Starting a New Business - Example

Business Plan Name Course Lecturer Date Executive Summary This report provides a business plan for starting a new business. The report provides strategies on how to start up mobile business in a van. The report is prepared after carrying out a feasibility study; the feasibility study provides the foundation of this report. The report is divided in to market feasibility, focusing on the various aspects in the market as well as how to gain a competitive edge. A technical feasibility provides critical aspects of the products and services that the business will provide as well as how to improve and position the products strategically and services the market. The report also have a financial feasibility, this part provides a critical analysis of the financial projections as well as the required capital and finances to startup the business. Part of the financial feasibility is provided in the appendix. The last part is the human resource feasibility, this part provides a discussion of the human resource required to run the business. It provides the experience, knowledge and skills of workforce. Table of Contents Table of Contents iii 1.0 Market Feasibility 1 2.0 Technical Feasibility 4 3.0 Financial Feasibility 6 4.0 Human Resource Feasibility 10 5.0 References 12 6.0 Appendix A 14 1.0 Market Feasibility The size of the market is very huge. This is because the market is composed of high school students, college and university students as well as persons pursuing personal interests in adventure and ready as a hobby. The students borrow books pretty regularly and this provides a good plat form for this business (Bryant et al., 2009). Library with a van is very rare in this country; this provides a unique opportunity to bring various reading materials to students and other person needing the reading materials. The business will experience unprecedented growth during the school term when students are attending their classes. This is the time that the students need books and other reading materials most; this is because they are preparing for their examinations (Gilligan & Wilson 2009). To pass the exams, they must be well prepared by reading various books in order to have an extensive understanding. This provides a good business. The growth rate of this industry is accelerating (Ashcroft 2010). People and especially students are moving from reading physical books to reading electronic materials in their school libraries. This is changing how reading materials are used. Many students do not need the physical reading materials; they prefer to read electronic reading materials. For this reasons, publishers of books are ensuring that they provide both physical materials as well as electronic copies of the same. This is another perspective in this business; however this business will concentrate on providing physical books and reading materials. It will target the students and other persons requiring reading materials at their homes or any other place as they may request (Craig & Douglas 2005). Essentially, the publishing of books and other reading materials is growing at a high rate. The readers have a plenty of reading materials to choose from on their specific subject of study and research. The market is not at full capacity. Importantly, the market keeps on changing with authors publishing new books, research work and other reading materials. This means that the industry cannot reach full capacity. Usually, there are many reading materials in one particular subject. In addition, the advancement in technology keeps on improving things and this influences this industry (Kim et al., 2006). The customers are getting the reading materials from school and university libraries as well as public libraries. The customers also get these products from internet in form of electronic form. The school and university libraries are the popular place where students get reading materials as well as study books. In essence, most of the customers are students from high school, colleges and universities. They form 80% of the customers. Therefore, the customers are from learning institutions. They are mostly found in these learning institutions as well as in their homes. This business is unique in that it will provide the customers upon request in the place they will like the books to be delivered (Barringer 2009) Essentially, customers will purchase our products depending on their need for study materials. This business expects at least 37% of customers to be purchasing from by business. This will enable by business to grow, by serving 37% of the market, it gives me a good platform to not only grow the business but also to acquire more customers and market share as well. There are external factors influencing this business. One of the external factors is permission from the publishers to stock and distribute their products (Maritz 2008). Another external factor is government regulation, this business have to bet business permit as well as permission to ensure that the business is distributing authorised products. The industry dynamics are also in effect, the business has to adhere to the industry standards. This opportunity will last for a very long time. This is because there are always students in schools and universities. These students need books and other reading materials in the course of their studies. As such, this business opportunity will run in perpetuity (Kirschbaum 2005). However, the business activities will slow down when the schools and universities go for break or go for recess. During this period there are students though they are few and hence the business will be continuing though at a few business activities. This market is composed of competitors with huge financial base; this is the main factor that keeps competitors from entering this business. Other factors are lack of sustainable market and long time to break even of business for low starters. 2.0 Technical Feasibility There are options for developing the technology in this business. One of the option is to develop is to develop online presence such as website for customer to request and get the products. This will also provide customers with an opportunity to get electronic copies of the reading materials. Besides, this business will be unique in that customers will not come to purchase but the products will be delivered to the customer at their preferred location. Customers will only need to place a request and their location and the product will be delivered at their convenience (Wilson & Gilligan 2005). Practically, there are no options of producing the product. However, the business will be purchasing books, research materials and other reading materials and then lending them to customers. The owner of the business will purchase these materials from publishers and then will be lending them at a charge to customers. There are various options for sales and distribution. The business will not be stationary in one point, it will be very mobile (Kim, Knotts & Jones 2008). The vendor will be delivering the products to customers as well as collecting them after customers are through with them. This is the option for sales and distribution for this business. Some of the resources required for development are skills, facilities and equipment and suppliers. The vendor needs to have sales and public relations skills and competence in order to be able to make sales and relate well with customers. Moreover, the business needs a lot of books and reading materials. Books are the principal revenue generating products for this business. Other facilities are vans, shelves and stockers for holding the products. There are various laws and regulations regulating and relating to this business. Although it seems not to be much regulated, there are regulations that the business has to adhere. This mobile library, just like any other library, is under the scrutiny if the department of education science and technology. All materials and activities of the business are under the watchful supervision of the department. This business is also under the joint board of library management. Furthermore, the publishers body is subject to review the books both physical and electronic books stocked by all libraries to ensure authenticity and copyright. Significantly, the business is under the intellectual property for patents copyrights and trademarks (Welling & Chavan 2010). The research has not discovered nay moral or ethical issues that the business might be uncomfortable with, however, the business is under the IFLA’s Glasgow Declaration on Libraries, Information Services and Intellectual Freedom. This universal declaration is aimed at helping librarians and guide libraries in situations where they face ethical dilemmas (Johnson, Craig & Hildebrand 2006). The major technological change changing the business is the move towards electronic books and reading materials. Publishers and producers are now moving to electronic books and putting their work in electronic form. This is making them to have direct contact with customers. Another technological change is the development of devices, such as tablets and smartphones, which can allow users to get access to electronic books at nay place using the internet. These affect the business as they reduce the number of customers as many prefer to use the electronic materials, they reduce customers considerably. 3.0 Financial Feasibility The projected revenues from the sale of the services are $40,000. These are the monthly projected revenues. The projected sales volume is 4444 units with value of $40,000. The selling price per unit is very sensitive as this will determine the profitability of the business as well as competition (Mariotti & Glackin 2007). The selling price will not be too high in order to ensure that customers do not avoid purchasing our services; they will be within the market rate. As such, the selling price will be $9 per service for one day. The total expected revenue to be made by the business is $50,000 per month. The cost per unit will be made of fixed costs (rent, salaries, utilities and maintenance), variable costs (fuel costs, travel expenses, purchase cost). The cost of goods sold will be made up of purchase cost, return inwards and return outwards. The controllable costs are fuel costs, travel expenses and maintenance costs. The fixed costs per unit are as follows; Fixed costs Rent $0.5 Utilities $0.5 Salaries $1 Maintenance $0.5 Total fixed costs = $2.5 The variable costs will depend on the cost of items in the market and the number of items purchased. Cost of materials is subject to change depending on the market conditions. The net margin per unit Selling price per unit $9 Variable sold $3.5 Gross margin $5.5 Fixed cost $2.5 Net margin per unit $3 The business is worthwhile financially as indicated below; Max Mobile Library Pro-forma income statement For Year 2014-2015 ($) Item November December January February March April May June July August September October Total Sales 50,000 54,500 59,405 64,751 70,579 76,931 83,855 91,402 99,628 108,595 118,368 129,021 1,007,036 Cost Of Goods Sold 15,554 15,554 16,021 16,501 16,996 17,506 18,031 18,572 19,129 19,703 20,294 20,903 214,766 Gross Profit 34,446 38,946 43,384 48,250 53,583 59,425 65,824 72,830 80,499 88,891 98,074 108,118 792,270 Gross Margin 69% 71% 73% 75% 76% 77% 78% 80% 81% 82% 83% 84% 79% Operating Expenses                           Salaries And Wages 10,000 10,000 10,200 10,404 10,612 10,824 11,041 11,262 11,487 11,717 11,951 12,190 131,687 General Administrative Expenses 800 820 828 836 845 853 862 870 879 888 897 906 10,285 Subscription Fees 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Insurance Expenses 200 200 200 200 200 200 200 200 200 200 200 200 2,400 Vehicle Running Expenses 1,000 1,100 1,111 1,122 1,133 1,145 1,156 1,168 1,179 1,191 1,203 1,215 13,724 Rent And Utilities 2,000 2,000 2,020 2,040 2,061 2,081 2,102 2,123 2,144 2,166 2,187 2,209 25,134 Miscellaneous Expenses 500 600 612 624 637 649 662 676 689 703 717 731 7,801 Total Operating Expenses 14,650 14,870 15,121 15,377 15,638 15,903 16,173 16,448 16,729 17,014 17,305 17,601 192,830 Net Profit 19,796 24,076 28,263 32,873 37,945 43,522 49,650 56,381 63,770 71,877 80,769 90,517 599,439 Net Profit Margin 40% 44% 48% 51% 54% 57% 59% 62% 64% 66% 68% 70% 60% The total investment required is $342,100. The possible sources of financing are banks and financial institutions. This business will not use borrowed funds as the owner has enough savings to start the business (McDonald & Wilson 2011). Some of the financial risks involved in this business are non-performance, lack of profitability, lack of making target sales and market recess. The general financial numbers that will indicate attractiveness of the venture are a gross margin of 60%, net profit margin of 40%, return on investment of 30%, payback period of one year breakeven period of six months (Katz & Green 2007) 4.0 Human Resource Feasibility The vendor will need technical experience of three years, to be able to operate the mobile library effectively and to handle customers in the right way, the vendor need to have worked in a busy library for at least three years (McDonald & Wilson 2011). This will have enabled the vendor to gain valuable experience of doing this business. In addition, the vendor needs to have management experience of one year; this is enough to manage the business as it is just starting. This business is owned by one person, xxxxxxxxxxxxxxxxx. The owner of the business is the sole proprietor and the manager of the business. He will be responsible for managing the business. He will hire three persons to help him in distributing books to various locations as per customer requests. As indicated above, the ownership structure is sole proprietorship. The manpower requirements are skills and knowledge in library services. Knowledge of different market needs as well as various publishers offering quality products will be needed (English 2006). This needs at least degree qualification in the field of information technology and business management for the owner. The employees need at least college education in any course related to library services and customer service. Employees will be sourced from staffing organisations; their compensation will be based on their experience, level of knowledge and hours worked. Employees will be duly compensated for extra hours worked as well as paid leave and an off time every week. This will motivate the employees. The performance of the employees will be appraised every week. This will highlight their strengths and weaknesses and thereby help them to improve on their weaknesses while exploiting their strengths (Changchien & Lin 2005). They will also be updated on any current developments as they come. Value addition and sustainable profitability is the growth strategy that this business will employ (Iacobucci & Churchill 2009). The vendor will ensure that customers are supplied with the best quality books and reading materials on request. The business is not large as it is just starting; it is also a sole proprietorship business. As such, the structure will be just the owner and the employee. The owner will assign responsibilities and dictate the way forward. The owner will also be responsible with ensure growth of the business. For the employees, their career path is that of librarians and information analyst. The vendor will ensure that they do not only get experience but also career growth. 5.0 References Ashcroft, L, 2010, marketing strategies for visibility: Journal of Librarianship and Information Science. Barringer, B, R, 2009, preparing effective business plans: an entrepreneurial approach: Upper Saddle River. Bryant, C. A., McCormack Brown, K. R., McDermott, R. J., Debate, R. D., Alfonso, M. L., Baldwin, J. A., & Phillips, L, M, 2009, community-based prevention marketing: a new framework for health promotion interventions, emerging theories in health promotion practice and research, 331-356. Changchien, S, & Lin, M, C, 2005, design and implementation of a case-based reasoning system for marketing plans: Expert systems with applications, 28(1), 43-53. Craig, C. S., & Douglas, S, P, 2005, International marketing research, Chichester: John Wiley & Sons. English, J, 2006, How to organise & operate a small business in Australia: Allen & Unwin. Gilligan, C, & Wilson, R, M, 2009, strategic marketing planning: Routledge. Iacobucci, D, & Churchill, G, 2009, marketing research: methodological foundations, Cengage Learning. Johnson, D, Craig, J, B, & Hildebrand, R, 2006, entrepreneurship education: towards a discipline-based framework; Journal of Management development, 25(1), 40-54. Katz, J, A, & Green, R, P, 2007, entrepreneurial small business (Vol, 200): McGraw-Hill/Irwin. Kim, K, S, Knotts, T, L, & Jones, S., C, 2008, characterizing viability of small manufacturing enterprises (SME) in the market: Expert Systems with Applications, 34(1), 128-134. Kim, S, Y, Jung, T, S, Suh, E, H, & Hwang, H, S, 2006, customer segmentation and strategy development based on customer lifetime value: A case study: Expert systems with applications, 31(1), 101-107. Kirschbaum, R, 2005, open innovation in practice: Research-Technology Management, 48(4), 24-28. Mariotti, S, & Glackin, C, 2007, entrepreneurship: Starting and operating a small business; Pearson Prentice Hall. Maritz, A, 2008, entrepreneurial services marketing initiatives facilitating small business growth: Journal of Small Business & Entrepreneurship, 21(4), 493-503. McDonald, M, & Wilson, H, 2011, marketing plans: How to prepare them, how to use them, John Wiley & Sons. Welling, M, N, & Chavan, A, S, 2010, analysing the feasibility of green marketing in small & medium scale manufacturers: Sri Krishna International Research & Educational Consortium, 1(2), 1-15. Wilson, R, M, & Gilligan, C, 2005, strategic marketing management: planning, implementation and control: Routledge. 6.0 Appendix A There is no land required instead; it is three vans required at a total cost of $80,000 Item Total Cash Required Land $80,000 Capital equipment $30,000 Computer $25,000 Total $135,000 Beginning inventory   $10,000 Startup supplies   $15,000 Licenses and permits   $3,000 Leasehold improvements   $5,000 Utility hookups and installation   $4,000 Advertising   $10,000 Insurance   $5,000 Miscellaneous   $2,000 Total   $54,000 Startup Expenses Estimate Number of Months Total cash Owners salary 12 $75,000 Salaries, wages and benefits 12 $120,000 Rent 12 $12,000 Promotion expenses 12 $15,000 Supplies and postage 12 $2,000 Vehicle expenses 12 $16,000 Telephone 12 $2,000 Travel 12 $5,000 Maintenance 12 $5,000 Miscellaneous 12 $5,000 Total cash required to cover operating expenses $257,000 Plus: total one-time cash requirements $54,000 Plus 10% safety factor $31,100 Total cash required for startup $342,100 Read More