The General Core Business of the Company - Essay Example

Business Plan: Present, Interact, Share & Exchange (P.I.S.E CONNECTION, INC. Henrietta Francis Dr. Betty Ahmed BMAL 603 Entrepreneurship May 07, 2014 Executive Summary P.I.S.E. CONNECTION, INC is a start-up company that intends to start its operation on 1st July, 2014. It has two founders who have a lot of experience in this area of operation hence giving them an advantage in this undertaking. The company intends to provide and present information for the post-modern youth worker through workshops, speaking engagements, consulting and seminars to disseminate relevant information pertaining to all kinds of issues of Christian adolescents and teens. This will be a unique product since it will be tailor made to meet the needs and demands of the clients, as opposed to general training, which is being offered by different organizations through seminars and other group programs. To ensure that it achieves its objective of providing a unique product, the company will divide its market into different segments in terms of age and geographical characteristics. The company recognizes the strength it has as it joins the market such as the experience of the founders, but it also recognizes the fact that it will face stiff competition from providers of the same service. In addition, lack of enough funds may make the company not to compete favorably with others due to lack of advertising and other promotional activities. At start-up, the company will operate from the premises of the founders so as to minimize the operation costs. Further, the company intends to break –even within the first two years of its operation. Once the company breaks-even and the sales thereof increase to a considerable level, the company will employ a number of growth strategies. These include online sales, acquisitions, decreasing operating costs, market research and reaching out to new client base among others. In cases of stiff competition, the company’s contingency plan includes sourcing of funds to be used for intense advertisement and building of competitive advantage. Table of Contents Contents Executive Summary 2 Table of Contents 3 Marketing Plan 4 Situational Analysis 4 Market Analysis 4 Market Segments 5 Competitive Analysis 6 Company Analysis 6 Strengths Weaknesses, Opportunity and Threats (SWOT) Analysis 7 Objectives 7 Marketing Strategies 8 Action Plan 8 Financial Plan 9 The Balance Sheet 12 Break-Even Analysis 14 Growth plans 15 Contingency Plan 18 Harvest Strategy 19 Timeline to Launch 19 References 20 Marketing Plan Situational Analysis The general core business of the company is to provide and present information for the postmodern youth worker by providing workshops, speaking engagements, consulting and seminars to disseminate relevant information pertaining to all kinds of issues of Christian adolescents and teens. This marketing plan aims at providing the business clientele with high quality services. A tailor made program will be organized for all customers with a view of meeting the diverse demands of different youth groups in the community. Market Analysis Presently, there are many youth workers, who are highly motivated and passionate with their work, who have been working with the youth over the years. However, most of these youth workers are not well trained and equipped with knowledge and skill that match the current modern society (Amodeo & Collins, 2007). The world has greatly changed and there are a lot of emerging issues in areas of social media, advancement in technology, and intercultural communication and interaction (Samovar, Porter, & McDaniel). As such, the current youth workers need to be equipped with skills, which enable them provide the skills adolescents and teens will require to navigate through difficult obstacles they face in this contemporary and highly globalized world. Therefore, the company will provide a differentiated product with the modern teenager in mind. This will give it a competitive advantage over other companies, which have been providing the same product over the years. In addition, this strategy will enable the company to penetrate the market. Market Segments Market segmentation is a strategy that involves grouping a broad target market into subsets of consumers who share common needs, and thereafter designing strategies to target their specific needs and desires (McDonald, 2012; Wedel, 2000). In this case, the market will be divided into two main segments. That is modernized and highly sophisticated teenagers, moderately sophisticated teenagers and rural or ordinary teenagers. The modern and sophisticated youth will require special training and counseling since they are prone to negative influence of the modern technology. The use of computers and other devices makes it possible for teenagers in this segment to have access to myriad social sites, which instill different information to the modern youth. Some of the knowledge gained can be of benefit to the teenager while others can mislead them. Additionally, cases of teenage cyber bulling, and character change as a result of watching and playing violent video games is a problem inherent with this group (Anderson & Bushman, 2001). This requires the need for coming up with a training curriculum, which matches their needs. Rural youth segment is faced with challenges that are dissimilar to the modern or urban youth. Despite, the fact that they do not have access to modern technology, there are challenges, which they face that may affect their lifestyle. For example, lack of basic needs may force them to engage in premarital sex, the practice of early marriages and dropping out of school of some teenagers may require the need for specialized counseling skills for the trainer to handle such Christian adolescents. Therefore, youth workers handling different Christian adolescents should undertake training programs that are relevant to their areas of operation. However, the firm will reiterate the need for all youth trainers to equip themselves with knowledge that will enable them handle teenagers from different segments. The other segmentation will be in terms of age. Trainers will receive training that is capable of handling children below and above the age of 16. This segmentation will be designed to recognize the fact that children at different ages face different challenges, which calls for different approaches on the part of the trainer. The above segmentation indicates that the general division of the market is necessitated by the changing environment. However, more emphasis will be given to the needs of the customer. The client will stipulate the training they require based on the nature of their Christian adolescents. Competitive Analysis Although there are a number of competitors in the market, most of them address general issues affecting teenagers. For example, Youth Work Central, Youth work-practice or The National Youth Workers Convention normally addresses general problems, which an ordinary youth encounters. P.I.S.E. CONNECTION, INC. will have a competitive edge since it aims at addressing issues specific to the potential client as opposed to generalities that are sometimes presented by the prevailing competitors at a large conference setting. Company Analysis In general, there are different providers of this product. Since the competitors have been in the market for long, they will tend to have economies of scale, which will act in their favor. However, the experience of the founding partners and the innovative product that the company intends to offer will provide an opportunity for P.I.S.E. CONNECTION, INC to enter and grow in the market. Strengths Weaknesses, Opportunity and Threats (SWOT) Analysis SWOT analysis is vital for marketers in that it helps in understanding the environment in which the company will operate. Findings from this analysis will assist the company in penetrating market and capitalize on the opportunities (Dyson, 2004). Strengths The product is unique in that it is tailor made to meet the needs of the customers. The founders of the company are very experienced in this field. Weaknesses The company lacks enough start-up capital to enable it hire other supporting staff. The two founders lack previous experience and skills on product marketing. Opportunities The market is large The demand for modern technologies and increase in social network creates a demand for trained youth workers to help in curbing their negative effects Threats Stiff competition from established providers of the of the service There is a high possibility of entry of new companies selling the same service. Objectives The company intends to make sales worth $18,000 in its first year of operation, and The business is expected to break-even in the second year of operation Marketing Strategies The company will introduce the differentiated product in the market and will make use of penetration pricing, and extensive advertising to penetrate the market and increase both its revenues and growth rate (Gupta & Di Benedetto, 2007). Action Plan Product P.I.S.E. CONNECTION, INC will introduce a differentiated product, which entails the provision and presentation of information to the postmodern youth worker through workshops, speaking engagements, consulting and seminars.   Price The company will undertake a baseline survey whose objective will be to ascertain the price being offered by the competitors. Thereafter, it will employ penetration pricing to enter into the market. In addition, the survey will enable the company understand the product being offered by its competitors. This will enable it make informed decisions on how to ensure that the product it is introducing is unique and is indeed needed by the market. Promotion Due to lack of enough start capital, the company will not advertise its product both in print and non-print media. The company will send fliers to youth training organizations and other institutions dealing with the youth. The fliers will contain the name of the company, its vision and mission, the objectives of the company and the charges. It is expected that this move will be sufficient to attract customers needed to kick-off the business. However, after the company breaks even in the second year, different strategies of advertising and promotion will be deployed with the aim of increasing its sales turnover. Financial Plan The company’s financial plan comprises of a projection of the profit or loss for the business for the first 36 months, a projection of the cash flow, a projected balance sheet and a calculation of the break-even point. A close study of these financial statements may give a reasonable estimate of the future of the company as far as financial matters are concerned (Hung, 2000). In generating the financial plan, the company is guided by its goal, which entails creating a mix of resources that will enable it, operate with ample cash to cover all the cash outflows without necessarily using a lot of investment capital until PISE’s services produces a positive cash flow.  The main plan is to keep the overhead or variable costs and fixed costs at minimal levels as possible while at the same time maximizing the outcome thereof. As indicated, the company will be undertaking its operation from the premises of the founders. As such, any strain on the personal budget may lead to financial risk to the business. Therefore, the founders will have to make sure that the business monthly household expenses remain within their budget.  Further, PISE CONNECTION, INC is a start up business hence it has not established any credit history. Therefore, it is imperative for the founders to make sure that their credit history is intact as lenders and suppliers will use their personal credit history to determine terms of credit in the future. The following is a summary of financial projections of the company. Table 1: A Table Showing an Estimation of Sales and Revenues Years sales forecast Year 1 2 3 Workshop Sales $18,000 $24,000 $24,000 Workshops Training Packets , & Consulting Fees   $21,600 $28,800 Total ($) $18,000 $45,600 $52,000 Table 2: A Projection of Profit And Loss Statement for the First Three Years PISE CONNECTION, INC. Pro-Forma Income Statement For the period the first three years (2014 through 2016) Revenue                                              Year 1                         Year 2                         Year 3 Gross Sales                                          18,000                         45,600                         52,000 Less: sales return and allowances              0                                  0                                  0 Net Sales                                             18,000                         45, 600                      52,000 Cost of Sales     Material costs                                 5,000                           6,000                           7,000 Gross profit (loss)                               13,000                         39,000                         45,000    Operating expenses     Selling expenses               Salaries                                     0                                   0                                  0               Advertising                               0                                   0                                  0 General/Administrative                                   Salaries & wages                         0                                  0                                  0             Utilities                                   3,600                           3,700                           3,800             Office supplies                        5,000                           6000                            7,000             Equipment maintenance          2,000                           2,000                           2,000             Total general/administrative    19,600                         19,700                        24,800                         Expenses Total Operating Expenses                   19,600                         19,700                         24,800 Net Income Return Taxes                   -6,600                          19,300                         24,800             Taxes on income                         0                                2,900                           3,030 Net Income after taxes                       -6,600                          16,400                         17,170 Table 3: Forecast Start-Up Expenditure Asset Quantity Total Cost($)  Desks 2   400.00 Chairs 2      250.00 Phones 2     450.00 Office Supplies   5,000.00 Lab top & Projector 1 2,100.00 Computers 2 1,400.00 Printers 2  600.00 Photocopier 1 400.00 Scanner 1 400.00 Travel   4,000.00 Total             15,000   The Balance Sheet  A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity. Assets are the items that are used by the business and are owned by the owners of the business while liabilities comprise what the business owes other people. On the other hand, capital or owners equity is what is left to the owners, that is, the excess of assets over liabilities (Spurga, 2004; Kakani, & Ramachandran, 2009). Balance sheet is very critical since it will show the financial position of the business at the time of its computation. It provides a concise snapshot of the company’s financial position. It measures the financial standing, or even the net worth or owners’ equity of a company at a given point in time, typically at the end of a calendar or fiscal year. The balance sheet is one of three important financial statements intended to give investors a window into companys financial condition at a specific point in time. Most companies manage their balance sheets to ensure that the capital of the business is not eroded and that any gains paid out to staff or shareholders are paid out of profits rather than capital (Hobson, 2011). Table 4: A Projection of the Balance Sheet during the First Year of Operation P.I.S.E CONNECTION, INC. Balance Sheet As at the end of 2014/15 Financial Period Assets Capital and Liabilities ($) Assets Desks 400 Chair 250 Phones 450 Office Supplies 5,000 Lab top & Projector 2,100 Computers 1400 Printers 600 Photocopier 400 Scanner 400 11,000 ($) Liabilities 0 Capital/Owners Equity 11,000 11,000 Break-Even Analysis Break-even point refers to the point at which the revenues and expenses are equal. As such, there is no net loss or gain (Woolf, & Johnson, 2005). However, at this point the business has paid all costs related to the operation of the business, but the profit made is equal to zero. This analysis is very critical for decision making for not only the owners, but also investors. Prospective investors will use it to make an informed decision on whether they are investing in a business with growth potential and an exit strategy. Break-even point is given by; Formulae Let N represent the number of units produced by the firm when it makes zero profit. That is, Revenue – Total costs = 0. This forms the break-even point. Total costs = Variable costs x N + Fixed costs Revenue = Price per unit x N. Therefore; Price per unit x N – (Variable costs x N + Fixed costs) = 0. As such, N (break-even point) = Fixed costs / (Price per unit - Variable costs) (Jackson, Sawyers, & Jenkins, 2008). In calculating the break-even point for a business enterprise, the following assumptions are made: The company transacts only on one product, The beginning inventory in the business is assumed to be zero, and Fixed costs are unchanged and variable costs remain constant per unit over the range of N, which is under consideration. P.I.S.E CONNECTION, INC will break-even within the first two years. This is because, the total cost used to establish the business is; fixed cost = $ 11,000 while variable costs for year I = $19,600 and for year II = $19,700. As such, total expenses will be $50,300. On the other hand, total income for the two years will be $18,000 and $45, 600 respectively. This implies that total income for the first two years will be $63,600, which is greater than the total expenses for the company in the first two years. This shows that the company will break even within the first two years.          Growth plans The long term goal of P.I.S.E CONNECTION, INC is to reach out to many post-modern youth workers in the country as possible. This will be made possible by introducing a differentiated product in the market, bringing the product to new customers and continue introducing more differentiated products. The following strategies will be employed to achieve this long term strategy. Opening New Branches in New Locations At the onset, the company will operate as small scale business with the founders as only employees while sourcing for services of other professionals on need basis. After the business breaks even and the average cost curve is declining due to increasing output while holding the fixed costs constant, the company will employ more specialists. This will enable it to open new branches in new locations. New Client Base Once the objective of advancing new products to youth workers is attained, the company will ascertain means and ways of reaching out to new client base. This may include coming up with training curriculum that can be used to train people who can also train other youth workers. In addition, the company will look at the possibility of writing books that can be used as training manuals by youth workers. This strategy will enable the company reach out to many people as possible all over the world while at the same time increasing its sales. Undertaking market research in order to improve on the products As noted, the company is likely to face stiff competition from its competitors but it is banking on its unique product to enter and excel in the market. However, other service providers may decide to emulate the company’s products leading to a reduction of its competitive advantage. The moment it achieves good return on sales, it will set some money in its yearly budget aside for use on research. Occasional baseline and exit surveys plus researches will be conducted by the company with the aim of understanding the market in depth. This will enable the company to continue coming up with differentiated products and hence continue excelling in the market. Online strategy Globalization has led to advancement of technology and enabled the transfer of information and interaction of people all over the world. In order to increase its sales and reach out to more people globally, the company will come up with tailor made online programs aimed at educating post-modern youth workers via the internet. Prospective youth trainers will be expected to register online and undertake online courses. This will call for the employment of more employees especially those who are specialists in different fields. Additionally, the company will come up with online e-books, which shall be used to train interested trainers all over the world. Marketing and Advertising Advertising and marketing are very important tools of cementing competitive advantage (Macdonald & Sharp, 2003).  Even though the company intends to commence its operation without incurring advertisement costs, the company will need to invest heavily in advertising in order to remain relevant in the market. However, in order to minimize the costs of advertisement, the company shall design an online company with a very interactive website. The website will enable the company to advertise its product through social media and other online advertisement avenues. This will reduce the costs of advertisement while at the same time increase the clientele base. Acquisitions The company shall look at the possibility of growth through acquisition. However, this step will only be taken once the start-up business is well established and prepared to explore new markets. The company will not only look for companies that will assist in the provision of its products, but also those which present fresh opportunities for growth. Decreasing Operating Costs The company will expand its sales as much as possible in order to make use of learning curves and economies of scale to minimize the operating costs (Ang & James, 2001). Learning curves will enable the company become more efficient as it gains experience in its operation. On the other hand, economies of scale entail the reduction of average running costs over time as a result of an increase in purchasing power and specialization of the employees. Contingency Plan These are plans that are normally developed for selected critical risks, which cannot be mitigated by the techniques chosen (Kasse 2008, p.118).There is existing competitors in the market who are providing the same services. Having been in the industry for long, it is expected that they enjoy high economies of scale. This gives them a competitive advantage over P.I.S.E CONNECTION, INC Company. However, the company intends to have a competitive advantage since it will use penetration pricing in addition to providing a unique and differentiated. The company is aware that there is a possibility of not reaching the targeted sells as stipulated in the financial plan for several reasons. First, the competitors may use the economies of scale advantages to lower their prices. Secondly, some more competitors may join the market. Lastly, the company does not intend to use advertising as a way of promoting its products due to scarcity of resources. In case the company is unable to reach its targeted outcomes, it will request for a short term loan from financial institutions or other equity lenders in order to enable the company meet its running and advertisement costs. Harvest Strategy The harvest strategy is very vital to creditors and equity investors (Jones & Hill, 2011). This is because they are assured that the company owners have no intention of developing the proposed business and thereafter selling it either to another company or public investors. This ensures that management takes the challenge of running the company and makes it an attractive investment venture for others when the time for exit arrives. P.I.S.E. CONNECTION, INC does not intend to borrow funds either from equity investors or other lenders during the first years of its operations. However, when the company expands or when the founders deem it necessary to borrow some fund from outsiders, it will do so. Therefore, this company does not have an exit strategy or harvest plan, but the business plan shall be updated on need basis and the harvest plan shall be incorporated if the founders find it necessary to do so. Timeline to Launch P.I.S.E. CONNECTION, INC will be launched officially on 1st July, 2014. Therefore, its first financial year will end on 30th June, 2015. The founders will use the month of June 2013, to come up with a general curriculum for training, which shall be updated to fit the needs of the group to be trained when actual training commences. References Amodeo, M., & Collins, M. E. (2007). Using a positive youth development approach in addressing problem-oriented youth behavior. Families in Society: The Journal of Contemporary Social Services, 88(1), 75-85. Ang, J. S., & James, W. L. (2001). A fundamental approach to estimating economies of scale and scope of financial products: The case of mutual funds. Review of Quantitative Finance and Accounting, 16(3), 205. Retrieved from Anderson, C. A., & Bushman, B. J. (2001). 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