Royal Consultancy Limited - Coursework Example

Royal Consultancy Limited Table of Contents Royal Consultancy Limited 3 Executive Summary 3 Objectives: 4 Mission: 4 Keys to Success 4 Company Summary 5 Ownership 5 Start-up summary and financials 5 Company services 7 Market analysis Summary 8 Market segmentation 8 Small scale clients 9 Multinationals 9 Industry Participants 10 Distribution channels 10 Competitive comparison 11 Sourcing 11 Services and support 11 Market needs 11 Market trends 12 Market growth 12 Strategy and implementation 12 Strategy pyramids 13 Value proposition 13 Competitive advantage 14 Positioning statements 14 Pricing strategy 14 Sales Forecast 14 Strategic alliances 15 Management Summary 16 Organizational structure 16 Management Team 16 Personnel Plan 16 Financial Plan 17 Important assumptions 17 Major Financial Indicators 17 Break-even Analysis 18 Projected Profit and Loss 19 Projected Cash Flow 20 References: 22 Royal Consultancy Limited Executive Summary Royal Consultancy Limited is in the process of being formed. The company will specialize in offering consulting services both locally and globally. Its founders consist of anterior salespersons of consulting services and market researchers. The company is formed with a view of formalizing consulting services. After a thorough review of the market analysis my team came up with the following financial estimates. The table below shows projected gross incomes, sales and Net profits for three successive years. 2014 Gross Income $600,000.00 Total Sales $500,000.00 Net $100,000.00 2015 Gross Income $700,000.00 Total Sales $550,000.00 Net $150,000.00 2016 Gross Income $1,000,000.00 Total Sales $600,000.00 Net $400,000.00 Business plan highlights This report is written in order to guide the process of the company’s formation and management. In addition, the report seeks to pitch for potential investors. The following is a summary of the main points of the proposed marketing plan. Objectives: The objectives of Royal Consultancy Limited are to create revenues, grow at a sustainable rate and be a leader in upholding citizenship ethics. Mission: The mission of Royal Consultancy Limited is to provide a swift and dependable help to small scale computer users. Keys to Success Immediate responsiveness, quality service, customer retention, advertising and networking are the keys to success for Royal Consultancy Limited. Fineness in gratifying promise, confidentiality and reliability are central aspects in keys to its success. Mounting feasibility studies with a view of creating fresh business leads. Leveraging from the little available resources to create numerous income units. Company Summary Royal Consultancy Limited will provide high level expertise in business development, supply strategies and marketing. Ownership Royal Consultancy Limited will be founded as a US based international company owned and run by its core shareholders as well as its principal operators. Upon its full writing the plan will incorporate legal formation aspects. Start-up summary and financials In order to ensure Royal Consultancy Limited picks up, the owners will provide part of the funding in form of assets and liquid cash. The financial requirements to get the company started are enormous and as such a short term loan is sought to help secure home equity. This loan will be repaid within three years ones the net returns have increased substantially. To achieve this, aggressive advertising strategies will be formulated taking advantage of competitors’ feebleness. Through effective cost control measures huge net profits will be realised within the first year which increases through the next two years. After a careful analysis of the needs of this project, it was found that the total expenses amounts to $ 80,000. The short term assets is projected to cost $ 4,000 whereas the initial cash that would enable running of consulting services for the first six months is projected to be $ 1,100,000. The table below shows the start-up plan and costs involved Start-up expenses   Legal $ 1,500.00 Stationary $ 3,500.00 Brochures $ 5,200.00 Consultants $ 5,300.00 Insurance $ 400.00 Expensed equipment $ 3,100.00 Other $ 1,000.00 Total Start-up Expense $ 20,000.00 Start-up Assets Needed   Cash requirements $ 27,000.00 Start-up inventory $ - Other Short-term Assets $ 8,000.00 Total Short-term Assets $ 35,000.00 Capital Assets $ - Total Assets $ 35,000.00 Total Startup Requirements: $ 60,290.00 Left to finance: $ - Start-up Funding Plan Investment   Investor 1 $ 22,000.00 Investor 2 $ 22,300.00 Other $ 11,500.00 Total investment $ 55,800.00 Short-term borrowing   Unpaid expenses $ 5,700.00 Short-term loans $ - Interest-free short-term loans $ - Subtotal Short-term Borrowing $ 5,200.00 Long-term Borrowing $ - Total Borrowing $ 10,900.00 Loss at start-up $ 23,000.00 Total Equity $ 30,000.00 Total Debt and Equity $ 20,800.00 Expenses $ 20,000.00 Assets $ 35,000.00 Investment $ 55,800.00 Loans $ 10,900.00 The graph below is a graph representing the start-up plan projections Company services Royal Consultancy Limited offers technical assistance in matters related to channel dissemination, development, repairs, training and market expansion. The services will be packaged and sold depending on the customer needs, preference and financial capability. Computer repairs and installation will be conducted onsite as part of our marketing plans intended at overcoming completion from our competitors. In this regard, the packages will aim at promoting accessing retainer relationships, project-based consulting, alliance brokering, published as well as market research among other services. Royal Consultancy Limited will offer free transportation of machines to and from its workshop to the customer’s place of work should the problem involving it require thorough scrutiny. Market analysis Summary Royal Consultancy Limited is a computer based consulting service provider dealing with production and sale of extraordinary technology hardware and software facilities. Its main markets are the US, Europe and Latin America. The target population is large and to satisfy their requirement needs, it would require medium and large scale company operations. The company will tap into the opportunities presented by the existence of large number of multinational corporations in these regions. In this regard, the executives from these corporations form part of potential customers for Royal Consultancy Limited. They executives consist of marketing, general and sales managers charged with responsibilities of international focus. This is a group of persons who in most cases hate risking time and money looking for expertise. Such persons are always keen on protection of the company’s reputation and wouldn’t go for questionable experts. It is important to note that computing is one of the fastest growing industries in technology and innovation calling for a consistent need for business assistances in advising and update of databases. A study conducted within the jurisdiction of Royal’s market segment indicates a high percentage of dissatisfaction with the current services. Royal Consultancy Limited is therefore presented as a viable alternative giving it an attractive position for a ground-breaking start-up. With the existing market, Royal Consultancy Limited is expected to pose a swift growth rate of over 15 %. Apart from laying focus on multinationals, Royal Consultancy Limited aims at focusing attention to small scale business operators who in most cases hire professional IT managers to cater for their full time needs. Royal Consultancy Limited presents cheap and timely services for these customers. Market research indicates that there exists a thriving opportunity for fresh companies like Royal Consultancy Limited. Market segmentation Royal’s market is broken into two groups grounded on requirements: Small scale clients and multinational corporations. Small scale clients The group is made up of customers residing within a 20 mile radius having more than five computers in their businesses or a business based network operating on a total business time of more than 20 %. The use of such computers in business may be minor or major depending on the size and nature of the business. In most instances their computers are used in software, interactive programs and related arenas. Complex systems will call for critical and reliable repairs and installations. The type of technology that will be incorporated must be advanced as well. Multinationals This forms one of the most important segments for Royal Consultancy Limited. Multinational Corporations such as Apple, HP, IBM and Siemens will be seeking the services of Royal Consultancy Limited especially on matters related to software development functions that are difficult to develop in-house. The hardware and software needs for the two segmentations will include backup systems, networking systems and servers. The business market growth rate for small scale users is projected at 3 % while that for multinationals is projected at 8% annually. The overall market growth will most likely stand at 6.22% as shown in the table below YEAR  % growth 2014 2015 2016 Multinationals 8% 20,000 21,600 23,328 Small scale users 3% 15,000 15,450 15,914 Total 6.22% 35,000 37,177 39,489 The graph below shows the overall market growth for the three market segments. Industry analysis Generally, the world’s consulting industry is disorganised with the existence of thousands of consulting organisations made up of participants from major international names and individuals. The biggest challenge facing the Royal Consultancy Limited is how it will distinguish itself as a real consulting group that is relatively fair in cost and risk free venture. Industry Participants As earlier mentioned, the consulting industry is marred with disorganised imposters in form of small consulting organisations and private consultants to unknown companies. At the peak of the consulting groups are a group of renowned names in the management consulting bound by their partnership organisations and spread in world’s major economic markets. The few existing participants reap from international advertising, economies of scale, large volumes of sales and increasing trend towards brand loyalty. Distribution channels Small scale business purchasers have a tendency of buying software and hardware from vendors of such products through office visits. Competitive comparison Royal Consultancy Limited hopes to differentiate through proper definition of its vision of being a company of choice for computer consultancy in the region and in the world as a whole. The company will compete effectively in the market by offering real alliance. The returns we sell include intangible services such as confidence and reliability. Sourcing Royal Consultancy Limited’ cost of commodities and services arises due to margin squeeze. This squeeze ultimately forces manufacturer’s price goes high. In regard to the hardware components, margins will be expected to decline at a steady rate. As a result, margins will be squeezed from a high rate of 27 % to a relatively lower cost of between 10 – 15% within a period of 4 years making Royal Consultancy Limited a leader in consultancy and supply of computer components in the region. It is vital to note that with the declining costs of computer peripherals, the cost of purchasing software will see a drastic drop in the next few years. Services and support Royal Consultancy Limited endeavours to anchor its strategy on provision of impeccable services and customer support. This is crucial in differentiating Royal Computer service delivery and support giving it a competitive lead against its competitors. Market needs Consultancy industry is a service seeking industry involving vital market requirements such as maintenance, service, training and fittings. Royal’s consultancy key area of strategy focuses on target segments which is believed to have a better understanding of the needs and they are always willing to pay for the services being offered. It is important to note that all computer users require constant support and services. Market trends The most realistic and vital trends in the market today is diminishing prices. This is expected to persist for the next few years. Major brand manufacturers create computer systems and peripherals with high specifications in terms of speed, power and memory size. The brands have been made available to consumers at very competitive prices. There is a second trend that Royal Consultancy Limited is keen on; the cost of upgrade and the cost of purchasing a completely new system. In this regard, it has been found there is little or no difference at all. This implies that the cost of services offered by the company is at low cost. In addition, there is a greater improvement in connectivity due to the fact that many people call for internet connection. Most offices and business firms continue to connect local area networks (LAN) between offices and the same LAN connected to the internet. This means that the future of Royal Consultancy Limited is a promising one. Market growth The fall in prices translates to a drastic increase in unit sales. This is one of the vital avenues through which Royal Consultancy Limited hopes to tap into as a way of increasing volumes of sales. Reports from the published market research indicate that there is a high demand for computer consultancy services in the United States today absorbing the needs of more than 40 million persons and businesses. These demands have continued to grow at a high rate of 22% annually. This is promising trend in market growth for Royal Consultancy Limited. Strategy and implementation Multinational businesses are a vital and fastest growing market segment for Royal Consultancy Limited. In this segment alone, there are a stunning over 100 multinationals that require computer expertise and services. This number grows at a rate of 11 % per year presenting hope for market expansion. Royal Consultancy Limited believes that the estimates on its market service area published by the newspapers earlier. Small scale businesses constitute of commercial organisations of different types. They include home offices and real businesses from whence employees earn a living. The employees include clerks, writers, managers, accountants and legal officers. Other small scale businesses which shall be of prime focus include virtually retail businesses. There are over 10 000 such businesses within the jurisdiction of Royal’s market segment. Strategy pyramids As earlier mentioned in this report, Royal Consultants Limited will focus on service and support as their core business activity within its jurisdiction. Specifically, the main focus on networking as a service to Royal’s customers will incorporate mailers and in-service training. In this regard, in-service training will focus on specific areas as one on one mail promotion and education trainers programs. Royal Consultancy Limited will emphasize its operational tactics through proper marketing of the company and not specific products as a way of building confidence and trust among the customers. This will be done through regular contacts with the customers and convincing customers to increase volume of sales. Marketing programmes will be formulated by using modern means of writing sales literature, revised advertisement strategies and sending mail correspondence after service and support. In addition, programs for regular contacts shall be included in the plan. This can be done through call backs after installation and sales management. Value proposition Royal’s value proposition is both unique and attractive to customers. Royal Consultancy Limited offers target customer who are not self-reliant in employees and who seek consultancy services with strategic friendship in service at an affordable cost that will match the value of assurance and functioning of the system. Competitive advantage Royal’s competitive advantage will based on our strategic alignment and choice of market segments that stands out as a relatively vast technological area. The firm aims at building a long standing relationship of highly satisfied team of clients. This will shield Royal Consultancy Limited against competition from its potential competitors. The longer the friendship lasts, the greater help we will offer to our customers and the more they will benefit from our service. Positioning statements Royal Consultancy Limited wants to make sure that the service given to customers works reliably well. To achieve this endeavour the firm hopes to partner with trusted vendors who are keen at creating working systems. Such partners should be a characteristic of working with well-trained personnel and whose down time is minimum. Pricing strategy Though the services Royal Consultancy Limited envisions to offer are of high quality, such consultancy services shall not be charged exorbitantly as part of customer retention strategies. Royal Consultancy Limited revenue structure is expected to match its cost plan. This will then ensure that salaries are well paid to ensure continued provision of services at an affordable cost. The revenue collected from service and support cannot be quantified into cost of products. This is because customers may view it as a sign of exploitation since the same commodity may be priced lower in another chain. Sales Forecast . Royal Consultancy Limited envisions operating in an environment that will see it grow its success to one of the best multinationals in the world’s trade map. The following table shows its annual sales projections: Sales 2014 2015 2016 Retainer consulting $ 150,000.00 $ 200,000.00 $ 312,000.00 Project consulting $ 200,000.00 $ 250,000.00 $ 310,000.00 Market consulting $ 133,000.00 $ 180,000.00 $ 220,000.00 Strategic Reports $ 1,000.00 $ 40,000.00 $ 100,000.00 Other $ - $ -   Totals Sales $ 484,000.00 $ 670,000.00 $ 942,000.00         Cost of Sales 2014 2015 2016 Retainer consulting $ 28,000.00 $ 18,000.00 $ 25,000.00 Project consulting $ 36,000.00 $ 23,000.00 $ 30,000.00 Market consulting $ 73,000.00 $ 41,000.00 $ 45,000.00 Strategic Reports $ 500.00 $ 17,000.00 $ 38,000.00 Other $ - $ - $ - Totals cost of Sales $ 137,500.00 $ 99,000.00 $ 138,000.00         Graphical representation of these projections is as shown in the graph below Strategic alliances The success of Royal Consultancy Limited will greatly depend on its strategic alliance given the existence of prospective partners around it. It will seek to form business alliances with major consultants in Latin America, the United States and Europe. Management Summary The preliminary team of managers will be dictated by funding partners i.e. the founders. As Royal Consultancy Limited continue to grow other stake holders may come in to take more consulting activities, sales and even marketing. Organizational structure Royal Consultancy Limited will operate under the management of its core founders. At the start of the business 4-6 executives will be incorporated. These are: Chris Alison Two major partners One partner representing Europe One funder representing Latin America One Partner from representing United States The organisation will initially operate on a top down management approach. Each of the founders and partners will be given the autonomy to operate in his or her area of jurisdiction. Management Team Royal Consultancy Limited requires highly global international expertise. All cohorts will be involved in the running of business with a view of making voluminous sales. For this reason, partners will be incorporated in major business proposals. The initial workers plan is expected to involve about 2-3 partners, 2-4 consultants and 1 marketing consultant. Personnel Plan The following data is a comprehensive workers plan estimates for the first one year. Personnel Plan 2014 2015 2016 Partners $ 124,000.00 $ 170,000.00 $ 197,000.00 Consultants $ - $ 65,000.00 $ 64,000.00 Editorial $ 20,000.00 $ 20,000.00 $ 27,000.00 Marketing $ 21,000.00 $ 47,500.00 $ 51,000.00 Sales persons $ - $ 27,300.00 $ 30,000.00 Office Manager $ 8,200.00 $ 31,000.00 $ 30,000.00 Secretarial $ 5,000.00 $ 17,000.00 $ 20,000.00 Other $ - $ - $ - Subtotal $ 178,200.00 $ 377,800.00 $ 419,000.00 Financial Plan The most essential aspects in any fiscal plan are the need to improve vital factors affecting the flow of cash. Royal Consultancy Limited will by all means develop a better inventory other than sliding in the inventory turnover flow to a tune of 6 turns by the end of the third year. In addition, Royal Consultancy Limited will bring the cross margin up by close to 30%. This is interconnected to the improvement of hardware revenues and revenues collected out of service revenues in return for better profit margins. In order to achieve its financial start up target the firm plans to borrow a long term loan of at least $200,000. Important assumptions The financial plan adapted for the purpose of this report depends on some assumptions. To start with, it is assumed that a slacking economic growth rate will take effect without recession. Secondly, it is assumed that there will be unanticipated variations in technology that can result in immediate obsolescence of products. The table presented below shows the general assumptions prepared for purposes of this report. It shows Royal’s utmost ambitions and most unquestionable assumptions. Below are the financial improvement projections turnovers. General Assumptions 2014 2015 2016 Short-term Interest Rate % 7.5% 7.5% 7.5% Long-term term Interest Rate % 7.8% 7.8% 7.8% Payment Days Estimator 50 50 50 Collection Days Estimator 50 50 50 Inventory Turnover Estimator 6.5% 6.5% 6.5% Tax Rate % 19% 19% 19% Expenses in Cash % 12% 12% 12% Sales on Credit % 65% 65% 65% Personnel Burden % 15% 15% 15% Major Financial Indicators The standard comparison chart below shows Royal’s ambitious plans aimed at correcting diminishing gross margins as well as inventory gross revenue. The chart explains why Royal Consultancy Limited believes that the projected sales increase as per the company’s plan is a reasonable one. Benchmarks Key: 2014 2015 2016 2017 2018 2019 Break-even Analysis For purposes of the break-even analysis, Royal Consultancy Limited assumes that the running costs would approximately amount to $100,000 per month. This includes costs incurred on payroll, rent and services. It is important to note that the initial payroll amounts to approximately $65,000. The chart below shows that Royal Consultancy Limited needs to sell about $ 400,000 to break-even. Projected Profit and Loss Royal Consultancy Limited believes that the gross margin in its anticipated profit and loss statement is expected to rise. It is expected to rise well above 25 %. The rise in gross margin depends on changing sales mix. Profit and Loss (Income Statement)   2014 2015 2016 Sales $ 6,570,430.00 $ 7,234,500.00 $ 9,846,487.00 Direct Cost of Sales $ 4,789,990.00 $ 5,909,232.00 $ 6,790,332.00 Production Payroll $ 145,000.00 $ 213,000.00 $ 206,087.00 Other $ - $ - $ - Total Costs of Sales $ 11,505,420.00 $ 13,356,732.00 $ 16,842,906.00 Gross Margin $ 1,835,356.00 $ 1,964,744.00 $ 2,973,583.00 Gross Margin % 23.20% 27.77% 35.04% Sales and Marketing Payroll $ 320,000.00 $ 413,000.00 $ 500,000.00 Adverts $ 124,000.00 $ 138,000.00 $ 184,000.00 Catalogue $ 21,000.00 $ 18,000.00 $ 19,874.00 Mailing $ 115,200.00 $ 119,000.00 $ 147,000.00 Promotions $ 17,000.00 $ 21,000.00 $ 26,000.00 Shows $ 20,100.00 $ 26,312.00 $ 32,896.00 Literature $ 8,000.00 $ 11,000.00 $ 13,390.00 Public Relations $ 980.00 $ 1,200.00 $ 1,740.00 Seminar $ 35,000.00 $ 40,000.00 $ 55,000.00 Service $ 11,450.00 $ 12,657.00 $ 16,230.00 Training $ 6,000.00 $ 7,560.00 $ 14,800.00 Total Sales and Marketing expenses $ 678,730.00 $ 807,729.00 $ 1,010,930.00 Projected Cash Flow The cash flow is dependent on assumptions for inventory revenue and payment days. It is projected in this report that a 50 days collection period is both essential and reasonable. This is possible with immediate assistance of $200,000 which will aid in a financial flow dip and build of mid-year sales. Pro-forma cash flow 2014 2015 2016 Net Profit $ 350,000.00 $ 421,000.00 $ 910,000.00 Depreciation $ 15,000.00 $ 17,000.00 $ 160,000.00 Change in Accounts Payable $ 567,000.00 $ 65,000.00 $ 188,000.00 Current Borrowing (Repayment) $ 400,000.00 $ - $ - Increase and Other Liabilities $ - $ - $ - Long-term (Repayment) $ 72,254.00 $ 24,765.00 $ 97,978.00 Capital Input $ 241,744.00 $ - $ - Sub total $ 1,280,998.00 $ 89,765.00 $ 285,978.00 Less       Change in account Receivable $ 478,000.00 $ 142,000.00 $ 328,354.00 Change in Inventory $ 750,000.00 $ 97,000.00 $ 138,645.00 Change in Assets $ 100,000.00 $ - $ - Capital Expenditure $ 90,000.00 $ 230,000.00 $ 450,000.00 Dividends $ - $ - $ - Subtotal $ 1,418,000.00 $ 469,000.00 $ 916,999.00 Net cash $ 300,000.00 $ 78,000.00 $ 245,000.00 Cash balance $ 254,786.00 $ 264,000.00 $ 213,000.00 References: SAHLMAN, W. A. (2008). How to write a great business plan. Boston, Mass, Harvard Business School Press. Read More