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Start-Up Plan for Internet Cafe - Assignment Example

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The focus of this paper "Start-Up Plan for Internet Cafe" is on a new business start-up that aims to service the internet needs of the student sector in the Yorkshire and Humber region.  X Internet Café is the answer to increasing demand in cashless systems and affordable rates of internet access. …
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Start-Up Plan for Internet Cafe
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INTERNET CAF BUSINESS PLAN Strictly Private & Confidential Address, contact numbers, fax and email. Add website as well if it exists Confidentiality Agreement The undersigned reader acknowledges that the information provided by in this business plan is confidential; therefore, the reader agrees not to disclose it without the express written permission of . It is acknowledged by the reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to Upon request, this document is to be immediately returned to . Signature.. Name (typed or printed).. Date: .. This is a business plan. It does not imply an offering of securities. Table of Contents INTERNET CAF NAME 1 BUSINESS PLAN 1 1.0 Executive Summary X Internet Caf is a new business start-up which aims to service the internet needs of the student sector in the Yorkshire and Humber region. X Internet Caf is the answer to an increasing demand in cashless systems and affordable rates of internet access. This will be achieved by introducing an innovative method of managing payment and access to internet services. This will allow the customer the flexibility of access, payment and budgeting. The rates offered for internet access will be competitive. The concept is still at start-up level, however, the next stage is to secure funding and this will be carried out by applying for funding to various sources. There is the potential to trademark our concept of the Access Card, and enquiries are being made to the relevant authorities. Our market mainly consists of students who cannot afford to be tied down to long term internet contracts, and this segment as a whole is currently experiencing record levels of borrowing to sustain their education. This is a huge potential market of 42 401 students in the Yorkshire and Humber region (UCAS 2006), and are desperately in need of more flexible internet access. To ensure this, we will be undertaking an aggressive marketing campaign and liaising with the National Students Union. Our concept will require a minimum of 100,000 for the first year, with a 20% stake offered for potential investors. 20 000 will also be made available from personal savings of the owner . 1.1 Objectives X Internet Caf's objectives for the first three years of operation include: The creation of a novel way to access and pay for internet access. Provide an integrated internet and data management service at affordable prices. Expand into other areas of the United Kingdom Achieve a 60% penetration rate for the national student community. 1.2 Mission As the cost of broadband internet access comes down, its popularity will increase, but at the price of long and binding contracts. X Internet Caf will provide student communities with access to the Internet, at a price they can control, and at hours that are compatible with their lifestyles. 1.3 Keys to Success The keys to success for X Internet Caf are: The creation of the Access Card that will differentiate payment methods and accessibility of computers. An all-inclusive service that is suitable for every budget. 1.4 Risks The risks involved with starting X Internet Caf are: Will the anticipated demand materialise Will the popularity of all-inclusive broadband internet in accommodation rates grow 2.0 Company Summary X Internet Caf, soon to be located in the city of Sheffield, will offer the student community with affordable internet services, through the innovative Access card which allows the student to browse and access internet services at manageable prices. X Internet Caf will also offer photocopying, binding, laminating and printing services which can paid off the Access Card. X internet caf was born out of the lack of basic internet access that seems prevalent in the UK. The UKs e-government programme has focussed on rolling out internet access to poor and disadvantaged communities in a bid to close the digital divide (Norris 2001). Recent figures also highlighted that the south-east of England had a higher uptake of broadband internet services (BBC Website 2006). This suggests that other areas of the UK are missing out on broadband internet for a variety of reasons. Whilst dial-up internet is widely and readily available, it does not meet the requirements for today's email communication, which often involves large downloads and attachments. Broadband is considered to be ideal in terms of internet access; however services tend to come with long binding contracts which do not suit a large section of the market. For instance, students represent a large proportion of internet users during term time, but the structure of the university terms is incompatible with broadband contracts. Sometimes landlords may provide an internet service, however, students often share accommodation, and this arrangement lends itself easily to wireless broadband, which is an additional cost. 2.1 Company Ownership X Internet Caf is a solely owned by . However, if any investors would like to invest, they will obtain a stake in the company, or seek a partnership arrangement. 2.2 Start-up Summary X Internet Caf's start-up costs will cover the rental, renovation, equipment (computers, scanners, barcode, printers, etc), capital to cover losses in the first year and equipment to get the students online. 2.3 Company Locations and Facilities A site is still to be chosen in Sheffield, but initial consideration is being given to locations close to the student union and on off-site campuses. This is consistent with providing an accessible location, whilst taking the student's personal safety into consideration. Expressions of interest have been received from city tourist centres that are often at the heart of local tourist and student activity in the Yorkshire and Humber region. 3.0 Services An innovative method of providing internet access through internet cafes by introducing flat-rate all-inclusive fees for accessing the internet has been developed. Regular customers will be able to pay for internet access in advance by signing up for our Access Card, which will enable them to walk into any one of our cafes and browse the internet by producing and scanning the card at the machine to log in. This service is not attached to any contracts and if the customer does not top up their card, they cannot access the net. It is basically the typical pay-as-you-go service, but with benefit of being cashless and controllable. 3.1 Service Description The current environment is gravitating towards a total cashless society with the increase in use of credit and debit cards, as the preferred method of payment (BBC 2006). The Access Card will remove the need for customers to calculate the amount of money they need to access the internet, and introduce the freedom to control the money they spend. This card will allow the customer to top up at our cafes for any amount ranging from 5 to 20. We intend to increase the capability of the service by allowing customers to top up from Pay Point retailers (Shell LiveWire 2006); and possibly link up with the Oyster Scheme (Shell LiveWire 2006). Internet access will be charged at a rate of 1 per day for customers using the Access Card. Customers opting out of this card system will still be able to access the internet for a flat-fee of 1 per session. Enquiries are being made for any patents and trademarks (Irwin 1995) as we feel this is important if we are to expand our business nationally, without facing possible demise from copycats. 3.2 Competitive Comparison Advantages over rivals include the provision of a cashless system for customers and the use of technology to attract customers. 3.3 Fulfilment X Internet Caf will contact various computer suppliers, including Dell for equipment and support. BT will also be contacted for Internet access and connections as they are reliable and can be contacted at any time. Other office equipment will be sought from office suppliers such as Staples or Office World. 3.4 Technology X Internet Caf will invest in high-speed, high memory computers to provide a total experience of broadband internet. Barcode readers will also be present at each terminal to allow the customer to log into the network and top up their Access Card. 3.5 Future Services As X Internet Caf grows, more computers will be required, so will accommodation. This service will expand by opening additional sites. 4.0 Market Analysis Summary X internet caf will be operating in a mainly student market and will be able to absorb the costs of reduced student numbers during the holiday period, by remaining open to tourists and other residents. 4.1 Market Segmentation X Internet Caf is targeting students in the Yorkshire and Humber region of England, as this region is currently experiencing a 6% growth of students (UCAS 2006), and this segment has grown by almost 10% within the last 4 years (UCAS 2006). Although the South East and the Greater London regions demonstrated stronger growth, these regions are in the south and at an advantage in terms of the North-South divide (Norris 2001). It was felt that no great benefit could be achieved by operating in a region that is probably over-subscribed in terms of internet cafes. The rental on properties is also significantly higher, whereas this is more favourable in the North of England (Rightmove 2006). 4.2 Target Market Segment Strategy The main products currently being offered vary to this market. Internet cafes offer a basic pay as you go service for a charge per minute. Students are also getting the option to rent student accommodation that comes complete with internet, but this is often provided at a premium. Student tuition fees are also on the increase, which would mean that most students would be looking at saving their money. The current market growth trends demonstrate that students in this region will grow by another 6% (UCAS 2006) due to the perceived quality of life in this region and lower cost of living. 4.2.1 Market Needs Internet cafes also offer other services like photocopying, binding, laminating and printing. X internet caf will also offer these additional services to provide a total package. 4.2.2 Market Trends Main competitors include Easy Internet Cafes, and other prominent cafes, and they target the general public and are often situated in city centres. Other key market characteristics of the internet cafes include similar pricing plans (e.g. 1p per minute), and traditional opening hours, which sometimes do not cater for the uncertainties faced by students. 4.3 Service Business Analysis X internet caf is going to compete on innovation and technology by offering a new method of paying for internet services from internet cafes. X Internet Cafe will not be competing on price, as this bit of the market is saturated with competitors offering cheap rates including Easy Internet. Our competitive advantage will come from the new feature - our Access Card which will allow us to compete on quality and convenience. We believe this difference is important to the customer, as price for service provision is not the issue, but it's the quality and convenience of service that matters. 4.3.1 Business Participants The power of our suppliers is weak as there are large numbers of computer suppliers and those of plastic card systems. The market is intense amongst suppliers which brings the added advantage as we will be in a position to bargain for the best price. The barriers to entry into this sector are high (mainly from rentals and cost of equipment). However, the modest profits realised in this industry do limit, to some extent any potential entrants. 4.3.2 Distributing a Service Currently, the only threats are existing broadband services, as internet providers are constantly coming up with new price plans to undercut each other. If our business takes off, there is the strong possibility that a business with the financial resources can copy this and implement it faster than we can. Hence, the importance of being the first to market. There is little rivalry amongst existing internet cafes, because the profits in this industry are not huge. Internet cafes are also widely dispersed across geographical locations and have become the norm. 4.3.3 Competition and Buying Patterns Our buyers are our customers, and their power is high, as we are a service industry and this means that if the customer cannot see any perceived benefits, they will not use our service. Even if they use our service, the quality has to be high to guarantee returns. 5.0 Strategy and Implementation Summary X Internet Caf has three main strategies. The first is to focus on promoting the benefits of the Access Card technology. The second is to focus on appealing and attracting students and other members of society who would benefit from this Internet concept. The third strategy is to focus on innovating payment methods and subscribing to popular technologies such as PayPoint and the Oyster Card Scheme. 5.1 Benefits of Access Card Customers opting out of the Access Card will pay for the service prior to access the net, and will be given up to 60 minutes for access. 5.2 Attracting Customers Our internet caf is targeted at largely student communities. Other secondary market segments will include tourists, especially lone travellers or hikers, who simply want to stay in touch with friends and family. We will acquire premises on a rental basis to start off with and this will be located close to student locations and accommodation in city and town centres. The internet caf will have our company colours and logo across the front, and we will arrange for city brochures to include a map to our caf. The internet caf will also be open between the ours of 7:30 am and 12 midnight, to allow sufficient time for early birds and the late comers. 5.3 Innovative Payment Methods Our new technology is better placed than that of rivals to take advantage of the existing dissatisfaction amongst consumers and to attract the new customers entering the market. We are also less vulnerable to price competition because of the lower costs involved in the production of our technologically different products. 5.4 Marketing Strategy Our core strategy for marketing our products is primarily through university student unions, and student literature. If funds are obtained for marketing, X internet caf will also market itself through the local newspapers like the Metro, and will make sure it is located within easy reach of customers and that it is easily identifiable. A website will also be created which will provide further information and act as a point of access to potential customers. The site will also allow customers to order an Access Card for collection in-store. The website will cost 127 per year (Heart Internet 2006) to keep it up and running. The domain name will cost 30 for two years (Heart Internet 2006) and reminders will be sent towards the end of this period (Heart Internet 2006). Some university student unions may offer advertising for free if students can be guaranteed a discount. 5.4.1 Pricing Strategy Internet access will be charged at a rate of 1 per day for customers using the Access Card. Customers opting out of this card system will still be able to access the internet for a flat-fee of 1 per session. 5.5 Sales Strategy As an organisation in the service retail sector, X Internet Caf will employ people to handle non-Access Card transactions and deal with customer queries. Employees will therefore need to possess basic computer skills and will be trained by a technician as well, so as to assist with equipment maintenance. 5.6 Milestones The next key stages are submitting this business plan to business angel networks to garner support and interest, as well as get the attraction of major funders (Bartol & Martin 1998). Our milestones will be securing some funding regardless of amount, as it will signify that our business idea is viable and will give us the room and the motivation to succeed. 6.0 Management Summary X Internet Caf is owned and operating by . The organisation is small, and only requires a simple organisational structure. All major management decisions in addition to monitoring all other business activities will be made by . 6.1 Personnel Plan Staff will consist of 4 part-time employees working 60 hours a week altogether at the minimum wage of 4.50 per hour. These employees will be responsible for helping and assisting customers, and will work in alternate shifts. Other staff, like service and technicians will be contracted out on an individual basis. This provides flexibility and allows the dispersal of information and allows us to react quickly to changes in the market. 7.0 Financial Plan There is a financing requirement of 98 200 which will be sought from Business Angel Investors. The equity offered will be 20%. The company has no loans or overdrafts and at this stage does not plan any. In terms financial structure, the shareholding structure of the company will be as follows: Shareholders Pre - Financing Stake Post - Financing Stake CEO (Founder) 100% 80% Current Investors 0% 20% Total 100% 100% Table 3.0 Shareholding structure The investment will be used as follows: Investment Area Proportion Amount Rent (750/month for 12 months)Figure based on average shop rentals across Yorkshire. 9% 9 000 Equipment (computers) based on average PC price of 400 20% 20 000 Staff (based on minimum wage for 2 employees working full-time hours) 51% 50 000 Marketing (based on internet marketing, radio and TV marketing fees) 10% 10 000 Overheads (estimation of gas, electric and water charges of 250) 3% 3 000 Broadband Internet Rental (based on BT Business broadband of approx 80 per month with set-up and support fees). 1% 1 000 Networking and Internet Support (Based on average cost of setting up and maintaining a central network) 1% 1 000 Web Hosting (based on Heart Internet prices of approx 12 per month for a year) 0.02% 200 Professional Services (this is for legal and accounting services and is based on approximate costs of 50 per hour for a consultation or service) 1% 1 000 Insurance (based on average cost of insuring the building and property from Norwich Union) 2% 2 000 Security (approximate costs of police linked alarm system at approximately 80 per month) 1% 1 000 Total 100% 98 200 Table 4.0 Investment Allocation Cash Projections As we stated previously, the company anticipates that it would recouped its investment in 18 months time - though this could be sooner. Key financial data and financial projections are presented as an appendix to this document. Exit Route These funds will be used to take this concept to market, at which stage we could continue to supply at lower levels without further funding or may decide to undertake a second round of financing to expand more aggressively. Our planned exit route will be through a business auction or sale to investors. It is expected that within five years the internet cafe will achieve sales in excess of 200,000 and to be on a fast rising sales curve with the potential substantially higher sales growth as other catalysts in our product portfolio gradually reaches the market. We currently do not have non-executive directors or mentors and efforts are being made to take some on board by submitting this business plan to business angel networks. As we are starting up, we still have some skills shortages in the area of accountancy and law. We will utilise the services offered by organisations supporting small businesses until the business can afford to recruit its own skills. X internet caf aims to provide a high quality internet service to students located away from their main campus and who cannot afford to be tied down to a lengthy contract. X internet caf would like to develop its brand by establishing itself in the main student cities and towns across the UK. Appendix Your CV Full illustrative financial projections References Bartol, K M & Martin, D C (1998) Management. 3rd Edition, Irwin McGraw-Hill, New York. BBC Website (2006) Education Section. http://www.bbc.co.uk - page last accessed 12 August 2006. BBC Website (2006) Technology Section, http://www.bbc.co.uk - page last accessed 12 August 2006. Bradford University, Student Accomodation Services, Richmond Road, Bradford, West Yorkshire. Burch, J G. (1986) Entrepreneurship. Wiley, New York Churchill, N C and Lewis, V L (1983) The Five Stages of Small Business Growth. Harvard Business Review - May-June. Dale, B.G., (1999) Managing Quality (Third Edition), Blackwell Publishers, Oxford, 1999. Drucker, P. (1968) The Practice of Management. Pan Books. Halloran, J W (1994) Entrepreneurship. Mc-Graw-Hill. Hamal, G & Prahalad, C K. (1994) Competing for the Future. Harvard University Press. Heart Internet (2006) Web Hosting Solutions. http://www.heartinternet.co.uk - page last accessed 12 August 2006. Innovator Entrepreneur Intelligence (2003) Full Financial Plan. http://www.innovateur.co.uk - page last accessed 12 August 2006. Irwin, D (1995) Planning to Succeed in Business. Pitman Publishing Matalan (2004) Annual Report. http://www.matalan.co.uk - page last accessed 12 August 2006 Mullins, L J (1999) Management and Organisational Behaviour. 5th Edition, Financial Times-Pitman Publishing, London. Norris, P. (2001). Digital Divide: Civic Engagement, Information Poverty, and the Internet Worldwide. Cambridge: Cambridge University Press. Porter, M E (1980) Forces driving industry competition. RightMove (2006) - http://www.rightmove.co.uk - page last accessed 12 August 2006. Shell LiveWire (2006) Marketing Research for the first time. http://www.shell-livewire.org.uk - page last accessed 12 August 2006. Shell LiveWire (2006) Writing your first business plan. http://www.shell-livewire.org.uk - page last accessed 12 August 2006. Shell LiveWire (2006) Organising your business and keeping it legal. http://www.shell-livewire.org.uk - page last accessed 12 August 2006. Sheffield University (2006) Student Accomodation Services. http://www.sheffield.ac.uk. Page last accessed 12 August 2006 Siropolis, N C (1994) Small Business Management. 5th Edition, Houghton Mifflin, Boston. UCAS (2006) http://www.ucas.ac.uk - page last accessed 12 August 2006. Read More
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