Hang-out Cyber Cafe Business - Term Paper Example

ID No. Business Plan: Hang-out Cyber Cafe Executive Summary One-Stop Shop Cyber Café: Concept and Services Customers Management and Personnel Mission and Objectives 2. Business Description Company Ownership Floor Area Interior Layout 3. Industry and Market Analysis Growth rate New Entrants to the Business 4. Competitive Analysis Primary Competition Secondary Competition 5. Marketing Strategy Printed Promotional Adverts Product Discounts 6. Operational Issues Leasehold Arrangement Suppliers Utility Requirements 7. Human Resource Requirement Quantity of Personnel Skills and Qualifications 8. Financial Projections Start-up Expenditure Operational Expenses for 12 Months Cash Inflow for 12 Months Breakeven Analysis 9. Appendices 1. Executive Summary Hang-out Cyber Café is not a typical internet café that provides internet services and snack and drinks for users. It is a one-shop shop that caters to night surfers, products and supplies and computer services and repair. It will be conveniently located in an area that would be accessible to a commercial district and a residential area so that it could capture users going home from work and moms and dads who are freed of family obligations at night. Since most shops and stores would be close at night time, consumers and users could avail of the various services and products Hang-out Cyber Café can offer. Its operating hours would start at 5:00 o’clock PM until 5:00 o’clock AM of the next day. Three regular staff would be manning the café. The owner, as manager, would be in the café during the week and can assist the staff on some tasks, especially is the volume of customers would need additional hand. The target gross income per month is $8,000 that would yield $96,000 in a year. Break-even point and return of investment can be attained in three to five years depending on the actual inflow of customers. With the start-up expense of $100,000 and initial month operational expense of $5,000 ($105,000), the current cash on hand of $80,000 would only require $25,000 that would be sourced out from relatives and friends. Bank loan is not a viable alternative at present since it will incur interest in addition to the burden of monthly amortization (which will not occur in the case of investors). An initial of 20 computer units will initially provide the internet services with a plan to add 20 more units after three years. After five years, there will be expansion in the area, lease another property with larger space or establish a second branch. One-Stop Shop Cyber Café: Concept and Services Hang-out Cyber Café is a one-stop shop business outfit that will offer product and services to customers during nighttime. It will be operating for 12 hours daily from 5:00 o’clock PM to 5:00 o’clock AM for seven days a week. It can offer its internet services and products continuously in a month without interruption. This will ensure continuous earning for the business. Hang-out Cyber Café will offer snacks and drinks for users and shoppers. It will also offer office, school and computer supplies that consumers can purchase conveniently since most of the stores and malls will be closed at nighttime. The supplies would include bond paper, ball pen, pencil, stationery, notebook and pad paper, blank CD and DVD, printer ink, etc. Besides the internet services, Hang-out Cyber Café would al provide other essential and related services as a CD copying and burning, fax, scanning, photocopying and printing services. Further, technical services will be offered such as repair of laptops, PCs and printers. Customers of this repair service can return after two or three days to retrieve the units. Twenty 20 computer units will initially provide the internet services. It will be centrally controlled by the computer administrator (also acing as cashier) at the counter. The usage will be charged on a per hour basis according to the standard fee in the area the café is situated. User for longer hours will receive discounts. The customer can purchase a bundle package that can be used for three days and one week. Regular customers who reached a certain number of hours of usage for the past three months will be offered a loyalty membership and will receive additional privileges and discounts. A fixed usage must be maintained by members in a month, otherwise, the membership will be revoked. The Café is intended to provide convenience to users. Thus, the interior must project a cozy ambiance. Music can be played in the background that would add to the homely atmosphere and make users more relaxed. Ambiance and convenience will get more customers and enhance the business profits. Ten computer units will be set up in the traditional attached computer tables (see Appendix A) with side partition and covered front. Five units will be placed side by side while the other five units will be set at the opposite side. The other 10 units will use single detached computer tables with glass top (see Appendices B and C). This table design is for those who want open space while surfing the net. The customers can have a choice whether to use the attached table or the individual tables. Customers Hang-out Cyber Café will cater to a broad segment of customers from businessmen, regular employees, students and parents who cannot find suitable time during the day to surf the net. With its strategic location between the residential area and commercial district, it can capture the daytime employees, businessmen and students going home after work and parents who are pressed by household obligations who only have free time in the late afternoon and at nighttime. This will also serve the teenagers and young adults hooked to the internet or have to attend to their social networking activities. It is reported that North America has an estimate of 340,831,831 internet users as of the year 2009 (Internet Usage 1). In a study conducted among Americans, 36 percent access the internet from home (Where Americans 1). The same study also identified other access point such as home and work, home and another place, etc. But the fact that can be derived from the study is that only 36 percent of the estimated 340,831,831 people have internet connections at home. The remaining percentage can be attributed to other venues which include the internet cafes. Management and Personnel The overall administration and supervision will be handled by the owner of the establishment. He will oversee the day to day operations and provide additional manpower when there are many customers and during the day off of an employee. Three staff will regularly man the café. They are entitled to a whole day off during a work week (or four days in a month) which will be distributed during the week so that operations will not be hampered. Hang-out will hire one more personnel at the beginning of the second year of operation. Objectives The gross profit of a 20-unit internet café operating for 12 hours in a month is projected at $3,500 and net income of $1,995 (using 57 percent of gross sales as net sales). Gross sales of goods, food and snacks is estimated at $2,000 per month ($1,140 net income) while technical services can provide an added income of $2,000 a month. The monthly net income is projected at $5,135. The annual gross income (excluding income from technical services) is estimated at $66,000. The third year gross sales computed at a conservative increase of five percent per year would be $72,765. Table 1 The annual net income (including the income from technical services) is estimated at $61,620. Using the five percent increment in income every year would yield $67,936. Table 2 The capital outlay of $279,500 (start-up expenses) can be recoup by the middle of the 5th year of operation (the total net income after the end of the 5th year is $340,489). The monthly operational expenses are excluded in the computation since they are already deducted from the gross sales when computing for the net sales. Attaining the financial objectives as projected would make the venture profitable and feasible. Mission Hang-out Cyber Café will be an alternative internet services provider for people who prefer to surf at nighttime. It will provide a cozy and homely environment that would enhance customer satisfaction and feel relaxed from the daytime pressures and hard work. Hang-out Cyber Café envisions of attracting more customers from the convenience and ambiance the environment offers. 2. Business Description Hang-out Cyber Café will operate as a sole proprietorship business outfit. The possibility of a partnership or corporate existence might occur in the future when the success of the operation requires its transformation. It will occupy an area of 50 square meters, with six square meters allocated for the counter and cashier (where the computer units will be centrally controlled) and another six square meters as the stockroom. An area in the counter will be used to sell food and drinks. Near the counter, a lounge with four tables (with three chairs each) will be set up for shoppers or non-users (see Appendix D) can sit or take a snack. The attached computer tables and single glass top tables will be suitably placed on the remaining space. 3. Industry and Market Analysis Study on trends and historical sales that internet usage has a growth rate of four percent and is expected to continually grow. The new technology offered by social networking sites (e.g. Twitter) gives businessmen, students and socially-inclined users more reasons to use the net to exchange and access information. Universities, colleges and high schools already included in their curricula that students should post academic blogs and articles for other students to respond to. Students are graded according to the research content and presentation of the entries. Thus, the potential of Hang-out Cyber Café as a nighttime alternative is huge. It will capture a significant segment of night surfers and shoppers as well as people who do business or school requirements during the night. Hang-out’s extended service of up to 5:00 o’clock in the morning will make it more competitive since no other internet cafes offer such service in the area. New entrants in the business would likewise not pose a threat to Hang-out since they operate at the same time as existing internet cafes. Hang-out will be established in a location where few or no nighttime cafes exist. 4. Competitive Analysis Existing internet cafes operating in the usual operating time are not a threat to Hang-out Cyber Café. Indeed, Hang-out complements their existing services. The technical repair service has no primary competitor since it accepts customers only at past 5:00 o’clock in the afternoon when other repair shops have already closed down. There is no identified secondary competitor. 5. Marketing Strategy Traditional promotional approaches will be used by Hang-out such as banner and signage (to be placed in front of the establishment) and flyers (handbill or brochure). Printed flyers will be distributed to a wide area as possible that includes the neighboring residential areas and commercial districts. The flyers will include a promotional discount offer for the first seven days after business outfit has been launched. Freebies and novelty items will also be given to selected customers or through raffle draw after using the internet facilities. Hang-out can recoup the expenses for these giveaways as these will promote the name of the outfit and influence more people to use its facilities. A t-shirt giveaway is a mobile advert when worn by any of the Hang-out customers. Once in a while, the Café will give discounts on selected occasions such as Christmas, New Year, Valentine, etc. Customers entitled for membership shall also receive special privileges and discounts. Bundle package (prepaid) sold for three days use (96 hours) and seven days (168 hours) can be availed at a lower price than the per hour use availed at the moment of use (post paid). 6. Operational Issues The area of 80 square meters will leased for a period of one year to be renewed every thereafter. However, an arrangement will be made with the property owner that Hang-out intends to use the premises for a period of 10 years. The rental fee shall be paid on a monthly basis. The supplies (office and computer supplies) will be purchased in bulk from the manufacturer or authorized dealer in the area at a wholesale price. Thus, the acquisition price per item is much lower while it would be sold at the prevailing retail price. This approach will maximize the profits of Hang-out. In the same manner, internet connection, electricity and water will be paid on a monthly basis. A standby revolving fund of $50,000 will be available on hand for emergency purchases, operational expenses and bill payments. But this fund shall be replenished as soon as sales and income come in. This amount is not included in the start-up capital requirement. This will be provided by the owner apart from the original cash on hand contribution for the start-up. 7. Human Resource Requirement Three personnel will be regularly present during the seven-day operation except for three days when one of them will on day off. Although they will have specific tasks assigned, they may be required by the owner to perform certain tasks for the effective operation of the business. The personnel complement will comprise the cashier/internet administrator, technical/service staff and sales staff. The owner will act as the overall manager and supervisor of the staff. They will perform the following functions: Manager/Supervisor – oversee the overall operations of the Café. He will be reconciling the daily expenses and purchases. He will also handle the procurement and purchase of supplies as well as negotiate with new suppliers in order to avail of wholesale or discounted prices. Cashier/Internet or Computer Administrator – will designate the computer to be used by the customer and set the time in the central computer system which will unlock such computer. The cashier will also receive the payment for internet usage and technical repair service. Technical Repair Staff – repair computer, printer, etc. of the Café and the customers. The technical staff will also maintain the units in good condition. He will be in-charge of faxing, photocopying and burning of CDs services. Sales Staff – man the snacks counter and supplies for sale, as well as serve the food and hot or cold drinks. He/she will receive the payment for the food, drinks and supplies. This food and supplies section will maintain a separate cash register for easy inventory and reconciliation of sales and stocks. The sales staff will be in-charge of the inventory and receipt of incoming supplies (which will occur only between 5:00 – 6:00 o’clock in the afternoon. He/she will also clean up the lounge area and glass top computer tables of food wrappers or cups. All the staff will be required to follow a dress code for easy identification by customers. They will undergo a three-day on the job training and value formation in order to inculcate the company culture and mission, job expectation and tasks assignment. 8. Financial Projections The total capital fund needed by Hang-out Cyber Café is $329,500, $279,500 will be used as start-up capital and $50,000 as cash reserve (revolving or emergency fund) for operational expenses or emergency purchases. Any amount taken from the reserve cash will be immediately replenished from the sales and income. Of the start-up capital, $129,500.00 will be furnished by investors while the owner will provide the remaining $150,000. The cash reserve will be provided the owner. Table 3 Start-up Summary Start-up Funding Start-up Expenses $279,500 (procurement of area, annual rental, advertising, legal work, improvements, etc. before operation) Start-up Assets $150,000 (Cash on hand or in the bank) Total Funding Required $129,500 Assets Non-cash Assets from Start-up $0 Cash Requirements from Start-up $150,000 Additional Cash Raised $0 Cash Balance on Starting Date $150,000 Total Assets $150,000 Liabilities Total Liabilities $0 Capital Investment Planned Investment Investor 1 $25,000 Investor 2 $22,000 Investor 3 $20,000 Investor 4 $20,000 Investor 5 $18,000 Investor 5 $15,000 Investor 6 $9,500 Additional Investment Requirement $0 Total Planned Investment $129,500.00 Start-up Expenses Legal $7,500 Improvements $222,000 (Includes upholstery, computer tables and chairs) Annual rental $37,000 Annual Insurance $1,500 Computer Units, Software, Hub, $7,200 Router, Cables, etc. Printer, Scanner, Photocopy $2,000 machine Internet connection $800 and installation, DSL Fee) Advertising (banner, brochure, $1,500 freebies) Others (supplies, stationery) $1,500 Total Start-up Expenses $279,500.00 Operational Cost (per month) Salaries $11,100 Stocks $3,000 (Food, Drinks and Supplies for Sale) Utility Bills $4,500 Total Operational Cost $18,600.00 Breakdown of Salaries Cashier/Computer Administrator $3,700 Technical Staff $3,700 Sales Staff $3,700 Total $11,100.00 Return of investment (ROI) can be totally recouped during the mid pat of the 5th year of operation. At the end of the 5th year, the investor’s will receive a five percent dividend from their investments. The dividend will be increased to 10 percent the following year. Thereafter, the investors will receive a yearly dividend of 10 percent. However, they may opt to withdraw their investments any time after the 6th year of operation wherein they will be entitled to a pro rata dividend. 9. Appendices Appendix A (Source: http://digitalbattle.com/wp-content/uploads/2006/04/2005-5-18-china-internet-cafe_web.jpg) Proposed Layout in one section of the café (with front cover and side partitions). One section would utilize this table design with 10 units, five units on side and the other five units would be on the opposite side. Appendix B (Source: The Learning Station, n.d. http://www.the-office.com/office/LS-512P.htm) Proposed computer table with glass surface. The monitor will be placed beneath the table top. Ten units will utilize this table design. Appendix C (Source: The Learning Station, n.d. http://www.the-office.com/office/LS-512P.htm) Schematic diagram of the computer table with glass surface as depicted in Appendix B. Appendix D (Source: Fotosearch, 2009. http://www.fotosearch.com/FSD067/x25965768/) Proposed Layout of the lounge area where non-users could simply sit or take a snack. The actual area would only accommodate four tables. Hang-out Cyber Café will not provide computer units in this area. Works Cited Internet Usage Statistics: The Internet Big Picture: World Internet Users and Population Stats. Internet World Stats. Usage and Population Statistics. 2009. 15 November 2009 . Where Americans Use the Internet. infoplease. 2009. 15 November 2009 . Read More