Whats Hot App in the Australian Market - Example

BUSINESS MODEL AND PLAN FOR WHAT’S HOT APP Name Professor (Tutor) University Course City and State Date BUSINESS MODEL AND PLAN FOR WHAT’S HOT APP Executive Summary The application What’s Hot is a newly designed app, which can show venues, events, concerts or festivals using the newest geolocation technology. Globally, the smartphones have become the most available communication mode. We, therefore, created this application to fill the hole in the market with only one such app available in the Australian market. This paper entails a business model and plans on how to form a company that will manage this product and ensures it grabs a large market share in Melbourne and later in the whole of Australia through special marketing and growth strategies. Major issues that were addressed in the business model include customer segments, value proposition, customer relationships, channels, Minimum Viable Product, Key Resources, key activities, key partners, revenue and cost structure. The business plan discussed the market feasibility where the emphasis was put on the projected market size and some external environmental factors that might influence the market. Technical feasibility and human feasibility, which is mainly the human resource part, are also discussed. Finally, the financial feasibility is discussed where the emphasis is put on the projected revenues, projected profit and loss account for the first three years and the approximate startup capital. Contents Business model 4 Customer segments 4 Value Propositions 4 Customer relationships 5 Channels 5 Minimum Viable Product 5 Key Activities 5 Key Resources 6 Key Partners 6 Revenue Structure and Cost Structure 6 Business Plan 7 Market feasibility 7 Technical Feasibility 8 Financial Feasibility 9 Startup Costs 9 Profit and Loss Projection for the first three years 11 Human Resource Feasibility 13 References 14 Appendices 16 Appendix A: Projected Profit and Loss for the first three years. 17 Appendix B: Startup Capital approximates 18 Business model Customer segments The segment dimension of the customers presents a market that is multi-sided. The customer segment is described as multi-sided because the company will target the people of Melbourne and its nightlife and the advertisers. Teaming up with most of Melbourne's venues is an indication that the What's Hot needs advertisers. The customer segments are divided based on several demographic factors including age and gender. Psychographics that may include lifestyle and personality. Geography, which entails customer location and distance. The customer segments for this application is mainly classified according to demographic factors of age and gender. The application customer segment will comprise of main males for their love of technology and gadgets. Women will also make up about 40% because they love to attend events (Research Reports, 2017). When it comes to age, the application targets adults and therefore most of the users will be adults aged 18 to 27 years. However, a small percentage projected to be about 10% will be adults aged above 27 years. Value Propositions The value propositions can be either social or economic. Social values include making the whole event experience effective and easier since prior information about the event can be found in the application including dress code and time. Besides it also improves networking as people can connect with one another and it provides a platform for an event to promote itself without favors. Concerning economic values, the app provides the consumer with options so that he or she can weigh an event or nightclub that can be economical or suit his economic status. Moreover, it also improves the tourism of Melbourne and Australia, in general, earning both the local and national government foreign exchange (Klofsten, 1998). Customer relationships Customers can interact with one another or with the company through several social media platforms such as Instagram, Twitter, Facebook, and LinkedIn, which act as promotional platforms (Zarrella, 2010). The customer relations is also improved through running competitions and free drinks. These offers improve customer relations to high levels. Besides, we provide points for users who refer their friends to the application and these points can be redeemed for special offers. Overall, the consumer interacts with us and with one another in these ways through the sale of product and services. Channels The channels are simply ways that we communicate to the customer segments and sell the product to them (Koekemoer & Bird, 2004). The main channel is through social media, which includes, Instagram, Twitter, Facebook, and LinkedIn. This platform allows us to communicate to the user and promote the application (Zarrella, 2010). Besides, event venues have posters to promote the application. Another channel of promotion is through the user where he or she refers to friends. Minimum Viable Product The minimum viable product is the ability of our product to satisfy customer needs and demands, especially for the early customers. These customers will then provide feedback on the future development of the product. Key Activities Key activities include the important things we need to do to ensure that we deliver on the business propositions and objectives, therefore, ensuring that the business runs smoothly. One major key activity is to ensure that the application works properly and is reliable at all times. To ensure this, maintenance of the application is necessary at a regular interval. In addition, learning about the customers and the application to allow improvements on the application that is product improvement. Key Resources Key resources for us include the main assets that we need to ensure that we gain a competitive advantage over our competitors in event mobile app industry (Klofsten, 1998). Key Partners The key partners are the venue owners in Melbourne. The venue owners are the ones that provide important information on the venue. Apart from venue owners, event organizers are also important partners in the business that is What's Hot app. Event organizers also provide critical information on the events including the time, dress code, and fee to be paid. It is clear that there is nothing the app can present to its users without event organizers and venue owners. These partners are critical to the functioning of the app and provide information on events daily. The social media platforms are also important partners in the business. It is through the social media platforms especially Facebook where the app is advertised to the world. The main platform is Facebook where when joining, one can login with Facebook which will allow the app to be shared to their Facebook profile. Every business has partners who are essential as without them the business cannot run effectively. All these key partners are linked to the key activities of the business. Revenue Structure and Cost Structure The company's revenue structure and cost structure is dependent on some factors including the employees acquired and trained marketing strategies, and investment costs including all the startup capital. The revenue of the company will be obtained from the app sales through downloads and event advertising costs. Further analysis of the revenue and cost structure of the company will be discussed in the financial feasibility study of the business. Business Plan Market feasibility The market size is big considering that most of the population in Melbourne Australia are the youth who are mainly targeted by the application. The nightlife at Melbourne is the biggest in Australia and therefore the market size is big. Besides, there are also tourists that visit Australia, Melbourne is their favored destination, and this therefore further expands the market size. The mobile application industry for event advertisement and planning is growing at a very high rate especially due to the dynamic and growth patterns of technology. The revenue growth in Australia is driven by demand for smartphone applications from businesses and regular customers (Bobbie, 2016). As at the year 2015, over 5 million people aged 15 and above have been accessing several mobile applications in Australia and the number is projected to continue rising (Research Reports, 2017). The thriving smartphone applications industry in Australia, therefore, means that the growth rate is high. However, the already existing market is not at the full capacity mainly because the young population will grow into the market and further expand the market and use of the product. Customers are getting alternatives including the application Where to Tonight. This application does almost the same work as What's Hot but ours is an improvement through the provision of rewards and incentives. Our target customers are those located and those visiting Melbourne. However, we will have to put in place a growth strategy to expand the business to all Australian Cities and even globally. We have projected that about 40% of the total market will purchase or product mainly because it is effective and reliable especially to those that are new in Melbourne (Bobbie, 2016). We have targeted 40% of the market share at first but with improved marketing and growth strategies, the market share will increase. There exist external environmental factors that can affect our business. The political factors that include both the national and local government will have great effects (Ahonen & Moore, 2005). The current political position seems to favor the mobile app industry especially for event marketing and planning since the government does not have lockout laws. The industry is dynamic in nature and it would be important to always put in place improvement strategies for the application to ensure that it continues to attract and retain the customers. Some important factors that may bar new entrants into the industry include heavy capital investment needed, need for highly developed technologies, the need for the economies of scale, and strong distribution networks. Technical Feasibility Technical feasibility is all about the methods of development, production techniques, sales and distribution options, available resources, laws and regulations, technological changes, and ethics related to the industry. Development of the What’s Hot app was through sub-contracting where we employed a different app development company to create the app but app maintenance will be done by our own company’s IT personnel. Since we are four in number the mode of producing the product can be through combinations. The partnership is also important in producing our product as we have to collaborate with venue owners, event owners, and the social media platforms. Partnership, therefore, becomes the main option of producing the What's Hot app (Day, 2004). Sales and distribution of our product will be through pay per download, where income or revenue is acquired directly when customers download the applications. Besides, in-app advertising can also be used where event planners provide us with information that we use to advertise their events and they pay us. These two types of sales are classified as the in-house sales where we are the ones that sell the product. The main resources we need in the development of our product include skill, equipment, and suppliers. The skill of development we acquired through sub-contracting while maintenance skill will force us to employ IT developers and Software technicians. We will do the management of different company segments. Important raw materials such as stationery and printing materials will be needed especially in dealing with posters. Equipment such as printers and other equipment, computer software, fax machines, phones, and vehicles are also important for the company. Important licenses needed due to laws and policies in Australia include vehicle registrations, permits, licenses, insurance for building and company assets, vehicles, and public liability. With the dynamic nature of technology, some issues such as the changing structure of applications and new social media platforms may force the company to invest more in technology. Financial Feasibility The estimation of a 40% market share presents a market size of about 1 million people in Melbourne. The sale forecast of the app will be based on page views, conversations, application traffic, and downloads. Downloads and searches are estimated to be 1 000 in one month and we project to advertise about 100 events per month due to the busy Melbourne nightlife. The pricing of our app and advertisement fees need to consider the existing competition prices. The app price is set at $ 5 for download and the advertising price per event is estimated to cost a total of $ 100 with a deposit of $50 and completion of the payment after the event. With this figures the total revenue per month is estimated to be $ 10000 and removing all the other expenses the revenue is projected to be $ 5 000 per month. Startup Costs START-UP COSTS Cost ($) EQUIPMENT/CAPITAL COSTS Cost ($) Registrations   Business purchase price  200 Business name  100 Franchise fees  100 Licenses  100 Start-up capital  1000 Permits  200 Plant & equipment   Domain names  50 Vehicles  60000 Trade marks/designs/patents  100 Computer equipment  10000 Vehicle registration  100 Computer software  1000 Membership fees  200 Phones  500 Accountant fees  - Fax machine  200 Solicitor fees  50 Security system  1000 Rental lease cost (Rent advance/deposit)  400 Office equipment   Utility connections & bonds (Electricity, gas, water)  200 Furniture  10000 Phone connection  50 Shop fit out  5000 Internet connection  50     Computer software  1000     Training  1000     Wages  20000     Stock/raw materials  1000     Insurance       Building & contents  100     Vehicle  200     Public liability  150     Professional indemnity  100     Product liability  100     Workers compensation  300     Business assets  500     Business revenue  1000     Printing       Stationery & office supplies  500     Marketing & advertising  1500     Total start-up costs $29 050 Total equipment/capital costs $89 000 Assumptions: All figures are GST exclusive. Profit and Loss Projection for the first three years PROFIT & LOSS Month 1 Month n Year 1 Year 2 Year 3 Sales  $10000 $10000  $120 000   $ 500 000 $ 1 000 000 000 less cost of goods sold  $14000  $14000 $ 168 000  $ 168 000 $ 168 000 Other costs  $100  $100  $1200  $ 1200 $ 1200 Gross profit/net sales -$ 4 100 -$ 4 100 -$ 69 202 $330 800 $999 830 800 Expenses       Accountant fees $ - $ - $ - $ - $ - Advertising & marketing $ 120 $ 120 $ 1500 $ 1500 $ 1500 Bank fees & charges $ 100 $ 100 $ 1000 $ 1000 $ 1000 Bank interest $ 20 $ 20 $ 200 $ 200 $ 200 Credit card fees $ 10 $ 10 $ 100 $ 100 $ 100 Utilities (electricity, gas, water) $ 10 $ 10 $ 100 $ 100 $ 100 Telephone $ 5 $ 5 $ 50 $ 50 $ 50 Lease/loan payments $ 120 $ 120 $ 12000 $ 12000 $ 12000 Rent & rates $ 50 $ 50 $ 500 $ 500 $ 500 Motor vehicle expenses $ 50 $ 50 $ 500 $ 500 $ 500 Repairs & maintenance $ 50 $ 50 $ 500 $ 500 $ 500 Stationery & printing $ 50 $ 50 $ 500 $ 500 $ 500 Insurance $ 10 $ 10 $ 100 $ 100 $ 100 Superannuation $ 5 $ 5 $ 50 $ 50 $ 50 Income tax $ - $ - -$ 40 $ 30 $ 130 Wages (including PAYG) $ 23 000 $ 23 000  $ 230 000 $230 000  $ 230 000 More… $ - $ -  $ - $ -  $- Total expenses $23 600 $23 600 $247 060 $247 130 $247 230 NET PROFIT (Net Income) -$27 700 -$27 700 -$ 316 262 $83 670 $997 360 570 Assumptions: All figures are GST inclusive. The values are approximations. Important sources of startup finances include donations and loans from friends and families with some being repaid later. Another source is from our own savings where all our savings will be put into the business. We will also acquire loans from financial institutions which will provide us with the loans only after analyzing our business idea and ensuring that it will be able to repay the loan (Klofsten, 1994). Important revenues for the business over the first three years is analyzed as shown below. Year 1 Year 2 Year 3 Gross profit Margin 20% 25% 30% Net Profit Margin 10% 12% 15% Return on Investment 7% 10% 15% Therefore, from the table, it is estimated that the business will have paid back all its startup capital by three years or even less. The break even for the business is, therefore, a period of two years or even less. Human Resource Feasibility The personnel plan for the company does not include many individuals, as the company will employ two software and IT specialists who will deal with customer support, application and website maintenance, marketing, and What’s Hot community administration. Drivers will also be needed which will be three drivers to drive the company vehicles. Finally, cleaners to clean the building will be needed and it will be one since the office space is not big. The management team will include the four members that came up with the business idea. Finance manager being Harty, Daniel will be the Marketing manager, Valen will manage the human resource including the IT and software specialists, and finally, Jayden will be the general C.E.O of the company. We will, however, have the same powers. The right employees for the company during the startup will be selected through interviews and those that seem to conform to the values and culture the company is set to uphold will be employed. Valen will come up with several ways to ensure employees are motivated including giving them off periods, provision of incentives and allowances for top performing employees, and treating all employees with respect and care (Davila et al., 2006). This will ensure employees are retained and the company would also be able to acquire talented employees in the future. The developers will be paid an average annual salary of $ 70 000, with drivers and cleaners paid an average of $ 30 000 annually. Training of employees especially the IT and software specialists will be important in order to improve their skills and knowledge. The growth plan for the company includes important management strategies including diversification, joint ventures with other companies including event planning organizations, innovation, and market development, which includes venturing into new markets or increasing inputs in the existing markets (Nieman et al., 2004; Vyakarnam & Leppard, 1995). It is important to note that these growth strategies would change the company’s organizational structure especially if the business expands and grows to cover the whole of Australia (Quelle, 2012). The existing IT and software developers will have to be promoted to manage other new developers that will be employed due to growth. Besides, new managers that do not include the business owners will be needed to manage subsequent branches. References Ahonen, T. T., & Moore, A., 2005. Communities dominate brands: business and marketing challenges for the 21st century. London, Futuretext. Bobbie G. 2016. ‘The Future of the App Economy in Australia.’ Accessed from: http://www.bandt.com.au/featured/future-app-economy-australia. [14 May 2017]. Davila, T., Epstein, M. J., & Shelton, R. D., 2006. The creative enterprise: managing innovative organizations and people. Westport, Conn, Praeger Publishers. Day, G. S., 2004. Strategic market planning: the pursuit of competitive advantage. St. Paul, West Pub. Co. Klofsten, M., 1994. ‘Technology-Based Firms: Critical Aspects of their Early Development,’ Journal of Enterprising Culture, 2(1), pp. 535-557. Klofsten, M., 1998. The Business Platform: Entrepreneurship and Management in the Early Stages of a Firm’s Development, European Commission, Luxembourg: TII. Koekemoer, L., & Bird, S., 2004. Marketing communications. Lansdowne, South Africa: Juta Academic. Nieman, G., Pretorius, M., & Dyer, T., 2004. Managing growth: a guide for entrepreneurs. Cape Town, Juta Academic. Quelle, G., 2012. Profitable growth: release internal growth brakes and bring your company to the next level. Berlin, Springer. Accessed from: http://www.myilibrary.com?id=424769. [14 May 2017]. Research Reports. 2017. ‘Mobile apps thrive in the Australian market,' researchacma. Accessed from: http://www.acma.gov.au/theACMA/Library/researchacma/Research- reports/mobile-apps-thrive-in-Australian-market. [14 May 2017]. Vyakarnam, S., & Leppard, J., 1995. Action plans for the small business: growth strategies for businesses wondering where to go next. New York, DBM Pub. Zarrella, D., 2010. The social media marketing book. Beijing, O'Reilly. Accessed from: http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=415 087. [14 May 2017]. Appendices Appendix A: Projected Profit and Loss for the first three years. PROFIT & LOSS Month 1 Month n Year 1 Year 2 Year 3 Sales  $10000 $10000  $120 000   $ 500 000 $ 1 000 000 000 less cost of goods sold  $14000  $14000 $ 168 000  $ 168 000 $ 168 000 Other costs  $100  $100  $1200  $ 1200 $ 1200 Gross profit/net sales -$ 4 100 -$ 4 100 -$ 69 202 $330 800 $999 830 800 Expenses       Accountant fees $ - $ - $ - $ - $ - Advertising & marketing $ 120 $ 120 $ 1500 $ 1500 $ 1500 Bank fees & charges $ 100 $ 100 $ 1000 $ 1000 $ 1000 Bank interest $ 20 $ 20 $ 200 $ 200 $ 200 Credit card fees $ 10 $ 10 $ 100 $ 100 $ 100 Utilities (electricity, gas, water) $ 10 $ 10 $ 100 $ 100 $ 100 Telephone $ 5 $ 5 $ 50 $ 50 $ 50 Lease/loan payments $ 120 $ 120 $ 12000 $ 12000 $ 12000 Rent & rates $ 50 $ 50 $ 500 $ 500 $ 500 Motor vehicle expenses $ 50 $ 50 $ 500 $ 500 $ 500 Repairs & maintenance $ 50 $ 50 $ 500 $ 500 $ 500 Stationery & printing $ 50 $ 50 $ 500 $ 500 $ 500 Insurance $ 10 $ 10 $ 100 $ 100 $ 100 Superannuation $ 5 $ 5 $ 50 $ 50 $ 50 Income tax $ - $ - -$ 40 $ 30 $ 130 Wages (including PAYG) $ 23 000 $ 23 000  $ 230 000 $230 000  $ 230 000 More… $ - $ -  $ - $ -  $- Total expenses $23 600 $23 600 $247 060 $247 130 $247 230 NET PROFIT (Net Income) -$27 700 -$27 700 -$ 316 262 $83 670 $997 360 570 Assumptions: All figures are GST inclusive. Appendix B: Startup Capital approximates START-UP COSTS Cost ($) EQUIPMENT/CAPITAL COSTS Cost ($) Registrations   Business purchase price  200 Business name  100 Franchise fees  100 Licenses  100 Start-up capital  1000 Permits  200 Plant & equipment   Domain names  50 Vehicles  60000 Trade marks/designs/patents  100 Computer equipment  10000 Vehicle registration  100 Computer software  1000 Membership fees  200 Phones  500 Accountant fees  - Fax machine  200 Solicitor fees  50 Security system  1000 Rental lease cost (Rent advance/deposit)  400 Office equipment   Utility connections & bonds (Electricity, gas, water)  200 Furniture  10000 Phone connection  50 Shop fit out  5000 Internet connection  50     Computer software  1000     Training  1000     Wages  20000     Stock/raw materials  1000     Insurance       Building & contents  100     Vehicle  200     Public liability  150     Professional indemnity  100     Product liability  100     Workers compensation  300     Business assets  500     Business revenue  1000     Printing       Stationery & office supplies  500     Marketing & advertising  1500     Total start-up costs $29 050 Total equipment/capital costs $89 000 Assumptions: All figures are GST exclusive. 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