days. All rates are based on a minimum of two persons, and
additional persons are extra. There is a deduction of 20 percent for children 12 and under,
accompanied by two adults. All packages do not include the cost of fishing licenses or
BWCAW permits. There is a 15 percent discount for not-for-profit groups. Additionally,
repeat guests are granted a 5 percent discount off their packages. Early reservations are en-
couraged so Rockwood can make application for entry permits and have everything
packed and ready for the departure. A deposit of $50 per person for complete outfitting
and food packages is required. A deposit of $20 per person is required on partial outfitting
packages. These deposits will be refunded, minus a $20 service charge, if notice of cancel-
lation is made 14 days prior to departure date.
Advertising and Promotion
State Help
Rockwood is in an ideal situation when it comes to advertising. In the tourism industry,
Minnesota is one of the best states to be located in. The Minnesota Office of Tourism
(MOT) spends a great deal of money each year in an effort to boost the tourism dollars
generated by the state. Currently, “the mission of the MOT is to market Minnesota as a
travel destination, sustain and increase tourism revenues, and lead tourism policy and
Marketing 783
product development. MOT markets Minnesota in North America and internationally as

a travel destination to consumers, tour operators, and travel agents and promotes coverage
of Minnesota by domestic and international trade media. The tourism industry is an ac-
tive partner in the state’s tourism marketing initiatives and participates in marketing ef-
forts through a variety of partnership activities.”38 The MOT’s strategies to increase
tourism follow.
2001 Marketing Strategies

1. Leverage the celebrity and widespread recognition of Governor Ventura to promote
travel to and throughout the state.
2. Develop year-round tourism business by promoting Minnesota’s core travel activities
that keep the summer season strong, and by expanding promotion of activities in non-
peak travel periods.
3. Provide high quality travel information and services that generate incremental sales and
achieve a competitive advantage in the marketplace.
4. Develop initiatives to attract new travel audiences and assist the tourism industry in
product development.
5. Increase international travel to Minnesota by broadcasting promotion in target mar-
kets.
6. Develop public and private sector involvement in tourism marketing partnerships and
cooperative opportunities to extend resources and to maximize impact.
7. Provide strategic leadership for tourism initiatives and related policy development.
As previously mentioned, the MOT utilizes partnerships to promote its tourism in-
dustry. “Media used [to do so] include print, broadcast, direct mail and the Internet. Re-
gional editions of magazines are selected based on reader demographics and activity in-
terests. In-state broadcast, both television and radio, are available through a partnership
agreement with the Minnesota Broadcasters Association (MBA). Television ads are also
placed in selected out-of-state markets.”39 The partnership with the MBA allows the MOT
to have access to $1 million in radio airtime and $180,000 in television airtime.
To help boost Minnesota’s popular fishing industry, the MOT has paired up with sev-
eral media. This includes “TV advertising on In-Fisherman and Babe Winkleman’s Good
Fishing; print ads in In-Fisherman and Walleye Insider, a postcard mailing in North Amer-
ican Fisherman’s shared mailing program; and a targeted direct mailing. The 2001 Min-
nesota Fishing Guide is published by Star Tribune. Plans for 2002 will be formulated in
July–September 2001.”40 Similar efforts are made to promote cross-country skiing and
snowmobiling.
Advertising Opportunities provided by Minnesota. There are several advertising opportu-

nities provided by the state of Minnesota to businesses in the tourism industry. First,
there is the Explore Minnesota Travel Guide. This resource primarily targets out-of-state
visitors. It is a full-color guide promoting Minnesota’s diverse travel destinations and ac-
tivities. There is a circulation of 350,000 copies. Second, there is the Minnesota Explorer
Travel Newspaper. This media is produced three times a year and each addition has over
38. Tourism—Marketing Goals and Strategies 1999 (February 13, 2002) http://www.dted.state.mn.us/04x04.asp.
39. http://www.dted.state.mn.us, opcit.
40. Ibid.
370,000 copies that are inserted into the Wednesday issue of the Star Tribune. Third,
there is a “Minnesota Fishing” edition that is also done with the help of the Star Tribune.
This edition includes 300,000 copies that go out in the Sunday, March 4 edition of the
newspaper. Additionally, 100,000 copies will be distributed to sport shows, travel infor-
mation centers, and in response to general requests for fishing information. Third, there
is a “Minnesota Canoeing” edition published in partnership with Minnesota Monthly.
This edition is inserted into the January issue of Minnesota Monthly with a circulation
of about 70,000. Additionally, the MOT will distribute 35,000 copies at sport shows, etc.
These three mentioned pertain specifically to Rockwood but are just some of the op-
portunities that the state provides. All together, there are even more opportunities than
what is listed here that the state of Minnesota provides for tourism organizations and
businesses.
The Gunflint Trail Association

The Gunflint Trail Association (GTA) plays a major role in the success of Rockwood’s
business. This association not only provides guidance to the tourism industry along the
Gunflint, but also plays a key role in advertising. The GTA is the one who puts up the
money to promote the Gunflint Trail in the aforementioned state opportunities for ad-
vertising. This organization collects a 3 percent lodging tax from the sales of all lodging
along the Gunflint Trail. This tax revenue goes directly to advertising and promotes the
Gunflint Trail as a major tourism destination for those looking for getaways to the great
outdoors.
Rockwood’s Sign
At the turnoff for Rockwood, there is a very nice wooden sign. According to Bill Martin-
son of the Minnesota Department of Transportation, there is an annual average daily traf-
fic volume of 360 vehicles that pass by the sign for Rockwood.41 He stated that this figure
is distorted because in winter there is much less traffic than summer, and this number is
an annual average. He also stated that the figure might be as much as 50 percent higher in
the summer season. This figure expanded into a yearly total is 131,400 vehicles that pass
by Rockwood’s sign on the Gunflint Trail. Most people already have reservations at some
resort by the time they pass this sign, but it will still be used to inform them of Rockwood’s
existence. More importantly, they may choose to look into staying there in the future. Ad-
ditionally, the CCC Group has allowed a budget of $500 during the first season to modify
this sign to include advertising for the dining aspect. This way, even those who are staying
at other resorts that might not offer dining or all-inclusive packages, might be persuaded
to stop at Rockwood and eat.
Rockwood’s Web site

In addition to the advertising accomplished by the GTA, Rockwood also has its own Web
site. Here in the twenty-first century, most people turn to the Internet to research their va-
cation destinations. This is precisely why Rockwood has its own Web site. This Web site can
be viewed at http://www.rockwood-bwca.com. There, potential guests can peruse the Web
site to see pictures and details about what Rockwood has to offer, as well as contact infor-
mation to make reservations or ask additional questions. Boreal Access will be the dial-up
41. Phone conversation with Bill Martinson, April 5, 2002.

Marketing 785
provider as well as the Web host for the Web page. They have indicated that it will cost $80
per month for a combination of their best packages.
Sport Shows
Another way the CCC Group plans to reach the target markets is to attend sport shows in
the Midwest. This is a good way to get out in the field and inform potential customers
about Rockwood and the Gunflint Trail. These sport shows are managed by Renfro Pro-
ductions and are offered in several major metropolitan areas in the Midwest. Renfro was
contacted to inquire about the cost of booth space at these shows and they indicated the
costs would be between $500 and $750 depending on the show.42 The CCC Group will set
up a booth at the most appropriate shows (three a year) to take reservations and build new
relationships with future customers. This will require an initial outlay of $800 to construct
a booth display. After which, it is estimated that $5,850 will be needed each year to cover
sport show-related expenses including travel and lodging.
Color Brochures
The CCC Group will also have full-color brochures printed up and available at the sport
shows, the lodge, and for general requests about information. These brochures will have
descriptions of the resort and services, prices, and contact information. It is estimated that
this will cost $2,500 per year for printing services.
Newsletters to Previous Guests

Rockwood will keep a complete list of all customers who have stayed at the resort and
those who have inquired about the resort. Annual newsletters, including an email version,
will be sent out to all of those in this database. This newsletter will keep guests updated on
what is going on at Rockwood, upcoming events, and generally remind them to make their
reservation soon. The e-mail version will be utilized as much as possible to cut down on
expenses. However, an annual budget of $1,000 will be set aside for this communication
with customers.
Advertising and Promotion Budget

The cost of advertising and promoting the business will be relatively inexpensive due to the
amount of advertising done by the GTA. However, there will be a substantial amount of
money spent on other forms of advertising. An estimated annual budget of $10,850 will be
set aside for the aforementioned forms of advertising. This allotment will be designated to
the following areas:
Web site $ 1,500

Sport show expenses 5,850
Newsletter expenses and mailings 1,000
Color brochures 2,500
Total for advertising $10,850
In addition to these figures, the 3 percent lodging tax will be put towards advertising
by the GTA.
42. Personal communication with Kevin Renfro, April 8, 2002.

V. location
A. Location
Located 30 miles north of Grand Marais, Minnesota, Rockwood is located right on the
Gunflint Trail in the heart of the Boundary Water Canoe Area Wilderness (BWCAW). The
exact address is:
Rockwood Lodge & Canoe Outfitters
50 Rockwood Road
Grand Marais, MN 55604
Advantages
Rockwood is located inside Superior National Forest. Each year, there are approximately
2.4 million visits to this forest.43 In addition, Rockwood is surrounded by the major tourist
destination, the BWCAW. “National Geographic Traveler magazine named the BWCAW as
one of the top 50 travel destinations in the world.”44 This is federally protected land where
vacationers retreat every year. This region yields some of the most dense wilderness and
spectacular wildlife in the country. From bears to wolves to moose to bald eagles, this part
of the country is known by many as “God’s Country.” This awe-inspiring area is a perfect
location for a “northwoods” resort.
Another advantage of this location is that it is situated halfway up the Gunflint Trail
with easy access from the road. This aspect provides several benefits. First, this not only
makes it easy to find, but also more visible to the general public. That is, those traveling
along the Gunflint Trail will most likely pass the Rockwood sign (and turnoff) on the way
to or from their destination. According to Bill Martinson of the Minnesota Department of
Transportation, there is an annual average daily traffic volume of 360 vehicles that pass by
the sign for Rockwood.45 He stated that this figure is distorted because in winter there is
much less traffic than summer, and this number is an annual average. He also stated that
the figure might be as much as 50 percent higher in the summer season. This figure ex-
panded into a yearly total is 131,400 vehicles that pass by Rockwood’s sign on the Gunflint
Trail. Secondly, this location provides a strategic position for the outfitting business. Nes-
tled into a cove on Poplar Lake, Rockwood has direct access into the BWCAW. Also, located
within a half hour’s drive from any entry point from the Gunflint into the BWCAW, Rock-
wood will be able to provide the option of a van shuttle for those who choose to use a dif-
ferent entry point. Third, because this location is halfway up the Gunflint Trail, this will be
ideal for the expansion into both the restaurant and the winter business. Again, this is due
to the easy access from the road along with the fact that more people—potential cus-
tomers—will pass by here than, for example, at the north end of the Gunflint Trail where
it is a dead end road. This will especially play a big part in the winter when catering to all
of the people who pass along the trail on cross-country skis and snowmobiles, should the
CCC Group decide to expand into winter operations.
Still one more advantage can be seen in this location and summed up by the phrase,
“half the fun is getting there.” For most tourists visiting this area, they will find themselves
43. Dave Tucci, Summary of National Visitor Use Monitoring Results for the Superior National Forest (Minneapolis, MN:
Forest Service, 2001).
44. Explore Minnesota 2002 Travel Guide, 49.
45. Phone conversation with Bill Martinson, April 5, 2002.
Location 787
driving up the North Shore of Lake Superior. “The North Shore Scenic Drive along Lake
Superior has been named an All-American Road, one of only 15 in the U.S., for its spec-
tacular views of this great lake, wooded hills and waterfalls.”46 Every year, approximately
1.7 million passenger vehicles pass through Grand Marais, which is along this remote sce-
nic route and is also the turnoff for the Gunflint Trail.47 From waterfalls and lighthouses
to hiking and trout fishing, there is a whole range of things to visit and do on the journey
up the North Shore. With Superior National Forest on one side of the road and Lake Su-
perior on the other, this scenic drive provides a wonderful journey for tourists on their way
to the Gunflint Trail and the BWCAW.
Zoning
Rockwood Lodge & Canoe Outfitters is located on parcel 51-401-4210, which is zoned as
Resort Commercial/Residential. “The principal purpose of the RC Resort Commercial
District is to provide for the specific commercial activity of resorts, lodges, and outfitters.
Residential uses and limited service oriented commercial uses are also allowed.”48
Taxes
There are four applicable taxes to the location. In the State of Minnesota, there is a sales tax
of 6.5 percent. Locally there is a county tax of 1 percent. Additionally, resorts operating on
the Gunflint Trail who collect income from room or cabin sales must pay a special tax to the
Lodging Tax District. This tax revenue gets collected by the county and channeled through
to the Gunflint Trail Association. This special lodging tax is 3 percent and the entire revenue
is used by the Gunflint Trail Association to pay for marketing to promote business at these
resorts. Additionally, there is property tax. This figure is based on the assessed value of the
property, which the county assessor does annually. According to Carol Pratt of the Cook
County Assessor’s Office, the assessed value currently is $577,100 and this will be used to
calculate taxes for 2003. Currently, there are taxes of $4,188 due for this year.49
B. Proximity to Supplies
With 20+ resorts on the 60-mile Gunflint Trail being serviced by suppliers, Rockwood will
have no trouble getting supplies. To better understand the makeup of Rockwood’s suppli-
ers, the supplies are broken down into the following three categories: lodge and general
supplies, outfitting, and gift shop. The lodging supplies will come from food and beverage
distributors that deliver to the Lodge. All of the supplies needed for the outfitting opera-
tion will be available through mail order. The gift shop merchandise will also be ordered
through mail order suppliers.
C. Access to Transportation
Rockwood is located right on the Gunflint Trail, the only road in this region that navigates
Superior National Forest and the BWCAW. Rockwood has private parking at all of the cab-
ins in addition to a small parking lot (12 spaces) at the Lodge. There is additional parking
on the premises just a couple hundred feet from the Lodge that serves as bunkhouse and
overflow parking.
46. Explore Minnesota 2002 Travel Guide, 10.

47. Minnesota Department of Transportation: Trunk Highway Traffic Volume Map, 2000.
48. Cook County Zoning Ordinance, Article 4.
The Gunflint Trail, a.k.a. County Road 12, is a designated Scenic Route in Minnesota
and is accessed by another Scenic Route, Highway 61, which travels along the North Shore
of Lake Superior. This highway starts in Duluth, Minnesota, and is accessed by the nation’s
interstate and highway networks. Following is a brief summary of approximate distances
from some major cities.
City Miles
Chicago 590
Des Moines 500
Duluth 113
Fargo 420
Grand Forks 375
Indianapolis 760
Kansas City 700
Minneapolis/St. Paul 260
Omaha 640
St. Louis 865
Winnipeg 530
Since the majority of tourists visiting this area of Minnesota come from other parts of
Minnesota or adjacent states, and air travel is less favored since 9-11-01, it is expected that
driving to this destination will be the most popular choice of transportation. Although
many will make the drive, international travelers and those outside of what they consider
to be an acceptable driving range will still have the option of air travel to shorten their trip.
For the tourists visiting the Gunflint Trail who must fly, the Minneapolis/St. Paul air-
port is a major hub for air travel. In Minneapolis, travelers have their choice of major do-
mestic airlines including Air Tran Airways, America West, American, American Trans Air,
Continental, Delta, Frontier, Northwest, United, and US Airways. This will ensure a com-
petitive price for their airfare. Currently, for the first week in June the round-trip airfare
from Indianapolis to Minneapolis/St. Paul is quoted as $218.00 from Northwest Airlines.
Some of the car rental companies located at the airport in Minneapolis include Alamo,
Avis, Budget, Dollar, Hertz, and National. From the Twin Cities, the tourist will have a 260-
mile drive, of which 113 miles are on scenic routes.
VI. management
A. Management Team—Key Personnel
All of the management team will live on the premises and therefore the salaries are low be-
cause the cost of living will be included in employment at Rockwood. This cost of living
includes shelter, utilities, etc. All members of the team are also provided with health in-
surance through a comprehensive plan from Blue Cross & Blue Shield of Minnesota.
General Manager
The General Manager of Rockwood will be Mr. Jason B. Correll. Mr. J. B. Correll has a
Bachelor’s Degree from Ball State University in Entrepreneurship from the Department of
Management. Ever since Mr. J. B. Correll was a young boy, he has always enjoyed the “great
outdoors.” He is an avid camper, fisherman, canoeist, mountain biker, skier, and more. Mr.
J. B. Correll will be responsible for all aspects of running the business. This will include,
but not be limited to, the following.
Management 789
General Duties
• Overseeing daily operations
• Server (restaurant)
• Backup outfitting manager
• Housekeeping (Wednesday & Saturday)
• General maintenance
Administrative
• Supplier/vendor relations
• Marketing
• Web site maintenance
• Human resources
Mr. J. B. Correll will be compensated with an annual salary of $20,000.
Assistant Manager
As an equal partner, Mr. John R. Correll, with almost 30 years of business experience, will
bring much wisdom and competence to the family business. Mr. J. R. Correll, like his two
sons, is also an avid outdoorsman. He enjoys every aspect of being outdoors, especially
boating and fishing. Mr. J. R. Correll will be responsible for strategic planning, but with
special emphasis on community/public relations. This will include, but not be limited to,
the following.
General Duties
• Overseeing daily operations
• Fishing guide
Administrative
• Community/Public relations
• Strategic management
• Write newsletters
• Safety manager
Mr. J. R. Correll will be compensated with an annual salary of $10,000.
Host and Gift Shop Manager

Providing an essential input into the family business, Mrs. Nancy Correll is an excellent
choice to be the host and gift shop manager at Rockwood. Mrs. Correll, wife of Mr. J. R. Cor-
rell, has nearly 30 years of business experience to bring to Rockwood. With her warm-
hearted personality, Mrs. Correll will provide unparalleled hospitality and is the perfect can-
didate to be the host of the Lodge. Mrs. Correll will be responsible for the following duties.
General Duties
• Hostess/gift shop manager
• Welcome and check-in
• Reservations for the cabins
Administrative
• Accounting/payroll
Mrs. Nancy Correll will be compensated with an annual salary of $10,000.
Outfitting Manager
Heading up the outfitting aspect of the business is Mr. Tony Correll. Mr. T. Correll is the
ideal person to run the day-to-day operations of the outfitting business due to his
charisma and passion for the wilderness and outdoor activities. He possesses a love for the
outdoors that radiates onto others. This passion for his outdoor hobbies, along with his
experience in sales and operations, qualifies Mr. T. Correll for the role of outfitting man-
ager. As an equal partner, he will be responsible for helping with many aspects of running
the business, but with primary emphasis on the outfitting business. In particular, this will
include, but not be limited to, the following.
General Duties
• Trip scheduling/planning
• Wilderness instruction
• Shuttle to other entry points
• Maintenance
• Backup fishing guide
Administrative
• Outfitting marketing planning
• Outfitter supplier relations
Mr. T. Correll will be compensated with an annual salary of $20,000.
Restaurant/Kitchen Manager
Filling the position of restaurant manager is Mr. Jason Partin. Now at age 30, he has 14
years’ experience working in the food industry. His expertise in the kitchen will provide
Rockwood with consistently good quality food. He is practically family and will fit right
into this family business. He will be responsible for, but not be limited to, the following.
General Duties
• Food preparation and presentation
• Backup server
Administrative
• Developing the menu
• Food inventory/ordering
Mr. Partin will be compensated with an annual salary of $15,000.
B. Legal Structure
The legal structure of CCC Group will be a Limited Liability Corporation. This structure
will provide the CCC Group with the limited liability of a corporation and the tax advan-
tages of a partnership.
Rockwood Lodge & Canoe Outfitters is a family owned and operated business. Mr.
Jason B. Correll is the General Manager, but an equal partner in the business. The name
CCC Group comes from first letter of the last names of the three main partners, Jason,
John, and Tony. These three partners all have an equal share in the business. Together they
will devote their expertise full-time to the business as owners and operators.
Financial 791
C. Board of Advisors
An informal board of advisors will be assembled in order for the CCC Group to draw on
outside expertise for consultation and advice. This board will include the former owners
who operated the resort for 30 years, a seasoned entrepreneur restaurant owner, an ac-
countant, a lawyer, and an Internet Web site designer. The CCC Group will also work with
the Gunflint Trail Association and the Congress of Minnesota Resorters, which make
themselves available to the owner-operators of resorts in the area and offer many services
from marketing to business development.
The Austins, the couple who formerly owned and operated Rockwood, live on the
same lake and will make themselves available to the CCC Group for advice and general
knowledge about the business. They have a vested interest in seeing Rockwood succeed.
This will be a casual arrangement not having any costs.
Dave Sumpter, a relative and retired entrepreneur who owned and operated several
restaurants and inns throughout his career, will sit on the board as an advisor. Since he is
family, he will not charge anything for his contributions. His knowledge of the business
will provide the CCC Group with guidance in the development of the business as a pre-
mier place to stay and eat on the Gunflint Trail.
The services of Robert E. Spry, a CPA based in Grand Marais, will be called on in the
beginning months of operation to make sure that the CCC Group has a proper account-
ing system in place. This accounting service will also be used every year to file tax docu-
ments with the government.
Richard Johnson, an attorney in Grand Marais, will also be included on the board of
advisors for any legal matters that come into question. He will provide consultation for the
CCC Group in the beginning of its ownership to ensure that all aspects of the business are
legal and any propriety rights are protected.
Judy Johnson, of the Gunflint Trail Association, will also be on the advisory board for
the CCC Group. This association provides assistance to individuals in this business and
can be very helpful to promote the business.
Chad Jones, a Web designer and manager, will sit on Rockwood’s board of advisors
to provide suggestions for the company’s Web site. Mr. Jones will provide essential help in
marketing the business through the increasingly important advertising medium known as
the Internet.
And finally, the broker selling the business, who has owned several resorts and out-
fitting businesses, will continue to work with the CCC Group after the acquisition.
VII. financial
A. Financial Assumptions and Methodology
In order to provide a better understanding of how the CCC Group arrived at the financial
projections that are in this section, this detailed list of assumptions has been provided. Fol-
lowing these assumptions, financial ratios and a break-even analysis are presented.
Income Statement Assumptions
Sales
In order to allocate the projected sales appropriately for this seasonal business, the occu-
pancy rates from the last three years were calculated and averaged together to determine
what percentage each month actually contributes to the total sales for the season. The fol-
lowing three-year averages are listed and were applied to all projected seasonal sales in
order to arrive at an accurate estimate for monthly sales figures.
May 4.37%
June 19.54%
July 24.99%
August 27.7%
September 19.54%
October 3.86%
Cabin Rental.50 In order to arrive at the projected annual sales from cabin rental, the Cook
County Lodging Tax Report was used. More specifically, the revenues generated by the 3
percent Gunflint Trail Lodging Tax between May and October were taken and then divided
by 3 percent in order to arrive back at the total revenue generated by lodging along the
Gunflint Trail. This figure came to be $2,222,396, which was multiplied by Rockwood’s
projected market share of 5.2 percent. This yielded a projected market share of $115,565
for Rockwood during the first year.
Deposits. Deposits are made to hold the reservation of cabins. These deposits are applied
to the cost of the cabin rental. Therefore, customers have paid a portion of their stay up
front in order to hold their reservation. The deposit policy requires 25 percent of the
cabin rental cost to be put down. It is assumed that deposits will be made two months in
advance. The total for both deposits and cabin rental equals the projected cabin rental
sales.
Outfitting. In order to project the sales from outfitting, the average sales figure was taken
from the last three years. This average came to $84,108 and this is the figure that the CCC
Group believes it can easily obtain during the first year, considering the business generated
over $92,000 in 2001. A copy of the last three years of income statements is located in the
Acquisition Appendix.
Dining. For this new aspect of the business, projections were obtained by a formula de-
veloped by the CCC Group. This formula uses the most recent figure available for total
sales in Minnesota’s tourism industry. This figure was $8.3 billion in 1999.51 Additionally,
according to the Minnesota Department of Trade and Economic Development, 30.4 per-
cent of this was spent on lodging and 21.4 percent was spent on food.52 Therefore, there
was a total of $2,523,200,000 in lodging sales and $1,776,200,000 in food sales. Since Rock-
wood is only open six months of the year, these annual figures were divided by two to ar-
rive at a six-month representative. From there, Rockwood’s projected six-month cabin
sales were divided into the state’s figure to determine its share of the entire state’s lodging
market for a six-month period. The resulting percentage was then applied to the state’s six-
50. The projected sales for cabin rental and dining actually mesh together due to the methods of calculation. This is be-
cause of the all-inclusive packages that offer food and lodging as one package. In other words, for the sake of simplic-
ity, these projections are kept separate, but actually, much of the dining figure represents sales from all-inclusive
packages.
Financial 793
month food sales in order to project Rockwood’s sales for food. This figure came to
$81,352. The following formula illustrates this:
Rockwood’s $ Lodging / State’s Six-Month $ Lodging = Rockwood’s Share
$115,565 / $1,261,600,000 = .000091601
Rockwood’s Share State’s Six-Month Food Sales = Rockwood’s Food Sales
.000091601 $888,100,000.20 = $81,352
Next, beer sales needed to be added into this food sales figure. In order to do this, the in-
dustry averages for beer consumption were used to arrive at a formula to project the sales
from beer at Rockwood. According to T. J. Elbert, who has done lots of research on the beer
industry for his business plan, restaurants do 17 percent of all on-premise sales, and 52.5
percent of all on-premise sales are from beer. The CCC Group came up with the following
formula:
17% 52.5% = 8.93% of restaurant sales come from beer, on average
Given that total dining comes from beer and food, then:
Total Dining .9107 = Food Sales, and
Total Dining .0893 = Beer Sales
Therefore, Total Dining = Food Sales / .9107, or
Total Dining for Rockwood = $81,352 / .9107
Total Dining for Rockwood = $89,329
This figure of $89,329 is what the CCC Group projects for the first year.
Gift Shop Sales. To calculate the first year’s sales for the gift shop, the average sales from the
last three years were figured. It is assumed that the CCC Group will be able to obtain this
figure of $25,345 during the first year.
Store Sales. Again, it is assumed that the CCC Group will be able to attain the first year’s
sales that are equivalent to the average from the last three years. This average figure came
to $9,928.
ELS Commissions from License Sales. This small profit center is a result from the sales of
DNR permits through the Electronic Licensing System. For this projection, Drew, from the
Minnesota Department of Natural Resources, was contacted. He informed the CCC Group
that the commissions earned last year were $231.50. Assuming that the CCC Group will be
creating more business due to its aggressive marketing plan and general expansion of the
business, it is projected that a slight increase in these sales will be feasible. The assumed
sales figure is $250 for the first year.
Years 2 and 3. After the first year, sales are projected to increase due to the CCC Group’s
aggressive marketing and new services such as dining. As these business improvements
take hold, it is reflected in the projected sales. In the following table, are the projected in-
creases in each of the described profit centers.
Profit Center Year 2 Year 3
Cabin rental 6% 8%
Outfitting 6% 8%
Dining 6% 8%
Gift shop 3% 3%
Store 10% 10%
ELS 6% 8%
Cost of Goods Sold

For the cost of goods sold, the following methods were used for each of the different
categories.
Outfitting. To calculate the average cost of goods sold for this profit center, the income
statement for the 2001 season was used.53 According to the books, the total outfitting ex-
penses were $7,005.61 and the total sales generated by outfitting were $92,907.43. This re-
sults in a cost of goods sold of 7.54 percent.
Dining. To calculate the cost of goods sold for this area of the business, the industry aver-
age for eating and drinking places was used. Specifically, bizstats.com indicated that for
proprietorships, the average cost of goods sold was 41.9 percent.54 It is assumed that this
figure is a good representative for Rockwood’s dining function.
Gift Shop Merchandise. Here again, the 2001 income statement was used to arrive at a per-
centage for the cost of goods sold. In 2001, there was a total gift shop merchandise expense
of $10,331.58 and a sales figure of $16,944.39. This results in a cost of goods sold of 60.97
percent. It was assumed that the level of inventory was kept constant.
Store. For this figure, the CCC Group compiled the entire inventory it will carry. The cost
and selling price of each product was then calculated and averaged as a whole. This re-
sulted in an average cost of goods sold of 63 percent. For a list of inventory with costs and
selling prices, please reference the Financial Appendix.
Other (Honeymoon Packages). For this, the cost of one night’s room for all of the partici-
pating B&Bs were averaged together to figure the expense involved with the honeymoon
package. This came to $149. Additionally, $20 was added for additional expenses involved
with the package. Since there is a seven-night option that involves two nights in a B&B, an
additional amount of 1/2 of a night’s stay was added into this figure to account for half of
the packages being the seven-night version. It was assumed that 1/2 of these packages would
be the seven-night version. This resulted in a total cost of $244 per honeymoon package.
Operating Expenses
Presented next is a list of expense items and a brief description of how the costs were
calculated.
Advertising. For advertising, a total of $10,850 will be budgeted for each year. This is allo-
cated as follows:
Web site $1,500

Sport shows $5,850
Newsletters and mailings $1,000
Color brochures $2,500
Accounting Services. During the first month as owners, the CCC Group will spend $500 to
briefly consult with an accountant. After that, the CCC Group will budget $2,500 every
March for professional tax filing.
53. 2001 income statement for Rockwood.

54. Food Service and Restaurant Business Statistics 2002 (April 11, 2002) http://www.bizstats.com/restaurants.htm.
Financial 795
Credit Card Fees. Here, the average credit card fees were taken from the last three years of
financials and averaged. The same was done with the total sales. Then, the average credit
card fees were divided by the average credit card service charge of 2.5 percent. This resulted
in the average sales on credit cards. This figure came to $56,640 and was divided by the av-
erage amount of sales. Therefore, $56,640 was divided by the average total sales of
$241,358 and this resulted in a value of 23.47 percent. However, this value seemed to be
low, so to make it more realistic, the figure was doubled to 47 percent. Therefore, 47 per-
cent of all sales are subject to an average credit card fee of 2.5 percent.
Depreciation. This figure is best explained by the depreciation schedule located in the Fi-
nancial Appendix.
Fuel for Boats. For this expense, an average was taken from the last three years and then in-
creased by 10 percent to account for increased business and the increased cost of fuel.
Health Insurance. The value here was quoted for a group policy from Blue Cross & Blue
Shield of Minnesota.
Insurance (Property/GL/Etc.). This expense is based off a quote given by the independent
insurance agent that currently handles the resort.
Insurance (Liquor Liability and Workers’ Compensation). The same agent who quoted the
previous insurance amount also quoted this expense. It was estimated to be $1,000 per year
for liquor liability and $4 to every $100 of payroll for workers’ compensation insurance.
Legal Services. During the first year as owners, the CCC Group has budgeted $2,500 for
business incorporation and legal consulting.
Licenses. There are several licenses that apply to this business. The following table illus-
trates the costs associated with each license and when it is due.
License Fee Due

Cigarettes retail $50/season April
Food, beverage, and lodging $413/season April
Liquor license (county) $60/season April
Liquor license (state) $20/year April
Federal tax stamp (liquor) $250/year June
Federal tax stamp (first two One-time in April
months of first year) $41.67 during the first year
Outfitter guide permit $75/season April
Cooperators agreement to
issue BWCAW permits Free April
Office Supplies. This expense covers paper, forms, print cartridges, software, and other
miscellaneous items. This is assumed to be $800 each year and is expensed in quarterly dis-
bursements.
Other. This figure was added to the financials as a buffer in case of unexpected expenses.
The amount budgeted is $200 per month during the off season and $500 per month dur-
ing the open season.
Social Security Tax. This figure is 7.65 percent of salaries every month.
State Unemployment Tax. In Minnesota, the state unemployment tax is 1.29 percent of
each employee’s payroll for the first $21,000.
Federal Unemployment Tax. This tax rate is 0.8 percent of the first $7,000 per employee.
Phone. For this expense, an average was taken from the last three years, and this is esti-
mated to be $415 per month for all phone charges.
Property Tax. Carol Pratt from the Cook County Assessor’s office was contacted for this
information.55 The tax for 2002 is $4,188, or $349 per month. For 2003 and beyond, this
figure is calculated to be $5,542, or $462 per month.
Repairs and Maintenance. This expense was figured by taking an average of the last three
years. This figure came to $4,422. However, to cover any additional unexpected repairs, this
was rounded to $4,500 and expensed as $750 per month during the six months of the open
season. Additionally, during the first year there is $800 budgeted in January for the build-
ing of the sport show booth and materials. Also, during the first year there is $500 bud-
geted to modify the sign located by the edge of the road.
Salaries. All of the salaries add up to $75,000 per year or $6,250 per month.
Supplies. Included in this expense is the cost of detergent, soap, paper towels, napkins, toi-
let paper, cleaning chemicals, rags, scrub pads, etc. This is estimated to be $628 per month
during the open season.
Trash Service. For this expense, the costs over the last three years were averaged and this
came to $86. Therefore, a budget of $90 per month has been accounted for.
Utilities. Again, an average was taken from the last three years and this came to $6,940.
However, with the increased use of the kitchen for the dining aspect, this value was in-
creased by 8 percent to arrive at $7,495. For simplicity, this amount was rounded to $7,500.
It is assumed that 60 percent of this figure will be during the open season and 40 percent
during the closed season.
Vehicle Gas. The company vehicle will only be used during the open season and will be
used to transport canoeists and canoes, as well as occasional trips to Duluth for supplies.
This is an assumed amount of $2,400 per year or $400 per month.
Vehicle Insurance. This expense was quoted through Progressive Insurance for a commer-
cial vehicle. The cost of this is $884 annually and paid in three installments.
Operating Expenses in Years 2 and 3. As the CCC Group increases the business at Rockwood,
some expenses will rise as the level of business rises. These are summarized as follows.
Expense Year 1 Year 2 Year 3
Fuel for boats $788/mo 6% to $835/mo 8% to $902/mo
Phone $415/mo 2% to 423/mo 2% to $432/mo
Supplies $628/mo 5% to 660/mo 5% to $693/mo
Utilities $7,500/yr 5% to $7,875/yr 5% to $8,269/yr
Vehicle gas $400/mo $450/mo $500/mo

Financial 797
Interest Payments. There are three different balances that Rockwood will pay interest on.
First, there is the real estate loan. This loan has an APR of 7.5 percent. Second, the equip-
ment loan has an APR of 6.0 percent. Third, there is a line of credit up to $200,000 and this
has an APR of 6.5 percent. Steve Moore, the Senior Vice President of Star Financial Bank,
indicated these values.
Cash Flow Assumptions
Cash Receipts
These values represent net sales from the income statement. Bank borrowings are used
from the company’s line of credit to cover the expenses during the seasonal fluctuations.
Cash Disbursements
This section includes the total cost of goods sold, changes in inventory levels other than
those held constant, all operating expenses (less depreciation), principle and line of credit
payments made, interest payments, tax payments, and any dividends paid.
Balance Sheet Assumptions
Cash
Cash is taken from the ending cash balance on the cash flow statement.
Inventory
It is assumed that all inventory will remain constant with the exception of the dining
(food) inventory, which is depleted at the end of the season. This is reflected in the change
in inventory subsection to the disbursements section, located on the cash flow statement.
Goodwill
The value of goodwill represents the difference between the purchase price of $1,350,000,
and the estimated value of the business, including inventory that came with it.
Other Assets
These other long-term assets are recorded down at their book value estimated by the CCC
Group in the Acquisition Section.
Computer
This asset was contributed by the CCC Group and has a book value of $1,500.
Loan and Line of Credit

These values represent the outstanding balances on both loans and the line of credit.
Contributed Capital
The CCC Group contributed 20 percent of the purchase price, which came to $270,000. In
addition, the above-mentioned computer was contributed. Therefore, the CCC Group
contributed a total of $271,500.
Retained Earnings
This value reflects the accumulated net income from the income statement.
B. Ratios
Ratio* Year 1 Year 2 Year 3
Profitability Ratios
Profit Margin Ratio –5.4% –1.3% 4.1%
Return on Assets –1.3% –.3% 1.2%
Return on Equity –6.9% –1.8% 5.7%
Liquidity Ratios**
Current Ratio .32 .33 .32
Quick Ratio .005 .02 .02
Debt Utilization Ratios
Debt to Total Assets 80.7% 80.6% 78.8%
Times Interest Earned .76 .94 1.23
* Balance sheet formulas use the month of October, the end of the open season.
** Snapshot of the end of October—figure does not include bank borrowings that
help with seasonal cash flow. Therefore, the figure appears distorted.
C. Break-Even Analysis
The break-even analysis was performed using the combination of sales, total cost, and fixed
cost. Variable costs included were cost of goods sold, credit card fees, and fuel for boats. All
other operating expenses plus interest were considered to be fixed. Total cost was the sum of
both these types of costs. The chart below illustrates these three factors over the first three
years. The break-even point was reached in the third year after sales surpassed $348,155.
Break-Even Analysis
400,000
350,000
300,000
250,000
Sales
200,000 Total cost
Fixed cost
150,000
100,000
50,000
0
0 1 2 3
Year 0 1 2 3
Sales — 324,525 343,633 370,036
Total cost 270,596 342,139 348,155 352,170
Fixed cost 270,596 270,596 272,625 271,386
Variable cost — 71,543 75,530 80,784
Income Statement
November 2002–October 2003
November December January February March April May June July August September October Year End
Sales:
Cabin Rental $— $— $— $— $ — $ — $3,788 $16,936 $21,660 $24,009 $16,936 $3,346 $86,675
Deposits — — — — 1,263 5,645 7,220 8,003 5,645 1,115 — — 28,891
Outfitting — — — — — — 3,675 16,435 21,018 23,298 16,435 3,247 84,108
Dining — — — — — — 3,904 17,455 22,323 24,744 17,455 3,448 89,329
Gift Shop — — — — — — 1,108 4,952 6,334 7,021 4,952 978 25,345
Store (Bait, Tackle, Cigarettes, etc.) — — — — — — 434 1,940 2,481 2,750 1,940 383 9,928
ELS Commissions from License Sales — — — — — — 11 49 62 69 49 10 250
Net Sales — — — — 1,263 5,645 20,140 65,770 79,523 83,006 57,767 11,412 324,526
Cost of Goods Sold:

Outfitting (Food and Fuel) — — — — — — 277 1,239 1,585 1,757 1,239 245 6,342
Dining (Food and Beverage) — — — — — — 1,636 7,314 9,353 10,368 7,314 1,445 37,430
Gift Shop Merchandise — — — — — — 676 3,019 3,862 4,281 3,019 596 15,453
Store (Bait, Tackle, and Convenience Goods) — — — — — — 273 1,222 1,563 1,733 1,222 241 6,254
Other (Honeymoon Packages) — — — — — — 244 488 488 244 — — 1,464
Total Cost of Goods Sold — — — — — — 3,106 13,282 16,851 18,383 12,794 2,527 66,943
Gross Margin — — — — 1,263 5,645 17,034 52,488 62,672 64,623 44,973 8,885 257,583
(continued)
Financial
799
800

Income Statement
appendix
Operating Expenses:
Advertising 125 125 3,050 3,050 1,125 2,625 125 125 125 125 125 125 10,850
Accounting Services 500 — — — 2,500 — — — — — — — 3,000
Credit Card Fees — — — — 15 66 237 773 934 975 679 134 3,813
Depreciation 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 36,228
Fuel for Boats — — — — — — 35 154 197 218 154 30 788
Health Benefits 873 873 873 873 873 873 873 873 873 873 873 873 10,476
Insurance: Property/Liability/etc. — — 2,500 — — 2,500 — — 2,500 — — 2,500 10,000
Insurance: Liquor Liability — — 250 — — 250 — — 250 — — 250 1,000
Insurance: Workers’ Compensation 250 250 250 250 250 250 250 250 250 250 250 250 3,000
Legal Services 2,500 — — — — — — — — — — — 2,500
Licenses (liquor, resort, cigarette, etc.) — — — — — 660 — 250 — — — — 910
Office Supplies 200 — — 200 — — 200 — — 200 — — 800
Other 200 200 200 200 200 200 500 500 500 500 500 500 4,200
Social Security Tax 478 478 478 478 478 478 478 478 478 478 478 478 5,736
State Unemployment Tax 81 81 81 81 81 81 81 81 81 81 81 81 972
Federal Unemployment Tax 50 50 50 50 29 19 13 13 5 — — — 279
Phone 415 415 415 415 415 415 415 415 415 415 415 415 4,980
Property Tax 349 349 462 462 462 462 462 462 462 462 462 462 5,318
Repairs and Maintenance — — 800 — — 500 750 750 750 750 750 750 5,800
Salaries 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 75,000
Supplies (cleaning and laundry, paper products, etc.) — — — — — 628 628 628 628 628 630 — 3,770
Trash Service 90 90 90 90 90 90 90 90 90 90 90 90 1,080
Utilities 500 500 500 500 500 500 750 750 750 750 750 750 7,500
Vehicle Gas — — — — — — 400 400 400 400 400 400 2,400
Vehicle Insurance 346 — — — 269 — — — 269 — — — 884
Total Operating Expenses 16,226 12,680 19,268 15,918 16,556 19,866 15,556 16,261 19,226 16,464 15,906 17,357 201,284
Operating Profit (Loss) (16,226) (12,680) (19,268) (15,918) (15,293) (14,221) 1,478 36,227 43,446 48,159 29,067 (8,472) 56,299
Less: Real Estate Loan Interest — 5,310 5,300 5,291 5,281 5,271 5,261 5,252 5,242 5,232 5,222 5,211 57,873
Less: Equipment Loan Interest — 1,152 1,139 1,125 1,112 1,098 1,085 1,071 1,057 1,043 1,030 1,016 11,928
Less: Line of Credit Interest 76 163 287 395 498 618 677 548 380 185 93 197 4,117
Total Interest 76 6,625 6,726 6,811 6,891 6,987 7,023 6,871 6,679 6,460 6,345 6,424 73,918
Net Income Before Taxes (16,302) (19,305) (25,994) (22,729) (22,184) (21,208) (5,545) 29,356 36,767 41,699 22,722 (14,896) (17,619)
State Income Tax — — — — — — — — — — — — —
Federal Income Tax — — — — — — — — — — — — —
Net Income (Loss) $(16,302) $(19,305) $(25,994) $(22,729) $(22,184) $(21,208) $(5,545) $29,356 $36,767 $41,699 $22,722 $(14,896) $(17,619)
Statement of Cash Flows
Beginning Cash Balance $ — $ 717 $ 431 $ 456 $ 746 $ 581 $ 83 $ 134 $ 92 $ 268 $ 283 $ 279
Add: Receipts:
Period Revenues — — — — 1,263 5,645 20,140 65,770 79,523 83,006 57,767 11,412 324,526
Bank Borrowings 14,000 16,000 23,000 20,000 19,000 22,000 11,000 — — — — 19,200 144,200
Total Cash Available 14,000 16,717 23,431 20,456 21,009 28,226 31,223 65,904 79,615 83,274 58,050 30,891 —
Less: Disbursements
Cost of Goods Sold (Inv.) — — — — — — 3,106 13,282 16,851 18,382 12,794 2,527 66,942
Change in Inventory — — — — — 4,309 — — — — — — 2,809
Operating Expense 16,226 12,680 19,268 15,918 16,556 19,866 15,555 16,261 19,226 16,464 15,906 17,357 201,283
Less: Depreciation
Real Estate Principal Payment — — — — — — 3,078 3,117 3,156 3,195 3,236 3,276 19,058
Equipment Principal Payment — — — — — — 5,346 5,400 5,454 5,509 5,564 5,620 32,893
Line of Credit Payment — — — — — — — 23,900 31,000 36,000 17,000 — 107,900
Total Interest 76 6,625 6,726 6,811 6,891 6,987 7,023 6,871 6,679 6,460 6,345 6,424 73,918
Total Taxes — — — — — — — — — — — — —
Dividends Paid — — — — — — — — — — — — —
Total Cash Outflows 13,283 16,286 22,975 19,710 20,428 28,143 31,089 65,812 79,347 82,991 57,771 30,740 468,575
Cash Balance, Ending $ 717 $ 431 $ 456 $ 746 $ 581 $ 83 $ 134 $ 92 $ 268 $ 283 $ 279 $ 151 $ 154
Accumulated Line of Credit 14,000 30,000 53,000 73,000 92,000 114,000 125,000 101,100 70,100 34,100 17,100 36,300 36,300
Financial
801
802

appendix
Balance Sheet
November December January February March April May June July August September October
Assets
Current Assets:
Cash $ 717 $ 432 $ 457 $ 747 $ 582 $ 84 $ 135 $ 93 $ 269 $ 285 $ 282 $ 154
Gift Shop Inventory 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Outfitting Inventory 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Store Inventory — — — — — 2,809 2,809 2,809 2,809 2,809 2,809 2,809
Dining Inventory (food) — — — — — 1,500 1,500 1,500 1,500 1,500 1,445 —
Total Current Assets 7,717 7,432 7,457 7,747 7,582 11,393 11,444 11,402 11,578 11,594 11,536 9,963
Long-Term Assets:
Goodwill 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391
Property 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476
Buildings 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624
Furniture, Fixtures, and Equipment 202,350 202,350 202,350 202,350 202,350 202,350 202,350 202,350 202,350 202,350 202,350 202,350
Outfitting Equipment 100,159 100,159 100,159 100,159 100,159 100,159 100,159 100,159 100,159 100,159 100,159 100,159
Computer 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Less: Accumulated Depreciation (3,019) (6,038) (9,057) (12,076) (15,095) (18,114) (21,133) (24,152) (27,171) (30,190) (33,209) (36,228)
Total Long-Term Assets 1,341,481 1,338,462 1,335,443 1,332,424 1,329,405 1,326,386 1,323,367 1,320,348 1,317,329 1,314,310 1,311,291 1,308,272
Total Assets 1,349,198 1,345,894 1,342,900 1,340,171 1,336,987 1,337,779 1,334,811 1,331,750 1,328,907 1,325,904 1,322,827 1,318,235
Liabilities and Equity

Loan 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,071,576 1,063,059 1,054,449 1,045,745 1,036,945 1,028,049
Line of Credit 14,000 30,000 53,000 73,000 92,000 114,000 125,000 101,100 70,100 34,100 17,100 36,300
Total Liabilities 1,094,000 1,110,000 1,133,000 1,153,000 1,172,000 1,194,000 1,196,576 1,164,159 1,124,549 1,079,845 1,054,045 1,064,349
Stockholder's Equity
Contributed Capital 271,500 271,500 271,500 271,500 271,500 271,500 271,500 271,500 271,500 271,500 271,500 271,500
Retained Earnings (16,302) (35,606) (61,600) (84,329) (106,513) (127,721) (133,265) (103,909) (67,142) (25,441) (2,718) (17,614)
Dividends Paid — — — — — — — — — — — —
Total Equity 255,198 235,894 209,900 187,171 164,987 143,779 138,235 167,591 204,358 246,059 268,782 253,886
Total Liabilities and Equity $1,349,198 $1,345,894 $1,342,900 $1,340,171 $1,336,987 $1,337,779 $1,334,811 $1,331,750 $1,328,907 $1,325,904 $1,322,827 $1,318,235
Difference — — — — — — — — — — — —
Income Statement
Sales:
Cabin Rental $ — $ — $ — $ — $ — $ — $ 4,016 $17,952 $22,960 $25,449 $ 17,952 $3,546 $ 91,874
Deposits — — — — 1,339 5,984 7,653 8,483 5,984 1,182 — — 30,625
Outfitting — — — — — — 3,896 17,421 22,280 24,696 17,421 3,440 89,154
Dining — — — — — — 4,138 18,502 23,663 26,229 18,502 3,655 94,689
Gift Shop — — — — — — 1,141 5,101 6,524 7,231 5,101 1,007 26,105
Net Sales — — — — 1,339 5,984 21,333 69,645 84,206 87,885 61,162 12,080 $343,633
Cost of Goods Sold:

Gross Margin — — — — 1,339 5,984 18,064 55,637 66,426 68,474 47,642 9,410 272,977
(continued)
Financial
803
804

Income Statement
appendix
Operating Expenses:
Advertising 125 125 3,050 3,050 1,125 2,625 125 125 125 125 125 125 10,850
Accounting Services — — — — 2,500 — — — — — — — 2,500
Credit Card Fees — — — — 16 70 251 818 989 1,033 719 142 4,038
Depreciation 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 36,228
Fuel for Boats — — — — — — 37 163 209 231 163 32 835
Health Benefits 873 873 873 873 873 873 873 873 873 873 873 873 10,476
Legal Services — — — — — — — — — — — — —
Office Supplies 200 — — 200 — — 200 — — 200 — — 800
Other 200 200 200 200 200 200 500 500 500 500 500 500 4,200
Federal Unemployment Tax 50 50 50 50 29 19 13 13 5 0 0 0 279
Phone 423 423 423 423 423 423 423 423 423 423 423 423 5,076
Property Tax 462 462 462 462 462 462 462 462 462 462 462 462 5,544
Repairs and Maintenance — — — — — — 750 750 750 750 750 750 4,500
Salaries 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 75,000
Supplies (cleaning and laundry, paper products, etc.) — — — — — — 660 660 660 660 660 660 3,960
Trash Service 90 90 90 90 90 90 90 90 90 90 90 90 1,080
Utilities 525 525 525 525 525 525 788 788 788 788 788 788 7,878
Vehicle Gas — — — — — — 450 450 450 450 450 450 2,700
Less: Real Estate Loan Interest 5,201 5,191 5,181 5,170 5,160 5,149 5,139 5,128 5,117 5,106 5,096 5,085 61,723
Less: Equipment Loan Interest 1,002 988 973 959 945 931 916 902 887 872 858 843 11,076
Total Interest 6,490 6,558 6,652 6,736 6,815 6,890 6,924 6,759 6,543 6,306 6,173 6,256 79,102
Net Income Before Taxes (19,862) (19,384) (25,153) (22,687) (22,066) (19,639) (4,559) 32,435 40,462 45,505 25,388 (14,969) (4,529)
State Income Tax — — — — — — — — — — — — —
Federal Income Tax — — — — — — — — — — — — —
Net Income (Loss) $ (19,862) $ (19,384) $(25,153) $ (22,687) $(22,066) $(19,639) $(4,559) $32,435 $40,462 $ 45,505 $ 25,388 $(14,969) $ (4,529)
Beginning Cash Balance $ 154 $ 11 $ 646 $ 512 $ 844 $ 798 $ 678 $ 396 $ 758 $ 48 $ 281 $ 514
Add: Receipts:
Period Revenues — — — — 1,339 5,984 21,333 69,645 84,206 87,885 61,162 12,080 343,634
Bank Borrowings 16,700 17,000 22,000 20,000 19,000 18,500 11,000 — — — — 20,000 144,200
Less: Disbursements
Change in Inventory — — — — — 2,000 750 — — — (1,219) (1,531) —
Less: Depreciation (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (36,228)
Total Interest 6,490 6,558 6,652 6,736 6,815 6,890 6,924 6,759 6,543 6,306 6,173 6,256 79,102
Total Taxes — — — — — — — — — — — — —
Dividends Paid — — — — — — — — — — — — —
Financial
805
806

appendix
Balance Sheet
Assets
Current Assets:
Cash $ 11 $ 646 $ 512 $ 844 $ 798 $ 678 $ 395 $ 757 $ 47 $ 281 $ 512 $ 597
Store Inventory 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809
Dining Inventory (food) — — — — — 2,000 2,750 2,750 2,750 2,750 1,531 —
Long-Term Assets:
Goodwill 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391
Property 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476
Buildings 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624
Computer 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Total Assets 1,315,073 1,312,689 1,309,536 1,306,849 1,303,784 1,302,645 1,300,093 1,297,436 1,293,707 1,290,922 1,286,915 1,282,450

Loan 1,028,049 1,028,049 1,028,049 1,028,049 1,028,049 1,028,049 1,019,056 1,009,964 1,000,773 991,481 982,087 972,591
Line of Credit 53,000 70,000 92,000 112,000 131,000 149,500 160,500 134,500 99,500 60,500 40,500 60,500
Total Liabilities 1,081,049 1,098,049 1,120,049 1,140,049 1,159,049 1,177,549 1,179,556 1,144,464 1,100,273 1,051,981 1,022,587 1,033,091
Retained Earnings (37,476) (56,860) (82,013) (104,700) (126,765) (146,404) (150,963) (118,528) (78,066) (32,559) (7,172) (22,141)
Dividends Paid — — — — — — — — — — — —
Total Equity 234,024 214,640 189,487 166,800 144,735 125,096 120,537 152,972 193,434 238,941 264,328 249,359
Difference — — — — — — — — — — — —
Income Statement
Sales:
Cabin Rental $ — $ — $ — $ — $ — $ — $ 4,336 $ 19,388 $24,797 $27,485 $ 19,388 $ 3,830 $ 99,224
Deposits — — — — 1,445 6,463 8,266 9,162 6,463 1,277 — — 33,076
Outfitting — — — — — — 4,208 18,814 24,062 26,671 18,814 3,717 96,286
Dining — — — — — — 4,470 19,982 25,556 28,327 19,982 3,947 102,264
Gift Shop — — — — — — 1,175 5,254 6,719 7,448 5,254 1,038 26,888
Net Sales — — — — 1,445 6,463 22,993 75,003 90,670 94,615 65,841 13,007 370,037
Cost of Goods Sold:

Gross Margin — — — — 1,445 6,463 19,512 60,042 71,672 73,853 51,368 10,148 294,503
(continued)
Financial
807
808

Income Statement
appendix
Operating Expenses:
Advertising 125 125 3,050 3,050 1,125 2,625 125 125 125 125 125 125 10,850
Accounting Services — — — — 2,500 — — — — — — — 2,500
Credit Card Fees — — — — 17 76 270 881 1,065 1,112 774 153 4,348
Depreciation 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 3,019 36,228
Fuel for Boats — — — — — — 40 176 225 250 176 35 902
Health Benefits 873 873 873 873 873 873 873 873 873 873 873 873 10,476
Legal Services — — — — — — — — — — — — —
Office Supplies 200 — — 200 — — 200 — — 200 — — 800
Other 200 200 200 200 200 200 500 500 500 500 500 500 4,200
Federal Unemployment Tax 50 50 50 50 50 50 50 50 50 50 50 50 600
Phone 431 432 432 432 432 432 432 432 432 432 432 431 5,182
Property Tax 462 462 462 462 462 462 462 462 462 462 462 462 5,544
Repairs and Maintenance — — — — — — 750 750 750 750 750 750 4,500
Salaries 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 75,000
Supplies (cleaning and laundry, paper products, etc.) — — — — — — 693 693 693 693 693 692 4,157
Trash Service 90 90 90 90 90 90 90 90 90 90 90 90 1,080
Utilities 552 551 551 551 551 551 827 827 827 827 827 827 8,269
Vehicle Gas — — — — — — 500 500 500 500 500 500 3,000
Less: Real Estate Loan Interest 5,074 5,063 5,051 5,040 5,029 5,018 5,006 4,995 4,983 4,971 4,960 4,948 60,138
Less: Equipment Loan Interest 828 813 798 783 768 752 737 722 706 691 675 659 8,932
Total Interest 6,319 6,381 6,473 6,553 6,630 6,700 6,725 6,542 6,303 6,037 5,897 5,977 76,537
Net Income Before Taxes (19,726) (19,242) (25,009) (22,539) (21,832) (19,042) (3,103) 36,813 45,680 50,874 29,141 (14,145) 17,870
State Income Tax — — — — — — — — — 530 530 — 530
Federal Income Tax — — — — — — — — — — 2,343 — 2,343
Net Income (Loss) $ (19,726) $ (19,242) $ (25,009) $ (22,539) $(21,832) $(19,042) $ (3,103) $36,813 $ 45,680 $ 50,874 $ 26,268 $(14,145) $ 14,997
Beginning Cash Balance $ 597 $ 390 $ 367 $ 377 $ 357 $ 544 $ 521 $ 435 $ 561 $ 447 $ 421 $ 27
Add: Receipts:
Period Revenues — — — — 1,445 6,463 22,992 75,003 90,669 94,615 65,841 13,007 370,035
Bank Borrowings 16,500 16,200 22,000 19,500 19,000 18,000 9,600 — — — — 20,000 140,800
Less: Disbursements
Change in Inventory — — — — — 2,000 — 1,000 — — (1,346) (1,654) 3,308
Less: Depreciation (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (3,019) (36,228)
Total Interest 6,319 6,381 6,473 6,553 6,630 6,700 6,725 6,542 6,303 6,037 5,897 5,977 76,537
Total Taxes — — — — — — — — — — 2,873 — 2,873
Dividends Paid — — — — — — — — — — — — —
Financial
809
810

appendix
Balance Sheet
Assets
Current Assets:
Cash $ 391 $ 368 $ 378 $ 359 $ 547 $ 524 $ 438 $ 564 $ 450 $ 424 $ 30 $ 419
Store Inventory 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809 2,809
Dining Inventory (food) — — — — — 2,000 2,000 3,000 3,000 3,000 1,654 -
Long-Term Assets:
Goodwill 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391 463,391
Property 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476 254,476
Buildings 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624 322,624
Computer 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Total Assets 1,279,225 1,276,183 1,273,174 1,270,136 1,267,305 1,266,263 1,263,158 1,261,265 1,258,132 1,255,087 1,250,328 1,246,044

Loan 972,591 972,591 972,591 972,591 972,591 972,591 962,990 953,284 943,472 933,552 923,524 913,385
Line of Credit 77,000 93,200 115,200 134,700 153,700 171,700 181,300 152,300 113,300 69,300 48,300 68,300
Total Liabilities 1,049,591 1,065,791 1,087,791 1,107,291 1,126,291 1,144,291 1,144,290 1,105,584 1,056,772 1,002,852 971,824 981,685
Retained Earnings (41,866) (61,108) (86,117) (108,655) (130,486) (149,528) (152,632) (115,819) (70,140) (19,265) 7,004 (7,141)
Dividends Paid — — — — — — — — — — — —
Total Equity 229,634 210,392 185,383 162,845 141,014 121,972 118,868 155,681 201,360 252,235 278,504 264,359
Difference — — — — — — — — — — — —
Critical Risks 811
VIII. critical risks

A. Forest Fires
In 1999, a phenomenon known as a “blow-down” occurred where Rockwood is located. This
left thousands of trees on the ground, which increases the threat of forest fires to this region.
The effects of a forest fire on wooden structures surrounded by forest could be devastating.
• Along with the necessary insurance, steps have already been taken by the Minnesota De-
partment of Natural Resources and the former owners to develop the “wildfire sprinkler
system.” This system uses pumps and sprinklers to completely saturate the property with
lake water in a matter of minutes in order to protect all the assets on the property.
• Additionally, Rockwood has $100,000 loss of income insurance.
B. Weather
Since the weather is out of human control and unpredictable, this poses a threat for Rock-
wood. For example, there was a phenomenon known as a blow-down a few years back.
This is basically a wind that is as strong as that of a tornado. This could cause loss of busi-
ness due to customers avoiding the area for a period following an event of this nature. Also,
this could cause damage to the buildings/property. There is also the chance of having no
or little snow or warm weather during the winter months; winter recreation in the area
would be affected and fewer people would travel to this area for winter vacations.
• Alternatively, Rockwood has $100,000 loss of income insurance in case of such perilous
events as that of storm damage.
• Additionally, Rockwood will not be open for the winter season for the first three years,
but after that, incentives and discounts could be offered to fill vacancies caused by such
winter weather problems.
C. Cancellations
One of the most important considerations regarding critical risks is cancellations. Out of
control from the CCC Group, vacationers who hold reservations for cabins may decide to
cancel those reservations at the last minute. The effect of this could be devastating on rev-
enue. While there is a cancellation policy to help combat this, the CCC Group does not
want to settle for just the deposit.
• An alternative to the cancellation threat is to have a cancellation policy in place to retain
the deposit.
• Additionally, Rockwood will be aggressively marketing the business, and this will keep
vacancies to a minimum.
• Furthermore, the Gunflint Trail Association is very helpful in these situations. When they
are notified of a new vacancy, they can usually fill it with ease during the busy season.
D. The Boundary Waters Canoe Area Wilderness (BWCAW)

Although unlikely, future expansion of the BWCAW may pose a threat to the Rockwood
property. That is, the government may acquire the property in order to increase the size of
the wilderness preserve. The effects of this would be that Rockwood would be bought by
the government and put out of business.
• An alternative here is for the CCC Group to build a relationship and work with the gov-
ernment to preserve the right to operate the business on the current property that it has
operated on since 1926.
E. Environmental and Ecological

There is also a potential risk of unforeseeable environmental and ecological problems. For
example, there could be some type of chemical dumped in the lake Rockwood is located
on. Although highly unlikely that this type of disaster could actually happen in the feder-
ally protected wilderness, the effect could be devastating on the business.
• This is highly unlikely, but to prevent it within their control, the CCC Group will do its
share to educate visitors about pollution and spills in the natural environment.
• Additionally, Rockwood has $100,000 loss of income insurance in case of such drastic
events.
IX. milestone schedule

July 2002 Sign purchase agreement and begin due diligence period
October 2002 Conclude due diligence period
Start the negotiations with current owners
November 2002 Close on the loan and purchase of Rockwood
Establish a line of credit of $200,000
Begin transition of ownership
Pay first salaries ($6,250 per month)
Develop new accounting system for business
Begin aggressively implementing new marketing plan
Begin building relationships with the local industry, the pre-
vious owners, suppliers, and possible new suppliers
December 2002 Make first interest payment
April 2003 Receive and pay for first supplies from vendors (dining)
Renew and apply for all applicable licenses
May 2003 Open for first season as new owners/management
All-inclusive packages are offered for first time at Rockwood
Restaurant opens with family style dining and limited hours
Beer is available in the lodge for the first time since 1997
Pay first double payment of principle
October 2003 Conclude first season as new owners/management and
reach sales of $324,525
Compile customer survey and financial performance data to
determine any new business strategies for the next season
May 2004 Open for second season
October 2004 Conclude second season and reach sales of $343,633
May 2005 Open for third season
October 2005 Conclude third season and reach sales of $370,036
Appendices 813
appendices
Acquisition Appendix
Subj: Rockwood Lodge

Date: 3/13/2002 9:24:57 AM US Eastern Standard Time
From: carol.pratt@co.cook.mn.us
To: Misterjbc@aol.com
Sent from the Internet (Details)
Jason—
I am sending you a copy of the field card today on Rockwood Lodge. We do not use the
field cards to record values any longer but the building information, a map, etc. are on the
field card.
The current estimated market value on Rockwood Lodge is $577,100 for assessment year
2002, taxes payable in 2003. The taxes due this year are based on the 2001 value and are
$4,188 for the year.
NORDIC APPRAISAL SERVICE, INC. REAL ESTATE APPRAISAL

SELF-CONTAINED COMPLETE APPRAISAL ROCKWOOD LODGE
November 18, 1998
Mr. Gordon Winzenburg, Senior Credit Underwriter

CreditAmerica Savings
P.O. Box 1330
Walker, Minnesota 58484
RE: Rockwood Lodge

825 Gunflint Trail
Grand Marais, Minnesota 55604
Our File #N8026
Dear Mr. Winzenburg
In accordance with your request, an inspection and self-contained appraisal has been made of the above-
referenced property for the purpose of estimating the market value of the fee simple interest. Based upon
an inspection of the property and the factors influencing value, and in consideration of the special condi-
tions and extraordinary assumptions listed below and on page #10, it is our opinion that the subject
property has market values as follows:
MARKET VALUE TABLE
VALUE TYPE EFFECTIVE DATE MARKET VALUE

“As Is” July 1, 1998 $1,670,000
“As Completed” July 1, 1999 $1,750,000
MARKET VALUE (BREAKDOWN)
Land $425,000
Buildings $637,000
Furniture, Fixtures & Equipment (FF & E – RND) $213,000
Outfitting Operation $475,000
TOTAL MARKET VALUE $1,750,000
Appendices 815
Outfitting Equipment Values

Item Quantity New $ Adjusted $ Total Adjusted Value
Kevlar Wenonah Canoes Valued At: 65%
MN III 1 $2,295 $1,492 $1,491.75
MN II 4 $2,095 $1,362 $5,447.00
Champlain 2 $2,095 $1,362 $2,723.50
Spirit II 2 $1,945 $1,264 $2,528.50
Sundowners 3 $2,095 $1,362 $4,085.25
Advantage (solo) 1 $1,595 $1,037 $1,036.75
Prism (solo) 1 $1,595 $1,037 $1,036.75
Itasca 1 $2,295 $1,492 $1,491.75
Royalex Wenonah Valued At: 65%

Adirondace 6 $945 $614 $3,685.50
Spirit II 7 $1,095 $712 $4,982.25
Sundowner 1 $1,045 $679 $679.25
Old Town Campers 2 $699 $454 $908.70
Aluminum Canoes 15 $499 $324 $4,865.25

Aluminum V-Bottom 14' Boats 7 $699 $454 $3,180.45
16' Deluxe Lund Fishing Boats 2 $6,930 $7,000 $14,000.00
Motors
Evinrude 6 H.P. 4 $1,074 $300 $1,200.00
Johnson 7.5 H.P. 1 $1,499 $500 $500.00
Johnson 4 H.P. 1 $999 $350 $350.00
Min Kota Trolling Motors 2 $199 $199 $398.00
Paddles Valued At: 85%

Bentshaft 20 $120 $102 $2,040.00
Kayak 2 $150 $128 $255.00
Regular 100 $50 $43 $4,250.00
Stearns Life Vests 85 $50 $43 $3,612.50

Canoe Seat Backs 12 $50 $43 $510.00
Tents 35 $100 $85 $2,975.00
Cots 4 $35 $30 $119.00
Tarps 23 $15 $13 $293.25
Waterjugs 12 $10 $9 $102.00
Stoves 20 $40 $34 $680.00
Saws 16 $25 $21 $340.00
First Aid Kits 9 $25 $21 $191.25
Map Cases 11 $15 $13 $140.25
Collapsable Water Buckets 5 $20 $17 $85.00
Water Filters 6 $60 $51 $306.00
Journals 100 $8 $7 $680.00
Compasses 4 $10 $9 $34.00
Thermal Bags 4 $15 $13 $51.00
Cook Kits 18 $20 $17 $306.00
Griddles 10 $15 $13 $127.50
Therm-A-Rest Pads 29 $35 $30 $862.75
(continued)
Outfitting Equipment Values Continued

Sleeping Bags Valued At: 85%
K-Plus Package 21 $150 $127.50 $2,677.50
Deluxe Package 52 $75 $63.75 $3,315.00
Group 20 $50 $42.50 $850.00
Packs Valued At: 85%

Duluth Packs 37 $100 $85 $3,145.00
Granite Gear Packs 30 $150 $128 $3,825.00
Canoe Trailers 2 $1,500 $800 $1,600.00

1995 Chevy Suburban 1 N/A $12,195 $12,195.00
Totals:
Total Adjusted Value of Outfitting Equipment $100,159.00

Income Statement Data
From January 1 through December 31, 1999–2001
Vertical Vertical Horizontal Horizontal
Analysis Analysis Analysis Analysis
2000 2001 1999–2000 2000–2001
Account 1999 2000 2001 (%) (%) (%) (%)
Sales:
Cabin Rental $119,231 $112,776 $112,574 52.32 47.92 (5.41) (0.18)

Fishing License 3,534 4,750 6,109 2.20 2.60 34.41 28.61
Gift Shop 34,539 24,553 16,944 11.39 7.21 (28.91) (30.99)
Store/Lodge 14,088 8,179 6,093 3.79 2.59 (41.94) (25.50)
Outfitting 97,343 62,073 92,907 28.80 39.55 (36.23) 49.67
Reimbursed Expense 4,878 3,225 279 1.50 0.12 (33.89) (91.35)
Net Sales 273,613 215,556 234,906 100.00 100.00 (21.22) 8.98
Cost of Goods Sold 45,161 22,945 38,087 10.64 16.21 (49.19) 65.99
Other 1,056 0 0 0.00 0.00 (100.00) 0.00
Total Cost of Sales 46,217 22,945 38,087 10.64 16.21 (50.35) 65.99
Gross Margin $227,396 $192,611 $196,819 89.36 83.79 (15.30) 2.18
Operating Expenses:
Selling Expenses:
Advertising 6,500 8,222 8,732 3.81 3.72 26.49 6.20
Car and Truck 8,600 8,700 8,169 4.04 3.48 1.16 (6.10)
Commissions and Fees 0 0 1,593 0.00 0.68 0.00 0.00
Rent of Vehicles, Machines 0 0 107 0.00 0.05 0.00 0.00
Supplies 4,655 2,770 0 1.29 0.00 (40.49) (100.00)
Wages 17,746 21,543 8,498 9.99 3.62 21.40 (60.55)
Total Selling Expenses 37,501 41,235 27,099 19.13 11.54 9.96 (34.28)
Appendices 817

Income Statement Data (continued)
From January 1 through December 31, 1999–2001
Vertical Vertical Horizontal Horizontal
Analysis Analysis Analysis Analysis
2000 2001 1999–2000 2000–2001
Account 1999 2000 2001 (%) (%) (%) (%)
General and Administrative
Expenses:
Depreciation 0 0 0 0.00 0.00 0.00 0.00
Employee Benefits 319 396 1,509 0.18 0.64 24.14 281.06
Insurance 4,706 9,994 9,696 4.64 4.13 112.37 (2.98)
Office 0 0 1,243 0.00 0.53 0.00 0.00
Repairs and Maintenance 1,080 2,048 9,884 0.95 4.21 89.63 382.62
Mortgage Interest 83,138 126,398 124,296 58.64 52.91 52.03 (1.66)
Legal Services 0 0 0 0.00 0.00 0.00 0.00
Travel 0 0 45 0.00 0.02 0.00 0.00
Meals and Entertainment 0 0 0 0.00 0.00 0.00 0.00
Utilities 12,179 11,427 12,188 5.30 5.19 (6.17) 6.66
Taxes and Licenses 6,930 7,883 4,640 3.66 1.98 13.75 (41.14)
Other 26,336 17,183 9,109 7.97 3.88 (34.75) (46.99)
Total General and
Administrative Expenses 134,688 175,329 172,610 81.34 73.48 30.17 (1.55)
Total Operating Expenses 172,189 216,564 199,709 100.47 85.02 25.77 (7.78)
Net Income (Loss) $ 55,207 $(23,953) $ (2,890) (11.11) (1.23) (143.39) 87.93
EBIT $ 145,275 $110,328 $126,046 51.18 53.66 (24.06) (14.25)

Recast Income = EBIT +
Wages + Repair & Main. +
Emp. Benefits $ 164,420 $134,315 $145,937 62.31 62.13 (18.31) (8.65)
Average Recast Income $148,224
818
American Plan Rates

#3—log #4—loft
appendix
#1—loft #2—loft cabin bedroom, #6—loft

bedroom, bedroom, skylights, main level bedroom, #7—2 #8—1
main level main level bedroom bedroom, #5—log main level bedroom, bedroom,
bedroom, bedroom, faces lake timber cabin, 1 bedroom, log and knotty pine,
Cabin Description knotty pine** knotty pine** with sliding door frame** room, cozy log beam** knotty pine very private
Beds 2 doubles in 2 doubles in 1 queen, 2 doubles in 1 queen 2 doubles in 1 queen, 2 2 doubles,
loft, 1 double, loft, 1 double, sofa sleeper loft, 1 double, loft, 2 twins, daybed sofa sleeper
1 twin in main, 1 twin in main, 1 twin in doubles in
sofa sleeper sofa sleeper main, sofa main, sofa
sleeper sleeper
Sleeps 9 9 4 9 2 10 5 5
Fireplace gas gas no gas no wood wood gas
May 1st—May 31st $174.25/day* $174.25/day* $157.25/day* $174.25/day* $144.50/day* $182.75/day* $169.15/day* $169.15/day*
June 1st—Sept 30th** $205/day* $205/day* $185/day* $205/day* $170/day* $215/day* $199/day* $199/day*
Oct 1st—Oct 31st $184.50/day* $184.50/day* $166.50/day* $184.50/day* $153/day* 193.50/day* $179.10/day* $179.10/day*
* Minimum price is for first two adults
Children 3 and under are free
Children 4—12 are half price
Taxes: State 7.5%, Lodging 3%
Additional Persons:
Month of May $87/day $87/day $78/day $87/day $72/day $91/day $84/day $84/day
June 1st—Sept 30th $102/day $102/day $92/day $102/day $85/day $107/day $99/day $99/day
Month of October $92/day $92/day $83/day $92/day $76/day $96/day $89/day $89/day
**Cabins 1, 2, 4, and 6 have a
four-person minimum charge July
and August
July and August $409/day $409/day $409/day $429/day
Modified Plan Rates
#3—log #4—loft
sleeper sleeper
Sleeps 9 9 4 9 2 10 5 5
May 1st—May 31st $158.50/day* $158.50/day* $142.50/day* $158.50/day* $131/day* $166/day* $153.50/day* 153.50/day*
June 1st—Sept 30th** $186.50/day* $186.50/day* $168/day* $186.50/day* $154.50/day* $195.50/day* $181/day* $181/day*
Oct 1st—Oct 31st $167.50/day* $167.50/day* $151/day* $167.50/day* $139/day* $175.50/day* $162.50/day* 162.50/day*
Additional Persons:
and August
July and August $372.50/day $372.50/day $372.50/day $389.50/day
Appendices
819
820
Housekeeping Plan Rates

#3—log #4—loft
appendix

sleeper sleeper
Sleeps 9 9 4 9 2 10 5 5
May 1st—May 31st $141/day* $141/day* $114/day* $141/day* $106/day* $147.50/day* $136.50/day* 136.50/day*
June 1st—Sept 30th** $166/day* $166/day* $134.50/day* $166/day* $125/day* $174/day* $161/day* $161/day*
Oct 1st—Oct 31st $149/day* $149/day* $121/day* $149/day* $112.50/day* $156.50/day* $144.50/day* 144.50/day*
Additional Persons:
and August
July and August $296/day $296/day $296/day $296/day
Appendices 821
Honeymoon Packages
4-Night Package
Spend first night at a B&B
in Duluth or Twin Cities
followed by next three
nights at Rockwood.
$1,570 per couple
7-Night Package
Spend first and last night at a
B&B in Duluth or Twin Cities
with the middle five nights
spent at Rockwood
$2,390 per couple
Anniversary Packages
2-Night Package
$549.00 per couple
4-Night Package
$1,049 per couple
822 appendix
Family Packages
#3—log #4—loft
Cabin Description knotty pine knotty pine with sliding door frame room, cozy log beam knotty pine very private
sleeper sleeper
Sleeps 9 9 4 9 2 10 5 5
May 1st—May 31st* $239 $239 $219 $239 N/A $245 $225 $225
June 1st—Sept 30th* $249 $249 $229 $249 N/A $255 $235 $235
Oct 1st—Oct 31st* $239 $239 $219 $239 N/A $245 $225 $225
*Price is per adult per night
(minimum of four nights)
Minimum two adults and one child
Children 3 and under are free (cribs
are complimentary)
Fishing Packages
#3—log #4—loft
sleeper sleeper
Sleeps 9 9 4 9 2 10 5 5
Standard Fishing Package

Rates $239/day* $239/day* $209/day* $239/day* $199/day* $249/day* $219/day* $219/day*
Additional Persons $65/day $65/day $65/day $65/day $65/day $65/day $65/day $65/day
Deluxe Fishing Package

Rates $280/day* $280/day* $260/day* $280/day* $245/day* $290/day* $274/day* $274/day*
Additional Persons $102/day $102/day $92/day $102/day $85/day $107/day $99/day $99/day
four-adult minimum charge July
and August
Appendices
823
Outfitting Packages
Rockwood Kevlar Plus Complete Deluxe Outfitting*
3 days $285 3 days $245
4 days $365 4 days $300
5 days $445 5 days $350
6 days $505 6 days $405
7 days $555 7 days $450
8 days $595 8 days $495
9 days $635 9 days $540
10 days $675 10 days $585
Solo package $120/day *Deluxe outfitting w/ Kevlar canoes,
Add $5 per person per day
K-Plus Equipment Package $55 per person per day

Deluxe Equipment Package $45 per person per day
Food Package $30 per person per day
Food and Canoe Package

Aluminum Canoes $38 per person per day
Royalex Canoes $43 per person per day
Kevlar Canoes $48 per person per day
(5% discount available for repeat guests)
Lakeside Terrace Bunk Room

Rate for two persons $40 per night
Each additional person $15 per night
($20 deposit per night per room)
Partial Outfitting:
(canoes include youke, paddles, and life vests)
Aluminum Canoes $22/day
Wenonah Royalex (55-lb. Adirondac) $27/day
Wenonah Kevlar Canoe (38-lb. Adirondac or
40-lb. Sundowner) $37/day
Wenonah MN II, MN III, Itasca $43/day
Wenonah Solo Canoe $32/day
Tents with follor, netting, and zippered front (Eureka nylon)
two-person $13.00
four-person $15.00
six-person $17.00
Duluth Packs $5.00
Water Jug $1.00
Sleeping Bag $4.00
Rain Poncho $2.00
Single Burner Stove $3.00
Granite Gear Packs $6.00
Therm-A-Rest $3.00
Stearns Vest $2.00
Appendices 825
Camp Saw $2.00

Tarp $2.50
Cook Kit with Utensils (return in clean condition) $5.00
Parking $5/day/vehicle
Launch $5/canoe
Shower and Towel $5/person
Boats $25/day
Motors $30/day
Fishing Licenses (available in lodge)
Rockwood Lodge & Outfitters

Profit and Loss
January 1–December 31, 2001
Income
Cabin rentals $ 112,573.82

Fishing licenses sold 6,108.75
Gift shop 16,944.39
Store/lodge 6,092.52
Outfitting
Bunkhouse $ 9,826.01
Canoe rentals 34,496.39
Deluxe packages 10,330.00
K-plus packages 11,407.00
Miscellaneous 99.00
Pack food 2,600.81
Park and launch 697.00
Showers 875.00
Transportation 842.25
Outfitting—other 21,733.97
Total outfitting 92,907.43
Reimbursed expense and services 279.03
Total income $234,905.94
Expense
Soda $ 866.25
Bait and tackle 437.00
Gift shop merchandise 10,331.58
Fishing licenses 4,488.00
Advertising
Sport shows $ 850.00
Other 4,697.16
Total advertising 5,547.16
Total automobile expense 2,723.33
Bank service charges 108.87

Cabin furnishings 2,023.13
Credit card fees 1,230.87
Dues and subscriptions 2,478.00
Equipment 1,431.51
(Laptop and printer)
Equipment rental 106.88
Fees 1,592.75
Food 202.17
Gasoline equipment 463.05
Appendices 827

Profit and Loss (continued)
Improvements
Building cabin renovation $ 2,600.00
Equipment: Wildfire sprinkler
Upgrade 1,411.00
Icemaker service 300.00
Inventory
Three pumps 1,000.00
One water system solenoid 300.00
Other: Deck for tenthouse, etc. 900.00
Total improvements 6,511.00
Insurance
Health $ 1,509.00
Property—other 9,696.07
Total insurance 11,205.07
Internet
Boreal (monthly ISP) $ 182.30
Web site 2,761.56
Internet—other 240.65
Total Internet 3,184.51
License and permits 169.00
Lodge supplies
Groceries $ 8,772.74
Outdoor maintenance 458.79
Other 5,524.40
Total lodge supplies $ 14,755.93
Miscellaneous 949.74
Office supplies 293.08
Outfitting expense
Outfitting equipment $ 2,127.19
Outfitting food 3,869.91
Outfitting supplies 409.73
Outfitting—other 598.78
Total Outfitting 7,005.61
Payroll expenses
Casual labor $ 784.00
Payroll wages 7,714.29
Total payroll 8,498.29
(continued)

Profit and Loss (continued)
Postage 1,440.08
Printing (brochures, rate sheets) 3,851.11
Repairs
Building repairs $ 2,583.10
Equipment repairs 2,143.20
Repairs—other 634.99
Total repairs 5,361.29
Taxes
Property $ 4,410.00
State sales 42.32
Other 18.59
Total taxes 4,470.91
Telephone
Cell phone $ 791.64
Local 1,756.63
Long distance 2,125.36
Total telephone 4,673.63
Trash 1,000.90
Travel and entertainment 45.00
Truck lease 4,982.80

Appendices 829

Depreciation Schedule
Total Total
Residual Depreciation Depreciation/ Depreciation/ Depreciation/ Depreciation/
Quantity Item Book Value Value Life—Years Year Year Month/Item Month
Several Buildings $ 322,624 $75,000 30 $ 8,254 $ 8,254 $ 688 $ 688

1 MN III $ 1,492 $ 300 5 $ 238 238 $ 20 20
4 MN II $ 1,362 $ 275 5 $ 217 870 $ 18 72
2 Champlain $ 1,362 $ 275 5 $ 217 435 $ 18 36
2 Spirit II $ 1,264 $ 250 5 $ 203 406 $ 17 34
3 Sundowners $ 1,362 $ 275 5 $ 217 652 $ 18 54
1 Advantage
(solo) $ 1,037 $ 200 5 $ 167 167 $ 14 14
1 Prism (solo) $ 1,037 $ 200 5 $ 167 167 $ 14 14
1 Itasca $ 1,492 $ 300 5 $ 238 238 $ 20 20
2 16' Deluxe
Lund Fishing
Boats $ 7,000 $ 3,000 5 $ 800 1,600 $ 67 133
1 1995 Chevy
Suburban $ 12,195 $ 6,000 5 $ 1,239 1,239 $ 103 103
1 Computer $ 1,500 $ 100 5 $ 280 280 $ 23 23
$1 Furniture,
Fixtures, and
Equipment $ 202,350 $50,588 7 $21,680 21,680 $1,807 1,807
Total
Depreciation
per Year $36,226
Total
Depreciation
per Month $3,018

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APPENDIX

business plan based upon an acquisition

Rockwood Lodge &

Prepared by Jason B. Correll

rockwood lodge & canoe outfitters

I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .754

II. business description

Store and Gift Shop

1. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.

National/State Park 10%

0% 5% 10% 15% 20% 25% 30% 35%

Specifically in the outdoor recreation aspect of the industry, it is important to point

Sports Events 6.0%

Theme/Amusement Park 7.8%

National/State Park 7.7%

Cultural Events/Festivals 9.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

7. Tourism Highlights (February 13, 2002) http://www.dted.state.mn.us/04x03x05.asp.

C. Potential of the Venture

11. Travel and Tourism Trends (February 13, 2002) http://www.dted.state.mn.us/TravelTrends.asp.

D. Uniqueness of the Product and Service

Product and Service

III. the acquisition

Why Is the Business Being Sold?

What Is the Current Physical Condition of the Business?

14. Personal communication with Carol Pratt, March 13, 2002.

What Is the Condition of the Inventory?

How Many Personnel Will Remain?

What Type of Competition Does the Business Face?

What Does the Firm’s Financial Picture Look Like?

B. Assessing the Value of the Business

Valuation Method #1: Valuation of Hotels and Motels17

Valuation Method #2: Formula from “How to Buy or Sell a Business”18

Valuation Method #3: From “Business Management”19

Valuation Method #4: The Excess Earnings Method20

Valuation Method #5: The Sum of the Assets Approach to Value21

Average of Valuation Methods

Market Size and Trends

Source: Travel Industry Association of America.

23. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.

Source: Travel Industry Association of America.

Source: Minnesota DTED.

25. Economic Impact (February 13, 2002) http://www.dted.state.mn.us/04x03x01.asp.

Boundary Waters Canoe Area Wilderness (BWCAW)

26. Personal communication with Tim Cambell, March 18, 2002.

Summary of Primary Research

31. Economic Impact (February 13, 2002) http://www.dted.state.mn.us/04x03x01.asp.

Estimated Market Share

35. Economic Impact (February 13, 2002) http://www.dted.state.mn.us/04x03x01.asp.

36. Tourism Expenditures (February 13, 2002) http://www.dted.state.mn.us/04x03x03.asp.

37. Daisann McLane, In Minnesota, Due North (September 6, 1998) http://www.nytimes.com/library/travel/frugal/

American Plan (All Meals)

Modified Plan (with Dinners)

Housekeeping Plan (No Meals)

Rockwood Kevlar Plus Package

• Showers and sauna after your trip

Complete Deluxe Outfitting Package

Kevlar Plus Equipment Package

Deluxe Equipment Package

Food and Canoe Packages

Lakeside Terrace Bunk Room

Discounts and Other Points

Advertising and Promotion

product development. MOT markets Minnesota in North America and internationally as