Time Series Foundation Models - current state and future directions
Vempain teknikka inc
1. Entrepreneurship
Business Plan: Vempain Teknikka INC.
Presented to: Mr. Imran hameed
Waqas Qadir Baloch
Waqas Siddique
Rizwan Saeed
Afshan Nazakat
Faculty of Management Sciences
Air University
1
2. Table of Contents
Executive Summary...................................................... 6
Highlights .......................................................... 8
Objectives....................................................................... 9
Mission Statement ................................................. 11
Key to Success................................................................. 11
Company Summary ............................................................. 12
Start – Up Summary................................................... 12
Company Locations & Facilities .............................................14
Products & Services........................................................... 15
Sales Literature ................................................................... 15
Product & Service Description........................................ 15
Competitive Comparison.................................................. 16
Technology ............................................................. 17
Service & Support....................................................... 17
Future Products &
Services......................................................................... 18
Fulfillment........................................................................... 18
Market Analysis
Summary........................................................................ 19
Market Segmentation.............................................. 19
Target Market Segment
Strategy............................................................... 20
Market Trends................................................................. 21
2
3. Market Growth.............................................................. 21
Market Needs................................................................ 22
Service Business
Analysis.......................................................................... 22
Industry Analysis......................................................... 24
Competition & Buying
Patterns........................................................................... 26
Distributing a Service.................................... 26
Main Competitors.............................................................. 26
Competitor Analysis.......................................................... 27
Strategy and Implementation
Summary.................................................................... 27
Competitive Edge......................................................... 27
Strategy
Pyramid............................................................................. 28
Value Propositions...................................................... 29
Value – Stream Mapping .................................. 30
Marketing Strategy............................................................ 31
Sales Strategy............................................................... 32
Sales Forecast................................................................. 32
Milestones..................................................................... 34
Sales Programs ................................................................... 36
Marketing Program ............................................................... 36
Positioning Map ............................................................. 37
3
4. Strategic Alliances ................................................................ 39
Management Summary......................................................... 39
Organizational Structure.................................................... 40
Personnel Plan ...................................................................40
Management Team ................................................................44
Financial Plan ...................................................................44
Start – Up Funding................................................................. 45
Important Assumptions....................................................... 47
Key Financial Indicators......................................................... 48
Break Even Analysis.............................................................. 49
Projected Profit & Loss......................................................... 50
Projected Cash Flow............................................................ 53
Projected Balance Sheet........................................................ 55
Business Ratios................................................................. 56
Appendix ...................................................................58
4
5. Acknowledgement
We are extremely grateful to Mr. Imran Hameed for assigning us this
project and giving us the opportunity to explore of inner capabilities as
well as implementation of academic acquisition of Entrepreneurial
Skills in Real Life. We are again grateful to him for his guidance,
assistance and useful help in fulfillment of this project.
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6. Executive Summary
Cellular phones have revolutionized the communications arena,
redefining how we perceive voice and visual, as well as advent of the
Personal Digital Assistant’s (PDA) or Pocket Pc’s. Traditionally, cellular
phones remained out of the hands of most consumers due to their
high cost. As a result, cell phone carriers have invested time and
resources into finding ways to give the systems higher capacity and
thus lower cost. Cell systems are benefiting from this research and
starting to develop into large-scale consumer products.
Today, cellular phones are truly consumer electronics devices with
over 59 million subscribers. The Nokia N – 9, Samsung Galaxy and
i - Phone are further evidence of the idea that cell phones are
consumer electronics devices. Cell phones have ceased to be an
exclusive status symbol of high-powered lawyers and are now in the
hands of millions of consumers.
Vempain Teknikka, Inc. is taking advantage of an opportunity to
become a highly distinguished and recognized leader in the cellular
communications industry. It is the goal of our company to become
established as the leading distributor of wireless communications
services in Pakistan and in Area of South Asia.
In order to achieve this goal, Vempain Teknikka critical success
factors will be to identify emerging trends and integrate them into our
company operations, respond quickly to technology changes/be there
early, provide high-quality services, invest time and money in
marketing and advertising, expand into specialty markets, and stay
ahead of the "technology curve."
Revolutionary Cell phone-Gadget (Nano-Gadget) is a high-end device.
Symbolic Value Propositions:
Newly-enabled flexible and transparent materials blend more
seamlessly with the way we live.
Integrated sensors might allow us to learn more about the
environment around us, empowering us to make better choices
(Environmental Sensing).
Transparent electronics offering an entirely new aesthetic
dimension.
Devices become self-cleaning and self-preserving.
6
7. Renewable power resources inclusive moderate wind,
lightening/thundering and solar energy for operation and
recharging.
The Nano-Gadget will be sole manufactured at initial stages, followed
by Global Alliances/Strategic Alliances for pursuing the manufacturing
and engendering pool of Funds & Investments from Investors/Stake
Holders. Alliance/Partnership with Global Thumbs and Big Wigs of the
Industry will also entail Global Expansion with the aim of reaching and
providing this transgressing Nano-Gadget to every Human Being of
Human Kind.
Nanotechnology & sciences in the realm of consumer electronics is in
its’ own a solid proof and evidence as the Nanotechnology & Sciences
Industry has been evolving since 15 to 20 years along with World
Class Business & Products. The so called ―Prototypes & Prologue‖ of
the Cell phone-Gadget (Nano-Gadget), appended Snap of the
Exposition which has also been held and conducted at the ―The
Museum of Modern Art‖ and displayed as part of the museum's
"Design and The Elastic Mind" Exhibit.
The unveiling demonstration of the concept, so called‖ Prototype‖
at The Museum of Modern Art in the Global Arena has helped us to
impart information and awareness creating widespread
Comprehension , Image and Pre-Dominating Loyal customer Base.
Backend conducted surveys in Global Economies and Repeated
Customer Surveys for the Demand-Estimation (Expected) has
engendered trends and outcome depicting rapid growth rate for
progressing upward sloping and exponential demand.
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9. Objectives
The company plans to focus on the following target markets that will
provide us with the greatest market penetration: the specialty users,
the general users, and the personal users. We intend to offer products
and service packages that are priced appropriately for each segment
and will offer the services that best suit each segment's needs.
“Inclusive Alliance/Partnership with Global Thumbs and Big
Wigs of the Industry for pursuing Global Expansion with the
aim of reaching and providing this transgressing Nano-Gadget
to every Human Being of Human Kind.”
The above excerpt Statement Serves as Foundation Stone for
Customer Segmentation, Targeting & Positioning. Planet Earth is the
Target Market for the Business, as the Business will operate with the
Maxim, Belief & Vision of Life Enhancement and Problem-Solving. So
Target Market will be in the form of Global Community entailing every
Human Being from all Social Classes, Income Categories and Tiers of
Economic Pyramid with Differential Pricing Techniques & Semi-Pricing
Techniques serving as Key Success Factor (KSF) for conducting the
Business Successfully (From Tier -1 to Tier – 4; Exclusive concern for
the Bottom of The Pyramid).
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10. Our company will center on serving the growing Target Market
(Community) (presently at a 6% per year rate) as well as
concentrating on the local (Urban & Rural) population, banking on the
current growing trend of using mobile phones.
Our company will concentrate on selling products for Global System for
Mobile Communications (GSM) protocol cellular phones - sales,
services and support.
Business Objectives:
Company growth
Become established as the leading distributor of cellular phones and
wireless communications services
Increase number of retail outlets
Financial Objectives:
Create and increase revenue
Marketing Objectives:
Increase marketing efforts
Expand market area
Expand marketing reach
Brand recognition
Increase telemarketing efforts
Operational Objectives:
1. Achieve healthy earnings (EBIT) in the first year of operation.
2. Maintain a midrange gross margin throughout the entire
operation.
3. Maintain just-in-time (JIT) inventory levels, or 11 turns per year.
4. Increase sales modestly but steadily in the second and third
years.
10
11. Mission Statement
Vempain Teknikka mission is to offer its customers the highest
quality cell phone products and network services. Its owner focuses on
personalized service to his customers by offering convenience and
rapid service. Additionally, Vempain Teknikka has the technological
expertise to assist customers in picking the product and service that
best meets their needs. Finally, our staff will have strong vendor
relationships with the product suppliers and will be able to meet
customers' demand for the newest innovation in cellular phone
technology.
We believe it is important to remain an active member of the
community, and to impact people's lives in more ways than deriving a
profit from them. We propose to host community events that bring out
the best in people.
Keys to Success
The keys to our success are:
Building and maintaining strategic alliances with our manufacturers
and other industry related business partners;
Adopting a customer- and market-focused sales and marketing
paradigm; and,
Managing the business by implementing, and consistently
measuring and adjusting the fundamentals of a Balanced
Scorecard:
1. Financial Goals vs. Results
2. Internal Business Process Goals vs. Results
3. Employee Learning and Growth Goals vs. Results
4. Customer Satisfaction Goals vs. Results
Our company keys to success will include:
Provide excellent customer service
Grow and maintain a referral network of customers
Focus expertise in GSM cellular phones and GSM cellular phone
programs
Respond rapidly to customer problems with product or plan
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12. Company Summary
Vempain Teknikka, Inc. will manufacture, sell and serivce high-end
devices, with a focus on the Target Market (community). Vempain
Teknikka, will be formed as the result of the acquisition of three
existing businesses: Maui Technologies, Inc.; Electronics Hilo, Inc.;
and, Kauai Telecommunications, Inc.
Company Ownership
Vempain Teknikka will be initially a sole proprietary company for its
first year launch and official commencement of the business, in order
to make it a fully fledged and newly Fangled Company for future.
Afterwards it will be privately-held [Limited Liability Company] owned
in majority by its Employee Stock Ownership Trust. There are currently
15 employees, and all will own equal shares in the ESOT. New
employees will be given the opportunity to become vested in the
Employee Stock Ownership Plan (ESOP) after a suitable probationary
period.
Start-up Summary
Our start-up costs will be $1M, which includes $450,000 for the
acquisition of the Maui and Hilo operations of Integrated Office
Technology.
The remainder of the funds will be used for:
Initial Inventory: $200,000
Initial Capitalization: $225,000
Legal, Insurance, Rent & Misc: $125,000
The start-up funding will be financed by loans arranged through the
Micro Finance Bank, and by the Community Loan Fund, and the Small
Business Administration as a guarantor. Start-up assumptions are
shown in the following table and chart.
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13. Start-up Requirements
Start-up Expenses
Legal/Accounting $10,000
Stationery etc. $1,500
Brochures $1,000
Consultants $7,500
Insurance $25,000
Rent $15,000
Software & IT (Web) $40,000
SPI Buyout $450,000
Setup New Company/ESOP $25,000
Total Start-up Expenses $575,000
Start-up Assets
Cash Required $225,000
Start-up Inventory $200,000
Other Current Assets $0
Long-term Assets $0
Total Assets $425,000
Total Requirements $1,000,000
Start-up Funding
Start-up Expenses to Fund $575,000
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14. Start-up Assets to Fund $425,000
Total Funding Required $1,000,000
Assets
Non-cash Assets from Start-up $200,000
Cash Requirements from Start-up $225,000
Additional Cash Raised $0
Cash Balance on Starting Date $225,000
Total Assets $425,000
Liabilities and Capital
Liabilities
Current Borrowing $1,000,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $1,000,000
Capital
Planned Investment
Investor 1 $0
Investor 2 $0
Other $0
Additional Investment Requirement $0
Total Planned Investment $0
Loss at Start-up (Start-up Expenses) ($575,000)
Total Capital ($575,000)
Total Capital and Liabilities $425,000
Total Funding $1,000,000
Company Locations and Facilities
The company will be headquartered in Islamabad, Pakistan. We have
two locations, one South Korea and the other in China. The two offices
are presently being leased by the local authorities by Vempain
Teknikka and we will rent from them on a month-to-month basis until
we are able to relocate to more suitable facilities. On Kauai, we have a
sub-contractor agreement with Kauai Technology Equipment to handle
installations and service.
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15. Products and Services
Vempain Teknikka will acquire an existing operation whose primary
business has been the manufacture, sale and service of business
appliances (consumer electronics, facsimiles, High End Devices etc.)
and will operate as a part of the Nano –Sciences Telecommunications
Industry. We will build from this base to transform the business into a
value-added provider of the emerging services and technologies of the
new Information Industry. Following the lead of Nokia, Germany and
other manufacturers which we represent, we will approach the
marketplace from a total communications and connectivity solutions
viewpoint.
This new paradigm will begin with an analysis of the customers
existing and planned usage, and will provide total workflow solutions
utilizing multifunctional platforms and information distribution
systems. These systems will be backed by professional and reliable
technical service and proactive customer service. By forming strategic
alliances with Global Nano Sciences & Telecommunications Industry
Value-Added Resellers, we will be able to offer Global System for
Mobile GSM, General Packet Radio Service GPRS or Enhanced Data
Rates for GSM Evolution (EDGE), Wireless Application Protocol (WAN)
and turnkey Local Area Network (LAN) systems and the ability to
retrofit existing LAN and peer-to-peer communications & systems.
Sales Literature
Copies of our product and sales literature are attached as appendices.
Of course, one of our first tasks will be to change the message of our
literature to make sure we are selling the company, rather than the
product.
Product and Service Description
Vempain Teknikka will market and sell brand name consumer and
business communication, connectivity & information distribution
systems and hardware, technical service and support for these
products, and the consumable supplies used by these systems. We will
be a single-source provider for and business communication,
connectivity & information distribution systems products and services.
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16. After researching our various manufacturers’ offerings and
evaluating our core competencies, we will focus our marketing and
sales efforts around the digital & High – End products offered by
our manufacturers. We will supplement this product line with Litter
Guard and Bolt Cellular Phone Accessories which includes:
antennas, batteries, belt clips, cables and adapters, cases,
chargers, faceplates, and modems.
As we continue to transition the company into the high end & digital
product/service vendor, we will form alliances with additional IT
manufacturers and suppliers who can round out our product and
services line.
The following are the products that will be offered by Vempain
Teknikka, Inc:
GSM Cellular Phones: Nano – G, Nano – G Extreme & Nano 7.
Fixed Wireless Phones
Cellular Phone Accessories: antennas, batteries, belt clips,
cables and adapters, cases, chargers, faceplates, and modems.
Competitive Comparison
The only way we can hope to differentiate well is to define the vision of
the company to be a technology provider to our customers. We will not
be able to compete in any effective way with the large giants. We need
to offer a real complete package to our local (urban & rural)
customers.
The benefits we sell include many intangibles: confidence, reliability,
knowing that somebody will be there to answer questions and help at
the important times. These are complex products that require serious
knowledge and experience to use. Our competitors tend to sell only
the products themselves, and very little in the way of after-sale
training and support.
16
17. Unfortunately, we will not sell these products at a higher – end of
prices not just because we are here to offer products and services both
which will engender substantial revenues by offsetting each other but
we are here with a vision to provide our customers accessibility,
connectivity and portability, along with products and services at
Quality, Quantity and Economically affordable; the market has shown
that it will not support that concept. We have to also sell the service
and consumable supplies and charge for them separately. This
monthly recurring revenue is the foundation of our financial stability.
Technology
New technology has changed almost everything about the traditional
office equipment (copier) industry, and for all practical purposes it no
longer exists. The Nano Sciences Industry has emerged because of the
technology of convergence. The primary driver of convergence of
different forms of information is technological change, specifically the
rapid diffusion of digital technology into an ever-wider array of
information. Beyond digitization, dramatic changes in computing and
telecommunications industries (mainly in faster microprocessors and
increasing bandwidth) are also driving convergence.
Vempain Teknikka, will make convergence the theme of its vision,
planning, and marketing strategies. We will move into the new
Information Industry's technology with the aim of bringing the most
efficient workflow solutions to our Customers while providing value-
added customer support and service, and earning a reasonable profit
in the process.
Service and Support
Our strategy hinges on providing unparalleled service and support,
which is critical to setting us apart from the competition. We need to
differentiate on service and support in order to become true partners
with our Customers. Our service offers will include:
Uptime guarantees: we will include "uptime guarantees" with
our all-inclusive service agreements to insure maximum
productivity for our Customers.
Internal training: the "learning and growth" part of our
Balanced Scorecard performance measurement strategy will
include the requirement that our Systems Engineers and sales
17
18. professionals become network and IT certified by the end of
FY2011.
Customer training: we will package comprehensive customer
training programs with all of our offerings, to include systematic
follow up and refresher training.
Upgrade analysis: we will periodically assess our client's
business processes and requirements, and offer cost-effective
upgrade solutions to meet changing needs.
Future Products and Services
Beginning at start up, we will explore and research new information
technologies for inclusion in our product offerings. The products which
we choose will be in line with our vision to transition the company from
being an appliance seller, to being a provider of total information
management solutions. These convergent information products will
include:
Wireless LAN systems
Information & Connectivity management systems (hardware
and software)
Tele-business and E-Commerce systems
Media transport and reproduction (Distribute and Share)
Fulfillment
We have an established relationship with our manufacturers and
suppliers, and will be able to take advantage of all discounts and
promotions in order to keep our margins at roughly 49% throughout
the operation. We will also implement and employ "just-in-time"
inventory strategies for hardware, supplies, and service parts orders to
further strengthen our margins.
As we continue to grow the business, we will evaluate other IT
industry manufacturers and product lines to strengthen our offerings
with a view primarily to quality and margin advantages.
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19. Market Analysis Summary
Vempain Teknikka will focus on global as well as on local markets,
including Children in the (age group of 10-17 years old), Students,
General public, Professionals & Service organizations and companies
that need to be in constant communication with their employees and
people around them.
Market Segmentation
Vempain Teknikka, Inc., Inc. will focus on five customer groups,
bearing in mind that it is quite customary today to have more than one
cell phone per family:
Children in the age group of 10-17 years old
Students
General public/ Generic Users
Professionals
Service organizations and companies that need to be in constant
communication with their employees.
19
20. Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential
Customers Growth CAGR
Children 10-
17 years old 3% 90,000 92,700 95,481 98,345 101,295 3.00%
Students 2% 50,000 51,000 52,020 53,060 54,121 2.00%
Professionals 2% 40,000 40,800 41,616 42,448 43,297 2.00%
General
Public 2% 250,000 255,000 260,100 265,302 270,608 2.00%
Operating
Service
Companies 4% 40,000 41,600 43,264 44,995 46,795 4.00%
Other 1% 30,000 30,300 30,603 30,909 31,218 1.00%
Total 2.29% 500,000 511,400 523,084 535,059 547,334 2.29%
Target Market Segment Strategy
Developing a market strategy is a departure from the way the
company has been managed in the past. We will change the paradigm
of being a product- and price-focused sales organization, to that of
becoming a customer- and market-focused organization, with all
departments sharing responsibility for customer satisfaction. We will
accomplish this paradigm shift through the implementation of a
balanced scorecard philosophy of management, with special attention
to employee learning and growth.
As mentioned previously our market segmentation strategy is
straightforward, and addresses all components of the Target Market
(Community). Planning and implementing specific strategies for each
of the four identified segments will be an on-going process, and we will
consult with marketing specialists, and our manufacturers, to further
refine these efforts as we develop our marketing plan.
20
21. The market for cellular phones and their accessories is very
fragmented, crowded and competitive. Vempain Teknikka, Inc.
current niche in its location, variety of products and expertise in
serving the public will assure the projected sales.
We expect to take full advantage of the trends described in the Market
Analysis above, and try to penetrate the market with new innovations
and gadgets — mainly with the younger generation, using
advertisements and demonstrations. We shall also try to lure
independent small sellers and manufacturers to join our effort.
Market Trends
The most significant trend in today's business-to-customer
marketplace is the move from analog to digital technology and from
stand-alone workflow functions to multifunctional platforms which are
connected to a network. It is this trend that has caused many of the
major players in the outdated connectivity and
telecommunications industry (Motorola, Ericsson etc.) to falter, and
see their profits decline. This is true mainly because of their inability to
change rapidly from an "analog mentality" and move forward
in applying the emerging convergence of digital and modern
technologies to their products and the marketplace.
That is the primary reason that VEMPAIN TEKNIKKA, INC. has chosen
as Maui Technologies, Inc; its preferred manufacturer. Maui
Technologies, Inc has led the way in the industry with its digital
technology innovations, and its ability to bring both the product and
the concept to the marketplace. We will follow Maui Technologies, Inc
lead and bring this efficient, productivity-enhancing technology.
Market Growth
As Cell phone-Gadget continue to fall, unit sales increase. The
published market research on sales of Cell phone-Gadget is
astounding, as the United States market alone is absorbing more than
30 million units per year, and sales are growing at more than 20
percent per year. We could quote Dataquest, Infocorp, IDC, or others;
it doesn't matter, they all agree on high growth of cell phones sales.
This rapid growth rate holds true for Cell phone-Gadget which
connects people and business around the globe whether they are
urban or rural. The stand-alone analog systems and appliances which
abound in the customer and business marketplace today will be
21
22. replaced by connected digital convergence systems in the coming
months and years. VEMPAIN TEKNIKKA, INC. will position itself to be a
value-added provider of this rapidly emerging technology for its
customers.
Market Needs
All customers and businesses have in common a need to be
continuously productive, and they rely on their service providers and
vendors to sustain their productivity. Effectively filling this need
requires that the vendor bring to the table sound planning, quality
products, reliable service, and a true partnership and support
relationship.
Specific business needs include the ability to communicate, connect,
access, portability and gather, compile, analyze, and distribute
information in various formats. This is where VEMPAIN TEKNIKKA,
INC.'s strengths will be most beneficial to our Customers, both big and
small. Anyone can sell the "Cell phone" at an attractive price, but only
a true value-added provider can offer the peace-of-mind that comes
from a customer-focused approach to the relationship.
Primarily due to geographic distances/High proximity and hefty
population, the Target Market (Community) has an additional common
need of being able to rely on other locally-based vendors and suppliers
for quick, reliable, customer service and support. Having to call
someone on Alaska, or the mainland, to place a service call, or to
order supplies, or get an answer to a simple billing question, is both an
irritant and a hindrance to most people. Our primary goal is to fill this
need by bringing true pro-active, and total, customer service to the
Target Market (Community), and to gain their confidence and loyalty.
This will become one of our underlying strengths.
Service Business Analysis
VEMPAIN TEKNIKKA, INC. will be part of the Nano Sciences &
Telecommunications Industry, and specialize in providing connectivity
& information management systems and technology for customer
purposes as well as business processes. We envision that a converged
Nano Sciences & Telecommunications industry operating within the
context of an advanced information infrastructure will be a huge boost
for Customers and businesses. Several Washington think tanks
estimate that it could spur more than $300 billion annually in new
sales and increase worker productivity by 20 to 40 percent.
22
23. At the present time, an estimated two-thirds of all global jobs are
information related, and that number will increase as the shift from
manufacturing to service industries continues. The convergence of
Nano Sciences & Telecommunications industries will continue because
the technological and business imperatives are compelling. If one
company does not see the possibilities, another will.
23
24. Industry Analysis
Porter Five Forces Model
Force Rating/Score
Threat of New Entrants High
Threat of Substitute Products Low
or Services
Rivalry Among Existing High
Competitors
Bargaining Power of High
Costumers
Bargaining Power of High
Suppliers
The Global market is dominated today by three large companies:
T-Mobile Wireless - owned by a subsidiary of Deutsche Telekom
since May 31, 2001.
Revenues: Exceeding $13.6 billion in 2001.
Wireless Phone Service Subscribers: Cellular voice, messaging and
high-speed wireless data services to more than 8 million customers.
Cellular Phone Service and Technology: T-Mobile Wireless operates
the largest all digital, wireless networks based exclusively on GSM
(Global System for Mobile Communications) technology. GSM is the
24
25. most widely used digital standard worldwide, accounting for more
than 70 percent of the total digital wireless market.
Nextel Communications, based in Reston, VA, is a leading provider
of fully integrated, wireless communications services on the largest
guaranteed, all-digital, wireless network in the country.
Ownership: Nextel Wireless is traded on the NASDAQ National
Market under the symbol NXTL. Nextel Partners is a separate
company traded on the NASDAQ National Market.
Revenue on the cellular service $8.7 billion (2002).
Cellular Phone Service Subscribers: 10.61 million (Q4 2002).
Cellular Phone Service and Technology: Nextel uses a packet-based
platform, the integrated Digital Enhanced Network (iDEN™)
technology, developed by Motorola. The Nextel 4-in-1 service—
Nextel Digital Cellular, Direct ConnectSM, Nextel Mobile Messaging,
and Nextel Online®—covers thousands of communities across the
United States. Nextel and Nextel Partners, Inc., currently serve 197
of the top 200 U.S. markets.
Nokia Corporation, a Finnish multinational communications corporation
that is headquartered in Keilaniemi, Espoo, a city neighboring Finland's
capital Helsinki.
Nokia is engaged in the manufacturing of mobile devices and in
converging Internet and communications industries, with over
132,000 employees in 120 countries, sales in more than 150
countries and global annual revenue of over €42 billion and
operating profit of €2 billion as of 2010.
It is the world's largest manufacturer of mobile phones: its global
device market share was 23% in the second quarter 2011. Nokia's
estimated share of the converged mobile device market was 31% in
the fourth quarter, compared with 38% in the third quarter 2010.
Nokia produces mobile devices for every major market
segment and protocol, including GSM, CDMA, and W-CDMA (UMTS).
Nokia offers Internet services such as applications, games, music,
maps, media and messaging through its Ovi platform. Nokia's joint
venture with Siemens, Nokia Siemens Networks produces
telecommunications network equipment, solutions and services.
Nokia is also engaged in providing free digital map information
and navigation services through its wholly owned subsidiary
Navteq.
25
26. Vempain Teknikka, Inc. is aiming to gather a share of the market from
these three giants.
Competition and Buying Patterns
Optimally Generic Users, Urban Professionals, decision makers and
corporate professionals understand the concept and value of products
service and support, and are much more likely to pay for it when the
offering is clearly stated.
There is no doubt that we compete more against the product pushers
than against other service providers. We need to effectively compete
against the idea that our costumers should buy gadgets as plug-in
appliances that don't need ongoing service, support, and training.
Our research and experience has indicated that our target market
segments think about price, but would buy based on quality service, if
the offering were properly presented. They think about price because
that is what is traditionally presented to them first. We have very good
indications that many would rather pay 10-20% more for a
relationship with a long-term vendor providing back-up and quality
service and support. They end up in the channels because they are
not aware of the alternatives.
Accessibility, Availability & Distribution is also very important. The
Generic Users, Professionals & decision makers (customers) tend to
want immediate, global solutions to problems.
Distributing a Service
Medium to large customer segment buyers are accustomed to buying
from vendors and their outlets, who visit their offices. Businesses
usually expect the cell phone or network connection vendors, office
products vendors, or whomever, to visit their office to make their
sales.
Unfortunately our target segment buyers may not expect to buy from
us. Many of them turn immediately to the retailers, intermediaries or
other dealers (Cell phones, Network Connections, and Cell phone
accessories), the Web, and mail order to look for the best price,
without realizing that there is a better option for them for only a little
bit more. We will overcome this hurdle through innovative service
offerings, and targeted marketing.
26
27. Main Competitors
Our main competitors as mentioned earlier are Nokia, T – Mobile and
Nextel Communications in context of Services (Telecommunication &
Network).
Whereas, our main competitors in context of products (cell phones &
Cell phone accessories) are Nokia, Samsung & I – Phone currently
being offered by them.
Competitor Analysis
Competitor Competitor Competitor
Key Industry #1 rating #2 rating #3 weighted
Success Factors
T – Mobile Nokia Nextel
1 - Extensive distribution 6 3 1.2
2 - Customer focus 4 5 1.5
3 - Economies of scale 3 3 .6
4 - Product innovation 7 4 .4
Totals 20 15 3.7
Strategy and Implementation Summary
Vempain Teknikka, Inc. will use a strategy of total market service.
Assumptions:
1. Every person is a potential customer and all our potential markets
will experience growth.
2. Marketing to one segment of the population will lead to an
expansion in overall market growth.
27
28. The following sections review the various strategies that will support
this effort.
Competitive Edge
Our competitive edge is our positioning as a strategic ally with our
clients, who are clients more than customers. By building a business
based on long-standing relationships with satisfied clients, we
simultaneously build defenses against competition. The longer the
relationship stands, the more we will help our clients understand what
we offer them and why they should both stay with Vempain Teknikka,
and refer us to other businesses. In close-knit communities like the
South Asia, Europe and North America reputation is extremely
important, and word-of-mouth advertising is invaluable
Vempain Teknikka, competitive edge will be:
Location:
Locating the company in a suburb of South Asia enables the company
to cover a large and rapidly developing customer populace.
Customer Service:
The CEO of Vempain Teknikka, Inc has a lot of research and has dig
out in these industries for past many years, and accumulated a vast
knowledge and experience in the cellular phone market, with a special
expertise in GSM phones. He is very familiar with his target customer
base. He has an excellent reputation for customer service.
E-Commerce:
The company will make an effort to enhance its sales through a
serious and advantageous website in order to attract customers that
are reluctant to do business with large companies.
Strategy Pyramid
Our main strategy will be placing emphasis on service and support,
and our main tactics are networking expertise, systems training, and
implementing a customer relationship management system (CRM)
from e-automate. Our specific programs for networking include mailers
and internal training. Specific programs for end user training include
direct mail promotion, and on-site customer programs. Implementing
28
29. the CRM software and training will be coordinated with the e-automate
Corporation.
Our second strategy is emphasizing relationships. The tactics are
marketing the company (instead of the products), more regular
contacts with the customer, and increasing sales per customer.
Programs for marketing the company include new sales literature, and
direct mail. Programs for more regular contacts include call-backs after
installation, direct mail, and sales management. Programs for
increasing sales per customer include upgrade mailings and sales
training.
Value Proposition
The phone's feature list would include the ability
to mould/reshaped into numerous shapes, so it can be worn around
the wrist or held up to the face; transparent electronics, which would
allow the device to be see-through yet functional, self-cleaning
surfaces that can absorb solar energy, renewable power resources
inclusive moderate wind, lightening/thundering and solar energy for
operation and recharging of the cell phone-gadget and a wide range of
fully integrated sensors and connectors that will operate in the form of
Grass Sensors; using the platform of ―Nano-Grass‖.
Symbolic Value Propositions:
Newly-enabled flexible and transparent materials blend more
seamlessly with the way we live.
Integrated sensors might allow us to learn more about the
environment around us, empowering us to make better choices
(Environmental Sensing).
Transparent electronics offering an entirely new aesthetic
dimension.
Devices become self-cleaning and self-preserving.
Renewable power resources inclusive moderate wind,
lightening/thundering and solar energy for operation and
recharging.
29
30. Value – Stream Mapping
Process
Management End User
(Target Customer)
Supplier of
Sub -
Assemblies
Production in - Charge Monthly
Daily
4,167
Units
Ship
Daily Communication 4,167
Units
Assembling Component Software Operational Quality Packaging Laser
/Circuit Installation Run Assurance Marking
Configurati
on
12 2 5 4–5 6 2 2
Operators Operators Operators Operators Operators Operators Operators
20 Days
30
31. Marketing Strategy
The marketing strategy is the core of our main strategy:
Emphasize service and support
Build a relationship business
Develop specific programs for each target market segment
Short-term marketing strategies are those that bring will bring us a
temporary boost in traffic. Although these techniques are very
important to our over-all plan, they are only a temporary traffic source
and must not be solely relied upon. Short-term marketing strategies
include:
Purchasing Advertising
Bulletin Boards
Search Engines
Long-term marketing strategies are those that will bring us a steady
stream of targeted traffic over time. These strategies will continue to
produce results even years down the road. Long-term marketing
strategies include:
Opt-in Lists
Freebies
Content
By creating and implementing a balanced marketing strategy, using
both short-term and long-term strategies, Vempain Teknikka will drive
a steady stream of targeted traffic to our website.
Using this simple formula when creating our Internet marketing
strategy and excelling at all three, we hope to guarantee our success.
Our short-term marketing strategy will focus heavily on sales
promotion, niche positioning in the market and customer service with
loyalty and retention in sales.
Our promotions will always stay in tune with our company objectives
and mission statement.
31
32. Sales Strategy
Constructing our Sales Strategy we shall follow the following steps:
Sales Success Requires Planning - we shall formulate our sales
strategy and tactics to achieve our sales success.
Analyze Our Potential - we shall step through a structured process
that will prepare us for the development of our sales strategy.
Strategize Around Strengths - the description of our sales
activity will be analyzed producing a report that reveals factors
impacting our sales potential.
Develop Our Tactics - we shall receive guidance to develop a
comprehensive tactical plan to achieve our success.
Measuring Our Success - we shall constantly develop key
measurements that mark the progress of financial estimates that guide
our growth.
Employ An Action Plan for Success - we shall provide our sales
force a clear tactical plan that is also aligned with management's
strategic objectives.
The sales strategy of Vempain Teknikka, Inc. is simple. The key to
customer satisfaction is having the product and services that meet the
customer's needs. A crucial part of that is to also have
knowledgeable employees to help customers quickly find what they
want.
Sales Forecast
Sales forecast displayed here is very conservative — although we aim
very high, we decided to show a very slow growth and revise the plan
on a yearly basis. As a rule we expect to expand the volume much
more rapidly.
32
33. Sales Forecast
Year 1 Year 2 Year 3
Sales
Cellular Phones $138,000 $190,000 $270,000
Cellular Phones Accessories $126,000 $160,000 $200,000
Fixed Wireless Phones $46,500 $60,000 $90,000
33
34. Other Sevices $46,500 $90,000 $150,000
Total Sales $357,000 $500,000 $710,000
Direct Cost of Sales Year 1 Year 2 Year 3
Cellular Phones $31,650 $43,560 $61,900
Cellular Phones Accessories $30,450 $41,500 $51,800
Fixed Wireless Phones $11,700 $15,500 $23,300
Other Services $11,710 $23,300 $38,900
Subtotal Direct Cost of Sales $85,510 $123,860 $175,900
Milestones
The Milestones table hereunder is destined to be a working plan for the
formation of the new organization, including legal negotiations, hiring
of personnel, rental of the facility, building of initial inventory,
beginning of marketing and start of physical operation.
The team to execute the chores will have to follow up on the timetable
and make sure that everything falls in place — to ensure smooth start
of sales and success of the organization.
34
35. Milestones
Milestone Start Date End Date Budget Manager Department
Preview of
Business
Plan by
Investor 1/1/2005 1/15/2005 $1,000 CEO Department
Concluding
Legal
Matters 1/10/2005 2/10/2005 $4,000 Owner Department
Hiring of
Operators 2/1/2005 3/1/2005 $500 CEO Department
Conclusion of
Rentals 1/15/2005 2/15/2005 $2,000 Owner Department
Preparation
of Website 1/15/2005 3/1/2005 $2,500 Programmer Department
Acquiring
Initial Store
Inventory 2/15/2005 3/15/2005 $31,000 Personnel Department
Start of Marketing
Marketing 3/1/2005 4/1/2005 $3,500 Mgr. Department
Start of
Operation 4/1/2005 4/10/2005 $2,000 All Department
Totals $46,500
35
36. Sales Programs
Specific sales programs will be included in our new Marketing Plan, and
will be included in this Business Plan as they are finalized. In general
however, our sales programs will be centered around conducting
workflow and information distribution analyses, direct mail, and
placing an emphasis on the benefits which VEMPAIN TEKNIKKA, INC.
and its manufacturers will be able to offer its Customers through "total
care" service and support.
Marketing Programs
As we worked to complete this Business Plan, we have simultaneously
worked on our Marketing Plan. Because we are developing a new start
– up business, the foundations stones for our vision of customer- and
market-focused strategies will not happen overnight. We must plan
this shift carefully, and implement it judiciously, so as not to disrupt
our immediate operations. The business has been budgeted for, and
will utilize, marketing advisors and consultants (including our
manufacturers) for future designing of a New Marketing Plan, which
will be its operations oriented.
Positioning Statement
For businesses who want to be sure their information distribution
systems are always working reliably, VEMPAIN TEKNIKKA, INC. is a
vendor and trusted strategic ally who make certain their systems
work, their people are trained, and their down time is minimal. Unlike
the product/price oriented vendors, it knows the customer and goes to
their site when needed, and offers proactive support, service, training,
and installation.
36
37. Positioning Map
High Quality
Vempain
Teknikka
Low High
Price Price
Low Quality
Pricing Strategy
We must charge appropriately for the high-end, high-quality service
and support we offer. Our revenue structure has to match our cost
structure, so the salaries we pay to assure good service and support
must be balanced by the revenue we charge.
We cannot build the service and support revenue into the price of
products. The market can't bear the higher prices and the buyer feels
ill-used when they see a similar product priced lower with the
competition. Despite the logic behind this, the market doesn't support
this concept.
37
39. 11
Skimming Pricing Strategy
Skimming Pricing Strategy
22 & 3
&3
Semi-Skimming Pricing Strategy
Semi-Skimming Pricing Strategy
44
Differential & & Penetration Pricing Strategy
Differential Penetration Pricing Strategy
Promotion Strategy
We will employ the following general promotional strategies for the
various market segments:
Generic User: We will depend on periodic local newspaper
advertising, to reach new buyers in this segment. We will also
utilize direct mail and and the resources of the local Chambers of
Commerce and other affinity groups to reach this segment. The
message will emphasize service first, and "complete product and
service packaging" as a secondary theme.
Urban Professionals: Direct face-to-face contact (direct sales) will
continue to be our primary strategy for this market segment. Direct
selling will be supplemented by periodic promotional direct mailings
and personalized system upgrade opportunities.
Corporate Professionals: This segment will be handled by direct
contact and relationship building only. We will make personal
39
40. presentations to the decision makers in this group, and stress our
service and technical benefits and advantages.
Service/Operating Organization: a combination of direct mail
and face-to-face promotional strategies with this segment and the
message will be the local service and technical advantages of
VEMPAIN TEKNIKKA, INC. We will produce an attractive RFQ/RFP
response package to accompany our submissions.
Distribution Strategy
VEMPAIN TEKNIKKA, INC. is first and foremost a direct sales
organization, meaning that we must present our services and products
directly to the majority of our customers and Customers. Having said
that, for our planned penetration into the our Target market, we will
need to establish a presence as a Value-Added Reseller (VAR) for
certain high-end product lines which don't carry the margins
necessary to sustain the costs of direct sales. We will plan our new
locations accordingly.
Strategic Alliances
Our alliances with our manufacturers, and especially Maui
Technologies, will be the most pivotal to our success. We will remain a
Maui Technologies Authorized Dealer, and continue to enjoy all of the
benefits of this long-standing relationship.
We will form alliances with other locally-based VARs and computer
network providers to enable us to provide complete turnkey packages
for our Customers. These relationships are included in our Marketing
Plan.
Management Summary
Our management philosophy is simple and is an integral part of our
values: doing right things right, the first time (Kina'ole).
VEMPAIN TEKNIKKA, INC. will be an employee-owned company and
we all share the same vision of providing our Customers (who in many
cases are friends and neighbors) with the very best in customer
service - period. We will encourage personal growth, creativity, and
enable individual empowerment to achieve this goal. We will manage
40
41. the business by setting achievable Balanced Scorecard goals,
measuring them, and making mid-stream adjustments as necessary.
Organizational Structure
Our team includes 15 employees initially, and is organizationally flat.
The departmental divisions are sales and marketing, service, and
administration. Operational managers include:
President and General Manager:
He will oversee all operations with primary responsibilities for sales
and marketing. Functioning as the GM, this position will spend a good
deal of time in the field assisting the Account Managers, and helping to
build and maintain client relationships.
Secretary/Treasurer and Administrative Manager:
He will supervise all administrative functions including inventory; A/P
and A/R, banking, HR, and vendor and manufacturer relations. Primary
contact point for customer service issues and follow up. He will be
assisted by an Office Manager in the Hilo branch.
Systems Manager (two positions - Maui):
Will Manage all service issues including; service agreements, service
call prioritization and response, carry-in service, customer support,
and systems training and development. He will be assisted by Systems
Engineers, and Systems Technicians.
Personnel Plan
The total head count moving over from grass root level to fully fledged
company, at the time of the acquisition will be 13. We are adding two
former employees at startup to round out our team, for a total startup
head count of 15.
There are an additional six positions shown as "vacant" in the
Personnel plan. During each quarterly business plan review, we will
assess the need to fund these positions to sustain our growth, and
more evenly distribute the workload.
41
42. Personnel Plan
Year 1 Year 2 Year 3
Production Personnel
None planned $0 $0 $0
Other $0 $0 $0
Subtotal $0 $0 $0
Sales and Marketing Personnel
Sales (Maui) $38,250 $40,545 $42,978
Sales (Kona) $38,250 $40,545 $42,978
Sales (Maui) $38,250 $40,545 $42,978
Sales (Hilo) $38,250 $40,545 $42,978
Vacant - Aftermarket Sales (Maui) $0 $0 $0
Vacant - Aftermarket Sales (Hilo) $0 $0 $0
Subtotal $153,000 $162,180 $171,911
General and Administrative
Personnel
General Manager $57,600 $61,056 $64,719
Admin Manager $45,600 $48,336 $51,236
Vacant - Office Manager (Hilo) $31,200 $33,072 $35,056
Vacant - WHSE & Delivery (Maui) $0 $0 $0
Vacant - WHSE & Delivery (Hilo) $0 $0 $0
Other $0 $0 $0
Subtotal $134,400 $142,464 $151,012
Other Personnel
Systems Manager (Hilo) $49,800 $52,788 $55,955
Systems Manager (Maui) $49,800 $52,788 $55,955
System Engineer (Hilo) $39,600 $41,976 $44,495
System Engineer (Hilo) $39,600 $41,976 $44,495
System Engineer (Kona) $39,600 $41,976 $44,495
Sr. System Engineer (Maui) $41,100 $43,566 $46,180
System Tech (Maui) $28,800 $30,528 $32,360
System Tech (Maui) $28,800 $30,528 $32,360
Vacant - Syst Tech (Kona) $0 $0 $0
Vacant - Syst Tech (Maui) $0 $0 $0
Subtotal $317,100 $336,126 $356,294
Total People 15 15 15
Total Payroll $604,500 $640,770 $679,216
42
43. Management Team
President and General Manager: 55 years old, and has lived on
Maui for 43 years. Joined Integrated Office of Technology in 1998
as Maui branch manager, and became general manager for
Neighbor Island operations six months later. Prior management
experience includes: BTA market manager of the Neighbor Islands
for VoiceStream Wireless, Neighbor Island area sales manager for
Central Security Systems, and radar project manager for Telcom
International in Nigeria, West Africa. Bill has attended numerous
management and sales training courses and seminars throughout
his career.
Secretary/Treasurer and Administrative Manager: 48 year’s
old and local Maui resident. He/She has been at the same location
through three different owners prior to acquisition of The Office
Place in 1995, for a total of 15 years of local office
equipment industry experience. Laurie has extensive knowledge of
service procedures and dispatching, A/R and A/P procedures,
inventory control and tracking, as well as an intimate knowledge of
our customer base. Her experience and knowledge will be
invaluable in recovering our customer base, and in growing the
business.
Office Manager (Hilo): 40 years old and local Hilo resident.
He/She has also been with the company through all of the
acquisitions, and has 12 years experience in the office equipment
industry. She will assist Secretary/treasurer and administrative
manager by handling the administrative and customer service tasks
for our Hilo branch, and will be instrumental in our Big Island
customer recovery efforts.
Systems Manager: 38 years old and local Hilo resident. Like
above, He/She has been with the company through four different
owners, and has 10 years of local office equipment service
management experience. Earle has also completed Maui
Technologies "train the trainer" course, and will be a great asset in
the on-going training and development of our systems engineers
and technicians.
Systems Manager (Maui): 35 years old and local Maui resident
joined the Maui branch in 1999 as field service manager. He has 8
years of local office equipment industry service experience, and is
familiar with both Maui Technologies and Electronics Hilo products.
43
44. He/She is an asset to the Maui team, and has outstanding customer
service skills.
Management Team Gaps
We believe we have a good team for covering the main points of the
business plan. Key members have the experience and knowledge to
manage and grow the business, and are highly motivated by the
employee-owner concept.
The obvious management gap is a plan to fill the general manager's
position at some point in the future, before the current GM reaches
retirement age. As an employee-owned company, the preferred
strategy will be to promote from within, and fill vacancies as they
occur. As the company grows, we will seek out additional talent in all
operational areas.
Financial Plan
It is assumed that the owner's private resources will be sufficient to
finance any monthly cash-flow shortage. However, it would be
advisable to establish a bank relationship as soon as possible. Sales
could very well increase at a much sharper rate than assumed in these
conservative projections. Sharper sales will result in a greater need for
funds in support of inventory and receivables. An over-draft line of
credit with the bank will be an excellent cushion to fall back on.
This is considered a very good time to start a new business. The
economy is beginning its trek up, and consumer spending is up. The
Commerce Department reported, "Consumers had increased their
spending, the largest advance in nine months."
A shorter learning curve will be brought to the business by the owner
due to his extensive background and in-depth market knowledge. He
has a clear understanding of the need to manage costs and forecast
future needs so that the business is not "broadsided" by the
unexpected.
One other component on which the financial plan is based is wise
purchases. Finding the right product, at the right price will enable the
business to meet planned margins and maintain inventory at an
attractive level with a high turn rate.
44
45. Start-up Funding
Our start-up costs will be $1M, which includes $450,000 for the
acquisition of the Maui and Hilo operations of Integrated Office of
Technology.
The remainder of the funds will be used for:
Initial Inventory: $200,000
Initial Capitalization: $225,000
Legal, Insurance, Rent & Misc: $125,000
The start-up funding will be financed by loans arranged through the
Micro Finance Bank, and by the Community Loan Fund, and the Small
Business Administration as a guarantor. Start-up assumptions are
shown in the following table and chart.
Start-up Requirements
Start-up Expenses
Legal/Accounting $10,000
Stationery etc. $1,500
Brochures $1,000
Consultants $7,500
Insurance $25,000
Rent $15,000
Software & IT (Web) $40,000
SPI Buyout $450,000
Setup New Company/ESOP $25,000
Total Start-up Expenses $575,000
Start-up Assets
Cash Required $225,000
Start-up Inventory $200,000
Other Current Assets $0
Long-term Assets $0
Total Assets $425,000
Total Requirements $1,000,000
Start-up Funding
45
46. Start-up Expenses to Fund $575,000
Start-up Assets to Fund $425,000
Total Funding Required $1,000,000
Assets
Non-cash Assets from Start-up $200,000
Cash Requirements from Start-up $225,000
Additional Cash Raised $0
Cash Balance on Starting Date $225,000
Total Assets $425,000
Liabilities and Capital
Liabilities
Current Borrowing $1,000,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $1,000,000
Capital
Planned Investment
Investor 1 $0
Investor 2 $0
Other $0
Additional Investment Requirement $0
Total Planned Investment $0
Loss at Start-up (Start-up Expenses) ($575,000)
Total Capital ($575,000)
Total Capital and Liabilities $425,000
Total Funding $1,000,000
46
47. Important Assumptions
As a general rule our company will not sell on credit. However for very
special cases we might offer short-term credit against valid
assurances. We shall accept cash and checks, Visa, MasterCard,
Discover and American Express, and PayPal on the Internet. All sales
paid via credit cards will be deposited in our business checking account
within 48 hours.
The financial plan depends on important assumptions, most of which
are shown in Table. As mentioned previously, we assumed interest and
tax rates based on a "worst case" scenario, and these will be adjusted
once we have finalized the initial funding and establish the ESOT. We
have also assumed our personnel burden at 30% of payroll in order to
allow for above-average benefits for our employees. As we shop
around for benefits vendors, this assumption will be subject to revision
as well.
Other key business assumptions are:
We assume continued steady economic growth on the Global Level
especially in South Asia and Asia Pacific where our production
facilities and office locations will reside as predicted by World Bank,
and other Global Economists.
We assume the continued move towards convergence technology in
the Information Industry.
We assume access to the start-up funding necessary to re-shape
and re-build the company, and to provide adequate initial
capitalization.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 14.00% 14.00% 14.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 37.33% 38.00% 37.33%
Other 0 0 0
47
48. Key Financial Indicators
As shown in the Benchmarks chart below, our key financial indicators
are:
Projected Sales: Projections are based on actual past
performance, and are conservative. We will increase sales at an
average rate of 15% per year.
Gross Margins: Average gross margins are based on: hardware
sales = 37%; service = 57%; supplies = 52%; and, other = 50%,
for an overall operating gross margin of 49%.
Operating Expenses: Operating expenses are based on providing
our employee-owners with above average wages and benefits, and
providing superior customer service. Expenses are projected to
increase at the rate of 6% per year.
Collection Days (A/R): Based on the extensive use of leasing,
and including service and supply agreements into leasing packages,
we will maintain an average A/R turnover of 30 days. This is
projected to be reduced to 28 days in subsequent years by
increasing efficiencies in our internal business processes.
Inventory Turnover: We will maintain just-in-time inventory
levels, or 11 turns per year. This will require accurate sales
forecasting, and working closely with our manufacturers.
48
49. Break-even Analysis
Our break-even analysis is summarized by the following chart and
table.
Break-even Analysis
Monthly Revenue Break-even $17,916
Assumptions:
Average Percent Variable Cost 24%
Estimated Monthly Fixed Cost $13,625
49
50. Projected Profit and Loss
There are many factors to include when determining a projected profit
and loss statement these are included in the following table.
50
52. Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $357,000 $500,000 $710,000
Direct Cost of Sales $85,510 $123,860 $175,900
Other Costs of Sales $26,824 $30,000 $45,000
Total Cost of Sales $112,334 $153,860 $220,900
Gross Margin $244,666 $346,140 $489,100
Gross Margin % 68.53% 69.23% 68.89%
Expenses
Payroll $123,000 $135,960 $148,600
Marketing/Promotion $4,500 $10,000 $25,000
Depreciation $0 $0 $0
Rent $24,000 $24,000 $24,000
Insurance $12,000 $12,000 $12,000
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $163,500 $181,960 $209,600
Profit Before Interest and
Taxes $81,166 $164,180 $279,500
EBITDA $81,166 $164,180 $279,500
Interest Expense $0 $0 $0
Taxes Incurred $24,350 $49,254 $83,850
Net Profit $56,816 $114,926 $195,650
Net Profit/Sales 15.91% 22.99% 27.56%
52
53. Projected Cash Flow
Our projected cash flow is outlined in the following chart and table.
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $357,000 $500,000 $710,000
Subtotal Cash from
Operations $357,000 $500,000 $710,000
Additional Cash Received
Sales Tax, VAT, HST/GST
Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-
free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $50,000 $0 $0
Subtotal Cash Received $407,000 $500,000 $710,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
53
54. Cash Spending $123,000 $135,960 $148,600
Bill Payments $139,315 $247,800 $360,927
Subtotal Spent on Operations $262,315 $383,760 $509,527
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid
Out $0 $0 $0
Principal Repayment of Current
Borrowing $0 $0 $0
Other Liabilities Principal
Repayment $0 $0 $0
Long-term Liabilities Principal
Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $262,315 $383,760 $509,527
Net Cash Flow $144,685 $116,240 $200,473
Cash Balance $146,685 $262,924 $463,397
54
55. Projected Balance Sheet
The table shows the annual balance sheet results, with a healthy
projected increase in net worth. Detailed monthly projections are in
the appendix.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $146,685 $262,924 $463,397
Inventory $8,000 $11,588 $16,457
Other Current Assets $0 $0 $0
Total Current Assets $154,685 $274,512 $479,854
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $154,685 $274,512 $479,854
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $15,869 $20,770 $30,462
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $15,869 $20,770 $30,462
Long-term Liabilities $0 $0 $0
Total Liabilities $15,869 $20,770 $30,462
Paid-in Capital $93,000 $93,000 $93,000
Retained Earnings ($11,000) $45,816 $160,742
Earnings $56,816 $114,926 $195,650
Total Capital $138,816 $253,742 $449,392
Total Liabilities and Capital $154,685 $274,512 $479,854
Net Worth $138,816 $253,742 $449,392
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56. Business Ratios
Business ratios for the years of this plan are shown below. Industry
profile ratios based on the Standard Industrial Classification (SIC) code
5731.9902, Consumer electronic equipment, nec, are shown for
comparison.
Ratio Analysis
Industry
Year 1 Year 2 Year 3 Profile
Sales Growth 0.00% 40.06% 42.00% 5.90%
Percent of Total
Assets
Inventory 5.17% 4.22% 3.43% 33.94%
Other Current Assets 0.00% 0.00% 0.00% 26.57%
Total Current Assets 100.00% 100.00% 100.00% 80.73%
Long-term Assets 0.00% 0.00% 0.00% 19.27%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 10.26% 7.57% 6.35% 41.85%
Long-term Liabilities 0.00% 0.00% 0.00% 11.83%
Total Liabilities 10.26% 7.57% 6.35% 53.68%
Net Worth 89.74% 92.43% 93.65% 46.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 68.53% 69.23% 68.89% 32.59%
Selling, General &
Administrative Expenses 52.62% 46.24% 41.33% 17.11%
Advertising Expenses 0.00% 0.00% 0.00% 2.28%
Profit Before Interest
and Taxes 22.74% 32.84% 39.37% 0.85%
Main Ratios
Current 9.75 13.22 15.75 1.73
Quick 9.24 12.66 15.21 0.79
Total Debt to Total
Assets 10.26% 7.57% 6.35% 58.93%
Pre-tax Return on Net
Worth 58.47% 64.70% 62.20% 2.27%
Pre-tax Return on Assets 52.47% 59.81% 58.25% 5.54%
56
57. Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 15.91% 22.99% 27.56% n.a
Return on Equity 40.93% 45.29% 43.54% n.a
Activity Ratios
Inventory Turnover 8.67 12.65 12.54 n.a
Accounts Payable
Turnover 9.78 12.17 12.17 n.a
Payment Days 27 26 25 n.a
Total Asset Turnover 2.31 1.82 1.48 n.a
Debt Ratios
Debt to Net Worth 0.11 0.08 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $138,816 $253,742 $449,392 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.43 0.55 0.68 n.a
Current Debt/Total
Assets 10% 8% 6% n.a
Acid Test 9.24 12.66 15.21 n.a
Sales/Net Worth 2.57 1.97 1.58 n.a
Dividend Payout 0.00 0.00 0.00 n.a
Revenue Model:
Hypothetical Calculations:
No of Units Produced Annually = 500 Units
Unit Price (Price per Unit) = $ 11,800 (P-K-R 1,003,000.00/-)
Margin per Unit = 11,800/500 = $ 23.6 (P-K-R 2,006/-)
Revenues = 11,800x500 = $ 5,900,000 (P-K-R
501,500,000.00/-) Annually (Expected).
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