Ravens Sun Enterprise Case Study

HEC118
Volume 13
Issue 4
December 2015
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Raven’s Sun Enterprise Ltd.
Case prepared by Professor Philip BEAULIEU, 1 Anita LAKRA, 2 and Hannah LaPLANTE 3, 4
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1. Introduction
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On the morning of April 18, 2015, Mike LaPlante, founder of Raven’s Sun Enterprise Ltd. in
Calgary, Alberta, arrived home weary after a busy night shift at the fire department. Following an
unexpected economic slowdown coupled with unseasonably cold temperatures over the winter
months, he had to regroup. How could he maximize profits at his new business while keeping his
job at the Calgary Fire Department and still manage to free up time to spend with his family?
Mike wanted to continue working for the Calgary Fire Department while running his own
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business on his days off. He and his wife, a professional with her own career, had two children,
and they shared child-care responsibilities. In May 2014, his wife had been about to go on a year-
long maternity leave, so he had had time to launch his company. He had been thinking about
starting up an owner/operator transport business for a little over a year and had drawn up a full
business plan around the concept of a flatbed (a truck with an open body) “hot shot” service,
meaning dispatching within the hour. He knew there was a market for this type of transport
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service and believed it could be profitable. Since it had reasonably low start-up costs, he and his
wife had decided to fund the business.
2. Raven’s Sun History and Development

Raven’s Sun was founded in May 2014. It is an owner/operator transport company that now
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serves the non-residential construction industry after moving away from the highly competitive
unconventional oil and gas industry it initially served. The company provides transportation of
cargo as needed by clients and is available for both delivery within the hour and scheduled
deliveries (next day or beyond).
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1 Philip Beaulieu is an associate professor at the University of Calgary’s Haskayne School of Business, Calgary, AB, Canada.
2 Anita Lakra is an instructor in accounting at the University of Calgary’s Haskayne School of Business, Calgary, AB, Canada.
3 Hannah LaPlante is Technology excellence heavy oil manager, subsurface, at Statoil, Calgary, AB, Canada.
4 All three authors contributed equally to this case.
© HEC Montréal 2015
All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited.
The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599.
This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the
administrative situation presented. Deposited under number 9 90 2015 001 with the HEC Montréal Case Centre, 3000, chemin de
la Côte-Sainte-Catherine, Montréal (Québec) H3T 2A7 Canada.
This document is authorized for educator review use only by Ahmed Razman, Putra Business School until February 2016. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860
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Raven’s Sun started with one 2014 Dodge 3500 DRW 4x4 truck and a 36-foot trailer with 32 feet
of flat deck equipped with ramps. Mike had decided to purchase new equipment to gain the
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benefits of lower unscheduled maintenance costs, a warranty, engine options, and improved
appearance and safety. The truck was a Laramie edition, fully loaded with all optional equipment
and providing comfort, buyer appeal, and a higher resale value.
Mike was the sole owner/operator of Raven’s Sun with no other employees or outside help. He
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soon realized that, unless he also purchased a crane, he would be limited to sites with equipment
for loading and unloading cargo from his trailer and to normal business hours, i.e., 8:00 a.m. –
5:00 p.m. Although he didn’t want to assume unnecessary debt, after researching various options,
he had decided to purchase a two-ton crane that he had mid-mounted on his trailer for better
utility.
When Mike studied his four key success factors (Exhibit 1), he realized that, in one way or
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another, they all related to time management. If he could not make deliveries on his days off from
firefighting, he could not gain the necessary reputation for being reliable and available. He could
not work too many hours because that would compromise his safety and the quality of his family
life, both of which he valued highly. The deliveries he made had to be profitable. Mike therefore
realized that, before he could decide on the best operating strategy, he had to analyze the value of
his personal time.
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Before drawing up his business plan, Mike had used publicly available data to carry out an in-
depth study of the transportation industry (Exhibit 2). Although there was not a lot of public
owner/operator information available, he did find data that supported his business strategy.
Within its first three months of operation, Raven’s Sun had shifted gears to begin serving the
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non-residential construction industry within and outside the city. The company operated on most
of Mike’s weekdays off from the fire department and generated consistent revenues. This was
perfect for balancing work and family responsibilities, as Mike was still free to spend most
weekends with his family. As a result of the economic downturn, however, the business slowed
down substantially in October 2014, and Mike’s initial financial and business forecasts proved
unreliable. Mike realized he would now face stiffer competition from other trucking companies.
November, December, and January were also slow due to unseasonably low temperatures and the
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holiday season. Mike was forced to re-assess his financial situation, strategy, and marketing
approach.
3. Financial Analysis
Given Mike’s business strategy and key success factors, it was clear that Raven’s Sun required a
detailed financial analysis. There were difficulties, however. The different charges and units of
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measure for different services made it difficult to find a common unit of measure. Analyzing
profit potential was also difficult, as the business could only be run on Mike’s days off from the
fire department.
Mike divided his revenues into two categories:
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1. In-city deliveries (<50-km radius): billed by hourly rate plus loading/unloading rate
and waiting time
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2. Long-haul deliveries (>50-km radius): billed by kilometre rate plus loading/unloading
rate and waiting time
It was not cost effective to charge by the kilometre for in-city deliveries given the time spent at
stop lights and loading/unloading. Charges for in-city deliveries were therefore based on a
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minimum of two hours at an hourly rate plus a one-hour loading/unloading charge.
Long hauls were trips with a driving radius of more than 50 kilometres and were charged based
on distance traveled (at a rate of $1 per kilometre) plus a one-hour loading/unloading charge.
3.1 Cost and revenue data
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3.1.1 Costs
Mike decided to use number of working days as his measure of volume. For in-city deliveries, he
assumed two deliveries per day, each a 100-km round trip. For long hauls, he assumed the
equivalent of a one-day Calgary-to-Edmonton round trip of 600 km, but these couldn’t be done
before night shifts. Estimated costs are shown in Table 1.
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Table 1: Costs per 100 kilometres
Vehicle
Fuel Truck tires Trailer tires Fuel additives Food
maintenance
$22.30 $1.20 $1.70 $1.40 $0.70 $5.00
*The fuel cost estimate assumes a price per litre of 91 cents and consumption of 24.5 litres per
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100 km.
Costs per month:
$3,500
3.1.2 Revenues: In-city and long hauls

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For in-city deliveries, Raven’s Sun charges $70 per hour for a minimum of two hours per
delivery plus a loading/unloading charge of $80 per delivery. For long hauls, Raven’s Sun
charges $1.30 per kilometre and a loading/unloading charge of $80 per delivery.
Table 2 shows Mike’s estimated delivery demand for the next six months for both in-city
deliveries (Panel A) and long hauls (Panel B).
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Table 2: Estimated delivery demand for the next six months
Panel A. Estimated demand for in-city deliveries
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July August September October November December
Trips, each
100 km and 22 22 20 20 19 17
½ day
Days
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worked per 11 11 10 10 9.5 8.5
month
Total km
2,200 2,200 2,000 2,000 1,900 1,700
driven
Panel B. Estimated demand for long-haul deliveries
July August September October November December
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Trips, each
600 km and 6 6 6 6 5 5
1 day
Days
worked per 6 6 6 6 5 5
month
Total km
3,600 3,600 3,600 3,600 3,000 3,000
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driven
4. Mike’s Availability and the Possibility of Hiring a Driver

Mike’s schedule also plays a significant role in the analysis. Below is a table showing the days he
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is available to work for Raven’s Sun over a two-week period. “Unavailable” means that he is
scheduled to work for the fire department during the day. “Available 8 a.m. – 4 p.m.” means he is
scheduled to work a night shift for the fire department, so he could work for Raven’s Sun, but not
do long hauls. To allow him to spend time with his family, Mike’s ideal schedule would be to
operate Raven’s Sun twelve weekdays a month.
Table 3: Mike’s Fire Department Work Schedule

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Week 1 Week 2
Monday Unavailable Available
Tuesday Unavailable Available
Wednesday Available 8 a.m. – 4 p.m. Unavailable
Thursday Available 8 a.m. – 4 p.m. Available 8 a.m. – 4 p.m.
Friday Available Available 8 a.m. – 4 p.m.
Saturday Available Unavailable
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Sunday Available Unavailable
Mike realized that simply indicating his availability for deliveries did not fully account for his
scheduling challenges. He recalled one night when he was driving back to Calgary from
Edmonton on a deserted highway. At 1 a.m. he was startled by a backfire and realized that he
could not remember the last few seconds. Afraid that he had fallen asleep, he pulled over at a rest
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stop and slept for an hour. He could not recall any similar incidents as a firefighter, but he was
unwilling to risk such a possibility by filling every available time slot with deliveries. Already
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there had been a few weekends when he had had to postpone family outings, such as visits to the
zoo, because he needed to rest or catch up with paperwork. Mike wondered if he could free up
some personal time by hiring a driver and focusing on managing and marketing his business, as
those tasks could suffer if he continued to be the only driver.
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5. Conclusion
It was 11:00 a.m. on April 18, 2015, and Mike was exhausted after his night shift at the fire
department. His wife was about to have their third child, and he had to find a way to juggle his
job with the fire department and his new transport business while still spending quality time with
his family.
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Before launching Raven’s Sun, Mike had taken an introductory managerial accounting course
and recalled something called a cost-volume-profit (CVP) analysis that could help him with the
quantitative aspects of his decision. He would have to combine this analysis with safety, work-
life balance, and the key success factors in his business plan to come up with a solution that
would best suit him and his family. Since he was off the next day, he decided to devote the entire
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day to conducting an in-depth analysis. Should he focus solely on in-city deliveries, on long
hauls, or on a combination of the two? He needed to find a solution quickly, before the baby
arrived.
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2015-11-12
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Exhibit 1
Mission, Vision, Value Propositions, and Key Success Factors
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The original business plan contained mission, vision, and value statements providing a general
direction for the business. The core values reflected Mike’s personal beliefs – regarding safety,
for example – and were never revised. But after Raven’s Sun had been in operation for a few
months, the company’s mission and vision statements were revised as follows, giving the
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company a clear direction.
Mission: To create a new niche in the trucking sector of the transportation industry
by providing a diverse selection of equipment and capabilities that will
adequately service the transportation needs of multiple industries within
Alberta and its neighbouring provinces, British Columbia and
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Saskatchewan.
This was an ambitious mission statement for a company with just one
truck and a part-time driver and demonstrates the difficulty a small
business owner can have in articulating their strategy.
Vision: To capture a profitable share of the trucking sector of the transportation

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industry and to sustain profitability and growth for Raven’s Sun.
Value propositions: To be available to customers and to transport their cargo according to

their schedule, in a safe, professional manner, with an emphasis on
personalized customer service.
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Key success factors:
Based on Raven’s Sun’s mission, vision, and value propositions and Mike’s analysis of the
transportation industry, he developed the following four key success factors:
• Operate efficiently in selected markets to support competitive pricing and an acceptable
return on Mike’s investment of time and money, given the risks involved
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• Quickly build a reputation among clients for being able to meet their needs for reliable
and timely deliveries
• Operate safely
• Maintain an acceptable work/life balance
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Exhibit 2
Market Research Study
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• The demand for drivers was increasing
• Trucking demand was increasing
• Flatbed opportunities were expanding
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• Alberta was one of the top three provinces for domestic trade activity
• Construction materials were the main commodity carried in domestic trade
• Local freight haulers would benefit from strong non-residential construction activity and
the resulting need to transport building materials
Mike also learned that owner-operators had to deal with the following issues:
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• Stress
• Long hours
• Variation in costs
• Highly competitive environment. Pricing was competitive, and clients tended to hire
haulers with a good track record who they knew to be reliable and available when needed.
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This made it difficult for new owner/operators to break into the market.
Raven’s Sun’s original target market was the unconventional oil and gas industry, but economic
conditions pushed the company to change its focus to the non-residential construction industry.
Research showed that real capital spending on manufacturing plants and other industrial
buildings dropped by 10.5% in 2014, but there was a 2.7% increase in overall non-residential
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capital spending. In 2014, the commercial segment was the one bright spot in the non-residential
construction industry, with real commercial capital expenditures increasing by 8.5%.
Marketing initiatives indicated that the oil and gas industry was a harder market to break into
because companies needed to be added to vendor lists and have additional safety training and
field operation awareness. It was clear that conventional oil and gas reserves were declining and
there were increased costs associated with exploring for the remaining reserves due to the boom
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in the unconventional oil industry and its impact on the work force and rig availability.
Unconventional production would soon dominate the Canadian market and oil sands would play
an increasingly important role on the global stage. Based on this information, Raven’s Sun
originally decided to focus its efforts in the unconventional sector of the oil and gas market such
as companies operating in oil sands and coal bed methane. Mike also realized that the non-
residential construction market and the oil and gas market could complement each other by off-
setting activity levels throughout the year.
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© HEC Montréal 7

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HEC118

2. Raven’s Sun History and Development

Mike divided his revenues into two categories:

3.1 Cost and revenue data

3.1.2 Revenues: In-city and long hauls

4. Mike’s Availability and the Possibility of Hiring a Driver

Table 3: Mike’s Fire Department Work Schedule

Sunday Available Unavailable

Vision: To capture a profitable share of the trucking sector of the transportation

Value propositions: To be available to customers and to transport their cargo according to

Key success factors:

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