Business Plan for Master Minders - Assignment Example

Master Minders was formed because Founders realizes the need in Reading for a baby sitting agency that fills a void left by other temporary and permanent placement agencies. Master Minders aims is to provide high quality, experienced, professional baby sitters to clients that are currently relying on the instability of word-of-mouth contacts, and are spending much of their time and resources (and, therefore, money) locating such baby sitters. Master Minders is a private proprietorship, owned by its founders. The company founders, Ms. Smith and Ms. Fakiri will manage day-to-day operations of the business. Both have strong management and administration skills. In addition, Ms. Fakiri has experience as she began working with children when she was at the University of Reading. Those skills support Master Minder's goals. The UK's changing demographics have led to families becoming more fragmented with parents of young children often finding they have little or no close family support when they start a family. But professional babysitting agencies are an emerging business trend as they provide a cheap form of childcare and represent an attractive option for busy mothers who need help not only with childcare but also with light house hold duties. Childcare provision in the UK is a clearly segmented market, as a result of legislation and constantly changing market needs. British parents pay high childcare bills and despite Government initiatives and tax changes, there is a growing need for the expansion of private sector services. Service, price and reputation are essential success factors in the childcare services industry. Master Minders will compete well in this industry by offering competitive prices, high-quality childcare services and by maintaining an excellent reputation with parents and the community we serve. Our target customers are dual-income, upper-middle-class families principally managers and senior officers who value the quality of education and childcare for their children. We will start our business on the First January 2009.We project healthy revenues and a high net profit for the four first years. The high profit will help the company to achieve its long-term goal which is to franchise and/or to become multi-location. To these ends, we are expecting to build a sustainable and profitable business. Highlights I.1 Mission Master Minder's mission is to contribute to the community by filling a need for specialized baby sitters. The company will provide baby sitters with a safe and independent environment. Close personal attention to each child is essential to providing a quality experience for all children; therefore, adequate personnel will be hired to ensure each child has the proper supervision whilst in our care. I.2. Objectives Master Minder's objectives are: To serve clients with needs for select, specialized baby sitters rather than clerical or light industrial baby sitters. To create a service based operation whose primary goal is to exceed customer's expectations. To increase the number of client's served by 10% each year. To develop a sustainable, profitable, start-up business. The long-term goal of the company is to franchise and/or to become multi-location, and eventually sell this business. I.3 Keys to success Keys to success for the company will include: Maintaining a high reputation in the community. Quality care by trainee program for our baby sitters. Maintaining and controlling cost to assure a sustainable profitable business. Offering flexible hours and competitive pricing, discounts and advantages to our customers to gain their loyalty. Master Minders is a temporary and permanent placement baby sitter agency working solely with skilled, professional baby sitters. Master Minders differs from other temporary and permanent placement agencies because of our skilled baby sitters and the variety of its services. Master Minders will be located in Reading. Master Minders will provide Baby sitters and Mother's Help Master Minders does the following for each client: Recruiting (reference checking) Skills evaluation (preliminary interviewing) Screening. II.1 Company Ownership Master Minders is a start-up managed principally by two partners, Ms. Fakiri and Ms.X. Both are capable of handling the sales/management and finance/administration areas, respectively. This business will start out as a simple proprietorship, owned by its founders. As the operation grows, the owners will consider re-registering as a limited liability company or as a corporation, whichever will better suit the future business needs. II.2 Start-up Expenses and Capitalization Costs will vary depending on the way in which the business is structured as it may be possible to run the business from home. However, it may be preferable to set up in proper office premises. Start up and running costs will therefore include a variety of the following: Office rent and rates (this may include a premium for a lease). Professional indemnity and other insurance. Stationery - some print shops offer start up packages for approximately 500 which include printed letterhead paper, compliment slips, business cards, invoice pads and envelopes. Alternatively, we may be able to design and print by ourselves using a PC and a software package such as Microsoft Publisher. Promotional material - this may include leaflets outlining our services and the cost of advertising. Computer/printer/modem - from 1,000. Desk and office chair - around 200. Fax/telephone - from 150. Photocopier - from 250. Website design - from around 250 upwards. As reflected in the table below, the projected start-up expenses for Master Minders will be 10,000. These costs will be financed solely by the owners' personal cash funds. Future expansion, growth and franchising strategy will be self-financed. Start-up Expenses Legal 500 Stationery etc. 350 Brochures 650 Insurance 500 Rent 1000 Expensed equipment 1,500 Advertising 500 Total Start-up Expense 5,000 Cash Requirements 5,000 Total Requirements 10,000 Funding Investment Jamila Fakiri 5,000 Sylvia 5,000 Total Investment 10,000 The typical services offered by a baby sitting are: Preparing and supervising light meals, help with home work, outdoor activitiesetc Looking after the children while parents are absent. Baby sitters normally work for no more than five hours at a time. They may also baby-sit for two to three evenings a week. From the point of view of the family and children, however, it must be remembered that few Baby sitters have childcare qualifications and often have very limited experience. Master Minders provides a complex blend of services to distinct populations. The company serves clients through connecting them with the contingent work force. It also serves the baby sitter by connecting them with clients, at no charge, and providing benefits not often provided by other employment agencies. Baby sitters are responsible for all aspects of childcare including feeding and providing stimulating activities as required. All baby sitters provided by Master Minders have experience and are trained by our company. Mother's Help's duties are similar to baby sitters. A Mother's Help provides the same degree of care for the children but in addition will also undertake some light housework. Mother's helps' are often unqualified but with the relevant level of experience. The babysitters are employees of the agency, will always be at least 18 years old, have the appropriate qualifications or have relevant experience. All staff are comprehensively vetted, have undergone a police check and we have verified all references and qualifications Conducting market research on potential customers is vital. A questionnaire circulated around local schools and parent groups gave us some useful feedback about who might use a baby sitter and what type of facilities are needed in the area. Another tactic to collect data and to understand our market and our potential customer was to use published information mainly from the 'Economic Development and Council' in Reading. There has been a growth in the use of agency staff due to parents preferring to leave their children in the care of people whose backgrounds have been verified. Recent cases have raised awareness of the possible problems inherent in using young, inexperienced people to look after small children. It is important to carry out strict checks on the character and criminal background of potential babysitters in order to ensure that the children are protected from physical and sexual abuse, and to safeguard the property of the family. Babysitting agencies play a useful role in matching the sitter to the family, and repeat business can be gained by ensuring that both parties fit well together. Host families should also be checked out as Baby sitters themselves could be taken advantage of by unscrupulous families. Programs televised in recent years have shown the extent of abuse when hidden cameras have been placed in homes. There are a number of preconceptions about the type of families using baby sitter services. The use of Baby sitters is generally seen as an 'upper-middle class' type of childcare and this can be off-putting to potential clients who may benefit from baby sitter services. Master Minders is a local firm that costs less than a consultant or agency and has an easy, pay and billing rate system that covers employee payroll and worker's compensation insurance. According to economic forecasters, employment agencies and financial services are expected to have the largest industry growth over the next 25 years. Just consider the time, energy, and resources an employer may spend trying to employ a person for a simple task. In addition to the already lucrative temporary industry, several companies in the UK place professional contingent baby sitters, but Reading is not currently being served. The company approaches primarily through networking and cold calls. Our intention is to utilize a Public Relations agency for more coverage as soon as possible. Master Minders will be a member of the area Chamber of Commerce and actively participates in as many activities as possible. Prior to start-up, Master Minders also surveyed several parents about their use of baby sitters. The company will use its website and other marketing materials that describe what services we provide and explain how simple it is to work with us. Master Minders advertises in local papers and trade magazines when absolutely necessary, but most often uses the Reading Employment Department, both community college and university campuses, and the networking groups we are members of to search out the right employee. IV.1 Market Trends The rise in numbers of people delaying parenthood means that many parents have established social lives, which they wish to retain, or have high profile careers which require them to work late or socialize for business purposes. Therefore obtaining reliable babysitting services can be increasingly problematic for many families. According to Childcare provision in the UK is the very costly and there is a growing demand for the expansion of private sector services. Changing demographics suggest that family networks are changing with many families no longer enjoying the support of a close extended family, able to offer ad hoc childcare. Generally speaking, babysitters are traditionally needed in the evenings when they are expected to amuse the children until bedtime, supervise their supper, bath them and put them to bed. The principal role is to provide a safe pair of hands and to supervise the household while parents are out. The growth in dual-career families, and increases in numbers of people becoming self -employed, mean that parents often need casual childcare provision or cover out of core working hours, yet need to keep this as flexible and low cost as possible. IV.2 Market Segmentation Customers are likely to include working families. A babysitting agency may be of particular use to some of the 60% of families that have at least one parent who works outside. Other customers are likely to be parents with social or business events to attend. This client group may require cover on a casual basis all through the year, but a babysitting service is likely to have seasonal peaks especially at Christmas and the New Year. In large cities especially, customers may also include people who are on holiday or visiting on business (perhaps from abroad) and who require ad hoc babysitting. IV.3 Target Market Segment Strategy Customers are likely to come from a number of sources but will predominately be made up of parents seeking a safe play environment for their children. Demand may be seasonal with interest rising in school holiday periods, particularly among the five to ten year old age group. There will be increased interest on weekends and after school hours, particularly for children's birthday parties. There may be demand on weekdays for provision for the under fives and toddlers. Master Minders is targeting one specific customer group, the middle to upper class, two-income professional family. These groups of families have both parents working, not allowing them time to raise their child during the day. This group has the money for child-care, and are willing to spend a little extra to get a higher level of care. This customer segment has already begun teaching its child-advanced concepts like reading, singing, socialization, etc. Master Minders will continue to develop the children's skills. This customer group is typically made up of two professional parents. This would explain why the parents have the money for more sophisticated child care and are ambitious in terms of their children's learning and development. IV.3 Market Size As a result of the market research and thanks to the data found in the 'Economic and development Council' in Reading, we found that our TARGET (the middle and upper class, especially made from managers and senior officials) market represents 40% of the workforce population in Reading. This means 38,000 people (40% of 95000). However we assume that there are people who do not have children or that are aware of our service but not going to use it we have 4,750 potential customers. IV. Competition The childcare market is one form of childcare which is reasonably competitive, often with several providers in the same area chasing the same market. Competition may include: Friends and Family members, who are the most popular choice for childcare while parents are busy. They offer a free, convenient and trusted service. However, some parents can not rely on close family. Daycare centers are growing in numbers and many parents also rely on nursery facilities, although places are limited and the cost is often prohibitive if used as a regular service. Playgroups are a popular choice for a few hours childcare in the day. They allow the child to socialize and learn in a secure environment. The regular times of sessions fosters stability as they are able to get to know other children and the staff over a period of time. Teenage babysitters providing cheap childcare, often at late notice. They usually live locally and are known to the children. Au Pairs live in with families and often become viewed as an older brother or sister. They usually provide babysitting two nights each week as part of their contract, however, an Au Pair is entitled to several nights off each week and a babysitting agency can provide supplementary childcare. Nannies. Increasingly, nannies provide babysitting cover, but, like an Au Pair, employing a nanny usually means a regular financial commitment, rather than being able to buy services as and when needed. Childminders. Some childminders are now beginning to offer overnight care. In addition, if the child attends the childminder on a regular basis after school, they will be familiar with each other and so less of an unknown quantity than a babysitter introduced by an agency. There are over 30 child-care providers in the local area. The larger commercial chain child-care centers, such as Kid Care, have a majority of the market share. These larger chains compete well because of a good reputation among the consumer market. Master Minders offers a high quality service which is appealing to most parents. In fact, the company provides a trained baby sitter which ensures parents that we are experienced and reliable. Additionally, we offer flexibility for parents, which is not the case for nannies and daycare center as their cost is often prohibitive. There are two main target groups to aim at when promoting a baby sitting agency - the families (usually principally the mother) and the Baby sitters themselves. Marketing is about getting the message across to clients that you are there and convincing them to use your services. Reputation and referral are critical success factors in marketing the childcare industry. Our marketing techniques are: Building a reputation and getting recommendations by word of mouth is the best way of marketing any business, however, all the usual sales and marketing techniques are relevant and include: Creating a strong market image that sets us apart from the competition and attracts the market sector we are aiming at. This involves developing an attractive and memorable business name and logo which should be used on all marketing materials. Using professional qualifications or evidence of experience in our marketing material to reassure clients that we are experienced and reliable. Building a website which includes testimonials from satisfied customers. V.1 Promotion strategy Practical ways in which to promote a baby sitting agency include: Advertising in suitable journals and magazines, especially those aimed at the target market such as 'The Lady'. Advertising in Yellow Pages (nationally if appropriate) and on www.yell.com. Word of mouth. Obtaining editorial/advertorial coverage in publications. Aim for up-market magazines. The Internet is becoming one of the main tools in the promotion of baby sitter agencies as it is accessible to Baby sitters and families in many countries. Clients and Baby sitters can register online and a website provides an excellent marketing opportunity. It is important to have a well designed, user friendly site that will appear at the top of search engine listings to ensure clients contact your agency first. Professional Baby sitters Our beginning point in marketing to baby sitters was approximately 10 personnel surveys to professional contingent baby sitters. Master Minders intends to recruit baby sitters through advertising in the newspaper and appropriate trade magazines, trade shows, the University of Reading career center, and by referral. We have found that each division within the company requires a different approach for recruitment. We try to use newspaper advertising, the employment department and also through a series of developed contacts. V.2 Pricing Strategy Fees vary from agency to agency. Some offer a free registration service for parents, other agencies charge a membership fee prior to the introduction of babysitters to a client, or a booking fee each time a babysitter is reserved. Master Minders must charge for the high-quality childcare service. This means we will not subscribe a 'low price' concept. The quality of our services will support the prices we charge. Typical fee levels are as follows: Evening babysitting service annual membership fee - from 50. Day and evening babysitting service annual membership fee - from 70. Booking fees - from 3 each time a sitter is reserved. Babysitting charges - these vary according to location and day of the week, with charges ranging from around 6.50 to 15 per hour for anything from a weeknight, to New Years' Eve. Because the parent pays the babysitter direct, they are not employed by the agency and usually no commission is taken. The agency therefore has to make its profits from the membership or booking fees alone. However, this does mean the agency will avoid national insurance, pension, sickness and holiday payments to the babysitter who is considered as self-employed. V.3 Sales forecast As we explained beforehand (see point IV. Market Size) our potential customers represent nearly 4,750 people. We assume that half of 4,750 will pay the Evening annual membership which represents 118,750 and the other half will pay the day and evening membership. This means 166250. We have to add 3 each time a sitter is reserved so at least they will reserve it three times a year 4,750*9 = 42,750. Therefore our Sales revenues in 2009 will be 327,750. We project that our sales will increase of 10% each year Our total revenue will be 360,525 in 2010, 396578 in 2011 and 436235 in 2012. V.4 Competitive edge Our approach is unique. There is no competitor in Reading that is offering the same concept: skilled baby sitters allowing quality and educational program childcare service. The main treat in our market is credibility. Master Minders is a new player and the credibility problems may affect our initial sales. However, if we maintain our marketing strategy, business development and boost our value we will be able to succeed. Another issue which may affect our sales is fidelity. To keep customers and baby sitters trust we will develop a trainee program for baby sitters. This allows us to ensure our customers that we are reliable and therefore keep their loyalty. Management is a style, a belief, and a strategy. The company founders, Ms. Smith and Ms. Fakiri will handle day-to-day operations of the business and will work collaboratively to ensure that this business venture is a success. The founders Ms. Fakiri and Ms. have strong management and administration skills. In addition, Ms. Fakiri has experience as she began working with children when she was at the University of Reading. Those skills support Master Minder's goals. In managing our clients, Master Minders will communicate regularly with them, setting up a schedule that meets their needs. The company will set goals for retention of clientele and strive to reach those goals by building relationships, listening to the client's needs, and meeting those needs. We will take responsibility for our errors and the outcome. In managing our baby sitters, Master Minders will communicate regularly with them, providing them with an employee manual to minimize their confusion, and offer them the best pay and benefits possible. Master Minders will set goals for retention of employees and strive to reach those goals by treating each employee with respect, provide protection when appropriate, and do everything within our power to assure a healthy working environment. This is a relationship business. Master Minders will manage all clients and employees through relationship building. IV.1 Management team The management team of Master Minders will be as follows: Manager (1) Deputy Manager (1) Employment specialist (1) Assistant (1) An Agency fee will be charged for each permanent member of staff introduced. The rate of agency fee depends on the particular vacancy. The fees are as follows: Team/Years 2 009 2 010 2 011 2 012 Manager 15 600 17 160 18 876 20 764 Deputy manager 14 400 15 840 17 424 19 166 Employment Specialist 15 000 16 500 18 150 19 965 Assistant 10 800 11 880 13 068 14 375 Total People 4 4 4 4 Total Payroll 55 800 61 380 67 518 74 270 All fees must be paid within 14 days of employment commencing. These fees will be reviewed by the Agency from time to time. Staff should not be directly contacted; all interviews must be arranged by the agency. No charge will be made if suitable staff cannot be found. What additional skills are required Excellent business and administration skills. Good communication and negotiation skills. An appreciation and understanding of other cultures and the difficulties experienced by people working abroad or being away from home for the first time. Tact and diplomacy. An understanding of basic law relating to agency, employment and regulations relating to Baby sitters. Experience as a parent and an appreciation of the difficulties in finding good quality, reasonably priced childcare. Master Minders is completely service minded, customizing personnel packages and offering the most it can to both employers and employees. The company brokers professional baby sitters to Reading residents. We will set up an electronic database and with the push of a button, Master Minders can search for a client or an employee needed. Employers and employees will be able to communicate with Master Minders via both new technological and traditional methods. Our Web page provides information about Master Minders including what professional fields we serve, what clients we are working with, and what services we offer. Master Minders forwards candidates' resumes and other information through a variety of methods: phone, fax, personal visit, mail, and the Web page. V.2 Managing Business When the company is contacted and expresses interest in contingent employees, the following procedures will be followed: Consult with client and create a follow-up plan. Complete the contact, client, and job sheet in the database. Print one of each and forward a copy of the job sheet on yellow paper to the employment specialist. File original sheets in the appropriate binders. Search for matches in the database and pull each folder that looks like it will work. Review that folder to assure a match. Call each potential candidate and discuss the job and pay to its fullest. Fax, e-mail, or otherwise contact client with information and/or resumes for review. Schedule interviews or make a decision on appropriate candidates. V.3 Managing Prospective Employees When an employee seeks to work with the company, the following procedures will be followed: Complete the professional's form in the database. While completing this sheet, screen the employee for experience levels, requiring professional experience in each arena they wish to work. Set up an interview with the employment specialist if the professional is qualified. Create a file for each employee and place all paperwork, along with a copy of the professional's form. Keep in touch with the professional quarterly if nothing comes up, more often if at all possible. When the professional agrees to a position, they will be supplied with the employee policy manual, letterheads for invoicing, and will complete the forms prior to beginning work. Master Minders will finance growth mainly through cash flow. The most important factor in our case are cost. We have to maintain our budget to avoid the increase of costs. VII.1 Key Financial Indicators The key financial indicators for the first four years are indicated in the following benchmark chart. We forecast a gradual growth in sales and operating expenses into the second, third year and fourth year. We forecast as well that the gross margin will stay stable during the first four years as the total sales costs are relatively indirect. Operating expenses increase gradually as payroll increases. Benchmarks VII.2 Profit and Loss Projection The following Profit and Loss will be for 4 years (2009-2010-2011-2012). We assume that our projected sales shown in the table below will increase each year by 10%. The return of our investment in these years will allow us to open another office and begin the franchise offering by the end of the fourth year. Profit from the additional offices and income from franchising are not included in this business plan. Profit and Loss Account Years 2009 2010 2011 2012 Sales 327 750 360 525 396 578 436 235 Evening annual membership 118 750 130 625 143 688 158 056 Day/Evening annual membership 166 250 182 875 201 163 221 279 Fees 42 750 47 025 51 728 56 900 Direct Cost of Sales 30 000 28 000 28 000 22 000 Gross Margin 297 750 332 525 368 578 414 235 Gross Margin % 90,85% 92,23% 92,94% 94,96% Expenses Payroll 55 800 61 380 67 518 74 270 Sales and Marketing 6 000 6 550 7 120 8 520 Depreciation 0 0 0 0 Rent 12 000 12 000 12 000 12 000 Utilities 1 560 456 456 456 Insurance 5 000 5 000 5 000 5 000 Payroll Taxes 8 370 9 207 10 128 11 140 Maintenance 500 500 500 500 Other 15 000 15 000 15 000 15 000 Total Operating Expenses 104 230 110 093 117 722 126 886 Profit Before Interest and Taxes 193 520 222 432 250 856 287 349 EBITDA 193 520 222 432 250 856 287 349 Interest Expense 0 0 0 0 Taxes Incurred (19%) 36 769 42 262 47 663 54 596 Net Profit 156 751 180 170 203 193 232 753 Net Profit/Sales 47,83% 49,97% 51,24% 53,35% VII.3 Projected Cash Flow The following table and chart highlight the projected cash flow for four years. Cash Flow Years 2009 2010 2011 2012 Cash Received Cash from Operations Cash Sales 327 750 360 525 396 578 436 235 Subtotal Cash from Operations 327 750 360 525 396 578 436 235 Additional Cash Received Sales Tax, VAT, HST/GST Received 0 0 0 0 New Current Borrowing 0 0 0 0 New Other Liabilities (interest-free) 0 0 0 0 New Long-term Liabilities 0 0 0 0 Sales of Other Current Assets 0 0 0 0 Sales of Long-term Assets 0 0 0 0 New Investment Received 0 0 0 0 Subtotal Cash Received 327 750 360 525 396 578 436 235 Expenditures 2009 2010 2011 2012 Expenditures from Operations Cash Spending 55 800 61 380 67 518 74 270 Bill Payments 78 430 76 713 78 204 74 616 Subtotal Spent on Operations 134 230 138 093 145 722 148 886 Additional Cash Spent Sales Tax, VAT 0 0 0 0 Principal Repayment of Current Borrowing 0 0 0 0 Other Liabilities Principal Repayment 0 0 0 0 Long-term Liabilities Principal Repayment 0 0 0 0 Purchase Other Current Assets 0 0 0 0 Purchase Long-term Assets 0 0 0 0 Dividends 0 0 0 0 Subtotal Cash Spent 134 230 138 093 145 722 148 886 Net Cash Flow 193 520 222 432 250 856 287 349 Not yet done Growing market segment No direct competition Profitable business able to finance growth New player. 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