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Vempain teknikka inc Vempain teknikka inc Document Transcript

  • Entrepreneurship Business Plan: Vempain Teknikka INC.Presented to: Mr. Imran hameedWaqas Qadir BalochWaqas SiddiqueRizwan SaeedAfshan Nazakat Faculty of Management Sciences Air University 1
  • Table of ContentsExecutive Summary...................................................... 6Highlights .......................................................... 8Objectives....................................................................... 9Mission Statement ................................................. 11Key to Success................................................................. 11Company Summary ............................................................. 12Start – Up Summary................................................... 12Company Locations & Facilities .............................................14Products & Services........................................................... 15Sales Literature ................................................................... 15Product & Service Description........................................ 15Competitive Comparison.................................................. 16Technology ............................................................. 17Service & Support....................................................... 17Future Products &Services......................................................................... 18Fulfillment........................................................................... 18Market AnalysisSummary........................................................................ 19Market Segmentation.............................................. 19Target Market SegmentStrategy............................................................... 20Market Trends................................................................. 21 2
  • Market Growth.............................................................. 21Market Needs................................................................ 22Service BusinessAnalysis.......................................................................... 22Industry Analysis......................................................... 24Competition & BuyingPatterns........................................................................... 26Distributing a Service.................................... 26Main Competitors.............................................................. 26Competitor Analysis.......................................................... 27Strategy and ImplementationSummary.................................................................... 27Competitive Edge......................................................... 27StrategyPyramid............................................................................. 28Value Propositions...................................................... 29Value – Stream Mapping .................................. 30Marketing Strategy............................................................ 31Sales Strategy............................................................... 32Sales Forecast................................................................. 32Milestones..................................................................... 34Sales Programs ................................................................... 36Marketing Program ............................................................... 36Positioning Map ............................................................. 37 3
  • Strategic Alliances ................................................................ 39Management Summary......................................................... 39Organizational Structure.................................................... 40Personnel Plan ...................................................................40Management Team ................................................................44Financial Plan ...................................................................44Start – Up Funding................................................................. 45Important Assumptions....................................................... 47Key Financial Indicators......................................................... 48Break Even Analysis.............................................................. 49Projected Profit & Loss......................................................... 50Projected Cash Flow............................................................ 53Projected Balance Sheet........................................................ 55Business Ratios................................................................. 56Appendix ...................................................................58 4
  • AcknowledgementWe are extremely grateful to Mr. Imran Hameed for assigning us thisproject and giving us the opportunity to explore of inner capabilities aswell as implementation of academic acquisition of EntrepreneurialSkills in Real Life. We are again grateful to him for his guidance,assistance and useful help in fulfillment of this project. 5
  • Executive SummaryCellular phones have revolutionized the communications arena,redefining how we perceive voice and visual, as well as advent of thePersonal Digital Assistant’s (PDA) or Pocket Pc’s. Traditionally, cellularphones remained out of the hands of most consumers due to theirhigh cost. As a result, cell phone carriers have invested time andresources into finding ways to give the systems higher capacity andthus lower cost. Cell systems are benefiting from this research andstarting to develop into large-scale consumer products.Today, cellular phones are truly consumer electronics devices withover 59 million subscribers. The Nokia N – 9, Samsung Galaxy andi - Phone are further evidence of the idea that cell phones areconsumer electronics devices. Cell phones have ceased to be anexclusive status symbol of high-powered lawyers and are now in thehands of millions of consumers.Vempain Teknikka, Inc. is taking advantage of an opportunity tobecome a highly distinguished and recognized leader in the cellularcommunications industry. It is the goal of our company to becomeestablished as the leading distributor of wireless communicationsservices in Pakistan and in Area of South Asia.In order to achieve this goal, Vempain Teknikka critical successfactors will be to identify emerging trends and integrate them into ourcompany operations, respond quickly to technology changes/be thereearly, provide high-quality services, invest time and money inmarketing and advertising, expand into specialty markets, and stayahead 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
  •  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, followedby Global Alliances/Strategic Alliances for pursuing the manufacturingand engendering pool of Funds & Investments from Investors/StakeHolders. Alliance/Partnership with Global Thumbs and Big Wigs of theIndustry will also entail Global Expansion with the aim of reaching andproviding this transgressing Nano-Gadget to every Human Being ofHuman Kind.Nanotechnology & sciences in the realm of consumer electronics is inits’ own a solid proof and evidence as the Nanotechnology & SciencesIndustry has been evolving since 15 to 20 years along with WorldClass Business & Products. The so called ―Prototypes & Prologue‖ ofthe Cell phone-Gadget (Nano-Gadget), appended Snap of theExposition which has also been held and conducted at the ―TheMuseum of Modern Art‖ and displayed as part of the museums"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 toimpart information and awareness creating widespreadComprehension , Image and Pre-Dominating Loyal customer Base.Backend conducted surveys in Global Economies and RepeatedCustomer Surveys for the Demand-Estimation (Expected) hasengendered trends and outcome depicting rapid growth rate forprogressing upward sloping and exponential demand. 7
  • Highlights 8
  • ObjectivesThe company plans to focus on the following target markets that willprovide us with the greatest market penetration: the specialty users,the general users, and the personal users. We intend to offer productsand service packages that are priced appropriately for each segmentand will offer the services that best suit each segments needs.“Inclusive Alliance/Partnership with Global Thumbs and BigWigs of the Industry for pursuing Global Expansion with theaim of reaching and providing this transgressing Nano-Gadgetto every Human Being of Human Kind.”The above excerpt Statement Serves as Foundation Stone forCustomer Segmentation, Targeting & Positioning. Planet Earth is theTarget Market for the Business, as the Business will operate with theMaxim, Belief & Vision of Life Enhancement and Problem-Solving. SoTarget Market will be in the form of Global Community entailing everyHuman Being from all Social Classes, Income Categories and Tiers ofEconomic Pyramid with Differential Pricing Techniques & Semi-PricingTechniques serving as Key Success Factor (KSF) for conducting theBusiness Successfully (From Tier -1 to Tier – 4; Exclusive concern forthe Bottom of The Pyramid). 9
  • Our company will center on serving the growing Target Market(Community) (presently at a 6% per year rate) as well asconcentrating on the local (Urban & Rural) population, banking on thecurrent growing trend of using mobile phones.Our company will concentrate on selling products for Global System forMobile 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 outletsFinancial Objectives: Create and increase revenueMarketing Objectives: Increase marketing efforts Expand market area Expand marketing reach Brand recognition Increase telemarketing effortsOperational 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
  • Mission StatementVempain Teknikka mission is to offer its customers the highestquality cell phone products and network services. Its owner focuses onpersonalized service to his customers by offering convenience andrapid service. Additionally, Vempain Teknikka has the technologicalexpertise to assist customers in picking the product and service thatbest meets their needs. Finally, our staff will have strong vendorrelationships with the product suppliers and will be able to meetcustomers demand for the newest innovation in cellular phonetechnology.We believe it is important to remain an active member of thecommunity, and to impact peoples lives in more ways than deriving aprofit from them. We propose to host community events that bring outthe best in people.Keys to SuccessThe 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. Results2. Internal Business Process Goals vs. Results3. Employee Learning and Growth Goals vs. Results4. Customer Satisfaction Goals vs. ResultsOur 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 11
  • Company SummaryVempain Teknikka, Inc. will manufacture, sell and serivce high-enddevices, with a focus on the Target Market (community). VempainTeknikka, will be formed as the result of the acquisition of threeexisting businesses: Maui Technologies, Inc.; Electronics Hilo, Inc.;and, Kauai Telecommunications, Inc.Company OwnershipVempain Teknikka will be initially a sole proprietary company for itsfirst year launch and official commencement of the business, in orderto make it a fully fledged and newly Fangled Company for future.Afterwards it will be privately-held [Limited Liability Company] ownedin majority by its Employee Stock Ownership Trust. There are currently15 employees, and all will own equal shares in the ESOT. Newemployees will be given the opportunity to become vested in theEmployee Stock Ownership Plan (ESOP) after a suitable probationaryperiod.Start-up SummaryOur start-up costs will be $1M, which includes $450,000 for theacquisition of the Maui and Hilo operations of Integrated OfficeTechnology.The remainder of the funds will be used for:  Initial Inventory: $200,000  Initial Capitalization: $225,000  Legal, Insurance, Rent & Misc: $125,000The start-up funding will be financed by loans arranged through theMicro Finance Bank, and by the Community Loan Fund, and the SmallBusiness Administration as a guarantor. Start-up assumptions areshown in the following table and chart. 12
  • Start-up RequirementsStart-up ExpensesLegal/Accounting $10,000Stationery etc. $1,500Brochures $1,000Consultants $7,500Insurance $25,000Rent $15,000Software & IT (Web) $40,000SPI Buyout $450,000Setup New Company/ESOP $25,000Total Start-up Expenses $575,000Start-up AssetsCash Required $225,000Start-up Inventory $200,000Other Current Assets $0Long-term Assets $0Total Assets $425,000Total Requirements $1,000,000Start-up FundingStart-up Expenses to Fund $575,000 13
  • Start-up Assets to Fund $425,000Total Funding Required $1,000,000AssetsNon-cash Assets from Start-up $200,000Cash Requirements from Start-up $225,000Additional Cash Raised $0Cash Balance on Starting Date $225,000Total Assets $425,000Liabilities and CapitalLiabilitiesCurrent Borrowing $1,000,000Long-term Liabilities $0Accounts Payable (Outstanding Bills) $0Other Current Liabilities (interest-free) $0Total Liabilities $1,000,000CapitalPlanned InvestmentInvestor 1 $0Investor 2 $0Other $0Additional Investment Requirement $0Total Planned Investment $0Loss at Start-up (Start-up Expenses) ($575,000)Total Capital ($575,000)Total Capital and Liabilities $425,000Total Funding $1,000,000Company Locations and FacilitiesThe company will be headquartered in Islamabad, Pakistan. We havetwo locations, one South Korea and the other in China. The two officesare presently being leased by the local authorities by VempainTeknikka and we will rent from them on a month-to-month basis untilwe are able to relocate to more suitable facilities. On Kauai, we have asub-contractor agreement with Kauai Technology Equipment to handleinstallations and service. 14
  • Products and ServicesVempain Teknikka will acquire an existing operation whose primarybusiness has been the manufacture, sale and service of businessappliances (consumer electronics, facsimiles, High End Devices etc.)and will operate as a part of the Nano –Sciences TelecommunicationsIndustry. We will build from this base to transform the business into avalue-added provider of the emerging services and technologies of thenew Information Industry. Following the lead of Nokia, Germany andother manufacturers which we represent, we will approach themarketplace from a total communications and connectivity solutionsviewpoint.This new paradigm will begin with an analysis of the customersexisting and planned usage, and will provide total workflow solutionsutilizing multifunctional platforms and information distributionsystems. These systems will be backed by professional and reliabletechnical service and proactive customer service. By forming strategicalliances with Global Nano Sciences & Telecommunications IndustryValue-Added Resellers, we will be able to offer Global System forMobile GSM, General Packet Radio Service GPRS or Enhanced DataRates for GSM Evolution (EDGE), Wireless Application Protocol (WAN)and turnkey Local Area Network (LAN) systems and the ability toretrofit existing LAN and peer-to-peer communications & systems.Sales LiteratureCopies of our product and sales literature are attached as appendices.Of course, one of our first tasks will be to change the message of ourliterature to make sure we are selling the company, rather than theproduct.Product and Service DescriptionVempain Teknikka will market and sell brand name consumer andbusiness communication, connectivity & information distributionsystems and hardware, technical service and support for theseproducts, and the consumable supplies used by these systems. We willbe a single-source provider for and business communication,connectivity & information distribution systems products and services. 15
  •  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 VempainTeknikka, 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 ComparisonThe only way we can hope to differentiate well is to define the vision ofthe company to be a technology provider to our customers. We will notbe able to compete in any effective way with the large giants. We needto 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 atthe important times. These are complex products that require seriousknowledge and experience to use. Our competitors tend to sell onlythe products themselves, and very little in the way of after-saletraining and support. 16
  • Unfortunately, we will not sell these products at a higher – end ofprices not just because we are here to offer products and services bothwhich will engender substantial revenues by offsetting each other butwe are here with a vision to provide our customers accessibility,connectivity and portability, along with products and services atQuality, Quantity and Economically affordable; the market has shownthat it will not support that concept. We have to also sell the serviceand consumable supplies and charge for them separately. Thismonthly recurring revenue is the foundation of our financial stability.TechnologyNew technology has changed almost everything about the traditionaloffice equipment (copier) industry, and for all practical purposes it nolonger exists. The Nano Sciences Industry has emerged because of thetechnology of convergence. The primary driver of convergence ofdifferent forms of information is technological change, specifically therapid diffusion of digital technology into an ever-wider array ofinformation. Beyond digitization, dramatic changes in computing andtelecommunications industries (mainly in faster microprocessors andincreasing bandwidth) are also driving convergence.Vempain Teknikka, will make convergence the theme of its vision,planning, and marketing strategies. We will move into the newInformation Industrys technology with the aim of bringing the mostefficient workflow solutions to our Customers while providing value-added customer support and service, and earning a reasonable profitin the process.Service and SupportOur strategy hinges on providing unparalleled service and support,which is critical to setting us apart from the competition. We need todifferentiate on service and support in order to become true partnerswith 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
  • 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 clients business processes and requirements, and offer cost-effective upgrade solutions to meet changing needs.Future Products and ServicesBeginning at start up, we will explore and research new informationtechnologies for inclusion in our product offerings. The products whichwe choose will be in line with our vision to transition the company frombeing an appliance seller, to being a provider of total informationmanagement solutions. These convergent information products willinclude: Wireless LAN systems Information & Connectivity management systems (hardware and software) Tele-business and E-Commerce systems Media transport and reproduction (Distribute and Share)FulfillmentWe have an established relationship with our manufacturers andsuppliers, and will be able to take advantage of all discounts andpromotions in order to keep our margins at roughly 49% throughoutthe operation. We will also implement and employ "just-in-time"inventory strategies for hardware, supplies, and service parts orders tofurther strengthen our margins.As we continue to grow the business, we will evaluate other ITindustry manufacturers and product lines to strengthen our offeringswith a view primarily to quality and margin advantages. 18
  • Market Analysis SummaryVempain 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 companiesthat need to be in constant communication with their employees andpeople around them.Market SegmentationVempain Teknikka, Inc., Inc. will focus on five customer groups,bearing in mind that it is quite customary today to have more than onecell 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
  • Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Growth CAGRChildren 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%GeneralPublic 2% 250,000 255,000 260,100 265,302 270,608 2.00%OperatingServiceCompanies 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
  • The market for cellular phones and their accessories is veryfragmented, crowded and competitive. Vempain Teknikka, Inc.current niche in its location, variety of products and expertise inserving the public will assure the projected sales.We expect to take full advantage of the trends described in the MarketAnalysis above, and try to penetrate the market with new innovationsand gadgets — mainly with the younger generation, usingadvertisements and demonstrations. We shall also try to lureindependent small sellers and manufacturers to join our effort.Market TrendsThe most significant trend in todays business-to-customermarketplace is the move from analog to digital technology and fromstand-alone workflow functions to multifunctional platforms which areconnected to a network. It is this trend that has caused many of themajor players in the outdated connectivity andtelecommunications industry (Motorola, Ericsson etc.) to falter, andsee their profits decline. This is true mainly because of their inability tochange rapidly from an "analog mentality" and move forwardin applying the emerging convergence of digital and moderntechnologies to their products and the marketplace.That is the primary reason that VEMPAIN TEKNIKKA, INC. has chosenas Maui Technologies, Inc; its preferred manufacturer. MauiTechnologies, Inc has led the way in the industry with its digitaltechnology innovations, and its ability to bring both the product andthe concept to the marketplace. We will follow Maui Technologies, Inclead and bring this efficient, productivity-enhancing technology.Market GrowthAs Cell phone-Gadget continue to fall, unit sales increase. Thepublished market research on sales of Cell phone-Gadget isastounding, as the United States market alone is absorbing more than30 million units per year, and sales are growing at more than 20percent per year. We could quote Dataquest, Infocorp, IDC, or others;it doesnt matter, they all agree on high growth of cell phones sales.This rapid growth rate holds true for Cell phone-Gadget whichconnects people and business around the globe whether they areurban or rural. The stand-alone analog systems and appliances whichabound in the customer and business marketplace today will be 21
  • replaced by connected digital convergence systems in the comingmonths and years. VEMPAIN TEKNIKKA, INC. will position itself to be avalue-added provider of this rapidly emerging technology for itscustomers.Market NeedsAll customers and businesses have in common a need to becontinuously productive, and they rely on their service providers andvendors to sustain their productivity. Effectively filling this needrequires that the vendor bring to the table sound planning, qualityproducts, reliable service, and a true partnership and supportrelationship.Specific business needs include the ability to communicate, connect,access, portability and gather, compile, analyze, and distributeinformation in various formats. This is where VEMPAIN TEKNIKKA,INC.s strengths will be most beneficial to our Customers, both big andsmall. Anyone can sell the "Cell phone" at an attractive price, but onlya true value-added provider can offer the peace-of-mind that comesfrom a customer-focused approach to the relationship.Primarily due to geographic distances/High proximity and heftypopulation, the Target Market (Community) has an additional commonneed of being able to rely on other locally-based vendors and suppliersfor quick, reliable, customer service and support. Having to callsomeone on Alaska, or the mainland, to place a service call, or toorder supplies, or get an answer to a simple billing question, is both anirritant and a hindrance to most people. Our primary goal is to fill thisneed by bringing true pro-active, and total, customer service to theTarget Market (Community), and to gain their confidence and loyalty.This will become one of our underlying strengths.Service Business AnalysisVEMPAIN TEKNIKKA, INC. will be part of the Nano Sciences &Telecommunications Industry, and specialize in providing connectivity& information management systems and technology for customerpurposes as well as business processes. We envision that a convergedNano Sciences & Telecommunications industry operating within thecontext of an advanced information infrastructure will be a huge boostfor Customers and businesses. Several Washington think tanksestimate that it could spur more than $300 billion annually in newsales and increase worker productivity by 20 to 40 percent. 22
  • At the present time, an estimated two-thirds of all global jobs areinformation related, and that number will increase as the shift frommanufacturing to service industries continues. The convergence ofNano Sciences & Telecommunications industries will continue becausethe technological and business imperatives are compelling. If onecompany does not see the possibilities, another will. 23
  • Industry Analysis Porter Five Forces Model Force Rating/ScoreThreat of New Entrants HighThreat of Substitute Products Lowor ServicesRivalry Among Existing HighCompetitorsBargaining Power of HighCostumersBargaining Power of HighSuppliers 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
  • 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 corporationthat is headquartered in Keilaniemi, Espoo, a city neighboring Finlandscapital 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 worlds largest manufacturer of mobile phones: its global device market share was 23% in the second quarter 2011. Nokias 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. Nokias 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
  • Vempain Teknikka, Inc. is aiming to gather a share of the market fromthese three giants.Competition and Buying PatternsOptimally Generic Users, Urban Professionals, decision makers andcorporate professionals understand the concept and value of productsservice and support, and are much more likely to pay for it when theoffering is clearly stated.There is no doubt that we compete more against the product pushersthan against other service providers. We need to effectively competeagainst the idea that our costumers should buy gadgets as plug-inappliances that dont need ongoing service, support, and training.Our research and experience has indicated that our target marketsegments think about price, but would buy based on quality service, ifthe offering were properly presented. They think about price becausethat is what is traditionally presented to them first. We have very goodindications that many would rather pay 10-20% more for arelationship with a long-term vendor providing back-up and qualityservice and support. They end up in the channels because they arenot aware of the alternatives.Accessibility, Availability & Distribution is also very important. TheGeneric Users, Professionals & decision makers (customers) tend towant immediate, global solutions to problems.Distributing a ServiceMedium to large customer segment buyers are accustomed to buyingfrom vendors and their outlets, who visit their offices. Businessesusually expect the cell phone or network connection vendors, officeproducts vendors, or whomever, to visit their office to make theirsales.Unfortunately our target segment buyers may not expect to buy fromus. Many of them turn immediately to the retailers, intermediaries orother dealers (Cell phones, Network Connections, and Cell phoneaccessories), the Web, and mail order to look for the best price,without realizing that there is a better option for them for only a littlebit more. We will overcome this hurdle through innovative serviceofferings, and targeted marketing. 26
  • 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 Nextel1 - Extensive distribution 6 3 1.22 - Customer focus 4 5 1.53 - Economies of scale 3 3 .64 - Product innovation 7 4 .4Totals 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
  • The following sections review the various strategies that will supportthis effort.Competitive EdgeOur competitive edge is our positioning as a strategic ally with ourclients, who are clients more than customers. By building a businessbased on long-standing relationships with satisfied clients, wesimultaneously build defenses against competition. The longer therelationship stands, the more we will help our clients understand whatwe offer them and why they should both stay with Vempain Teknikka,and refer us to other businesses. In close-knit communities like theSouth Asia, Europe and North America reputation is extremelyimportant, and word-of-mouth advertising is invaluableVempain Teknikka, competitive edge will be:Location:Locating the company in a suburb of South Asia enables the companyto cover a large and rapidly developing customer populace.Customer Service:The CEO of Vempain Teknikka, Inc has a lot of research and has digout in these industries for past many years, and accumulated a vastknowledge and experience in the cellular phone market, with a specialexpertise in GSM phones. He is very familiar with his target customerbase. He has an excellent reputation for customer service.E-Commerce:The company will make an effort to enhance its sales through aserious and advantageous website in order to attract customers thatare reluctant to do business with large companies.Strategy PyramidOur main strategy will be placing emphasis on service and support,and our main tactics are networking expertise, systems training, andimplementing a customer relationship management system (CRM)from e-automate. Our specific programs for networking include mailersand internal training. Specific programs for end user training includedirect mail promotion, and on-site customer programs. Implementing 28
  • the CRM software and training will be coordinated with the e-automateCorporation.Our second strategy is emphasizing relationships. The tactics aremarketing the company (instead of the products), more regularcontacts with the customer, and increasing sales per customer.Programs for marketing the company include new sales literature, anddirect mail. Programs for more regular contacts include call-backs afterinstallation, direct mail, and sales management. Programs forincreasing sales per customer include upgrade mailings and salestraining.Value PropositionThe phones feature list would include the abilityto mould/reshaped into numerous shapes, so it can be worn aroundthe wrist or held up to the face; transparent electronics, which wouldallow the device to be see-through yet functional, self-cleaningsurfaces that can absorb solar energy, renewable power resourcesinclusive moderate wind, lightening/thundering and solar energy foroperation and recharging of the cell phone-gadget and a wide range offully integrated sensors and connectors that will operate in the form ofGrass 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
  • 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 UnitsAssembling Component Software Operational Quality Packaging Laser /Circuit Installation Run Assurance Marking Configurati on 12 2 5 4–5 6 2 2Operators Operators Operators Operators Operators Operators Operators 20 Days 30
  • Marketing StrategyThe marketing strategy is the core of our main strategy:  Emphasize service and support  Build a relationship business  Develop specific programs for each target market segmentShort-term marketing strategies are those that bring will bring us atemporary boost in traffic. Although these techniques are veryimportant to our over-all plan, they are only a temporary traffic sourceand must not be solely relied upon. Short-term marketing strategiesinclude: Purchasing Advertising Bulletin Boards Search EnginesLong-term marketing strategies are those that will bring us a steadystream of targeted traffic over time. These strategies will continue toproduce results even years down the road. Long-term marketingstrategies include: Opt-in Lists Freebies ContentBy creating and implementing a balanced marketing strategy, usingboth short-term and long-term strategies, Vempain Teknikka will drivea steady stream of targeted traffic to our website.Using this simple formula when creating our Internet marketingstrategy and excelling at all three, we hope to guarantee our success.Our short-term marketing strategy will focus heavily on salespromotion, niche positioning in the market and customer service withloyalty and retention in sales.Our promotions will always stay in tune with our company objectivesand mission statement. 31
  • Sales StrategyConstructing our Sales Strategy we shall follow the following steps:Sales Success Requires Planning - we shall formulate our salesstrategy and tactics to achieve our sales success.Analyze Our Potential - we shall step through a structured processthat will prepare us for the development of our sales strategy.Strategize Around Strengths - the description of our salesactivity will be analyzed producing a report that reveals factorsimpacting our sales potential.Develop Our Tactics - we shall receive guidance to develop acomprehensive tactical plan to achieve our success.Measuring Our Success - we shall constantly develop keymeasurements that mark the progress of financial estimates that guideour growth.Employ An Action Plan for Success - we shall provide our salesforce a clear tactical plan that is also aligned with managementsstrategic objectives.The sales strategy of Vempain Teknikka, Inc. is simple. The key tocustomer satisfaction is having the product and services that meet thecustomers needs. A crucial part of that is to also haveknowledgeable employees to help customers quickly find what theywant.Sales ForecastSales forecast displayed here is very conservative — although we aimvery high, we decided to show a very slow growth and revise the planon a yearly basis. As a rule we expect to expand the volume muchmore rapidly. 32
  • Sales Forecast Year 1 Year 2 Year 3SalesCellular Phones $138,000 $190,000 $270,000Cellular Phones Accessories $126,000 $160,000 $200,000Fixed Wireless Phones $46,500 $60,000 $90,000 33
  • Other Sevices $46,500 $90,000 $150,000Total Sales $357,000 $500,000 $710,000Direct Cost of Sales Year 1 Year 2 Year 3Cellular Phones $31,650 $43,560 $61,900Cellular Phones Accessories $30,450 $41,500 $51,800Fixed Wireless Phones $11,700 $15,500 $23,300Other Services $11,710 $23,300 $38,900Subtotal Direct Cost of Sales $85,510 $123,860 $175,900MilestonesThe Milestones table hereunder is destined to be a working plan for theformation of the new organization, including legal negotiations, hiringof 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 timetableand make sure that everything falls in place — to ensure smooth startof sales and success of the organization. 34
  • 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 DepartmentConclusion of Rentals 1/15/2005 2/15/2005 $2,000 Owner DepartmentPreparationof 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
  • Sales ProgramsSpecific sales programs will be included in our new Marketing Plan, andwill be included in this Business Plan as they are finalized. In generalhowever, our sales programs will be centered around conductingworkflow and information distribution analyses, direct mail, andplacing an emphasis on the benefits which VEMPAIN TEKNIKKA, INC.and its manufacturers will be able to offer its Customers through "totalcare" service and support.Marketing ProgramsAs we worked to complete this Business Plan, we have simultaneouslyworked on our Marketing Plan. Because we are developing a new start– up business, the foundations stones for our vision of customer- andmarket-focused strategies will not happen overnight. We must planthis shift carefully, and implement it judiciously, so as not to disruptour immediate operations. The business has been budgeted for, andwill utilize, marketing advisors and consultants (including ourmanufacturers) for future designing of a New Marketing Plan, whichwill be its operations oriented.Positioning StatementFor businesses who want to be sure their information distributionsystems are always working reliably, VEMPAIN TEKNIKKA, INC. is avendor and trusted strategic ally who make certain their systemswork, their people are trained, and their down time is minimal. Unlikethe product/price oriented vendors, it knows the customer and goes totheir site when needed, and offers proactive support, service, training,and installation. 36
  • Positioning Map High Quality Vempain Teknikka Low High Price Price Low QualityPricing StrategyWe must charge appropriately for the high-end, high-quality serviceand support we offer. Our revenue structure has to match our coststructure, so the salaries we pay to assure good service and supportmust be balanced by the revenue we charge.We cannot build the service and support revenue into the price ofproducts. The market cant bear the higher prices and the buyer feelsill-used when they see a similar product priced lower with thecompetition. Despite the logic behind this, the market doesnt supportthis concept. 37
  • Pricing Model: 38
  • 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 StrategyPromotion StrategyWe will employ the following general promotional strategies for thevarious 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
  • 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 StrategyVEMPAIN TEKNIKKA, INC. is first and foremost a direct salesorganization, meaning that we must present our services and productsdirectly to the majority of our customers and Customers. Having saidthat, for our planned penetration into the our Target market, we willneed to establish a presence as a Value-Added Reseller (VAR) forcertain high-end product lines which dont carry the marginsnecessary to sustain the costs of direct sales. We will plan our newlocations accordingly.Strategic AlliancesOur alliances with our manufacturers, and especially MauiTechnologies, will be the most pivotal to our success. We will remain aMaui Technologies Authorized Dealer, and continue to enjoy all of thebenefits of this long-standing relationship.We will form alliances with other locally-based VARs and computernetwork providers to enable us to provide complete turnkey packagesfor our Customers. These relationships are included in our MarketingPlan.Management SummaryOur management philosophy is simple and is an integral part of ourvalues: doing right things right, the first time (Kinaole).VEMPAIN TEKNIKKA, INC. will be an employee-owned company andwe all share the same vision of providing our Customers (who in manycases are friends and neighbors) with the very best in customerservice - period. We will encourage personal growth, creativity, andenable individual empowerment to achieve this goal. We will manage 40
  • the business by setting achievable Balanced Scorecard goals,measuring them, and making mid-stream adjustments as necessary.Organizational StructureOur team includes 15 employees initially, and is organizationally flat.The departmental divisions are sales and marketing, service, andadministration. Operational managers include: President and General Manager:He will oversee all operations with primary responsibilities for salesand marketing. Functioning as the GM, this position will spend a gooddeal of time in the field assisting the Account Managers, and helping tobuild and maintain client relationships. Secretary/Treasurer and Administrative Manager:He will supervise all administrative functions including inventory; A/Pand A/R, banking, HR, and vendor and manufacturer relations. Primarycontact point for customer service issues and follow up. He will beassisted by an Office Manager in the Hilo branch. Systems Manager (two positions - Maui):Will Manage all service issues including; service agreements, servicecall prioritization and response, carry-in service, customer support,and systems training and development. He will be assisted by SystemsEngineers, and Systems Technicians.Personnel PlanThe total head count moving over from grass root level to fully fledgedcompany, at the time of the acquisition will be 13. We are adding twoformer employees at startup to round out our team, for a total startuphead count of 15.There are an additional six positions shown as "vacant" in thePersonnel plan. During each quarterly business plan review, we willassess the need to fund these positions to sustain our growth, andmore evenly distribute the workload. 41
  • Personnel Plan Year 1 Year 2 Year 3Production PersonnelNone planned $0 $0 $0Other $0 $0 $0Subtotal $0 $0 $0Sales and Marketing PersonnelSales (Maui) $38,250 $40,545 $42,978Sales (Kona) $38,250 $40,545 $42,978Sales (Maui) $38,250 $40,545 $42,978Sales (Hilo) $38,250 $40,545 $42,978Vacant - Aftermarket Sales (Maui) $0 $0 $0Vacant - Aftermarket Sales (Hilo) $0 $0 $0Subtotal $153,000 $162,180 $171,911General and AdministrativePersonnelGeneral Manager $57,600 $61,056 $64,719Admin Manager $45,600 $48,336 $51,236Vacant - Office Manager (Hilo) $31,200 $33,072 $35,056Vacant - WHSE & Delivery (Maui) $0 $0 $0Vacant - WHSE & Delivery (Hilo) $0 $0 $0Other $0 $0 $0Subtotal $134,400 $142,464 $151,012Other PersonnelSystems Manager (Hilo) $49,800 $52,788 $55,955Systems Manager (Maui) $49,800 $52,788 $55,955System Engineer (Hilo) $39,600 $41,976 $44,495System Engineer (Hilo) $39,600 $41,976 $44,495System Engineer (Kona) $39,600 $41,976 $44,495Sr. System Engineer (Maui) $41,100 $43,566 $46,180System Tech (Maui) $28,800 $30,528 $32,360System Tech (Maui) $28,800 $30,528 $32,360Vacant - Syst Tech (Kona) $0 $0 $0Vacant - Syst Tech (Maui) $0 $0 $0Subtotal $317,100 $336,126 $356,294Total People 15 15 15Total Payroll $604,500 $640,770 $679,216 42
  • 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
  • He/She is an asset to the Maui team, and has outstanding customer service skills.Management Team GapsWe believe we have a good team for covering the main points of thebusiness plan. Key members have the experience and knowledge tomanage and grow the business, and are highly motivated by theemployee-owner concept.The obvious management gap is a plan to fill the general managersposition at some point in the future, before the current GM reachesretirement age. As an employee-owned company, the preferredstrategy will be to promote from within, and fill vacancies as theyoccur. As the company grows, we will seek out additional talent in alloperational areas.Financial PlanIt is assumed that the owners private resources will be sufficient tofinance any monthly cash-flow shortage. However, it would beadvisable to establish a bank relationship as soon as possible. Salescould very well increase at a much sharper rate than assumed in theseconservative projections. Sharper sales will result in a greater need forfunds in support of inventory and receivables. An over-draft line ofcredit with the bank will be an excellent cushion to fall back on.This is considered a very good time to start a new business. Theeconomy is beginning its trek up, and consumer spending is up. TheCommerce Department reported, "Consumers had increased theirspending, the largest advance in nine months."A shorter learning curve will be brought to the business by the ownerdue to his extensive background and in-depth market knowledge. Hehas a clear understanding of the need to manage costs and forecastfuture needs so that the business is not "broadsided" by theunexpected.One other component on which the financial plan is based is wisepurchases. Finding the right product, at the right price will enable thebusiness to meet planned margins and maintain inventory at anattractive level with a high turn rate. 44
  • Start-up FundingOur start-up costs will be $1M, which includes $450,000 for theacquisition of the Maui and Hilo operations of Integrated Office ofTechnology.The remainder of the funds will be used for:  Initial Inventory: $200,000  Initial Capitalization: $225,000  Legal, Insurance, Rent & Misc: $125,000The start-up funding will be financed by loans arranged through theMicro Finance Bank, and by the Community Loan Fund, and the SmallBusiness Administration as a guarantor. Start-up assumptions areshown in the following table and chart.Start-up RequirementsStart-up ExpensesLegal/Accounting $10,000Stationery etc. $1,500Brochures $1,000Consultants $7,500Insurance $25,000Rent $15,000Software & IT (Web) $40,000SPI Buyout $450,000Setup New Company/ESOP $25,000Total Start-up Expenses $575,000Start-up AssetsCash Required $225,000Start-up Inventory $200,000Other Current Assets $0Long-term Assets $0Total Assets $425,000Total Requirements $1,000,000Start-up Funding 45
  • Start-up Expenses to Fund $575,000Start-up Assets to Fund $425,000Total Funding Required $1,000,000AssetsNon-cash Assets from Start-up $200,000Cash Requirements from Start-up $225,000Additional Cash Raised $0Cash Balance on Starting Date $225,000Total Assets $425,000Liabilities and CapitalLiabilitiesCurrent Borrowing $1,000,000Long-term Liabilities $0Accounts Payable (Outstanding Bills) $0Other Current Liabilities (interest-free) $0Total Liabilities $1,000,000CapitalPlanned InvestmentInvestor 1 $0Investor 2 $0Other $0Additional Investment Requirement $0Total Planned Investment $0Loss at Start-up (Start-up Expenses) ($575,000)Total Capital ($575,000)Total Capital and Liabilities $425,000Total Funding $1,000,000 46
  • Important AssumptionsAs a general rule our company will not sell on credit. However for veryspecial cases we might offer short-term credit against validassurances. We shall accept cash and checks, Visa, MasterCard,Discover and American Express, and PayPal on the Internet. All salespaid via credit cards will be deposited in our business checking accountwithin 48 hours.The financial plan depends on important assumptions, most of whichare shown in Table. As mentioned previously, we assumed interest andtax rates based on a "worst case" scenario, and these will be adjustedonce we have finalized the initial funding and establish the ESOT. Wehave also assumed our personnel burden at 30% of payroll in order toallow for above-average benefits for our employees. As we shoparound for benefits vendors, this assumption will be subject to revisionas 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
  • Key Financial IndicatorsAs shown in the Benchmarks chart below, our key financial indicatorsare: 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
  • Break-even AnalysisOur break-even analysis is summarized by the following chart andtable.Break-even AnalysisMonthly Revenue Break-even $17,916Assumptions:Average Percent Variable Cost 24%Estimated Monthly Fixed Cost $13,625 49
  • Projected Profit and LossThere are many factors to include when determining a projected profitand loss statement these are included in the following table. 50
  • 51
  • Pro Forma Profit and Loss Year 1 Year 2 Year 3Sales $357,000 $500,000 $710,000Direct Cost of Sales $85,510 $123,860 $175,900Other Costs of Sales $26,824 $30,000 $45,000Total Cost of Sales $112,334 $153,860 $220,900Gross Margin $244,666 $346,140 $489,100Gross Margin % 68.53% 69.23% 68.89%ExpensesPayroll $123,000 $135,960 $148,600Marketing/Promotion $4,500 $10,000 $25,000Depreciation $0 $0 $0Rent $24,000 $24,000 $24,000Insurance $12,000 $12,000 $12,000Payroll Taxes $0 $0 $0Other $0 $0 $0Total Operating Expenses $163,500 $181,960 $209,600Profit Before Interest andTaxes $81,166 $164,180 $279,500EBITDA $81,166 $164,180 $279,500Interest Expense $0 $0 $0Taxes Incurred $24,350 $49,254 $83,850Net Profit $56,816 $114,926 $195,650Net Profit/Sales 15.91% 22.99% 27.56% 52
  • Projected Cash FlowOur projected cash flow is outlined in the following chart and table.Pro Forma Cash Flow Year 1 Year 2 Year 3Cash ReceivedCash from OperationsCash Sales $357,000 $500,000 $710,000Subtotal Cash fromOperations $357,000 $500,000 $710,000Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived $0 $0 $0New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of Other Current Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $50,000 $0 $0Subtotal Cash Received $407,000 $500,000 $710,000Expenditures Year 1 Year 2 Year 3Expenditures from Operations 53
  • Cash Spending $123,000 $135,960 $148,600Bill Payments $139,315 $247,800 $360,927Subtotal Spent on Operations $262,315 $383,760 $509,527Additional Cash SpentSales Tax, VAT, HST/GST PaidOut $0 $0 $0Principal Repayment of CurrentBorrowing $0 $0 $0Other Liabilities PrincipalRepayment $0 $0 $0Long-term Liabilities PrincipalRepayment $0 $0 $0Purchase Other Current Assets $0 $0 $0Purchase Long-term Assets $0 $0 $0Dividends $0 $0 $0Subtotal Cash Spent $262,315 $383,760 $509,527Net Cash Flow $144,685 $116,240 $200,473Cash Balance $146,685 $262,924 $463,397 54
  • Projected Balance SheetThe table shows the annual balance sheet results, with a healthyprojected increase in net worth. Detailed monthly projections are inthe appendix.Pro Forma Balance Sheet Year 1 Year 2 Year 3AssetsCurrent AssetsCash $146,685 $262,924 $463,397Inventory $8,000 $11,588 $16,457Other Current Assets $0 $0 $0Total Current Assets $154,685 $274,512 $479,854Long-term AssetsLong-term Assets $0 $0 $0Accumulated Depreciation $0 $0 $0Total Long-term Assets $0 $0 $0Total Assets $154,685 $274,512 $479,854Liabilities and Capital Year 1 Year 2 Year 3Current LiabilitiesAccounts Payable $15,869 $20,770 $30,462Current Borrowing $0 $0 $0Other Current Liabilities $0 $0 $0Subtotal Current Liabilities $15,869 $20,770 $30,462Long-term Liabilities $0 $0 $0Total Liabilities $15,869 $20,770 $30,462Paid-in Capital $93,000 $93,000 $93,000Retained Earnings ($11,000) $45,816 $160,742Earnings $56,816 $114,926 $195,650Total Capital $138,816 $253,742 $449,392Total Liabilities and Capital $154,685 $274,512 $479,854Net Worth $138,816 $253,742 $449,392 55
  • Business RatiosBusiness ratios for the years of this plan are shown below. Industryprofile ratios based on the Standard Industrial Classification (SIC) code5731.9902, Consumer electronic equipment, nec, are shown forcomparison.Ratio Analysis Industry Year 1 Year 2 Year 3 ProfileSales Growth 0.00% 40.06% 42.00% 5.90%Percent of TotalAssetsInventory 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 SalesSales 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 Interestand Taxes 22.74% 32.84% 39.37% 0.85%Main RatiosCurrent 9.75 13.22 15.75 1.73Quick 9.24 12.66 15.21 0.79Total Debt to TotalAssets 10.26% 7.57% 6.35% 58.93%Pre-tax Return on NetWorth 58.47% 64.70% 62.20% 2.27%Pre-tax Return on Assets 52.47% 59.81% 58.25% 5.54% 56
  • Additional Ratios Year 1 Year 2 Year 3Net Profit Margin 15.91% 22.99% 27.56% n.aReturn on Equity 40.93% 45.29% 43.54% n.aActivity RatiosInventory Turnover 8.67 12.65 12.54 n.aAccounts PayableTurnover 9.78 12.17 12.17 n.aPayment Days 27 26 25 n.aTotal Asset Turnover 2.31 1.82 1.48 n.aDebt RatiosDebt to Net Worth 0.11 0.08 0.07 n.aCurrent Liab. to Liab. 1.00 1.00 1.00 n.aLiquidity RatiosNet Working Capital $138,816 $253,742 $449,392 n.aInterest Coverage 0.00 0.00 0.00 n.aAdditional RatiosAssets to Sales 0.43 0.55 0.68 n.aCurrent Debt/TotalAssets 10% 8% 6% n.aAcid Test 9.24 12.66 15.21 n.aSales/Net Worth 2.57 1.97 1.58 n.aDividend Payout 0.00 0.00 0.00 n.aRevenue Model:Hypothetical Calculations:No of Units Produced Annually = 500 UnitsUnit 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-R501,500,000.00/-) Annually (Expected). 57
  • AppendixSales Forecast Month Month Month Month Month Month Month Month Month Month Month 1 2 3 4 5 6 7 8 9 10 11 Month 12SalesCellular Phones 0% $10,000 $10,000 $10,000 $11,000 $11,000 $11,000 $12,000 $12,000 $12,000 $13,000 $13,000 $13,000Cellular Phones Accessories 0% $9,000 $9,000 $9,000 $10,000 $10,000 $10,000 $11,000 $11,000 $11,000 $12,000 $12,000 $12,000Fixed Wireless Phones 0% $3,500 $3,500 $3,500 $3,750 $3,750 $3,750 $4,000 $4,000 $4,000 $4,250 $4,250 $4,250Other Services 0% $3,500 $3,500 $3,500 $3,750 $3,750 $3,750 $4,000 $4,000 $4,000 $4,250 $4,250 $4,250Total Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500 Month Month Month Month Month Month Month Month Month Month MonthDirect Cost of Sales 1 2 3 4 5 6 7 8 9 10 11 Month 12Cellular Phones $2,300 $2,300 $2,300 $2,500 $2,500 $2,500 $2,750 $2,750 $2,750 $3,000 $3,000 $3,000Cellular Phones Accessories $2,250 $2,250 $2,250 $2,400 $2,400 $2,400 $2,600 $2,600 $2,600 $2,900 $2,900 $2,900Fixed Wireless Phones $900 $900 $900 $950 $950 $950 $1,000 $1,000 $1,000 $1,050 $1,050 $1,050Other Services $900 $900 $900 $950 $950 $950 $1,000 $1,000 $1,000 $1,060 $1,050 $1,050Subtotal Direct Cost ofSales $6,350 $6,350 $6,350 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000Personnel Plan Month Month Month Month Month Month Month Month Month Month Month 1 2 3 4 5 6 7 8 9 10 11 Month 12CEO 0% $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500Marketing Manager 0% $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200Programmer/OfficeAdministrator 0% $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,7502 Store Attendant’s 0% $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total People 0 0 0 0 0 0 0 0 0 0 0 0Total Payroll $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 58
  • Pro Forma Profit and Loss Month Month Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 Month 12Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500Direct Cost of Sales $6,350 $6,350 $6,350 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000Other Costs of Sales $2,000 $2,040 $2,081 $2,122 $2,165 $2,208 $2,252 $2,297 $2,343 $2,390 $2,438 $2,487Total Cost of Sales $8,350 $8,390 $8,431 $8,922 $8,965 $9,008 $9,602 $9,647 $9,693 $10,400 $10,438 $10,487Gross Margin $17,650 $17,610 $17,569 $19,578 $19,535 $19,492 $21,398 $21,353 $21,307 $23,100 $23,062 $23,013Gross Margin % 67.88% 67.73% 67.57% 68.69% 68.54% 68.39% 69.02% 68.88% 68.73% 68.95% 68.84% 68.70%ExpensesPayroll $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250Marketing/Promotion $0 $500 $500 $500 $0 $0 $1,000 $0 $1,000 $0 $1,000 $0Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total OperatingExpenses $13,250 $13,750 $13,750 $13,750 $13,250 $13,250 $14,250 $13,250 $14,250 $13,250 $14,250 $13,250Profit Before Interestand Taxes $4,400 $3,860 $3,819 $5,828 $6,285 $6,242 $7,148 $8,103 $7,057 $9,850 $8,812 $9,763EBITDA $4,400 $3,860 $3,819 $5,828 $6,285 $6,242 $7,148 $8,103 $7,057 $9,850 $8,812 $9,763Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Taxes Incurred $1,320 $1,158 $1,146 $1,748 $1,886 $1,873 $2,144 $2,431 $2,117 $2,955 $2,644 $2,929Net Profit $3,080 $2,702 $2,673 $4,079 $4,400 $4,369 $5,003 $5,672 $4,940 $6,895 $6,168 $6,834Net Profit/Sales 11.85% 10.39% 10.28% 14.31% 15.44% 15.33% 16.14% 18.30% 15.93% 20.58% 18.41% 20.40% 59
  • Pro Forma Cash Flow Month Month Month Month Month Month 1 2 3 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 Month 12Cash ReceivedCash from OperationsCash Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500Subtotal Cash fromOperations $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Other Liabilities(interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Other CurrentAssets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Investment Received $50,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Received $76,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500 Month Month Month Month Month MonthExpenditures 1 2 3 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 Month 12Expenditures fromOperationsCash Spending $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250Bill Payments $211 $6,333 $6,699 $6,836 $10,148 $13,851 $13,961 $16,256 $15,103 $15,850 $17,017 $17,050Subtotal Spent onOperations $10,461 $16,583 $16,949 $17,086 $20,398 $24,101 $24,211 $26,506 $25,353 $26,100 $27,267 $27,300Additional Cash SpentSales Tax, VAT, HST/GSTPaid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Principal Repayment ofCurrent Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Liabilities PrincipalRepayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Long-term LiabilitiesPrincipal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Other CurrentAssets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Spent $10,461 $16,583 $16,949 $17,086 $20,398 $24,101 $24,211 $26,506 $25,353 $26,100 $27,267 $27,300Net Cash Flow $65,539 $9,417 $9,051 $11,414 $8,102 $4,399 $6,789 $4,494 $5,647 $7,400 $6,233 $6,200Cash Balance $67,539 $76,957 $86,008 $97,421 $105,523 $109,922 $116,710 $121,204 $126,852 $134,251 $140,484 $146,685 60
  • Pro Forma Balance Sheet Month Month Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 Month 12 StartingAssets BalancesCurrent AssetsCash $2,000 $67,539 $76,957 $86,008 $97,421 $105,523 $109,922 $116,710 $121,204 $126,852 $134,251 $140,484 $146,685Inventory $30,000 $23,650 $17,300 $10,950 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Current Assets $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685Long-term AssetsLong-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Assets $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685 Month MonthLiabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 10 11 Month 12Current LiabilitiesAccounts Payable $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Current Liabilities $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Liabilities $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869Paid-in Capital $43,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000Retained Earnings ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000)Earnings $0 $3,080 $5,782 $8,455 $12,535 $16,934 $21,304 $26,307 $31,979 $36,919 $43,813 $49,982 $56,816Total Capital $32,000 $85,080 $87,782 $90,455 $94,535 $98,934 $103,304 $108,307 $113,979 $118,919 $125,813 $131,982 $138,816Total Liabilities and Capital $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685Net Worth $32,000 $85,080 $87,782 $90,455 $94,535 $98,934 $103,304 $108,307 $113,979 $118,919 $125,813 $131,982 $138,816 61