Woodville Consultancy for Microsoft, IBM and HP - Research Proposal Example

Business Plan Woodville Consultancy for Microsoft, IBM and HP Executive Summary Woodville Consultancy is an online specialist in the international marketing of high-end technology products and services facilitating business, market and channel development through general consultancy, specialist market reports and project work. Outsourcing decreases costs, increases flexibility, enhances expertise, boosts discipline, and provides the freedom to focus on core business capabilities. Our primary targets will be organizations such as Microsoft, IBM and HP whilst our secondary targets will be medium sized companies with excellent growth potential in multimedia and software. Our competition is predominantly in-house departments and the major international players. These fall into 2 main categories: generalists - such as Cap Gemini and Arthur Anderson; and market research companies – such as Dataquest and Gartner. Despite their market dominance these organizations do have flaws, for example the generalists lack the detailed knowledge high-end technology players expect consultants to have in their respective fields, whilst the market research companies lack the business savvy to be able to apply their findings to the organization’s business goals. Our offerings will be competitively priced in relation to other major consulting organizations who also offer high-end expertise. Our projected sales revenue estimates are $159,000 at Year 1 and $289,000 at Year 3. Profit is estimated at $65,000 by year 3 with a net profit margin of 6%. These figures factor in £130,000 of current debt with a further $50,000 in long term debt. This strategy will forestall any cash flow problems in the first 3 years of operation. Woodville Consultancy has already attracted $50,000 of start-up capital. Industry Analysis Consulting firms influence how businesses, governments, and institutions make decisions. Often working behind the scenes, these firms offer expertise—in the form of knowledge, experience, special skills, or creativity; another resource is time or personnel that the client cannot spare. Clients include large and small companies in the private sector; Federal, State, and local government agencies; institutions, such as hospitals, universities, unions, and nonprofit organizations; and foreign governments or businesses. The management consulting services industry is diverse. Management consulting firms advise on almost every aspect of corporate operations, including marketing; finance; corporate strategy and organization; manufacturing processes; information systems and data processing; electronic commerce (e-commerce) or business; and human resources, benefits, and compensation. Larger consulting firms usually provide expertise in a variety of areas, whereas smaller consulting firms generally specialize in one area of consulting. Consulting firms might advise clients in the implementation and use of the latest office technology or computer programs that could increase office productivity. Consultants may provide assistance to firms in areas such as developing new products and pricing, forecasting sales, planning and implementing a marketing strategy, and improving customer service. Clients also might seek the help of a marketing consultant to set up business franchises or license their products. Management consulting has grown rapidly over the past several decades, with businesses increasingly using consulting services. Using consultants is advantageous because these experts are experienced, are well trained, and keep abreast of the latest technologies, government regulations, and management and production techniques. In addition, consultants are cost effective, because they can be hired temporarily and can perform their duties objectively, free of the influence of company politics. The vast majority of establishments in the industry were fairly small, employing fewer than 5 workers (chart 1). Self-employed individuals operated many of these small firms. Despite the prevalence of small firms and self-employed workers, large firms tend to dominate the industry. Approximately 35.3 percent of jobs are found in only about 1.4 percent of the establishments, and some of the largest firms in the industry employ several thousand people. 1 Earnings typically are considerably higher than the average for the entire economy. According to a 2002 survey by the Association of Management Consulting Firms, the average total cash compensation (salary plus bonus or profit sharing) for research associates was $47,826; for entry-level consultants, $61,496; for management consultants, $78,932; for senior consultants, $112,716; for junior partners, $168,998; and for senior partners, $254,817. According to a 2003 survey conducted by Abbot, Langer, and Associates, the median annual cash compensation for junior consultants was $48,248; for consultants, $58,817; for senior consultants, $80,000; for principal consultants, $98,000; and for senior or executive vice presidents (with an ownership interest in the firm), $144,200. Besides earning a straight salary, many workers receive additional compensation, such as profit sharing, stock ownership, or performance-based bonuses. In some firms, bonuses can constitute one-third of annual pay. Between 2002 and 2012, wage and salary jobs are expected to grow by 55 percent—three and half times the 16 percent growth projected for all industries combined, ranking the industry fifth among the most rapidly growing ones. All areas of consulting should experience strong growth. Projected job growth can be attributed primarily to economic growth and the continuing complexity of business. A growing number of businesses means increased demand for advice in all areas of business planning, as consultants draft business plans and budgets, develop strategy, and determine appropriate salaries and benefits for employees. The increasing use of new technology and computer software is another major factor contributing to growth in all areas of consulting. Management consulting firms help clients implement new accounting and payroll software, whereas environmental and safety consulting firms advise clients on the use of computer technology in monitoring harmful substances in the environment or workplace. Consulting firms might also help design new computer systems or online distribution systems. One of the biggest areas upon which technology has had an impact is logistics consulting. The Internet has greatly increased the ability of businesses to link with their suppliers and customers, increasing productivity and decreasing costs. Technology-related consulting projects have become so important that many traditional consulting firms are now merging with or setting up joint ventures with technology companies so that each firm has access to the other’s resources in order to serve clients better. The trend toward outsourcing and mergers also will create opportunities for consulting firms. Globalization, too, will continue to provide numerous opportunities for consulting firms wishing to expand their services, or help their clients expand, into foreign markets. Consulting firms can advise clients on strategy, as well as foreign laws, regarding taxes, employment, worker safety, and the environment. The growth of international businesses has created numerous opportunities for logistics consulting firms, because now businesses have an international network of suppliers and consumers, which requires more coordination. Company Summary Woodville Consultancy will provide exemplary high-end business, market and channel development expertise to major organizations who wish to attain and or consolidate an international presence. Business Goals Gain credibility as the foremost authority on management consultancy in the global market. Woodville Consultancy intends to be amongst the 1.4% of all US organizations which supply more than 35% of the jobs in this sector. We will therefore need to become a by-word amongst our peers. We will do this by establishing our selves within trade journals, networking events, conferences and other well-tried routes to success such as employing and sub-contracting well respected analysts. Implement an online presence to facilitate communication between all stakeholders and to act as a primary marketing tool. At the heart of our service will be our content management system portal. This will be the primary means of communication from initial query through to sign-off of a commissioned project. We plan to ensure that we invest heavily in the latest technologies to ensure that we are able to provide our clients with a personalized, highly responsive service. Establish partnership programs which offer better value and services to our clients. We will partner with vendors who offer goods and services our customers need, but which we do not provide. Potential partners include providers of complementary information services, networking, hardware and software. Partnership activities such as link exchanges, affiliate programs, and banner ad exchanges will give Woodville Consultancy increased visibility on the Web at minimum cost while assisting our customers. Value Proposition Woodville Consultancy will provide best-of-breed expertise to the discerning organization who seeks competitively priced and superior consultancy. Business Model Although on the face of it Woodville Consultancy will be a virtual merchant we will also provide customer benefits and generate additional income streams through our partnerships and affiliates. The manufacturer or "direct model", is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. Woodville Consultancy will share its expertise with its customers as they develop their own e-commerce capabilities. Woodville Consultancy will use the virtual company approach to expand the scope of its business without a commensurate expansion of its own work force and without making a major acquisition. It will do so by developing a network of software and services companies that offer complementary technologies and skills that Woodville Consultancy lacks in its existing value web. However, Woodville Consultancy remains focused on the fact that it is first and foremost a management consultancy. Its e-commerce efforts are aimed at improving its own efficiency, enhancing customer satisfaction, and reaching new product markets by arousing awareness, interest and desire to attain its services. By receiving payment from its customers before it pays its suppliers, Woodville Consultancy will operate on a negative cash conversion cycle. This will minimize Woodville Consultancy’s working capital requirements and allow it to achieve high rates of return on its invested capital. Woodville Consultancy will also take advantage of its direct model to build strong, stable relationships with the large corporations and other organizations who are its core customers. Unlike indirect vendors, Woodville Consultancy will know who its customers are and will have a great deal of information that it will use to provide a high level of service and support, to target customers for retention and expanded sales, and to sell additional third party hardware and software. A key advantage of direct sales and bill-to-order is that expensive inventory does not build up in the channel and lose value before it can be sold, and new products can be introduced without having to clear out old inventory in the channel. The benefits of e-commerce include closer customer integration, higher customer satisfaction, supply chain efficiency, and lower costs for selling and supporting technology. In a Chicago Tribune article published on December 4, 2005 national correspondent Leon Lazaroff took an insightful look into advertising spend at Proctor and Gamble. They are the second largest advertiser in the US. In the first 6 months of 2005 they increased their internet marketing spend by 55% to $8.6m. Internet research firm eMarketer projects that online ad spending will total $11.3 billion this year, up 20.7% over 2004. Kagan Research is even more optimistic, projecting online ad spending of $11.5 billion this year, up 21.6% from 2004. The trend is away from the 30-second television spot and toward dynamic websites and personalized, interactive marketing. To take advantage of this Woodville Consultancy will focus on using IT and the Internet to improve internal processes such as ordering, assembly, delivery and support, to coordinate its broader value web, and to enhance the customer relationship. We know that to get on the prospect’s short list we need to build brand awareness. Studies from [DoubleClick] and Dynamic Logic show that rich media ads can increase branding metrics—as well as click-through rates—two or three times higher than standard banner ads. So in addition to white papers and other lead generation programs, Woodville Consultancy will provide “air cover” with rich media ad campaigns designed to get us into the set for consideration. Another fact driving the rich media advertising trend is that most B2B sites are viewed during business hours from a high-speed connection, which helps insure these larger ad files will run as intended for the prospects. Paid search and natural search are growing in importance. We believe that the best application of paid search is to highly optimize a very large keyword list across multiple search engines to drive the highest volume of leads at the lowest possible cost per lead. We will utilize e-mail as a functional vehicle to manage long-term dialogues with our client base. We will go to great lengths to understand specifically what our customers want to receive from us and how they want to receive it. We will put them in control by enabling customization of e-mail communication on their terms, not ours. As the dialogue progresses we will improve the engagement by tightening profiles, tracking editorial readership at an aggregate level and surveying customers about what they want to see from us. The result will be a degree of relevance and engagement that brings our e-mail communications above the noise level while ensuring that the communications are CAN-SPAM compliant. A key idea governing process improvements is that information should be diffused as widely as possible throughout the value web to enhance the performance of the entire network and provide rapid feedback to the center. This means that Woodville Consultancy can analyze trends, problems, solutions, performance, and customer satisfaction in real time, creating positive feedback flows that keep the whole system functioning well. Ownership The organization will be a [owner-partnership] constituted in New York, United States of America. It will be owned by its principal owners and investors and operate in the ‘silicon valley’ area of California. Management Summary Woodville Consultancy has been founded by [partner 1] and [partner 2], who command some [years of expertise] with internationally renowned management consultancies between them. Organizational Structure Partners will have strong project management and consultancy backgrounds and command at least one foreign territory. Each partner will have key responsibilities for a particular business segment with the emphasis on sales. Each partner will be assisted by an associate who is responsible for customer relationship management on a daily basis, such as overseeing order fulfillment, delivery, implementation and so forth. We will turn to qualified freelance expertise in those areas which do not consist of our core operation, so that we focus on our income streams and contract out those things which are not of immediate relevance to our daily operations. Whilst the details have yet to be finalized Woodville Consultancy foresees the following structure in the first year: Services We will be focusing on organizations who wish to increase their distribution channels and market segments. We foresee the need for general consultancy, detailed market reports and project management. General Consultancy Here we are replacing the in-house department, sitting in for the client to develop its business and marketing functions. This will require us to have an intimate knowledge of the organization’s goals and constraints as we represent its interests in initial talks with potential partners, suppliers and distributors. Project based consultancy Whereas General Consultancy is a life-time partnership with an organization, project based consultancy is targeted at one-off calls on our expertise in the field. Market Research Our clients will commission us to undertake targeted research on a particular segment or development which is of interest to them. We will also provide Trend reports which will be of general interest in the marketplace. Technology We will own our domain, and hence be able to provide our clients with secure access to personalized details of their commission. Our state of the art content management system portal will ensure transparency through the user interface, so that our clients will not have to worry about operating system platforms and so on. Market Analysis Summary Woodville Consultancy will be providing high-end services to organizations who wish to open international markets in order to sell hardware, software and networking products and services. Our clients will normally have delegated the responsibility for new channel development at VP level, and therefore we will be dealing with highly educated and experienced personnel who have a track record of success, and a vested interest in retaining their reputation for good management. Analysis of the Networked Readiness Index Rankings 20042 suggests that more than 50% of our clients will be in the US, Indo-China and Europe (including some of the old Baltic states). We note also the emphasis by many public sector organizations to broaden delivery of citizen services while improving efficiency. For example the European Union has developed the E-Europe 2005 Action Plan and Connected Health initiatives which are an attempt to facilitate broad-ranging social and economic reforms, with Information and Communications Technology at the heart of its projects. Taiwan is a case in point, with 22m people it is a main ICT supplier to the global marketplace3. Our target audience falls into large multinationals that will be outsourcing their in-house departments to us, and medium organizations who will be requiring our expertise for new market and new market segment development. Target Market Segment Strategy We anticipate that Europe will expand by 15% over the next 3 years, whilst the US will see growth of 10% and the Rest of the World by about 35%. As indicated in the Networked Readiness Index we will be focusing on organizations in those countries which are ready to leverage their investment in Information Communication and Technology. Whether the target audiences are consumers or businesspeople, marketing is marketing. The key differences between consumer marketing and B2B marketing are that business targets are harder to segment, they typically need far more details about a company's products or services prior to purchase and they usually take a longer time to reach a purchasing decision. Another key difference is that far more B2B purchases are finalized offline. While the Internet is an effective tool for establishing and maintaining contacts, it is less critical for actual selling. In a survey sponsored by the CMO Council, BtoB Magazine, and USA Today, the vast majority of B2B marketers said digital marketing was most valuable as a lead-generating tool. The growth of commoditization, or product parity, is pushing B2B marketers toward more image-building brand marketing. That's particularly true for companies whose products or services are similar to the competition's. According to 68% of B2B marketing executives in a separate PMG survey, establishing the company's brand describes the role of their department better than any other except for building awareness of the company's brands in the target market (at 72%). A sample of the results is given below: Role of digital marketing according to B2B and B2C marketers in North America 2003 as % of respondents Purpose B2B B2C New customer lead generation 86.6 70.2 Brand awareness and recognition 70.5 70.2 Improved customer relationships 64.2 74.5 Web site traffic generation 58.7 46.8 Cross sell and upsell to existing customers 56.3 63.8 Customer education 54.7 36.2 Source: Responsys sponsored by CMO Council, BtoB Magazine and USA Today, January 2004 Service Business Analysis Although the outsourcing sector is disorganized it is a multibillion dollar industry and is no longer confined to peripheral business activities such as legal services, cleaning and transport. Driven by a rapid and sustained reduction in the costs of cross-border communication, outsourcing will affect in quite tangible ways the business environment of the corporation4. Woodville Consultancy’s challenge then is to establish itself with the brand name consultancies in the international market. Business Participants The sector is dominated by a few large consultancy spin-offs from accounting companies and management consultancies (such as Arthur Anderson, McBain). They have very high charge out rates and high overheads due to their organizational structures. They have high-rent locations in major cities and markets. New commissions are sourced by sound networking through industry, business and social associations. Consulting is very much a word-of-mouth business, with the organization’s reputation resting on its quality of delivery. This is the most important factor in purchasing decisions by our prospective clients. Main competitors Internationally renowned management consultancy Strengths – enviable reputations in the sector, with strong incentive for success as they tend to be owner-partner led. Weaknesses – they are generalists with high fees and most of the work done by junior associates. Internationally renowned research company Strengths – specific market knowledge, with dedicated and permanent qualified staff . Able to forge strong relationships with potential client base. Weaknesses – no ability to turn numbers into goals and strategies for clients. Market/Function specific experts Strengths – extremely strong in their market and functional areas. Weaknesses – they are unable to offer management expertise, experience or wisdom. In-house Departments Strengths – division of labor, with separate planning and implementation teams. No additional costs other than salaries. Weaknesses – unable to take advantage of incremental opportunities. Difficult to release staff from mature projects to pursue new ideas. Strategy and Implementation Summary Our research suggests that we should focus on those countries which are in a position to leverage their investment in ICT. Due to our expertise we will focus on personal computers, software, networks, telecommunications and integration products. Pricing Strategy We are positioning ourselves at the upper end of the consultancy field, and our expertise is reflected in our pricing. Fees ($) Project 5,000 per day Market research 2,000 per day General 10,000 per month Reports 5,000 each Milestones The table below shows our detailed milestones for the first 14-months of operation. Budgetary items are included in the expenses section of the Profit and Loss summary found in the Financial section. Month 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Plan Logo Contracts Stationery Brochures Presentations Mail out Location Equipment Portal Development Month 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Financial Summary Assumptions We make a number of assumptions within the financial plans, namely: 1. interest rates will remain at 10% 2. tax rates will remain at 25% 3. we will attain 100% sales on credit Whilst we see major growth in revenue we also see corresponding increases in operating expenses and some volatility in collection days as we poise the business for expansion. Break Even Analysis Assuming $10,000 monthly fixed costs and an average per unit variable cost of 20 cents and average per unit revenue of $1, we anticipate that our monthly units break even point will be 12,500 with revenue of £12,500. Start-up & Capital Expenditure Estimates Expenses Liabilities Legal 1000 Current Stationery etc 3000 Accounts payable 350 Brochures 5000 Current borrowing 0 Consultants 5000 Other 0 Insurance 350 Long Term Liabilities 0 Expensed equipment 3000 Total Liabilities 350 Other 1000 Total Start Up Expenses 18350 Funding Investor A 20000 Assets Investor B 20000 Cash 25000 Other 10000 Other 7000 Total Investment 50000 Long Term Assets 0 Total Assets 32000 Loss at Startup -18350 Total Capital 31650 Total Requirements 50350 Total Capital & Liabilities 32000 Profit and Loss YEAR 1 YEAR 2 YEAR 3 Sales 592,000.00 875,000.00 1,100,000.00 Other revenue - - - Cost of Goods Sold 159,000.00 219,000.00 289,000.00 Gross Margin 433,000.00 656,000.00 811,000.00 Gross Margin % 73.14% 74.97% 73.73% Overheads Payroll 194,750.00 377,000.00 432,000.00 Sales, Marketing and Other 162,000.00 137,000.00 195,000.00 Leasing Charges 6,000.00 7,000.00 7,000.00 Utilities 12,000.00 12,000.00 12,000.00 Depreciation - - - Insurance 3,600.00 2,000.00 2,000.00 Rent 18,000.00 - - Payroll Taxes 27,265.00 52,780.00 60,480.00 Total Operating Expenses: 423,615.00 587,780.00 708,480.00 Profit before interest and taxes 9,385.00 68,220.00 102,520.00 Interest Expense 6,800.00 11,400.00 15,400.00 Tax incurred 646.00 14,205.00 21,780.00 Net Profit 1,939.00 42,615.00 65,340.00 Net Profit/Sales 0.33% 4.87% 5.94% Cash Flow Projection Cash Flow Year 1 Year 2 Year 3 Cash from Operations: Sales - - Receivables 495,000.00 828,630.00 1,063,133.00 495,000.00 828,630.00 1,063,133.00 Other Income: Other - - - Sales taxes received - - - New Borrowing 30,000.00 100,000.00 - New Other Liabilities - - - New Long-term liabilities 50,000.00 - - Sales of other current assets - - - Sales of long-term assets - - - New Investment - - - 80,000.00 100,000.00 - Income Total: 575,000.00 928,630.00 1,063,133.00 Expenditure From Operations: Cash 92,012.00 100,651.00 135,545.00 Accounts Payable 468,773.00 728,952.00 887,880.00 560,785.00 829,603.00 1,023,425.00 Additional Cash Spent - - - Non operating expense - - - Sales taxes paid out - - - Principal repayments - - - Other liabilities repayments - - - Long term liabilities repayments - - - Purchase other current assets - - - Purchase other long term assets - - - Dividends - - - - - - Expenditure Total 560,785.00 829,603.00 1,023,425.00 Net Cash Flow 14,215.00 99,027.00 39,708.00 Cash Balance 39,215.00 138,242.00 177,950.00 Balance Sheet Our balance sheet projections show healthy net worth growth throughout the first 3 years of operation and a strong financial position. Assets Current Assets Cash 39,215.00 138,242.00 177,950.00 Accounts Receivable 97,000.00 143,370.00 180,236.00 Other Current 7,000.00 7,000.00 7,000.00 143,215.00 288,612.00 365,186.00 Long Term Assets - - - Assets - - - Depreciation - - - Total Assets 143,215.00 288,612.00 365,186.00 Liabilities & Capital Accounts Payable 29,627.00 32,409.00 43,644.00 Current Borrowing 30,000.00 130,000.00 130,000.00 Other Current Liabilities - - - 59,627.00 162,409.00 173,644.00 Long Term Liabilities 50,000.00 50,000.00 50,000.00 Total Liabilities 109,627.00 212,409.00 223,644.00 Paid in Capital 50,000.00 50,000.00 50,000.00 Retained Earnings - 18,350.00 - 16,411.00 26,204.00 Earnings 1,939.00 42,615.00 65,340.00 Total Capital 33,589.00 76,204.00 141,544.00 Total Liabilities & Capital 143,215.00 288,612.00 365,186.00 Net Worth 33,589.00 76,204.00 141,544.00 Read More