Business Plan for a Startup Business - Assignment Example

Computer Builders B U S I N E S S P L A N Prepared by: Table of Contents I.Executive Summary 3 Mission: 3 II.General Company Description 3 III.Products and Services 4 IV.Marketing Plan 4 Market Analysis 4 5 Sales Forecast 6 Marketing Strategy 6 Marketing approach 6 V.Operational Plan 7 Development Stage 7 Operation Stage 8 VI.Management & Organization 8 Management Summary 9 Personnel Plan 9 VII.Personal Financial Statement 9 Projected Income Statement 10 VIII.Financial Plan 11 Start-up Requirements 12 Start-up Funding 12 Break-even Point 13 Cash Flow/Budget 13 I. Executive Summary Computer Savers will offer low cost customized computers coupled with an excellent repair service to small businesses as well as home PC users. The company intends to entice potential customers by offering value proposition of low cost, performance and technical support that is hard to refuse. Vision: To be able to offer value and performance to the customers computing needs through a wide selection of computer parts and repair services that can fulfill the customers need for value, savings and technical support. Mission: To become the leading provider of low-cost customized computers and repair service in the next three years of operation by offering customers the latitude to customize the specification and performance of their computers at a low cost with an after sales support of highly competent technicians. II. General Company Description Computer Savers is a computer assembly and repair business intended to cater to small business owners as well as home PC users. It is engage in the selling of computer parts and software and is also engaged in the customization, upgrade, repair, virus removal and hard disk data recovery of computers. The company intends to create a niche in the computer retail and service industry by providing customized computers as well as providing repair service at a significantly lower cost than competition. III. Products and Services Computer Savers offers customized computers and repair service to its customers. To enable Computer Savers to offer customized computers to its customers, it will sell computer parts for ease, convenience and easy availability of the necessary hardware to assemble a computer. It will also sell licensed softwares to make the assembled computers usable after leaving the outlet. The repair service component of Computer Savers will complement the computer customization business by offering repair service after the computer’s warranty coverage has elapsed. It will work in synergy with the computer customization business as the skills needed in the repair component of the business can also be used in the assembly of computers. IV. Marketing Plan Market Analysis Computer Savers will make a niche in the computer retail and service industry by offering computer products and services that is significantly lower than the competition. It will cater to the specific segment of a market where end users prefer to customize the specification of their computers. Computer Savers will also offer an after sales support through its repair business component. Combining these elements of offering customized computers at a lower price with an after sales support will make Computer Savers very competitive in its niche. Computer Savers will be directly competing with branded computers. Branded computers are typically priced at a premium whose specifications do not exactly match the customer’s preference. Computer Savers will have its competitive advantage by significantly cutting the cost by removing the brand out of its computer which added to its cost and provide the customers the latitude to dictate their preferred specifications by selecting the specific computer parts that can perform the desired speed and function of their computers. Personal research showed that customers are now becoming sophisticated and demanding with the performance of their computers. In the same vein, customers are also becoming price sensitive due to the recent economic crisis. Such, Computer Savers offers an excellent value proposition to its prospective customers where they can have customized computers at a cost lower than the branded computers. The repair service component of Computer Savers will serve as customer confidence building measure to assure customers that there will be an after sales support if they will have an issue with their computers. The repair service component of Computer Savers will also complement the technical skills required for computer assembly. Sales Forecast Growth Year 1 Year 2 Year 3 Year 4 Year 5 Sales and Repair Home PC Users 5 % 500,000 525,000 551,250 578,000 600,000 Small Business Users 10 % 1,000,000 1,100,000 1,210,000 1,331,000 1,500,000 Marketing Strategy Computer Savers will employ three pronged marketing strategy which will capitalize on the competitors’ weaknesses. Its main competitors, the branded computers are sold at exorbitant price tags at specifications which are pre-selected by the manufacturer. The after sales support is also costly after the warranty period has expired. To capitalize on these weaknesses, Computer Savers will beat the competitors by employing the following marketing strategy. Offer computers at a much lower price than the branded computers Customized these lower priced computers with a much better specification for speed style and performance. Availability of customer support at a much lower cost. Marketing approach These value propositions shall be aggressively conveyed to the potential customers through the following marketing mediums; Flyers - Flyers are one of the most effective and cost efficient method of reaching Computer Savers’ customers. Distribution shall be limited to the immediate vicinity of Computer Savers location specifying its products and service. Local Radio – Broadcast advertisements are to be used to reach the untapped and underserved computing market. Since the prospective customers are only limited to the immediate vicinity of Computer Savers, the local radio would be the appropriate medium to reach at the most number of customers at a minimal cost. Local Newspaper Advertisement –Print advertisement shall serve as the culmination of Computer Savers marketing promotion as the information about Computer Savers can be kept on record where customers can reference its products and services. V. Operational Plan Development Stage The customization of computers involves the assembly of its compatible parts that will be assembled to form a one efficient computer. This will allow customers to specify the desired look and performance of their computers since everything are put together from barebone to a complete computer. A desired computer performance can be achieved by integrating the necessary hardware which will do the task. For example, graphic artists would want a better media capability for their computers and this can be achieved by integrating a high performance video card coupled with a huge memory and faster processor. Through this scheme, the same performance of its high priced counterparts such as the Mac can be matched at a much lower cost. The business requires a high degree of technical know-how since it involves assembling a computer from scratch. Mistakes can be costly because putting in incompatible parts together might render the said computer parts unusable. Such, highly qualified technicians are required to operate the business. Parts can be easily procured from its manufacturers. Ordering in scale affords the business discount on the order price with a lesser freight cost (re-orders requires additional freight cost). Parts can be stocked since they are not perishable. Operation Stage The daily operation of the business involves consultative work as technicians/salespeople will be providing information on what is the best specification for their computer needs. From these advises, sales will follow when potential customers would like their computers assembled. It is anticipated that after three of years in operation, the repair service component of the business will increase as computers bought earlier will begin to have issues caused by wear and tear, virus etch. This will add revenue to the business but also will require more personnel. This will also serve as a marketing drive to inform customers that Computer Savers can be relied on when there are issues on their computers. VI. Management & Organization Management Summary Management shall be composed by its owner John Smith who will also serve as the Business Manager. John will be responsible for overseeing the daily operation of the business. John is an expert in computer assembly and repair having an extensive experience at XYZ Company as a computer technician in a addition to his degree in Computer Engineering. There shall be three personnel in the first year of operation who would serve as technicians and sales person. As orders increases in the coming year, additional personnel shall be added in the succeeding year. The following is Computer Saver’s personnel plan. Personnel Plan Personnel Plan Year 1 Year 2 Year 3 Owner $48,000 $48,000 $48,000 Employee 1 $36,000 $40,000 $44,000 Employee 2 $36,000 $40,000 $44,000 Employee 3 $36,000 $40,000 $44,000 Employee 4 $36,000 $40,000 Employee 5 $36,000 Total People 4 5 6 Total Payroll $156,000 $204,000 $256,000 VII. Personal Financial Statement Sales forecast for the first three years of operation respectively would be $500,000 on the first year, $550,000 on the second year and $600,000 on the third year. It is expected that the business will have a gross margin of 80% yielding a net profit after tax of 20.56% on the first year, 18.81 % on the second year and 17.46 % on the third year. The following projected financial statement will illustrate; Projected Income Statement Year 1 Year 2 Year 3 Sales $500,000 $550,000 $600,000 Direct Cost of Sales $100,000 $110,000 $115,000 Total Cost of Sales $100,000 $110,000 $115,000 Gross Margin $400,000 $440,000 $485,000 Gross Margin % 80 % 80 % 80 % Expenses Payroll $156,000 $204,000 $256,000 Marketing/Promotion 40,000 30,000 20,000 Lease 15,000 15,000 15,000 Insurance 5,000 5,000 5,000 Delivery Vehicles 15,000 15,000 15,000 Communication 500 500 500 Utilities 6,000 7,000 8,000 Internet 2,000 2,000 2,000 Total Operating Expenses $239,500 $278,500 $321,500 Profit Before Interest and Taxes $160,500 $161,500 163,500 Interest Expense 1,500 1,500 1,500 Taxes 56,175 56,525 57,225 Net Profit $102,825 $103,475 $104,775 Net Profit/Sales 20.56% 18.81% 17.46% VIII. Financial Plan To start Computer Savers as a business entity, the owner’s savings of $150,000 supplemented by investor’s contribution of $100,000 shall be used as a start-up capital. Additional loan of $50,000 shall be made with the local bank with the owner’s home equity which will be paid in 5 years. Given the potential of the business, it is anticipated that the business will be making comfortable profits starting from the first year of operation that includes the provision for loan repayment. Start-up expense amounts to $76,500 with $195,000 worth of current assets totaling to initial capital requirement of $271,000. Available initial capitalization of $300,000 however is enough to cover the start-up capital requirement. The sale of 250 units or $300,000 sales a month is Computer Savers’ breakeven point. This is a very realizable break-even point because it only translates to an 8 units of sale a day. In the projected sales forecast, it is anticipated that the company can make a $500,000 sales in the first year alone due to the potential of the business. The following are the financial plan for Computer Savers indicating the capitalization requirement for its start-up, its break-even point and cash flow/budget to ensure that the business is liquid to fund its operation and ensure that it will remain a going concern. Start-up Requirements Start-up Expenses Legal requirements $2,500 Insurance $1,000 Accountant $500 Advertisement/Marketing drive 30,000 Advances for rent 30,000 Physical improvement of outlet 15,000 Total Start-up Expenses $76,500 Start-up Assets Cash Required $75,000 Start-up Inventory $100,000 Other Current Assets $20,000 Total Assets $195,000 Total Requirements $271,500 Start-up Funding Start-up Expenses to Fund $76,500 Start-up Assets to Fund $195,000 Total Funding Required $271,500 Assets Non-cash Assets from Start-up 100,000 Cash 200,000 Additional Cash Raised $0 Cash Balance on Starting Date $ Total Assets $300,000 Liabilities and Capital Liabilities Current Borrowing $50,000 Total Liabilities $50,000 Capital Owner $150,000 Investor 100,000 Total Capital $250,00 Total Capital and Liabilities $300,000 Total Funding $271,500 Break-even Point Monthly Units Break-even 250 Monthly Revenue Break-even $300,000 Assumptions: Average Selling and Repair $600.00 Average Per-Unit Variable Cost (Selling and repair) $200.00 Estimated Monthly Fixed Cost $100,000 Cash Flow/Budget Year 1 Year 2 Year 3 Cash balance, beginning $150,000 $156,000 $125,000 Cash from Operations Cash Sales $500,000 $550,000 $600,000 Total Cash Available $650,000 $706,000 $725,000 Less: Disbursements Direct Materials 110,000 115,000 120,000 Operating Expense 239,500 278,500 321,500 Inventory Purchases 100,000 110,000 115,000 Total Cash Disbursements $449,500 $503,500 $556,500 Financing Borrowings, beginning $50,000 0 0 Payments (10,000) (10,000) (10,000) Total Financing $40,000 (10,000) (10,000) Cash Balance before Tax $240,500 $192,500 $158,500 Tax Payment 35 % 35% 35% Total Tax Payment 84,000 67,375 55,475 Cash, Ending balance $156,000 $125,125 $103,025 Read More