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SmallData Inc.
Small, Smart and Simple
Min Xu, Xueying Lu, Victor Li 2/25/16 Business Plan
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About SmallData Inc.
SmallData’s mission is to optimize information networks by making it simple and
friendly to all users.
We will accomplish our mission by building accurate, easy to use and reliable platforms
for our customers at a competitive price. We hope to learn with each project we undertake to
add to our knowledge base and to continuously develop innovations that are energy and data
efficient. We want to be a leader in information technology.
Our Company and People
SmallData was founded in 2015 and has 3 team members: Min Xu, Xueying Lu and
Victor Li. Each member brings different experiences and skillsets that are important to our
company’s mission. Min Xu is our founder and principle developer. Xueying Lu has an eye for
user experience and design, and Victor Li bring a background in business development and
marketing.
Min Xu is currently a 2nd
year MSEE student at CSULB. He has more than 5 years'
experience for mobile application development, and has developed several successful apps for
iOS, Android and J2ME. He previously worked as a software engineer in China. He helped two
of his friends successfully start their own business. His is responsible for product development
and software engineering.
Xueying Lu is also currently in her 2nd
year MSEE program at CSULB with a focus on
signal processing and wireless communications. Prior to CSULB, she worked for China State
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Grid as an electrical engineer. Her primary focus is design and user experience. Xueying has
previously designed numerous brochure layouts for many classmate’s small businesses in China.
Victor Li received his MBA from Arizona State University. He currently works as the
marketing manager at Caesars Entertainment where he is responsible for developing marketing
strategies including segmentation, revenue forecasting, branding and advertising as well as
customer acquisition and retention. Victor will focus on all business development and marketing
aspects of SmallData.
The Problem
Currently there is a significant amount of people in Southern California who use bus
system as their primary mode of transportation. These include a diverse group of individuals.
Those who chose to ride the bus are at the mercy of multiple factors when deciding when to get
to the bus station. Unfortunately buses can be unreliable which makes planning, especially those
with transfers difficult. Currently none of the public transportation systems in Los Angeles,
Orange County, or Long Beach offer a way to get up to date information on the location of each
bus. Without access to this type of information, people who depend on the bus to conduct their
daily lives suffer from wasted time and general inefficiency.
The Solution
SmallData has developed a mobile app that is available on the Google Play Store and
Apple App Store which can provide live tracking in an easy to use format. The Live Bus
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Tracker is free to download to all users and through it we hope to reduce our users travel
uncertainties. A screenshot of our product is shown in Exhibit 1 in the appendix.
Our tool currently tracks Long Beach Transit and Cal State Long Beach shuttles, and we
hope to quickly expand to Los Angeles, and Orange County to give our users more usability.
The Live Bus Tracker uses data directly from the transit system which is retrieved from
the buses while they are in route. This means that our system provides the most accurate
reporting of bus locations compared to any other system currently available.
Platform
SmallData’s platform is the basis for our present and future technology. The platform
emphasizes usability and scalability. In its current form, our platform uses GPS data to track
public transportation systems. In the future additional features such as bus transfers scheduling,
trip planning for the front end user and system efficiency and messaging capabilities for back
end users. Because our system is built on a scalable platform, we are able to update and improve
our product rapidly and at lower cost than our competitors. The platform also allows us to keep
user experience consistent through all upgrades. This feature helps our customers become
accustom to our product and will ultimately aid in user loyalty.
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Market Research
According to bus ridership statistics, as of 2012, between Los Angeles and Long Beach
Transits, there were a total of 388 million individual trips. If we include other major
metropolitan cities such as San Francisco and San Diego, the number jumps to an astonishing
550 million trips in 1 year.
Rider Demographics
Based on our market research bus riders are a very diverse segment. Below are some key
statistics of bus riders.
59% of riders are between ages 24-54
40.6% of riders are Caucasian, 33.1% African American, 14.3 Hispanic, 5.5%
Asian and 6.6 mixed or other
45.6% of riders reported an income between $19,999 to $49,999, and 34.3% of
riders have incomes over $50,000.
82% of all riders are either employed or students with only 6.4% of riders
unemployed.
55% of riders are female
70% of riders have at least 1 car in their household
These statistics reveal that bus riders have options and chose to ride the bus for a number of
reasons, a large percentage of them have adequate purchasing power and can be considered to
have upward mobility. All of this is important to us because our users need at a minimum the
ability to obtain a smartphone and have access to a data plan. The statistics show that a large
portion of the riders fit into our target market.
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Target Market
Our target market is very broad. We define anyone who rides the bus and has a
smartphone that allows them to access data as our target market. We define our market this way
for several reasons. First, we believe that our app would benefit all bus riders since our aim is to
offer the most accurate information. Second, our business model which will be discuss later
relies on being able to pinpoint our user’s location and target advertising to them. As our
company evolves we need access large amounts of rider data to accurate model rider behavior
and patterns. Eventually, SmallData will shift from an app company into an IT company, our
target market will shift from our users to transportation companies such as Long Beach Transit,
and eventually any company with IT needs. Lastly, we will enter the smart devices industry with
consumer and business customers.
Competitors and Market Analysis
There are numerous bus trackers apps currently available for download. The scope of
transit systems and the features they provide vary. Most of them utilize the bus schedule to
estimate when a bus will arrive at a certain location. Almost all of the apps that we surveyed on
Google Play and Apple Store pulls information from Google Maps. We believe that Google
Maps is the best available mapping system and also use it in our app. The main competitive
advantage we enjoy is the accuracy and real time reporting because we retrieve our data directly
from the source. In addition, our product allows for the reporting of multiple bus lines at the
same time. Since all of the apps we surveyed during our market research were free to download
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and use, we feel the best way to compete and gain market share is through an easy to use
interface and providing our users with the best available data. A chart of our competitive
analysis and SWOT analysis is included in our appendix and detailed below.
In the digital age there is zero barrier to entry when developing an app. We were able to
develop our program without the need to purchase any special equipment or startup capital. As
such, we do not have to worry about economies of scale for a development or manufacturing
perspective. Our distribution channels are also ready made through the Google and Apple App
stores. When analyzing our suppliers, our suppliers have a tremendous amount of power. We
depend on the local transportation systems to provide the data we need. If they decide deny
access we would no longer be able operate. We do not anticipate that the transportation bureaus
develop their own in house apps because of the costs and because others already provide this
service. Since our app and others in this category is free to users, the power of the buyer is very
large. They do not incur any switching costs and there is no price sensitivity. However we do
notice from the data provided by Google Analytics that our product is very sticky. Over 90% of
our users are return users. Even though our user numbers are currently low, we believe that this
type of stickiness gives validation to the quality of our product. Lastly there are numerous
substitutes in this category, but we feel that we can be competitive with added marketing. We
also have a comprehensive evolution plan for our company that we will discuss later in our
business plan.
Sales and Marketing
Marketing
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The first phase of our company growth is to introduce the product and to gain as many
users as possible. With our current budget, all of our marketing will be on social media and
word of mouth between users. One of the first features we plan on adding to our app is the
ability to link it to Facebook, Instagram, Pinterest and also to leave reviews for it on the app
store. Our goal is to gain brand awareness. We will start with students inside Cal State Long
Beach since this is a market that we can monopolize. Then we will ask these student users to
spread our word to their friends and family because users in this demographic tend to be the most
social and engaged in social media. We currently since launch have 2,000 users. Once we have
over 6,000 active daily users, we can conduct A B testing to continuously refine our product. At
this point, we will need capital to upgrade our IT equipment, purchase a dedicated hosting
location. We anticipate that with marketing, we can grow to 10,000 users within 3 months of
launch. Our final phase of marketing is to introduce push alerts, reminders and emails to our
users to get them to be more engaged with us. The alerts and reminders will help our users know
when their bus is almost here, and our emails will ask our users to give us more suggestions on
and provide general feedback on their daily transit.
Sales and Revenue
Our revenue will come from advertising within our app. We will partner with Google
AdMob, Amazon and their Amazon Mobile Associates program. We will incorporate
AdMob/Amazon placed ads directly into our app and instantly be able to monetize our product.
We feel this is the optimal solution for us because it is cost effective and we will be able to earn
revenue both on impressions and ad clicks. Therefore, our focus is to quickly grow our user base
and make sure the layout of our app is designed with ad placement a top consideration.
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In order to partner with AdMob and Amazon, we must meet a series of hurdles for our
app including usability, app behavior, and compatibility. We are currently testing to ensure that
our app will pass these test. The funding from the innovation challenge would expiate the
process allowing SmallData a faster path to revenue. Revenue is calculated at $.002 per minute
of usage. Currently our users are on our app on average 1.2-1.5 minutes which satisfies the
payment criteria. Using projections of 10,000 unique users and 80% utilization per day with 2
unique sessions, our revenue from the app is $960 per month. By 50,000 sessions a day, our
month revenue will be $4,800. We hope to reach this number by the end of year 1. However we
do not expect to gain any revenue in the first half of year 1 because we will focus on product
development, and market growth before introducing ads to our product. Our financial projections
for the next 3 years is detailed in exhibit 3.
Our shift in revenue is detailed below in future developments. We will shift from
advertising revenue to consulting and software sales. Apps are becoming commodities and our
competitive analysis reveals that apps are not a favorable industry to enter due to the number of
competitors as well as the lack of barriers to entry. We need to move upstream and shift our
focus to a less competitive field. Consulting and software will allow us to grow, diversify and
become profitable.
Partnerships
Partnerships are very valuable to our company’s growth. We hope to become partners
with CSULB and also Long Beach transit. For CUSLB, we would provide our software for all
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users and work with the school to find a more cost effective way to track the school shuttle
system. Our app would also help alleviate the parking congestion on campus by providing
students with a more effective way to plan their bus and shuttle usage on and around campus. If
the partnership is successful, we would be open to having CSULB taking an equity stake in our
company in exchange for capital and research partnership to speed up our growth. Through the
partnership, SmallData will gain a reputation as a dependable IT provider. This will benefit us
when we bid on IT contracts with other companies.
Future Development
Our growth will come in 4 phases. From these 4 phases we will transition ourselves from
an app based software company to a full service IT solutions company. These four phases are
expected to take 3 to 4 years depending on market conditions and company growth.
Phase 1: We are currently in phase 1 which includes completion of our Live Bus Tracker
app to include iOS support. We also hope to secure funding through CSULB’s innovation
challenge to fund our growth. We will also use grassroots marketing to gain brand exposure and
work with CSULB and Long Beach Transit to support their goal of offering reliable public
transportation. This phase will be complete at the end of the innovation challenge.
Phase 2: If we can secure adequate funding, we would like to expand our development
team with other students at a low cost. We will add more surrounding cities’ transportation
systems to improve our coverage and usability. SmallData will also quickly add Amazon Ads to
our app to provide us with revenue. We will also spend money on advertising in order to grow
our user base. The user experience needs to be further refined with testing on placement, colors,
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and calls to action within the app. We expect to be in phase 2 for 1 to 1.5 years. By the end of
phase 2, we anticipate sustained revenue and can move into phase 3.
Phase 3: SmallData will shift from our app to consulting and software sales. We will
need to hire a small software development team. Our goal during this phase is to develop our
own in house tracking system that can be fitted to any transportation device and uses our app as
its platform. We will also introduce in house system analytics which can optimize route
efficiencies, and user behavior. Our customer would include public transportation companies,
public school systems, waste management companies, tour bus operators to name a few. We will
compete based on value and reliability. Based on our market research, software systems of this
type typically cost between $40,000-$100,000 with $15,000 in installation costs. In addition,
there are monthly service monitoring charges of $5,000. We will price our software at $35,000
to start with free installation and monthly maintenance fees of $3,000 a month. Our company
will use the experience and results of our partnership to showcase our technology and provide a
basis for us to start selling our consulting services or software. We will complete phase 3 once
we have completed 5 sales of our systems. This phase is projected to take between 2-3 years.
Phase 4: Once our product has been successfully introduced, we will move to the final
phase. This phase involves developing 4 product lines within the company: transportation
logistics, IT optimization/consulting, smart sensors, and smart homes. We will using our
experience to build software solutions for smart home devices that will allow our customers to
control their devices from their smartphone. Another area of research and development are
control systems for smart devices. Our transition into smart sensors and smart homes will be
nature because our system is built around passing small packets of data efficiently and in a cost
effective way.
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Our Current Needs
We are participating in the CSULB Innovation Challenge to gain exposure for our
product and also to obtain seed money and other resources to help with our product development
and marketing. We are currently in Phase 1 of our development and working to rapidly grow our
user base. Our current user base is 2000 users with between 100 to 200 unique users a day. We
pride ourselves on lean and agile development methods our capital needs are low compared to
traditional brick and mortar companies. Our company are seeking between $10,000-$50,000 in
the first year to cover product development, marketing and legal fees. When we reach phase 2 of
our development, we will need additional capital for fixed expenses such as office space, and a
small development team. We would like to be the exclusive provider of shuttle tracking for
CSULB and to have our app featured in the CSULB website and campus newspaper. This will
allow us to continue to test and refine our product as well as to gain a rapid user growth. We
also would use the prestige of competing and winning the innovation challenge to add credibility
our company when we approach Long Beach and Orange County transit to become their tracking
provider.
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Appendix
Exhibit 1: Screenshot of the app
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Users Overview from Google Analytics Long Beach Bus for Android (7/30/2015 – 2/24/2016)
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Exhibit 2
SWOT Analysis of App market and Small Data App
Strength:
Most accurate data source
Free to use
Easy to use
Weakness:
Late to market
No marketing budget
No dedicated development
team
Threats
Larger competitors
Data we need is no longer
publicly provided
Opportunities:
Include more transit
systems
Add bus transfer planner
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Exhibit 3
Financial projection years 1 – 3
Year One Year Two Year Three
Expected Expenses
Advertising $ 5,000 $ 17,000 $ 35,000
Contract Labor $ 5,000 $ - $ -
Insurance $ - $ 2,000 $ 2,000
Sales & Marketing $ 2,500 $ 25,000 $ 50,000
Rent $ - $ - $ 25,000
Salaries $ - $ 50,000 $ 125,000
Office Expenses/Supplies $ 1,600 $ 5,000 $ 7,500
Utilities $ - $ 500 $ 750
Legal Fees $ - $ - $ 5,000
Total Expenses $ 14,100 $ 99,500 $ 250,250
Expected Revenue
Ad revenue $ 5,000 $ 25,000 $ 45,000
Consulting Fee per client $ - $ 36000 $ 36000
# of clients 2 5
Total Consulting Fee $ 72000 $ 180,000
Software Sales per client $ - $ 35,000 $ 35,000
# of clients 2 5
Total Software Sales $ 70,000 $ 175,000
Total Revenue $ 5,000 $ 167,000 $ 400,000
Profit $ (9,100) $ 67,500 $ 149,750
Profit Margin - 40.42% 37.44%
