Innovation and New Ventures Business Plan and Investor Presentation (Service) - Coursework Example

Executive summary Best Bet English will be offering private teaching of English as a foreign Language in South Korea. The firm is owned by three business partners; Felix, Adam and Jared. The partners have done other businesses together and one of the partners has actually taught English in South Korea before. This means that the partnership has some basic details on the requirements of teaching English in South Korea. The partners also have business experience since they have other businesses though not in the teaching or tutoring sector. One of the partners is also well versant with legal matters, currency and intellectual properties regulation issues. The third partner has stayed in South Korea and worked in a local marketing firm. Best Bet English Tutors therefore will benefit from the skills and experiences of its partners. Best Bet English Tutors will be offering personalized English tuition. Due to the high cost of running a teaching business on a rented space, Best Bet English Tutors intend to operate from individual homes. Other businesses in the industry usually rent out some space and provide transport services to and fro the place. Best Bet however will stand out and be different because the tutors will be going to their clients’ home. This will ease the transport complications for the clients and it will be convenient for the business as well. It will also be cheaper for the students because the running costs will be relatively small compared to other tutors in the industry. Teaching methods will emphasize on correct grammar, appropriate pronunciation, listening, speaking, reading and writing. Handouts, textbooks and other relevant teaching materials will be used. Periodical tests will be administered to evaluate student progress. There are several other businesses teaching English in South Korea. However, all of them operate in a conventional way where they hire or set up rooms where they teach form. According to PR Newswire (2011, p 2), if a start up is to excel it has to go out of the ordinary. Best bet however will be different from hose other because the teaching sessions will be held in the students homes. This will make their service cheaper than competitors in the market. Korea is densely populated which means there will be high demand. The business capital will be raised by its three partners’ equal contributions. Mission statement Best Bet mission is to help English students in South Korea through interactive teaching to achieve value for their money by being efficient in English. Objectives 1. To create a sustainable business relationship with the South Korean English students. 2. To achieve maximum business growth and revenue by the third year in the industry. 3. To penetrate the English Teaching industry in South Korea and its neighborhood. Opportunity & Assessment Business Description Best Bet English Tutors will be offering private teaching of English as a foreign Language in South Korea. The firm is owned by three business partners; Felix Adam and Jared. The partners have done other businesses together and one of the partners has actually taught English in South Korea before. This means that the partnership has some basic details on the requirements of teaching English in South Korea. The partners also have business experience since they have other businesses though not in the teaching or tutoring sector. One of the partners is also well versant with legal matters, currency and intellectual properties regulation issues. The third partner has stayed in South Korea and worked in a local marketing firm. Best Bet English Tutors therefore will benefit from the skills and experiences of its partners. Product Definition The services Best Bet English Tutors will be offering personalized English tuition. Due to the high cost of running a teaching business on a rented space, Best Bet English Tutors intend to operate from individual homes. Others businesses in the industry usually rent out some space and provide transport services to and fro the place. Best Bet however will stand out and be different because the tutors will be going to their clients’ home. This will ease the transport complications for the clients and it will be convenient for the business as well. It will also be cheaper for the students because the running costs will be relatively small compared to other tutors in the industry. Teaching methods will emphasize on correct grammar, appropriate pronunciation, listening, speaking, reading and writing. Handouts, textbooks and other relevant teaching materials will be used. Periodical tests will be administered to evaluate student progress. Market Size / Growth Research South Korea The country is largely populated which means that demand for English teaching services is high. The Koreans speak one ethnic language Korean. They have strong cultural values which set them apart from others. It is therefore important for any foreigner intending to do business in the country to understand their basic values, cultural practices and believes. For instance, the family ties and values are highly regarded through out the country. Each member of a family has some duties and obligation owed to his family and toward others. For a business like Best Bet which intends to operate in the houses and homes of Korean people, it is necessary to understand the Koreans person values without criticizing them. Language is an important part of culture, the Korean speak and use one language. Because the modern business environment has gone global, it means learning other language is important for the Korean people and thus the demand for English tuition (Kwintessential, 2010, p 4). The people of Korea like entering in to business deals with people they know on a personal level. More often People get introductions in social events and get to know one another before getting in o a business relationship. Best Bet will not have a problem overcoming that because one of the partners has taught English in the country earlier. Another partner has also stayed in the country and worked in a local marketing firm. Best Bet will rely heavily on the contacts established earlier by these two partners. After having a few students, referrals will be given and stronger business relationships will be established. The Koreans like communicating honestly and giving precise answers according to Kwintessential (2010, p 5). Best Bet will need to therefore give specific time tables on the teaching programs; for example one can not say that the program will take a few weeks or months to a Korean. One would be needed to be precise and say exactly how many weeks or months. The people of Korea appreciate use of business cards. Best Bet will prepare presentable business cards. They will use the cards to gain more contacts. In creating business relationship in Korea exchange business card after preliminary introductions. Bes Bet will have cards printed in English on one side and in Korean other back side since Korean is the language spoken in the country (Kwintessential, 2010, p 4). Market & Sales Plan Competitive advantage There are several other businesses teaching English in South Korea. However, all of them operate in a conventional way where they hire or set up rooms where they teach form. Best bet however will be different from the others because the teaching sessions will be held in the student’s homes. This will make their service cheaper than competitors in the market. Korea is densely populated which means there will be high demand (Stephenson, 2011, p 3). Entry strategy Best Bet intends to enter the Korean English teaching market by starting small and growing step by step. The business in its initial startup stage will rely heavily on the help of the two partners who have worked and lived in the country. One of the partners has taught English in the country before and therefore he will get back to earlier students for referrals and introduction to others Koreans. Awareness will be done by way of giving out business cards in the initial stages. However, when the business gets on the move, mass media advertising will be done. Best Bet also plans to stick notices on public notice board about their business after getting permission from the relevant authorities. The three partners will actively engage in as many social events as possible to get some more business contacts (Stephenson, 2011, p 4). Business Organization Best Bet will be registered as a partnership business with three partners. Profits and losses will be share equally because the partners have equally contributed to the startup capital. Task will be shared and allocated in line with each partner area of expertise and skills. It will have a partnership deed detailing on the operations of the business and rights, duties and obligations of each partner. Should the business come to dissolve, any assets owned will be equally shared among its partners (Stephenson, 2011, p 5). Operating Strategy The business will start slowly, penetrate the market and remain in the market. One of the businesses strategic goals is to diversify to teaching other languages. It will therefore continue conducting market research on the needs of the Korean people and the consumer behaviors to sustain its goal. Its strategic objectives will be aligned with the needs of the target market (Stephenson, 2011, p 3). Elevator Pitch To ensure that the business offers quality teaching services, comparisons with other businesses teaching English in Korea will be made. Opinions on the quality of service given will be solicited from the students. This will make sure that business keeps improving and meeting the students’ needs. Best Bet in the business of service provision where unlike in goods the service cannot be separated from its provider nor is it tangible. According to Stephenson (2011, p 3), it is therefore hard to compare the service offered since it has no physical features. Information on Customer perceptions and satisfaction would there be obtain from their feedback. Field Report Legal issues It is important for all business to understand the legal implication of doing business in foreign countries. In all countries, there are some legal rules and requirement that are put to place in order to protect governments, the consumer publics and the businesses they are pursuing. Best Bet plans to familiarize with all such legal requirements, and to abide by them to have the business penetrate and excel in a market in a foreign country. One example of such regulations is that any person going to Korea to teach should have final Visa processed from their home country before leaving for Korea. Again these requirements are not the same for people o different countries of origin (Kwintessential, 2010, p 4). Best Bet will register itself with the relevant bodies for purposes of business permit, foreign business incentives and taxation where applicable. SWOT Analysis. The SWOT analysis identifies and examines a company strategic strength, weakness, opportunities and threats. A company strengths and weaknesses refer to factors that may have an impact on a business and are internal to company. Opportunities and threats are factors that are outside a company yet they may somehow impact on business and its operations (Kwintessential, 2010, p 3). Strengths Best Bet has one business partner who has taught English in South Korea. This gives the business an upper hand than if it could be operating with him. Another partner has lived and worked in South Korea before. The two will have some basic knowledge on the Korean people culture business norms, values and heir expectations. It is important for any kind of business in whatever industry to understand the behaviors of its target market and their needs. This will enable the Best Bet to tailor make its services for different needs among the target market. For instance, some people may be interested in learning English for the purposes of doing business with foreigners; others may be interested in travelling to English speaking countries while there others who will want to know the language for the sake of it or as a leisure activity (Kwintessential, 2010, p 2). Best Bet is three business partners have owned and run other businesses before. They therefore know and understand each others skills and abilities which will make allocation of tasks and duties much easier and effective (Kwintessential, 2010, p 1). Weaknesses Best Bet will be setting up a business with limited financial capital. The partners will thus do all the work as they cannot hire staff at the initial stage of the business. Teaching, administrative tasks, marketing, public relations and business development will be done by the partners (Kwintessential, 2010, p 1). Opportunities The biggest opportunity is that South Korea speaks one Ethic language. This creates the demand for English as a second language to the Koreans. The country is also densely populated which again mean more demand. Globalization has also forced the Koreans to learn English to go with global trends (Kwintessential, 2010, p 3). Threats With the world going global and with rising technology advancement especially in the IT sector, it is possible to have e-learning. This refers to where the targets consumers could learn English in virtual classes and online tutors (Asia in Focus, 2011, p 3). Best Bet however, has analyzed that and intends to move with the trend. At a later stage in the business, Best Bet will also diversify from its core business of teaching individuals from their homes its to online tutoring .it will also teach other languages like French (Asia in Focus, 2011, p 3). Currency Issues Best Bet does not expect to have problems with the South Korea currency. According to Asia in Focus (2011, p 3), there are foreign exchange bureaus where one can convert to whatever currency one prefers. South Korean people use the Won. Advertising and Marketing The business will rely on use of public notice boards to market and advertise its services. However, this is just for the initial stage, later when the business grows it will be able to use other forms of advertising like the broadcast and print media. Business cards will also be used to create awareness and pass out the message on availability of this teaching service. Word of mouth advertising will also be important to the business; satisfied students will be encouraged to share with other Koreans (Asia in Focus, 2011, p 3). Assessments Intellectual Property There is a body that protects intellectual property and governs on use of intellectual property in Korea; the Korean Intellectual Property Office (KIPO).the offices are located in Daejeon metropolitan City. Best Bet will patent any books or teaching material it comes up with under the intellectual property requirement. The business will also follow the right procedures if it needs to use other people’s intellectual property (Asia in Focus, 2011, p 1). Human Resources The business will not be hiring people in its first year. However, after the business stabilizes it will need to recruit and hire teachers. It could recruit from the students who successfully learn English under its program or from outside. It will also need some IT technicians to take business advantage of highly developing technology (Asia in Focus, 2011, p 4). Globalization Globalization has reached all countries across the world. South Korea has also not been left behind in adopting and embracing global business ideas and trends. Globalization effects on the Koreans economy as well as on their perceptions. It is one of the macroeconomic factors creating demand for English language in Korea (Asia in Focus, 2011, p 4). Financial Plan and financial projection statements Funding Request & Exit Strategy Amount & Type of Funds Requested A startup capital of $40000 will be an appropriate amount for buying the starting requirements (assets, equipments/machinery), rent, insuring the business, and paying for all the start up expenses. $20000 of the amount will be raised from a financier, that is, an investor through presentation of the plan and showing the uses of the capital needed. The company intends to pay the financier double the amount of the loan. Therefore, the interest rates charged will be equivalent to the double amount of the loan. In the first year, the interest paid will be equivalent to $400 and the rest of the amount will be divided by two and paid in the remaining two years. In summary, the loan will be repaid in three years. The remaining capital required will be the stockholders equity accrued from other businesses (Asia in Focus, 2011, p 1). New sensor technologies will be selling bonds after the business has picked well. The bonds will be sold to the public in order to obtain money to expand the business to other cities. Exit Plan Form of Payment/Payout Planned (yes/no) Anticipated Time Frame Repayment of debt yes 3years New Sensor technologies will franchise its business. However, it is expected that the sensor/activator will be licensed and copyrighted under the patent law. Entrepreneurship Cash Flow Projections List And description of the monthly fixed costs Fixed Cost Amount Description Utilities $ 200 Office, Library, internet fee and electricity Salaries $ 600 Two tutors each getting $300 per month Advertising $ 1120 Road shows, business cards, notice boards and radio advertisements Insurance $ 300 Premeum of $ 220 per month Interest $ 20 Interest of loan at $ 20 every month Rent $ 300 Library, the office and computer laboratory for the partners. Depreciation $ 50 Equipment like computer machines, routers and UPS batteries lose value Unexpected $ 50___________ Misceleneous cost TOTAL $ 2640*3= 7920 Projected cash flow 1Q 2Q 3Q 4Q YR2 YR3 Starting Cash (+) $20000 $ 171980 $189800 $219610 $251590 $348720 Cash in from Operations [Sales] (+) $15000 $10000 $30000 $ 40000 $110000 $ 150000 Cash out from Operations [Cost of Goods Sold, Expenses, Taxes] (-) $ 7920 $7920 $7920 $7920 $7920 $7920 Cash in from Investing [Equity Infusions, Earnings on Investments] (+) $0 $0 $ 0 $ 0 $ 0 $0 Cash out from Investing [Equipment Purchases, Repaying Investors] (-) $0 $ 0 $ 0 $ 0 $ 0 $ 0 Cash in from Financing [Loans] (+) $10000 $ 0 $ 0 $ 0 $ 0 $0 Cash out for Financing [Repayment of Debt] (-) ____$100 __$100__ __$100__ $ 100 ___$4950__ __$4950___ Ending Cash Balance [Starting Balance for Next Period] (=) $171980 $189800 $219610 $251590 $348720 $485850 burn rate for the business. (Cash + Revenue)/Negative Cash Outflow per Month = Number of Months Before Cash Runs Out. $20000 + $15000 / $8920 = 3.9 Balance Sheet Projections Projected Balance Sheet Balance Sheet for (Best Bet) As of (Month/Day) 1Q 2Q 3Q 4Q YR1 YR2 YR3 Assets Cash $_____ $_____ $_____ $20000 $171980 $189800 219610 $251590 $348720 Accounts Receivable $20000 $15000 $2000 $40000 $160000 $160000 Inventory $1500 $2580 $3570 $10000 $45000 $58000 Capital Equipment $500 $400 $600 $900 $800 $1000 Other Assets $ 0 $0 $0 $0 $0 $0 Total Assets $42000 $189960 $195970 $270510 $ $457390 $567720 Liabilities Short-Term Liabilities $20000 $19900 $19800 $19700 $9850 $9850 Long-Term Liabilities $0 $0 $0 $0 $0 $0 Total Liabilities $20000 $19900 $19800 $19700 $ $9850 $9850 Owner’s Equity $ 2200 $ 170060 $176170 $250810 $ $447540 $557860 Total Liabilities & Owner’s Equity $42000 $189960 $195970 $270510 $ $457390 $567710 pie chart showing the current assets, long-term assets, current liabilities, and long-term liabilities. Income Statement Projections Projected Income Statement for the business For the Year Ending December 31, Year 1Q 2Q 3Q 4Q YR1 YR2 YR3 Net Sales Revenue (+) $15000 $10000 $30000 $40000 $110000 $150000 Cost of Goods Sold (-) $7920 $7920 $7920 $7920 $7920 $7920 ______ _____ _____ ______ ______ ______ ______ Gross Profit (=) 7080 2080 22080 32080 102080 142080 Operating Expenses (-) $0 $0 $0 $0 $0 $0 $0 General Expenses (-) $0 $0 $0 $0 $0 $0 $0 Other Expenses (-) $0 $0 $0 $0 $0 $0 $0 ______ ______ ______ ______ ______ ______ ______ Net Income Before Taxes $7080 $2080 $22080 $32080 $102080 $142080 Taxes $900 $1000 $900 $1000 $1000 $1000 ______ ______ ______ ______ ______ ______ ______ Net Income $6180 22740 21180 31080 101080 141080 7.7 Risks & Assumptions List of the risks and assumptions which will underlie the financial projection is given below. Category of Risk or Assumption Assumption Significance General economy Poor economical performance 10% Interest rates Rising of interest rates 5% Inflation Increase on the fuel prices 50% Economic health Decrease of economic strength 10% Tax rates Rising of the Tax rates 20% Industry growth/decline Increased competition 60% Customer preferences Changing of customer preferences 30% Competitive entrants/changes New companies joining the market 20% Prices Falling of the prices 50% Costs of goods sold Increasing of cost of production 20% Sources & Uses of Capital capital needed, When, What type and the terms Type of Capital Amount When Needed? What Terms? Loan $20000 November Pay interest equal to the amount given land $300 November Pay as rent on a monthly basis How the money raised will be used Use of Capital Amount When Needed? Notes Cash reserve $60000 November Will act as the reserved amount of capital before the business picks Starting cash $20000 November Will be the starting cash in the first quarter of the business. List of the items needed to buy to start the business Item Cost Estimate/Actual Start-Up Expenses Accountant Fees $300 Estimate Expensed Equipment $850 Estimate Financial Institution Fees $200 Estimate Identity Set/Stationary 1200 Estimate Insurance 220 Estimate Legal Fees $200 Estimate Licenses/Certificates/Permits $300 Estimate Marketing Materials $1120 Estimate Payroll (with taxes) $600 Estimate Professional Fees – Other $600 Estimate Rent $300 Estimate Research and Development $200 Estimate Travel $150 Estimate Utilities $170 Estimate Web Fees $250 Estimate Other 9633 Estimate Total Start-Up Expenses 16293 Estimate Start-Up Assets Cash Balance for Starting Date $20000 Estimate Equipment $40 Estimate Furniture & Fixtures $50 Estimate Leasehold Improvements $1000 Estimate Machinery $800 Estimate Rent Deposit $200 Estimate Signage $100 Estimate Utility Deposit $70 Estimate Other $9633 Estimate Total Start-Up Assets $31893 Start-Up Investment—TOTAL $40000 Cash Reserve $60000 Total Start-Up Investment + Capital Reserve $100000 A. List the sources of financing for your start-up capital. Identify each source as equity, debt, or gift. Indicate the amount and type for each source. Funding Source Equity Debt Gift Financier $20000 _ _ savings _ $40000 friends _ _ $40000 TOTAL START-UP INVESTMENT $100000 payback period Payback = Start-up Investment Net Profit per Month Payback = $138885 / $9840 =14.11 financing sources companies doing well in the diaspora are appropriate sources of finances since many companies like IBM computer manufacturers have a great interest in technology development. IBM can be finance New sensor Technologies with exchange for equity. venture capital Venture Capital Source Type of Fund Amount Available Expected Terms International Investors money $ 40000 Pay double the amount offered within three years Venture capital will enable the business to keep a capital reserve before commencement. Breakeven Analysis Breakeven Units = Fixed Cost Gross Profit per Unit 7080/ 3.3 = 2145 units Ratio Analysis Key ratios: Current ratio = Current assets Current liabilities = $567720/ $20000 = 22.386 Quick ratio = Quick assets (Quick assets = Current assets – inventory) Current liabilities = $567720-58000 = $509720 509720/20000 = 25.5 Debt ratio = Total debt (or liabilities) Total assets = 20000/ 567720 = 0.03 Debt to net worth ratio or debt to equity = Total debt (or liabilities) Tangible net worth = 20000/141080 = 0.14 Times interest earned = Earnings before interest and taxes (or EBIT) Total interest expense = 142080 / 20000 = 7.104 Average inventory turnover ratio = Cost of goods sold Average inventory 7920/58000 = 0.13 Net profit on sales = Net profit Net sales (annual) =141080/150000 = 0.9 Net profit to equity = Net profit Owners’ equity (or net worth) 141080/ 557860 = 0.02 References: Asia in Focus (2011). S.Korea has appropriate level of forex reserves: officials. Retrieved From ABI/INFORM Global. (Document ID: 2343445041). Investment Weekly News (2011). Electronic, Internet Commerce; More UK Entrepreneurs Research Online to Ensure Business Success. Retrieved from ABI/INFORM Trade & Industry. (Document ID: 2336975901). Kwintessential (2010). Retrieved from: http etiquette/south-korea-country-profile.html Megan Schnabel (2011). Have an idea for a new business? It pays to do your homework First. McClatchy - Tribune Business News, Retrieved from ABI/INFORM Dateline. (Document ID: 2334186301). PR Newswire (2011). Startup Expert Launches Entrepreneurial Advisory Service: Startup Expert is the simple way to launch your new business. Retrieved May 17, 2011, from ABI/INFORM Dateline. (Document ID: 2347953821). Stephenson James (2011) ‘Start a Service Business’ Everyone has skills, knowledge and Experience--and anyone can turn those assets into a thriving business. Retrieved from http://www.entrepreneur.com/startingabusiness/businessideas/article80686.html Wall Street Journal (2011). Reasons to Start a Business This Year. Retrieved from ABI/INFORM Global. (Document ID: 2233406771). Read More