Two young entrepreneurs in Rwanda, Mr. Davie, and Bawazir are looking into delving into a new line of industry targeting the budget tourists, also known as the "backpackers." These entrepreneurs have knowledge of the success of this type of endeavor in neighboring countries and are now planning to go into the same type of venture in a piece of land inherited by one of them. Said parcel of land is located near a lake and only a few minutes ride from a major bus terminal. Despite the limited financial resources, they acknowledge that what they are planning to go into is not that too expensive, operations-wise, and will attract budget-conscious travelers. Thus, Mr. Davie and Bawazir must come up with a great marketing plan and raise $19,000 soon before the high tourist season begins.
Nicole R.D. Haggerty; Dan Hernden; Annika Wang
Harvard Business Review (W13595-PDF-ENG)
January 23, 2014
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Case answers for Rwanda Backpackers
This case solution includes an Excel file with calculations.
Synopsis – The plan to start the “Rwanda Backpackers” business
Two young entrepreneurs, Mr. Davie and Bawazir, are looking into starting up a new hospitality business in Rwanda. The business is expected to be set up as a campsite by a lake and target low-budget tourists ( Rwanda backpackers). This new venture presents some risk, as the country’s low-budget tourism industry is in its infancy, with little government support, and transportation options to the campsite are unfavorable, and possibly deterrents, to tourists.
The entrepreneurs show great passion to get this business started, as they have shown a good amount of planning of the campsite construction and operations. However, their business plan is incomplete, which may hinder the financing stage of this start-up. This business plan is also expected to lay out a marketing plan to attract new customers. The entrepreneurs have accumulated excellent research and knowledge on various marketing opportunities, but now need to make a more detailed plan.
The following report shall describe the costs, both fixed and variable, that shall be incurred by the new business, and the required revenues for the business to break even with the first year. The break-even point shall be identified by selecting the best cost options, while also taking into account qualitative considerations.
The entrepreneurs need $19,000 to have sufficient capital to build and operate the campsite. There is some money available from their personal and family-member savings, but they will need to go out and raise a significant amount of money.
Various financing options are possible. Some options are less costly (lower interest rate) but are more difficult to obtain. Other options are easier to obtain but are associated with unfavorable conditions, such as the potential for violence.
2-Unexpected Customer Base & Unknown Break-even Point
The Rwanda Backpackers business is a start-up; inherently it does not have any customers, nor guarantee of customers when operational.
Although the entrepreneurs estimate a certain amount of demand in the beginning, will revenues from this low estimate cover fixed and variable costs?
This campsite and backpacking in Rwanda are not known within the low-budget tourism community. There is a significant risk in setting up a business in a market that is underdeveloped.
Certain marketing strategies have been conceived by the entrepreneurs, with an expected return on investment. These strategies may need to be put in place to…