Capstone Business Plan - Assignment Example

? Capstone Business Plan Contents Executive Summary 4 Keys to success 5 Company mission 6 Business goals and objectives 6 Company Summary 7 HR Consultancy – an industry overview 7 Legal form of ownership 8 Location and facilities 9 Management structure 10 Product and services 10 Market Analysis 11 Target market 11 Industry analysis 12 Competitive analysis 13 Market Strategy 13 4 Ps 14 Price list 15 Selling strategy 16 Sales forecast 17 Implementation Strategy 17 Overall strategy 18 Implementation 18 Control plan 20 Financial Statements and Projections 21 Revenue and cost estimate 21 Forecasted profit and loss statement 22 Break-even point 23 Capital/Investment needs 24 References 27 Executive Summary The Capstone Consultancy Services will offer its clients with a unique human resource service approach that ensures total satisfaction through customized service packs. The Unique Selling Point (USP) of the business is its prompt service and personalized services that it will provide to its customers. The customers can express their individual requirements to the HR consultants who can provide them with customized solutions to meet their specific needs. The clients will benefit from the specialized services of the well qualified consultants who can understand their requirements and provide prompt delivery of the tailored services on time. Capstone will be a start-up venture that will be owned and managed by 6 partners who are experienced in HR management areas and will contribute their skills and competencies to promote the above mentioned business goals. The business will initially start with an investment of US $300,000. The total capital requirement will be fulfilled by an investment of $50,000 by each of the 6 partners. The graph below illustrates the start-up expense and investment requirement of the business – The details of the expenses are provided in the subsequent sections of the business plan. According to the details of the business plan, it is estimated that the business will reach break even point between the tenth and eleventh month of the first year of its operation. The graph below illustrates the predicted sales and revenue estimates for th first five year of its operation – Keys to success The success of the business will be based on its strategy to create its market niche through specialized and customized HR solutions for its clients. The business will not focus only on selected industry segments, but will cater to the needs of companies across all industries and operations. The targeted market segment for the business hence will comprise of small, medium and large scale organizations who seek expert HR solution. While the HR consultancy sector faces intense competition with leading global players like Capgemini, Booz, Allen and Hamilton among others, the focus will be on superior service performance and instant service approach. Capstone will offer its clients with well-researched solutions that are arrived at after a complete evaluation of the client needs and existing strategic practices in manpower management. The initial focus will be on creating word-of-mouth recommendation or market reputation to establish its market presence. Hence the pricing of the services offered during the first two to three years of operation will be competitive. Company mission The mission of Capstone Consultancy Services will be to evaluate client requirements and offer customized HR solution packages that meet and exceed customer expectations. The business will cater to the HR needs of companies across all industry sectors and extend its expertise in delivering high standards of HR services. Business goals and objectives Capstone will focus on developing its strengths and capabilities in such a manner that it provides its customers with specialized service that will help the business in generating profit and sustaining long term growth. The goals and objectives of the business will be to: Offer its clients total satisfaction in providing customized HR solutions that include all aspects of HR management, people issues, and strategic challenges faced by managers in organizations. Employ individuals who have expert knowledge in distinctive HR fields such as talent management, diversity management, change management, employee compensation and benefits management, or employee relations management. Understand client needs and specifications while attending to their demands for specific services. Deliver expert advice and personalized attention to customers to ensure value-added benefits. Timely service delivery and prompt response to customer requirements. Company Summary HR Consultancy – an industry overview Human resources (HR) consulting business has assumed increased significance in the past few decades with more and more companies outsourcing their HR needs to consultancies. The focus of the HR consultancy businesses is on providing expert services to firms in the areas of payroll management, talent management, employee relations, change management initiatives, and management training on vital HR issues related to employee welfare and regulatory practices. The overall emphasis is on increasing the effectiveness of the HR function. HR functions play a critical role in promoting business goals and objectives. However, the present business environment is riddled with complexities that expose the firms to new challenges in the field of HR management. The globalization of economies and increasing movement of labor forces from one country to another, growing diversity in workforce, increasing cultural disparities, growing market opportunities and increasing workforce expectations are some of the prominent challenges facing the business enterprises today. The primary goal of the HR consultancy firms is to simplify the HR management process through expert solutions and outsourcing key activities for increased work efficiency and contributing to the client’s business goals and objectives (Kennedy Information, 2005). The origins of management consultancy can be traced back to the 19th century when enterprises in US and Europe established the first services of its kind. The advisory services offered by some of these firms focused on lending their management expertise to existing businesses to increase operational efficiency, employee performance and productivity. Small consultancy firms led by Edwin Booz, James McKinsey, Tom Kearney, and George Fry among others were among the first enterprises established during the period 1910 and 1940 (Poor and Milovecz, 2011). Gradually the scope of these services and the number of firms catering to the consulting needs of businesses expanded to offer specialized services. The primary force driving the market for such services was the growing market complexities and business challenges that triggered the need for expert solutions and services for increased efficiency (Poor and Milovecz, 2011). Industry reports have forecasted a growing demand for specialized HR services across all industry sectors such as healthcare, financial services, public sector, manufacturing, engineering, retail, energy, utilities, communication and media, and service sectors (Kennedy Consulting, 2012). A recent research report by Plunkett (2012) claimed that HR consultancy firms have a good scope for growth and revenue generation in the United States for more and more companies are seeking expertise in handling their HR management functions. Based on these observations and the expanding business opportunity for expert HR solutions, the business plan presents detailed insight into how Capstone Consulting Services will establish its market presence and achieve the key goals and objectives within the first five years of its operation. Legal form of ownership One of the primary concerns of starting a new business is the selection of the form of ownership. There are different business organizations options available to the entrepreneur and based on the nature and resource funding of the business enterprise, the choice is made. Sole proprietorship indicates a single owner business establishment, while a partnership reflects two or more owners who share the firm profits and liabilities. The Capstone Consulting Services will be conceived as a limited liability corporation (LLC) that combines the advantages of both partnership and corporation. The LLC provides the company shareholders with the advantages of both partnership and corporation where the debts and obligations of the shareholders are limited to the extent of their financial investment in the company. An LLC in US may comprise of one of many owners and it may be a combination of individuals and distinctive business entities. A single member ownership in LLC is treated as sole proprietorships for tax deduction purposes unless it classifies itself as a corporation for tax deduction. All members of the LLC are protected from individual liabilities and a formal written agreement between the members dictates the terms and conditions of the business management principles and controls (FTB, 2010). Four shareholders will invest in the firm to form the LLC. All these four individuals are experienced professionals who have worked in HR firms and hence have a practical knowledge of the business environment and market requirements. Location and facilities The business operations will be located in Katy, Texas. The business will initially rent a 3000 square foot office space in Katy. The initial investment in the office facilities will comprise of workstations, cubicles and networked systems to support approximately 15 employees. Each employee will be provided with one computer system and peripherals that will be connected to a networked server for easy processing and accessing of client data. The start-up expenses for the business will hence involve – Rent for the 3000 sq foot office space; Installation of 16 workstations, 2 filing cabinets; 16 computers, one printer, and one server machine; Routers, modems, and connectors for local area networking; 4 telephones, copier and fax machine. Management structure The business will be managed by the four shareholders who will form the LLC. Each of the management team members will contribute to the business expertise through acquisition of clients, processing client requests, and delivering value-added services to their clients. A formal written agreement at the time of business incorporation will specify the roles and responsibilities of each of the four individuals. Product and services The Capstone Consulting Services will focus on delivering value added services to its customers through a detailed assessment of their needs and customizing services to match their expectations. The primary goal of the firm at the initial stages will be to acquire niche clients who can help them generate market reputation as an expert HR solution firm. The company will focus its services in the following areas – HR strategy consultancy Payroll management Talent management Employee relations Employee compensation Employee rewards and recognition Diversity management Change management initiatives Performance appraisals Discrimination Career progression Training requirements Each of the services enumerated above will be charged nominally to extend client reach and enable business growth. Tailored and customized service packs will be designed for each client based on their individual needs and requirements to ensure increased customer satisfaction. Market Analysis This section provides a deeper analysis of the HR consultancy market in US and trends that have been defining corporate strategies and business practices in this sector. Target market The target market for Capstone Consultancy Services will comprise of small, medium and large scale business enterprises in and around Katy, Texas. The company will focus their marketing communications and efforts on new enterprises across all industry segments that are emerging in the market now. The idea behind focusing on the new enterprises is their willingness to achieve a high level of performance at any cost. The existing businesses might have tie-ups with other HR consultancy firms and this means Capstone has to focus its strengths on winning them over through market reputation and value based advantage over the other competitive forces. The chart below provides an illustration of the target market segment for Capstone business – The business aim of Capstone will be to expand its services and market presence in the local markets through extending its target customer base across all business sectors, industry operations and business size. Industry analysis The market demand for HR consultancy services is driven by people challenges faced by organizations. Businesses across all sectors and segments face people management issues that surfaces in the form of ineffective production, inadequate performance levels, and strained management-employee relationships that adversely impact business goals and objectives. HR consultancies provide specialized services to businesses in terms of handling people management issues, specific HR functions, and conceptualizing HR strategies to overcome performance barriers and provide a positive work environment (Dabu, 2009). The Plunkett Research (2012) and Kennedy Consulting (2012) reports indicate the growing demand for HR consulting services on account of increasing people management issues faced by businesses. The present workforce composition has undergone widespread transformation with the growing diversity in nationalities, culture, religion and ethnicity. The workforce today has become more mobile and have extended opportunities in terms of placement offers and alternative earning scope. These challenges are felt by companies in the form of increasing attrition rates, growing job dissatisfaction, below average performance levels, and lack of employee commitment. Management fail to understand employee behavior that is shaped by diverse work cultures and environmental influences. In such conditions the demand for specialized services that help in overcoming manpower issues is very high. Moreover, the outsourcing of HR functions to external agencies enable the management to focus on other vital business issues such as growth and expansion. Organizations, thus seek expert solutions and are willing to outsource vital HR functions to help overcome productivity barriers and focus on improving operational efficiency (Kennedy Information, 2005). Competitive analysis The HR consulting market in Texas presents a highly competitive market with more than a thousand firms catering to the HR needs of the business establishments in this region. While most of the firms are small and medium scale businesses, the key competitors for Capstone are leading global HR firms like Booz & Co., Booz Allen Hamilton, Boston Consulting Group, Capgemini, A T Kearney among many others. The market for HR consultants thus presents a highly competitive environment and hence Capstone must focus on creating its niche market for effective market penetration and expanding market shares. In order to differentiate its services from other competitors, Capstone will create its niche market through customized services. The focus of the business will be on retaining existing clients and obtain new clients through word-of-mouth recommendations from existing clients. This can be achieved only through adopting a total customer oriented approach to ensure 100 percent satisfaction to the clients. Market Strategy This section outlines the marketing strategy of the Capstone Consultancy Services. The marketing strategy provides a detailed overview of the 4 Ps of marketing, that is, product, price, place, and promotion. The section also provides an outline of the sales strategy, forecasted sales and price list of services offered by Capstone. 4 Ps The 4Ps of marketing namely product, price, place and promotion provide valuable insights into the strategic direction of the company’s marketing plan. Product Since the services of Capstone will encompass catering to the HR services needs of the business enterprises in and around Katy Texas, the list of services to be provided by the company can be enumerated as below – HR strategy consultancy Payroll management Talent management Employee relations Employee compensation Employee rewards and recognition Diversity management Change management initiatives Performance appraisals Discrimination Career progression Training requirements The scope of services offered by the company will be based on individual client requirements and their needs assessment. Price The price of services offered to clients will be competitive in order to help the business acquire customers. The overall prices for each customer will be adjusted as per specific requirements and extent of involvement required by the company. HR consultancy charges in specific cases will be based on man-hours. The pricing strategy will look into the key aspects of expanding business and developing long-term customer relationship for mutual benefit. Place The business will initially cater to the HR solution needs of business enterprises in and around Katy, Texas. Promotion Capstone will adopt an aggressive marketing communication program through the different media channels such as business journals, magazines, newspaper advertisements, sponsored articles, direct marketing, commercials, internet and social networking websites. These channels will be used to communicate and reach out to potential business clients who are seeking HR consultants. The focus of the marketing communication program will be on creating customer awareness, generating interest, and providing specialised services. The contents of these marketing campaigns will be highly informative in nature and the approach will be to drive the sales through increased consumer interest. Price list The price list of the HR services is given below – Service charges (monthly) HR strategy consultancy $600 Payroll management $400 Talent management $500 Employee relations $600 Employee compensation $200 Employee rewards and recognition $200 Diversity management $400 Change management initiatives $400 Performance appraisals $300 Discrimination $200 Career progression $300 Training requirements $300 These prices are indicative of the broad category of services offered by the company and the actual charges will be based on the extent of manpower involvement and specific business requirements of the client. Selling strategy Capstone Consultancy Services will focus its customer acquisition strategy on the small, medium and large business enterprises across all industry segments. The sales team will prepare a list of all companies in the local market who have not outsourced their HR functions to any other agencies or consultancies and with the help of this database the sales team will approach these companies with their service proposals. The sales team will be provided monthly targets based on which they can earn added incentives and bonus. This will be primarily to motivate the sales team to achieve increased targets. The sales process will cover the following procedures: personal interaction with the potential customers through prior telephonic appointment emails and follow ups sales letters promotional offers to induce the customers to try the services at least once An online demo of the services and its implications on the organizational performance will be given to potential customers to provide them with a clear idea of the benefits and advantages offered by Capstone. The focus of the business will be on retaining existing clients and obtain new clients through word-of-mouth recommendations from existing clients. This can be achieved only through adopting a total customer oriented approach to ensure 100 percent satisfaction to the clients. Sales forecast Based on the knowledge, experience, and marketing capabilities of the team, it is projected that Capstone will acquire nearly 100 customers in the first year of its operation. The table below illustrates the five-year sales forecast for the business – Market Analysis Marketing forecast 2012 2013 2014 2015 2016 Small-scale business 60 70 90 110 120 Medium scale business 40 55 75 100 130 Large scale business 10 25 35 45 70 110 150 200 255 320 Implementation Strategy This section provides an insight into the implementation details of the business plan. Overall strategy The implementation of the business objectives and strategic plans outlined in the previous section will be done in stages. The initial focus of the management will be on forming its operational teams and executives who will drive the growth and expansion of the business. The teams and individuals will then be given specific training on how to approach their job responsibilities, what will be the desired targets, and how can they achieve these targets. Client acquisition and retention strategies will be the primary goals and the workforce will be given a five day training on strategic plans, measures and approach that can lead to high customer satisfaction. Implementation Capstone will establish itself as a start up company that plans to capitalize on the growing market of human resource consultancy services. The growing demand for such services in the market is the primary factor that will enable the company to capture the market and establish a strong foothold in the industry. The company will initially invest in creating its infrastructure and consultancy team that will contribute to business development and sustainance strategies. Staff cost will be the major item of cost for the business and based on the requirements of number of sales personnel and consultants the following personnel plan has been drawn. The table below outlines the personnel plan projections for the next 5 years of operation along with estimated salary expenses under each head (all figures are in US$) – Personnel Plan (planned) Year 1 Year 2 Year 3 Year 4 Year 5 Senior Managers 360,000 360,000 360,000 360,000 360,000 HR Consultants 160,000 200,000 200,000 240,000 240,000 Executives 150,000 150,000 210,000 210,000 240,000 Total Payroll 670,000 710,000 770,000 810,000 840,000 Number of Employees Senior Managers 6 6 6 6 6 HR Consultants 4 5 5 6 6 Executives 5 5 7 7 8 Total Staff 15 16 18 19 20 Once the teams are in place, the marketing team, sales team, finance team, and consultants team will work in collaboration with each other to support an integrated business opreation. Key project teams of consultants will be formed to execute client services and these teams will be led by one manager who will be responsible for updating performance records and management on vital issues. The role of the top management team will be to monitor daily progress and outline strategic measures and approach that can help the business deliver effective results. The workforce will meet every Friday and Monday to update the week’s events, progress, discuss pertinent issues, brainstorm ideas and define new possibilities that can help the business grow. Besides operational management plans, the company will implement a customised IT system application that will help the company maintain its database of vital activities, information system to streamline its operations, and support knowledge sharing initiatives for improved employee capabilities. Capstone will provide its clients with easy accessibility to its services through its website and social networking channels that will allow the customers to interact and enquire at any point of time. The company will adopt a brick and click business model to minimize capital expenditures, operating costs and expanded customer outreach. The online interactive tools will enable the business to tap new customers, respond to their specific queries and provide service demo. This will be followed by a physical meeting to study the client requirement and provide them with service quotations. Control plan To minimize risks associated with any new business venture, Capstone has identified some key challenges that will improve the company’s chances to prosper and provide its customers with customized expert solutions: Technology based system – The company will adopt a systematic approach to fulfill the needs of the customers through scalable HR systems and application tools that address their needs adequately. Customized reports and information processing capabilities will lend credibility to the service scope and Capstone’s capabilities. Constant monitoring of strategies and operational outcomes – Capstone will ensure that its customers receive extended benefits through a constant monitoring and evaluating system. This system will be responsible for identifying and co-relating employee performance and specific productivity indicators to assess the effectiveness of the HR solutions provided by Capstone. This will help the client measure the value added component of the services provided besides enabling it to identify possible areas of development. Capturing market share – the entry of competitors in the industry in the near future will pose a threat to Capstone’s market and profitability share. To combat this the company needs to penetrate and capture the niche market with an aggressive marketing plan Among other control measures Capstone will focus on providing better customer service; increasing customer retention rates; increasing new customer acquisition; and focusing on their core competencies. Among market challenges and potential problems that the company might face in the future the following are prominent: Entry of more competitors into the market segment, and Businesses acquiring customized application software to cater to their specific HR needs. The management should be prepared to face the above-mentioned risks and problems associated with this line of business. Suitable strategies to meet changing market dynamics may involve providing the customers with extra value added services in terms of cost cutting or range of choices. Budgetary controls will be exercised in the number of staff recruited over the subsequent period. Financial Statements and Projections The company seeks a funding of $3 million dollars to cover the start-up cost and expenses. This covers the technology development cost, salaries for the professionals, business development activity cost and marketing expense. Revenue and cost estimate The estimated cost allocation under important headings are provided below (all figures are in US$)– Direct Cost Year 1 Year 2 Year 3 Year 4 Year 5 Staff Salary 670,000 710,000 770,000 810,000 840,000 Rent 60,000 61,000 62,000 63,000 64,000 Marketing communications 10,000 12,000 12,000 13,000 13,000 Miscellaneous 10,000 10,000 10,000 10,000 10,000 Total cost of sales 750,000 793,000 854,000 896,000 927,000 The projected revenue statement for the first year of operations is given below - (all figures are in US$) - Revenue statement (projection) Year 1 Year 2 Year 3 Year 4 Year 5 2,500,000 2,750,000 4,000,000 5,875,000 8,125,000 Forecasted profit and loss statement Profit & Loss Year 1 Year 2 Year 3 Year 4 Year 5 Sales 2,500,000 2,750,000 4,000,000 5,875,000 8,125,000 Direct Cost of Sales 750,000 793,000 854,000 896,000 927,000 Total cost of sales 750,000 793,000 854,000 896,000 927,000 Gross margin 1,750,000 1,957,000 3,146,000 4,979,000 7,198,000 Operating expenses Salaries 670,000 710,000 770,000 810,000 840,000 Administrative 5,000 5,250 5,513 5,788 6,078 Stationary 3,000 3,150 3,308 3,473 3,647 Marketing communications 10,000 12,000 12,000 13,000 13,000 Rent 60,000 61,000 62,000 63,000 64,000 Insurance 5,000 6,000 8,000 9,000 10,000 Systems and accessories 20,000 21,000 22,000 23,000 24,000 Others 10,000 11,000 12,000 13,000 14,000 Total Operating Expense 783,000 829,400 894,821 940,261 974,725 Profit before interest and taxes 967,000 1,127,600 2,251,179 4,038,739 6,223,275 Interest expense 705100 705100 705100 705100 705100 Tax incurred 0 0 0 0 0 Net profit 261,900 422,500 1,546,079 3,333,639 5,518,175 Net profit/Sales 10.48% 15.36% 38.65% 56.74% 67.92% Break-even point The company will achieve break even point in between tenth and eleventh month of its operation when the initial capital investment of $3000 will be recovered through the forecasted revenue chart provided below – Monthly revenue forecast for the first year of business operations Jan 50,000 Feb 70,000 March 90,000 April 150,000 May 170,000 June 190,000 July 210,000 August 230,000 September 250,000 October 280,000 Novermber 350,000 December 460,000 2,500,000 Capital/Investment needs The company seeks a funding of $3 million to facilitate the initial development and marketing activities. The company will seek 100 percent internal financing to cover up its start-up expenses. The finance will be utilized towards the office setup costs, business development and other startup expenses. The table below provides the break up of the startup expense total: Start-up Expenses Rent for office space 60,000 ($5000 per month) Office infrastructure 20,000 Insurance 5,000 Salary of consultants and executives 25,000 Research and marketing activities 15,000 Systems design 25,000 Computers and accessories 38,000 Stationaries 2,000 Others 10,000 Total Start-up Expense 200,000 Start-up Assets Needed Cash balance on start-up 0 Short term assets 100,000 Long Term Assets 0 Total asset requirement 100,000 Investment 300,000 Total capital requirement 300,000 References 1. Consulting Bench (2012). List of consulting firms. Retrieved on June 10th 2012 from http://www.consultingbench.com/companies/location/TX/page:2 2. Dabu, A. (2009). The HR consulting entrepreneur: firm builder, market-maker and diffuser of HR management knowledge in an emergent business system. Dissertation paper. UMI Microform Publishers. 3. Kennedy Consulting (2012). HR Consulting Marketplace: key trends, profiles and forecasts. Retrieved on June 10th 2012 from http://www.kennedyinfo.com/consulting/research/hr-consulting-marketplace-2011-2014?C=Jr03Zz62mOi3nEag&G=tEQoLNoQJ4WPNdn4 4. Kennedy Information (2005). The HR consulting and outsourcing markets: key data, forecasts and trends. Kennedy Information Inc. 5. Poor, J. And Milovecz, A. (2011). Management consulting in human resource management: Central and Eastern European perspectives in light of empirical experiences. Journal of Service Science and Management. Vol 4, pp 300-314. 6. Plunkett Research (2012). Introduction to the consulting industry. Consulting industry market research. Read More