How-To-Guide Series
How to Develop Business Plan
Dr. Eisa Abdelgalil
Data Management and Research Department
2005
Published by Dubai Chamber – Data Management &
Business Research
Tel. 04 2028410
Fax: 04 2028478
www.dubaichamber.ae
ISBN 9948 – 430 – 03 - 4
Table of Contents
Table of Contents...........................................................................................................1
1. Introduction................................................................................................................2
1.1 Background ..........................................................................................................2
1.2 Objective ..............................................................................................................2
1.3 Methodology and data..........................................................................................2
2. Business Plan .............................................................................................................3
2.1 What is a business plan? ......................................................................................3
2.2 Information needs ................................................................................................4
2.2.1 Market information ...........................................................................................5
2.2.2 Operation information.......................................................................................5
2.2.3 Financial information........................................................................................6
3. Writing Business Plan................................................................................................7
3.1 Introduction..........................................................................................................7
3.2 Executive summary..............................................................................................7
3.3 Industry analysis ..................................................................................................8
3.4 Description of business ........................................................................................9
3.5 Production plan ....................................................................................................9
3.6 Operations plan ..................................................................................................10
3.7 Marketing plan ...................................................................................................10
3.8 Organizational plan............................................................................................11
3.9 Financial plan.....................................................................................................11
3.10 Risk assessment ...............................................................................................13
3.11 Conclusion .......................................................................................................13
3.12 Appendix..........................................................................................................14
4. Sample Business Plan ..............................................................................................15
References....................................................................................................................32
Appendix I ...................................................................................................................33
Appendix II ..................................................................................................................36
1
1. Introduction
1.1 Background
The business planning process helps investors to understand what they want to do,
how and when. Planning is an important task for investors in avoiding fatal mistakes
during the implementation process of a new business. During planning, the process of
thinking, researching and analyzing is as useful as the plan itself. Going through the
planning process can be very beneficial to the new business.
During the business planning process, errors of judgment can easily be rectified and
new options can be explored, but it is too late to do that during the implementation
process of the business. A solid business plan may not necessarily lead to business
success but it is expected to identify the problems that may lie ahead.
A well-prepared business plan demonstrates that the investor knows the business very
well and that he has carefully thought of the new business in terms of product/service,
management and organization, marketing and competition, and financing and risks.
1.2 Objective
Business plan is an important document that any entrepreneur needs when starting up
a new business (the words investor and entrepreneur are used interchangeably in this
guide). It helps the entrepreneur put things into perspective and understands what is
needed to be done. The objective of this guide is to enhance the awareness of those
who are starting their businesses and help them develop step by step their business
plans. This guide answers the following research questions:
1. What is a business plan?
2. What are the information needs for a business plan?
3. How is a business plan developed?
1.3 Methodology and data
A step-wise approach is used to develop step-by-step business plan. Literature
materials are compiled from various sources, including the Internet.
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2. Business Plan
2.1 What is a business plan?
The business plan (BP) is a document which describes the pertinent internal and
external factors and influences that are involved in starting a new business. Ideally,
the BP provides answers to the crucial questions of where is the business now? Where
is the business going? And how does it get there? The PB, as a road map, helps the
investor put things into perspective and understands what is needed to be done.
The BP can be prepared by the investor, but he/she may hire or enlist the help of other
people, such as business consultants and experts. The Internet provides a free source
where samples of BP can be found. Whether the PB is to be prepared by the investor
or a consultant depends on whether the investor has the necessary skills that are
needed for preparing a BP, such as planning, organizing, forecasting, marketing and
sales, etc. Usually, the investor determines which skills he/she possesses and which
are lacking and then look where to find them.
When drawing up the BP, there are three perspectives that are to be considered. These
are namely the investor's perspective, the market perspective, and the lenders'
perspective.
In the first perspective, the investor views the new business through his/her own eyes
and should be able to articulate and crystallize the basic concept of the new business.
In the second perspective, the investor view the new business through the customers'
eyes and therefore needs to think of whether or not the product/service will satisfy the
customers' needs.
In the third perspective, the investor views the business through the lenders' eyes and
therefore needs to think whether or not the business has sound financial projections.
The scope and the level of the details of the BP are determined by several factors.
These are the type of the new business, the growth potential of the business, the
market size of the product/service, and competition, among others. The potential
readers/evaluators of the BP are people such as the business employees, suppliers,
customers, and potential lenders such as bankers and financiers. The BP is supposed
to satisfy the needs of all those who are likely to read and evaluate it. For example,
the potential lenders are usually interested in the so-called four Cs of credit: character,
cash flow, collateral; and capital contribution. In other words, the lenders are mainly
3
interested in that the BP reflects the investor's credit history (character), his ability to
repay debt and interest (cash flow), the tangible assets that secure the loan (collateral)
and the equity that he has invested in the business (capital).
The BP helps determine the feasibility of the new business, provides guidance to the
investor in planning and organizing the business activities, and helps in getting the
necessary financing.
Generally speaking, there are two main types of business plans. These are namely
basic plan and comprehensive plan. The following table summarizes the different
features of these two types of plans, based on survey results:
Table 1: Characteristics of business plans
Purpose of Plan
Type of Plan
Approx
Pages *
Elapsed
Months **
External
Help?
Number
of Drafts
Parts of
Greatest
Difficulty
Internal/
Market analysis
Basic
10
<2
No
1-3
personal use
Raise bank
Financial
Comprehensive
15
1
Probably
2-4
projections
loans
Seek venture
Market analysis
Comprehensive
20+
2-5
Probably
2-5
capital/ equity
Assess viability
Market analysis
Basic
10
2
Possibly
2-4
of business
Secure
approval from
All parts equal
Comprehensive
15
2-3
Possibly
2-6
shareholders/
directors
Source: Business Plan Ware, available at http://www.planware.org/insights.htm?source=trpanel#2
* Main sections only - excludes appendices, attachments etc.
** Covering research, writing & redrafting.
2.2 Information needs
The preparation of the BP requires a lot of time and energy. Therefore, before the
investor makes that commitment it is preferable that the investor makes a quick
preliminary feasibility study for the idea of the new business to identify whether there
are obstacles to its success. Before doing the pre-feasibility study, the investor needs
to define the goals of the new business because these goals set the framework of the
production, marketing and financial plans of the new business. The quick feasibility
study needs information and these are marketing, operational, and financial
information.
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2.2.1 Market information
The information on the target market of the new business product/service is important
element for the investor to know. The definition of the target market (the buyers) of
the product/service helps the investor determine the size of the market and the market
goals of the business. The target market can be defined based on things like income
group, educational level, geographical location, demographic and gender factors, etc.
A good marketing plan needs gathering information on the industry and the market
under consideration. The investor may start gathering broad information on general
environmental and demographic factors and national industry trends (the one in which
the investor will be operating). Then work down to the medium level of the local
environmental and demographic factors, local industry trends, and local competition
strengths and weaknesses. Then finally the investor can narrow down on the actual
market positioning in the competitive environment and market objectives and goals of
the new business, that are quantifiable and measurable.
2.2.2 Operation information
The operational information that the BP plan may incorporate and may need some
search by the investor is as follows (assuming manufacturing business operation):
♦ Location: The accessibility of the new business to customers, suppliers,
distributors, etc. is determined by its location.
♦ Manufacturing operations: The identification of the machine and assembly
operations and which part is sub-contracted.
♦ Raw materials: The source and cost of raw materials and suppliers contact
information.
♦ Equipments: The equipments to be purchased or leased and their cost.
♦ Labour: The different types of labour skills that are needed and their costs and
how to get them.
♦ Space: The space size that is to be rented or bought.
♦ Overhead: The items that are needed to support the activity.
5
2.2.3 Financial information
The investor needs to prepare a budget which includes all possible expenditures and
revenues in the first year of the new business. The expenditures may include capital
expenditure, direct operations costs and other expenses that are likely to be incurred.
The revenues can be forecasted using market data. The industry benchmarks, which
represent the industry history and trends, can be used to prepare the pro forma
financial statements and estimate the costs.
6
3. Writing Business Plan
The BP should be comprehensive and convey a full picture and understanding of the
new business to those who will be interested in it. The outline of a BP is shown in
Appendix I at the end of this guide. This section explains in more details the items
that are included in the outline of the BP, which is shown in the appendix. In
principle, the presentation can easily be adapted to fit manufacturing or nonmanufacturing businesses, whether they are producing a product or providing a
service.
3.1 Introduction
This introductory page summarizes the basic idea of the new business. Those who are
interested in the BP can read it and form a clear idea of the business. This is the cover
page that gives a short description of the contents of the BP and the page usually
includes the following information:
♦ Name and address of the new business.
♦ Name of the investor, phone and fax numbers, e-mail, website, if there is one.
♦ Short description of the nature of the new business.
♦ Financing needs that can start this new business and keep it running.
♦ Statement on the confidentiality of the report.
3.2 Executive summary
This is an essential part of the BP because it is supposed to encourage and stimulate
the people, who are interested in the BP, to read through the whole plan. Therefore
this part will determine whether or not the BP is interesting enough to read it all. The
executive summary usually puts forward the key points of the BP in a clear and
persuasive manner. The executive summary is not about summarizing every part of
the BP, but highlighting the essential and the crucial issues in the new business idea.
An example of a business plan executive summary is shown in Appendix II at the end
of this guide.
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Although the executive summary appears first in the business plan, but usually it is
written when the whole plan is finished. It covers the most important facts such as
sales growth and profitability and strategic focus. The contents of the summary
depend on the goals of the plan. If the goal is to sell a business idea to
financiers/investors, then the summary should include the main highlights that will
stimulate potential financiers/investors to read the plan in its entirety. These main
highlights may be growth rates, competitive edge, new technology, etc. On the other
hand, if the plan is for the business internal use only, then the summary is matched to
that purpose.
As a general rule, the first paragraph should include the name of the business, what it
sells, where it is located, the nature and purpose of the plan, and the keys to the
success of the new business. Then the strategic focus of the plan, and any other
important information that other people should know, should be highlighted. Charts
that show sales, gross margin, and profits for at three years can be included, and these
numbers should also be mentioned in the summary text. Always remember that the
executive summary is the key to the rest of the plan. Therefore, keep it short and get it
right.
3.3 Industry analysis
In this section, the BP starts with the description and the assessment of the external
environment of the new business, that is, the variables that are beyond the control of
the business. These are things such as the economy, technology, laws and regulations
and culture. For example, things such as unemployment, average income, interest rate
changes and technological advances, socio-cultural changes in society. In addition,
competition and trends of industry, in which the new business will be operating, are
discussed and analyzed. Usually, this part covers the following important issues:
♦ Economic, technological, legal and cultural issues at national economy level.
♦ Products/services of the industry.
♦ Industry sales over the last three to five years.
♦ Industry expected growth in the foreseeable future.
♦ Entry of other companies into the industry over the last 3 to five years.
♦ Competitors and their strengths and weaknesses.
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♦ Sales growth of the competitors.
♦ Market trends in the local market of the new business.
♦ Profile of the customers of the new business and that of the competitors.
3.4 Description of business
This section of the BP describes in details the product/service provided by the new
business and the size and the scope of the new business and its operations. Examples
of things to be emphasized here are management team, company technical capability,
products, infrastructure, offices, transport, strengths and weaknesses, and strategic
objectives. Usually this section covers the followings important issues, among others:
♦ Mission statement which describes what the new business attempts to achieve.
♦ Reasons of establishing the new business and the reasons of its likely success.
♦ Description of the product or service provided.
♦ Location of the new business, its accessibility to traffic and parking facilities.
♦ Business premises, their conditions and their legal status.
♦ Utilities available at the premises such electricity, water and sewage.
♦ Personnel and purchased or leased office equipment.
♦ Experience of the investor that is needed for the success of the business.
3.5 Production plan
If we assume the new business is a manufacturing facility, then this part of the
business plan should describe in details the manufacturing process of the product that
is to be produced by the new business. Usually, this part covers the following issues,
among others:
♦ Lay out of the manufacturing process of the product.
♦ Manufacturing machinery and equipment, their costs and suppliers.
♦ Manufacturing raw materials, their costs and suppliers.
♦ Costs of sub-contracting and the sub-contractors and their details.
♦ Product manufacturing costs.
9
If the new business is non-manufacturing operation, then this section can easily be
adapted. For example, for a retail trader he/she needs to think of things like the goods
to be purchased, inventory control, storage space, steps of the business transaction,
flow of goods to customers, and customer service, etc.
3.6 Operations plan
This section of the BP plan describes the flow of a product or a service from the
producer or the provider to the customers. This includes things such as inventory
control, product or service delivery and customer support services, the steps involved
to finalize a business transaction and the role of technology in that transaction
process. For the businesses that provide services, the service delivery quality is
important feature of the new business and therefore it should be detailed in this part of
the BP.
3.7 Marketing plan
♦ The market plan is basically about how the new business will effectively
compete and survive in the market place. This part of the BP describes how a
product/service is promoted, priced and distributed. It describes the market, its
geographical area, consumers' behavior and market segmentation, actual
demand, potential demand, and future demand. Usually, this section of the BP
covers the following critical issues, among others:
♦ Market description
- Customers description: Segmented by consumer demographics such as
age,
sex,
income,
occupation,
education,
etc.;
and
consumer
psychographics such as needs, attitudes, interests, life style etc.
- Competitors description: Identify businesses that compete with you
directly, describe their strengths and weaknesses and know their marketing
strategies.
-
Marketing objectives and goals
-
Marketing strategy and action programmes
-
Budget and controls for marketing strategy and action programmes
10
♦ Product/service description
- Product: Describe the benefits of the product/service to the customers.
- Price: Describe how the price is set for the product/service.
- Place: Describe the aspects of getting the product/service to consumers.
- Promotion: Describe how the product/service is promoted.
3.8 Organizational plan
This part of the business plan describes the new business in terms of ownership,
authority and responsibilities. This section of the BP usually covers issues like the
legal form of the new business. The business legal status may be proprietorship,
partnership, joint stock or limited liability company. Also, this section includes the
number of employees and managers of the business and the business organizational
structure with job descriptions and responsibilities for all the key employees of the
business. This is translated into an organizational chart that delineates the authority
lines and who is responsible for what within the new business and how the employees
interact when carrying out their duties.
3.9 Financial plan
This section of the BP describes in details the financial projections of the new
business and its financial and economic feasibility. Also, it describes the investor's
financial commitment to the new business. These financial projections are usually
made for the first three to five years of the new business. For the first year, the
projections are made on monthly basis and for other years they are made on annual
basis. Usually, three financial statements are prepared by the investor and these are
pro forma income statement (also know as profit and loss account), pro forma cash
flow statement, and pro forma balance sheet.
The pro forma income statement (also known as profit and loss statement) describes
projected net income/profit as projected revenue minus projected costs. It consists of
four main sections and these are namely:
♦ Sales revenues: Inflows from the operations of the company
♦ Costs of goods sold: Direct costs of goods produced or services provided.
♦ Expenses: These are costs incurred in the business operations, such as
administrative and selling cost.
11
♦ Net income: Net outcome of revenues minus costs and expenses.
The pro forma cash flow statement or budget describes the projected cash available as
projected cash inflows minus projected cash outflows or disbursements. It consists of
four main sections and these are namely:
♦ Beginning cash balance: Cash available to the business at the beginning of
operation, it can at hand or in bank accounts.
♦ Cash inflows: Cash from sales, collection of accounts receivable, loans
proceeds, and any other cash received.
♦ Cash outflows: Payments to suppliers and employees, capital expenditures,
loans repayments, and any other cash dispersed.
♦ Ending cash balance: It is the beginning cash balance plus cash inflows minus
cash outflows.
The pro forma balance sheet (also known as statement of financial position) describes
the projected assets, projected liabilities and the projected net worth of the new
business. It consists of three main sections, and these are namely:
♦ Assets: Resources of the business for operation.
♦ Liabilities: Claims by outsiders on the business resources.
♦ Owner's equity: What is remaining of the business resources when liabilities
are subtracted from the assets.
Another financial statement that may be needed is known as the sources and uses of
funds statement. This statement is needed if the BP is prepared with the view of
getting funding from financiers or lenders. It shows where the money is coming from
and where it is going to. It consists of two main sections, and these are namely:
♦ Sources of funds: Revenues from operations, increase in debt, sales of assets,
equity contribution, and any other sources of money.
♦ Uses of funds: Debt repayment, purchase of equipment, land and buildings,
operation expenses, and any other expenses incurred by the business.
♦ Changes in financial position: The difference between the inflows and
outflows of funds.
12
The following financial information, among others, is usually needed for drawing up
the financial plan:
♦ Fixed and variable cost projections for 3 to 5 years.
♦ Sales projections for 3 to 5 years.
♦ Projected cash flow for 3 to 5 years.
♦ Projected income statements for 3 to 5 years.
♦ Projected balance sheets for 3 to 5 years.
Also the investor needs to lay out the capital he/she requires to start the new business.
Not only what he/she needs in the start up phase, but also he/she should think of any
investment that may be needed at a later stage.
3.10 Risk assessment
This part of the BP describes the potential risks to the new business and the strategies
to deal them, in case they occur. The potential risks may come from competitors, poor
production, marketing or management performance, and new technology. Therefore,
all risks that the new business is likely to encounter are to be discussed and evaluated.
3.11 Conclusion
In conclusion, the investor needs to emphasize and highlight the main points that may
insure or indicate the success of the new business and why he/she will be able to carry
out the plan successfully. The following factors may be helpful in the preparation of a
good BP, and lead to the success of the new business:
♦ The goals of the new business are specific and measurable.
♦ Full commitment by the investor to the new business.
♦ Prior experience in the field of the new business.
♦ Having sense for the potential risks and weaknesses of the new business.
♦ Establishing customer needs of the product/service.
♦ Strong initial advertising.
♦ Ability to offer low prices.
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♦ Quality of product/service.
♦ Unique selling points and exclusive distribution channels.
♦ Capacity to innovate and modify product/service quickly.
3.12 Appendix
All the information and the documents that are not essential in the main body of the
BP are moved to this section. Examples of this are permits, leases, contracts,
agreements, market research data, and other supporting materials.
14
4. Sample Business Plan
This section introduces an illustrative example of a sample BP. The sample plan is for
an Internet Café and it has been adapted to Dubai from Business Plan Pro1. The
sample BP follows, more or less, the BP format that is shown in the Appendix.
1. Executive summary
Dubai Net Café, henceforth abbreviated as (DNC), will provide a forum for
communication and entertainment through the Internet. There is an increasing public
demand for access to the methods of communication and volumes of information now
available on the Internet; and access at a cost they can afford and in such a way that
they aren't socially and economically isolated. DNC's goal is to provide the
community with a social, educational, entertaining, and atmosphere for worldwide
communication.
This business plan is prepared to obtain financing in the amount of AED 240,000. The
financing is required to begin work on site preparation and modifications, equipment
purchases, and to cover expenses in the first year of operations. Additional financing
has already been secured in the form of (i) AED 240,000 from the Dubai Economic
Development Fund (ii) AED 190,000 of personal savings from the owner the business
(iii) AED 360,000 from three investors (iv) and AED 90,290 in the form of short-term
loans.
DNC will be registered as a limited liability company (LCC). This will shield the
owner and the three outside investors from issues of personal liability. The investors
will be treated as shareholders and therefore will not be liable for more than their
individual personal investment of AED120,000 each.
The financing, in addition to the capital contribution from the owner, shareholders and
the Dubai Economic Development Fund, will allow DNC to successfully open and
maintain operations through year one. The large initial capital investment will allow
DNC to provide its customers with a fully-fledged Internet cafe. A unique and
1
This sample business plan is adapted from Business Plan Pro, Palo Alto Software, Inc., 2000.
15
innovative environment is required to provide the customers with an atmosphere that
will spawn socialization. Successful operation in year one will provide DNC with a
customer base that will allow it to be self sufficient in year two.
1.1 Objectives
The objectives of DNC for the first three years of operation are:
♦
Creation of unique and innovative environment that differentiates DNC from
other coffee shops.
♦
Educating the community on what the Internet has to offer.
♦
The formation of an environment that brings people with diverse interests and
backgrounds together in a common forum.
♦
Good coffee/tea and bakery items at a reasonable price.
♦
Affordable access to the resources of the Internet and other online services.
1.2 Mission statement
As the popularity of the Internet continues to grow, easy and affordable access is
becoming a necessity of life. DNC provides the community with the ability to access
the Internet, enjoy a cup of coffee/tea, and share Internet experiences in a comfortable
environment. People of all ages and backgrounds will come to enjoy the unique,
educational, and innovative environment that the DNC provides.
1.3 Keys to success
The keys to the success for DNC are:
♦
Creation of unique and innovative atmosphere that differentiates DNC from
other coffee shops and Internet cafes.
♦
Establishment of DNC as community hub for socialization and entertainment.
♦
Creation of environment that does not intimidate the novice user. DNC
positions itself as educational resource for individuals wishing to learn about
the benefits the Internet has to offer.
♦
16
Great coffee/tea and bakery items.
1.4 Risks
The risks involved with starting DNC are:
♦
Will there be sufficient demand for the services offered by DNC?
♦
Will the popularity of the Internet continue to grow?
♦
Will individuals be willing to pay for the service DNC offers?
♦
Will the cost of accessing Internet from home drop so significantly that there
will not be a market for Internet cafes such as DNC?
2. Company
DNC will be located in downtown Dubai in Deira City Centre, and it will offer easy
and affordable access to the Internet. DNC will provide full access to email, World
Wide Web (WWW), File Transfer Protocol (FTP), and other Internet applications
such as Telnet. DNC will also provide customers with a unique and innovative
environment for enjoying great coffee/tea, specialty beverages, and bakery items.
DNC will appeal to individuals of all ages and backgrounds. The educational Internet
classes, and the helpful staff that DNC provides, will appeal to the audience that does
not associate themselves with the computer age. This educational aspect will attract
young people who are rapidly gaining interest in the unique resources that online
communications have to offer.
2.1 Company ownership
DNC is privately owned Limited Liability Company (LLC). Mr. Ahmed Ali, the
founder of DNC, is the majority owner, holds 51% of the shares. Messrs Mohamed
Abdalla, Musa Hilal, and Abbas Mahmoud hold minority positions as private
investors; they hold 20%, 19% and 10% of the shares respectively.
2.2 Start-up
DNC's start-up costs will cover coffee/tea making equipment, site renovation and
modification, capital to cover losses in the first year, and the communications
equipment necessary to get its customers online.
17
The communications equipment necessary to provide DNC's customers with a highspeed connection to the Internet and the services it has to offer make up a large
portion of the start-up costs. These costs will include the computer terminals and all
costs associated with their set-up. Costs will also be designated for the purchase of
two laser printers and a scanner.
In addition, costs will be allocated for the purchase of coffee/tea making equipment.
One espresso machine, an automatic coffee grinder, and minor additional equipment
will be purchased.
The DNC's site at Deira City Centre will require funds for renovation and
modification. The renovation/modification cost estimate will include the costs
associated with preparing the site for opening the business.
2.3 Company location and facilities
A site has been chosen at Deira City Centre. The location is chosen for the following
reasons:
♦
Heart of Dubai-Deira downtown.
♦
Proximity to trendy and upscale apartments.
♦
Parking availability.
♦
Low cost rent.
♦
High visibility.
All of these qualities are consistent with DNC's goal of providing a central hub of
communication and socialization for Dubai-Deira area community.
3. Services
DNC will provide full access to email, WWW, FTP, and other Internet applications
such as Telnet. Printing, scanning, and introductory courses to the Internet will also be
available to the customer. DNC will also provide customers with a unique and
innovative environment for enjoying great coffee/tea, specialty beverages, and bakery
items.
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3.1 Service description
DNC will provide its customers with full access to the Internet and common computer
software and hardware. Some of the Internet and computing services available to
DNC customers are:
♦
Access to external POP3 email accounts.
♦
Customers can sign up for a DNC email account. This account will be
managed by DNC servers and accessible from outside the DNC network.
♦
FTP, Telnet, and other popular Internet utilities will be available.
♦
Access to Netscape or Internet Explorer browsers.
♦
Access to laser and color printing.
♦
Access to popular software applications like Microsoft Office.
DNC will also provide its customers with access to introductory Internet and email
classes. These classes will be held in the evening. By providing these classes, DNC
will build a client base familiar with its services. Good coffee/tea, specialty drinks,
bakery goods, and a comfortable place will provide DNC customers with a cozy
environment where they can enjoy the benefits of Internet and computing.
3.2 Competitive comparison
DNC will be the first Internet cafe in Deira-City Centre. DNC will differentiate itself
from the strictly coffee cafes in Deira-City Centre by providing its customers with
Internet and computing services.
3.3 Fulfillment
DNC will obtain computer support and Internet access from Etisalat. Etisalat will
provide the Internet connections, network consulting, and the hardware required to
run the DNC Network. Smart Coffee Co. will provide DNC with coffee/tea
equipment, bulk coffee/tea, and other supplies. A contract for the bakery items has
been completed with Dubai Bakeries to fulfill this requirement.
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3.4 Technology
DNC will invest in high-speed computers to provide its customers with a fast and
efficient connection to the Internet. The computers will be reliable and fun to work
with. We will continue to upgrade and modify the systems to stay current with
communications technology. One of the main attractions associated with Internet
cafes, is the state of the art equipment available for use.
3.5 Future services
As DNC grows, more communications systems will be added. The possibility of
additional units has been accounted for in the current plan. As the demand for Internet
connectivity increases, along with the increase in competition, DNC will continue to
add new services to keep its customer base expanding.
4. Market analysis
DNC is faced with the exciting opportunity of being the first-mover in the Deira City
Centre Internet cafe market. The consistent popularity of coffee/tea, combined with
the growing interest in the Internet, has been proven to be a winning concept.
4.1 Market segmentation
DNC's customers can be divided into two groups. The first group is familiar with the
Internet and desires an inviting atmosphere where they can get out of their offices or
homes and enjoy a cup of coffee/tea. The second group is not familiar with the
Internet yet, and is just waiting for the right opportunity to enter the online
community. DNC's target market falls anywhere between the ages of 15 and 65. This
extremely wide range of ages is due to the fact that both coffee/tea and the Internet
appeal to a variety of people. In addition to these two broad categories, DNC's target
market can be divided into more specific market segments. The majority of these
individuals are students, professionals and business people.
20
4.2 Target market segment strategy
DNC intends to cater to novice users who want a guided tour around the Internet and
to experienced users eager to indulge their passion for computers in a social setting.
Moreover, DNC will be a magnet for local and traveling professionals who desire to
work or check their email messages in a friendly atmosphere. These professionals will
either use DNC's PCs, or plug their notebooks into Internet connections. DNC's target
market covers a wide range of ages: from members of young generations who grew
up surrounded by computers, to old generations who have come to the realization that
people today cannot afford to ignore computers.
4.2.1 Market needs
Factors such as current trends and historical sales data ensure that the high demand for
coffee/tea will remain constant over the next five years. The Internet and online
services have been growing exponentially. The potential growth of the Internet is
enormous to the point where one day a computer terminal with an online connection
will be as common and necessary as a telephone. For the next five years, the online
service provider market is sure to experience tremendous growth. Being the first
Internet-cafe in Deira City Centre, DNC will enjoy the first-mover advantages of
name recognition and customer loyalty. Initially, DNC will hold a 100% share of the
Internet cafe market in Deira City Centre. In the next five years, competitors will
enter the market. DNC has set a goal to maintain a market share of more than 50%.
4.2.2 Market trends
A market survey was conducted in March 2005. Key questions were asked of hundred
potential customers. The following are some key findings:
21
♦
70 potential customers said they would be willing to pay to access Internet.
♦
Five Dirham an hour is the most popular hourly Internet fee.
♦
50 potential customers use Internet to communicate on regular basis.
4.3 Service business analysis
The retail coffee/tea industry in Dubai experienced rapid growth at the beginning of
the decade and is now moving into the mature stage of its life cycle. Many factors
contribute to the large demand for good coffee/tea in Dubai. The atmosphere in Dubai
City Centre is conducive to coffee/tea consumption. Current trends in Dubai reflect
the popularity of fresh, quality coffee/tea and specialty drinks.
The popularity of the Internet is growing exponentially. Those who are familiar with
the Internet are well aware of how fun and addictive surfing the Net can be. Those
who have not yet experienced the Internet need a convenient, relaxed atmosphere
where they can feel comfortable learning about and utilizing the current technologies.
DNC seeks to provide its customers with affordable Internet access in a cozy
environment.
Due to intense competition, cafe owners must look for ways to differentiate their
place of business from others in order to achieve and maintain a competitive
advantage. The founder of DNC realizes the need for differentiation and strongly
believes that combining a cafe with complete Internet service is the key to success.
The fact that no Internet cafes are established in Deira City Centre, presents DNC
with a chance to enter the window of opportunity and enter into a profitable niche in
the market.
4.3.1 Business participants
There are approximately 10 coffee wholesalers in Dubai. These wholesalers distribute
coffee/tea and espresso beans to over 100 retailers in Dubai-Deira area. Competition
in both channels creates an even amount of bargaining power between buyers and
suppliers resulting in extremely competitive pricing.
There is one online service provider in Dubai. This service provider uses a number of
different pricing strategies. These are charge monthly fee, charge hourly and/or phone
fees. Regardless of the pricing method used, obtaining Internet access through this
service provider can be rather costly for the average consumer. Consumers, who do
not frequently serve the Internet, will not be willing to pay these relatively high costs.
22
4.3.2 Competition
The dual product and service nature of DNC's business faces competition on two
levels. DNC competes not only with coffee/tea retailers, but also with Internet service
providers. The main competitors in the retail coffee segment are Cafe Havana, Swiss
Cafe, Gloria Beans, and Star Bucks. These businesses are located in Deira City
Centre, and target a similar segment to DNC's. Heavy competition between coffee/tea
retailers in Deira City Centre creates an industry where all firms face the same costs.
There is a positive relationship between price and quality of coffee/tea.
Competition from online service providers comes from the sole provider Etisalat.
Potential online service providers, after the liberalization of the telecommunication
market, are also a competitive threat to DNC.
The good news is that DNC does not currently face any direct competition from other
Internet-cafes in Deira City Centre. There are a total of ten Internet cafes in DubaiDeira area, but none of them is located in Deira City Centre. This number is expected
to grow with the increasing demand for Internet access.
5. Strategy
DNC has three main strategies. The first strategy focuses on attracting novice Internet
users. DNC plans on attracting these customers by:
♦
Providing a novice friendly environment. DNC will be staffed by
knowledgeable employees focused on serving the customer's needs.
♦
A customer service desk will always be staffed. If a customer has any type of
question or concern, a DNC's employee will always be available to assist.
♦
DNC will offer introductory classes on the Internet and email. These classes
will be designed to help novice users familiarize themselves with these key
tools and DNC computer systems.
The second, and most important, strategy focuses on attracting experienced Internet
users. Experienced Internet users serve an important function at DNC. They have the
knowledge and web-browsing experience that novice Internet users find attractive and
exciting. DNC plans on attracting these type of customers by:
23
♦
Providing the latest in computing technology.
♦
Providing scanning and printing services.
♦
Providing access to powerful software applications.
The third strategy focuses on building a social environment for DNC customers. A
social environment, that provides entertainment, will serve to attract customers that
wouldn't normally think about using the Internet. Once on location at DNC, these
customers that came for the standard entertainment will realize the potential
entertainment value the Internet can provide.
5.1 Competitive edge
DNC will follow a differentiation strategy to achieve a competitive advantage in the
cafe market. By providing Internet service, DNC separates itself from all other cafes
in Deira City Centre. In addition, DNC provides a comfortable environment with
coffee and bakery items, distinguishing itself from other Internet providers in DubaiDeira area.
5.2 Marketing strategy
DNC will position itself as an upscale coffee house and Internet service provider. It
will serve high-quality coffee/tea at a competitive price. Due to the number of cafes in
Deira City Centre, it is important that DNC sets fair prices for its coffee/tea. DNC will
use advertising as its main source of promotion. Advertisements (ads) placed in Dubai
daily news papers such Gulf News, Al-Khaleej Times and 7 Days, will help build
customer awareness. Accompanying the ads will be a coupon for a free hour of
Internet serving. Furthermore, DNC will give free three hours of Internet use to
beginners who sign up for an introduction to the Internet classes provided by DNC.
5.2.1 Pricing strategy
DNC bases its prices for coffee and specialty drinks on a solid pricing strategy. Our
pricing strategy drew on the experience of those companies who have been in the
coffee business for many years.
24
Determining an hourly price for online use is more difficult because there is no direct
competition from another Internet cafe in Deira City Centre. Therefore, DNC
considered three sources to determine the hourly price. First, it considered the cost to
use other Internet providers. Second, DNC looked at how Internet cafes in other areas
of Dubai went about pricing their Internet service. Third, DNC used the market
survey that it has conduced recently. Evaluating these three factors resulted in DNC's
hourly price of five Dirham.
5.2.2 Promotion strategy
DNC will implement a pull strategy in order to build consumer awareness and
demand. Initially, DNC has a budget AED 50,000 for promotional activities that will
include advertising, with coupons for a free hour of Internet use, in local news papers
and in-house promotions such as offering customers free Internet use if they pay for
an introduction to the Internet course taught by our computer technician.
DNC realizes that in the future, when competitors enter the market, additional budgets
must be allocated for promotion in order to maintain its market share.
5.3 Sales strategy
DNC employs staff to handle sales transactions. Computer literacy is an essential
requirement for DNC employees. If employees do not possess sufficient computer
skills when they are hired, they are trained by our full-time computer technician. The
full-time technician is also available for the assistance of our customers. DNC's
commitment to friendly and helpful service is one of the key factors that distinguish
DNC from other Internet cafes.
6. Management and personnel
DNC is owned and operated by Mr. Ahmed Ali. The company, being small in nature,
requires a simple organizational structure. Implementation of this organizational form
calls for the owner, Mr. Ahmed Ali, to make all of the major management decisions in
addition to monitoring all other business activities. The three private investors, Messrs
Mohamed Abdalla, Musa Hilal, and Abbas Mahmoud, will not be included in
25
management decisions. This simple structure provides a great deal of flexibility and
allows communication to disperse quickly and directly. Because of these
characteristics, there are few coordination problems seen at DNC that are common
within larger organizational chains. This strategy will enable DNC to react quickly to
changes in the market. The staff will consist of six part-time employees working thirty
hours a week. In addition, one full-time computer technician will be employed to
work forty hours a week.
7. Financial plan
Sales:
The projected coffee sales are based on financial information provided by a coffee
consultant. Internet sales are estimated by calculating the total number of hours each
terminal will be active each day and then generating a conservative estimate as to how
many hours will be purchased by consumers.
Cost of goods sold:
The cost of goods sold for coffee-related products is determined by the "retail profit
analysis" that is carried out by a consultant in the coffee business. The cost of bakery
items is 20% of the selling price. The cost of Internet access is AED 6,600 per month,
paid to Etisalat. The cost of e-mail accounts is 25% of the selling price.
Fixed costs:
Fixed costs associated with starting DNC are the following: 11 computers = AED
220,000, two printers = AED10,000, one scanner = AED 5000, one espresso machine
= AED100,700, one automatic espresso grinder = AED7,950, two coffee/food
preparation counters = AED10,000, one information display counter = AED10,000,
one drinking/eating counter = AED 5,000, sixteen stools = AED 10,600, six computer
desks with chairs = AED 20,400, stationeries = AED 5,000, two telephones = AED
2,000, decoration expense = AED 140,110.
Salaries expense:
The founder of DNC, Mr. Ahmed Ali, will receive a salary of AED 240,000 in year
one, AED 260,400 in year two, and AED 290,040 in year three.
26
Payroll Expense: DNC intends to hire six part-time employees at AED 57.50/hour
and a full-time technician at AED 100/hour. The total cost of employing seven people
at these rates for the first year is AED 70,240/month.
Rent expense: DNC is leasing a 1,700 square foot facility at AED 85/sq. foot. The
lease agreement DNC signed specifies that it pays AED 20,000/month for a total of
36 months. At the end of the third year, the lease is open for negotiations and DNC
may or may not re-sign the lease depending on the demands of the lessor.
Utilities expense: As stated in the lease agreement, the lessor is responsible for the
payment of utilities including gas, garbage disposal, and real estate taxes. The only
utilities expense that DNC must pay is the phone bill generated by fifteen phone lines;
thirteen will be dedicated to modems and two for business purposes. The basic
monthly service charge for each line provided by Etisalat is AED 170.29. The 13 lines
used to connect the modems will make local calls to the network provided by Etisalat
resulting in a monthly charge of AED 2,247.7. The two additional lines used for
business communication will cost AED 345.8/month plus long distance fees. DNC
assumes that it will not make more than AED 400/month in long distance calls.
Therefore, the total cost associated with the two business lines is estimated at AED
745.8/month and the total phone expense at AED 2,993.5/month. In addition, it is
estimated that there will be an additional utility expense of AED 8,000.
Marketing expense: DNC will allocate AED 50,000 for promotional expenses at the
time of start-up. These will be used for advertising in newspapers in order to build
consumer awareness.
Insurance Expense: DNC has allocated AED 14,400 for insurance for the first year.
As revenue increases in the second and third year of business, DNC intends to invest
more money for additional insurance coverage.
Legal and consulting fees: The cost of obtaining legal consultation in order to draw up
the paper work necessary for registering the company as LLC is AED10,000.
27
Depreciation: In depreciating capital equipment, computers are depreciated over a
five-year time period and the other fixed assets over seven years.
Accounts Payable: DNC acquired a loan of AED 240,000 from a local bank at a 10%
interest rate. The loan will be paid back at AED 7500/month over the next three years.
A short term loan of AED 92,900 will be paid back at a rate of 8%.
For further financial details, please refer to DNC's financial statements (cash flow
statement, income statement, and balance sheet) in the following pages. For the
business first year 2006, the financial statements detail the monthly financial position
of the business. For the following two years of the business 2007 and 2008, the
business financial position is given annually.
28
Pro-Forma Income Statement/Profit and Loss (in 000 Dirham): January-December 2006-2008
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2007
2008
Sales
7,600
10,730
12,425
20,809
21,613
22,451
23,278
24,137
25,030
25,958
26,923
27,926
248,878
303,549
Direct Cost of Sales
1,900
2,683
3,106
5,202
5,403
5,613
5,819
6,034
6,257
6,489
6,731
6,981
62,220
75,887
Gross Margin
5,700
8,048
9,319
15,607
16,210
16,838
17,458
18,102
18,772
19,468
20,192
20,944
186,659
227,662
Gross Margin %
75%
75%
75%
75%
75%
75%
75%
75%
75%
75%
75%
75%
75%
75%
5,000
2,500
2,500
2,500
2,500
2,500
2,500
1,000
1,000
1,000
1,000
1,000
25,000
25,000
-
-
750
-
-
-
-
-
-
-
-
-
750
-
Miscellaneous
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
12,000
12,000
Payroll Expense
6,800
6,800
6,800
6,800
6,800
6,800
7,610
7,775
7,957
8,156
10,376
10,617
93,291
121,824
Payroll Burden
1,020
1,020
1,020
1,020
1,020
1,020
1,142
1,166
1,193
1,223
1,556
1,593
13,994
18,274
Utilities
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
18,000
18,000
500
500
500
500
500
500
500
500
500
500
500
500
6,000
6,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
24,000
24,000
500
500
500
500
500
500
500
500
500
500
500
500
6,000
3,000
18,320
15,820
16,570
15,820
15,820
15,820
16,752
15,441
15,650
15,880
18,432
18,710
199,034
228,097
(12,620)
(7,773)
(7,251)
(213)
390
1,018
707
2,661
3,122
3,589
1,760
2,234
(12,376)
(436)
Interest Expense Short-term
71
65
59
52
46
40
34
27
21
15
9
-
439
-
Interest Expense Long-term
193
187
180
173
167
160
153
147
140
133
127
120
1,880
1,190
(12,884)
(8,025)
(7,490)
(438)
177
818
520
2,487
2,961
3,441
1,624
2,114
(14,695)
(1,626)
-170%
-75%
-60%
-2%
1%
4%
2%
10%
12%
13%
6%
8%
-6%
-1%
Operating expenses:
Advertising/Promotion
Travel
Insurance
Rent
Contract/Consultants
Total Operating Expenses
Profit Before Interest
Net Profit
Net Profit/Sales
Please note that the figures in brackets are negative values.
29
Pro-Forma Cash Flow (in 000 Dirham): January-December 2006-2008
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2007
2008
(12,884)
(8,025)
(7,490)
(438)
177
818
520
2,487
2,961
3,441
1,624
2,114
(14,695)
(1,626)
Change in Accounts Payable
6,889
1,049
1,048
3,057
(114)
312
103
(700)
288
297
(194)
313
12,348
106
Current Borrowing (repayment)
(750)
(750)
(750)
(750)
(750)
(750)
(750)
(750)
(750)
(750)
(750)
(1,040)
(9,290)
-
Increase (decrease) Other Liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term Borrowing (repayment)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(800)
(9,600)
(5,000)
Capital Input
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Subtotal
(7,545)
(8,526)
(7,992)
1,069
(1,487)
(420)
(927)
237
1,699
2,188
(120)
587
(21,237)
(6,520)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,525)
196
106
524
50
52
52
54
56
58
60
63
(255)
383
Change in Other Short-term Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Capital Expenditure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,525)
196
106
524
50
52
52
54
56
58
60
63
(255)
383
Net Cash Flow
(6,020)
(8,722)
(8,098)
545
(1,537)
(472)
(979)
183
1,643
2,130
(180)
524
(20,982)
(6,903)
Cash Balance
21,201
14,486
8,260
8,914
7,332
6,656
5,547
5,109
6,012
7,281
6,695
6,691
6,691
194
Net Profit
Plus:
Less:
Change in Accounts Receivable
Change in Inventory
Subtotal
Please note that the figures in brackets are negative values.
30
Pro-forma Balance Sheet (in 000 Dirham): January-December 2006-2008
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2007
2008
21,201
14,486
8,260
8,914
7,332
6,656
5,547
5,109
6,012
7,281
6,695
6,691
6,691
194
-
-
-
-
-
-
-
-
-
-
-
-
-
-
475
671
777
1,301
1,351
1,403
1,455
1,509
1,564
1,622
1,683
1,745
1,745
2,129
Other Short-term Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Short-term Assets
21,676
15,156
9,037
10,215
8,683
8,059
7,002
6,617
7,576
8,903
8,377
8,437
8,437
2,323
Capital Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Accumulated Depreciation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Long-term Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,676
15,156
9,037
10,215
8,683
8,059
7,002
6,617
7,576
8,903
8,377
8,437
8,437
2,323
Accounts Payable
6,889
7,938
8,986
12,043
11,928
12,240
12,344
11,644
11,932
12,229
12,034
12,348
12,348
12,453
Short-term Notes
8,540
7,790
7,040
6,290
5,540
4,790
4,040
3,290
2,540
1,790
1,040
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Subtotal Short-term Liabilities
15,429
15,728
16,026
18,333
17,468
17,030
16,384
14,934
14,472
14,019
13,074
12,348
12,348
12,453
Long-term Liabilities
23,200
22,400
21,600
20,800
20,000
19,200
18,400
17,600
16,800
16,000
15,200
14,400
14,400
9,400
Total Liabilities
38,629
38,128
37,626
39,133
37,468
36,230
34,784
32,534
31,272
30,019
28,274
26,748
26,748
21,853
Paid in Capital
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
55,000
Retained Earnings
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(62,290)
(73,311)
Net Worth
(16,953)
(22,971)
(28,589)
(28,918)
(28,785)
(28,172)
(27,782)
(25,917)
(23,696)
(21,115)
(19,897)
(18,311)
(18,311)
(19,531)
Short-term Assets
Cash
Accounts Receivable
Inventory
Long-term Assets
Total Assets
Liabilities and Capital
Other Short-term Liabilities
Please note that the figures in brackets are negative values.
31
References
Abrams, R. (2000) "The Successful Business Plan: Secrets and Strategies", Running
"R" Media, Palo Alto, California.
Arkebauer, J. (1995) "The McGraw-Hill Guide to Writing a High-Impact Business
Plan: A Proven Blueprint for First-Time Entrepreneurs" The McGraw-Hill, INC.,
New York.
Covello, J. and B. Hazelgren (1994) "The Complete Book of Business Plans: Simple
Steps to Writing a Powerful Business Plan", Source Books, INC., Naperville, Illinois.
Covello, J. and B. Hazelgren (1998)"Your First Business Plan: A Simple Question
and Answer Format Designed to Help You Write Your Own Plan", Source Books,
INC., Naperville, Illinois.
Gillman, J. and S. White (2001) "Business Plans that Work", Adams Media
Corporation, Holbrook, MA, U.S.
Hisrich, R., M. Peters and D. Shepherd (2005) "Entrepreneurship", McGraw-Hill
Irwin, Boston.
O'Donnell, M. (1991) "Writing Business Plans That Get Results: Step-by-Step
Guide", Contemporary books, Chicago.
Dethomas, A. and L. Grensing-Pophal, (2001) "Writing a Convincing Business Plan",
Borron's Educational Series, New York.
Schilit, W. (1990) "The Entrepreneur's Guide To Preparing A Winning Business Plan
and Raising Venture Capital", Prentice Hall.
Siegel, E., B. Ford, and J. Bornstein (1993), "Business Plan Guide", Ernst & Young
Business Guide Series.
Internet sites where there are relevant materials for business plan:
http://www.planware.org/guide.htm
http://planmagic.com/download.html
http://www.ebp.com/en-gb/guide/default.aspx
http://www.fundedplans.com/index.html
www.businesslink.gov.uk/bdotg/action/home?&domain=www.businesslink.gov.uk
http://www.paloalto.com/ps/bp/
http://www.smetoolkit.org/SubCategory.jsp?iCategoryId=45&locale=1
http://www.businessplansource.com
http://www.sba.gov/starting_business/planning/basic.html
32
Appendix I
Outline of Business Plan2
1. Introduction
i.
Name and address of the business
ii.
Names and addresses of principals
iii.
Nature of the business
iv.
Statement of financing needs
v.
Statement of confidentiality of the report
2. Executive summary (maximum 5 pages summarizing the whole business plan)
i.
Brief description of the new business
ii.
Opportunity (market, industry, competition, strategy)
iii.
Financials (projected sales and profits and growth potential)
iv.
People (persons involved in the new business)
3. Industry analysis
i.
Future outlook and trends
ii.
Analysis of competitors
iii.
Market segmentation
iv.
Industry and market forecasts
4. Description of the business
2
i.
Product/service
ii.
Size of business
iii.
Office equipment and personnel
iv.
Background of the investors
Adapted from Hisrich, Peters and Shepherd (2005).
33
5. Production plan (assuming manufacturing facility)
6.
i.
Manufacturing process
ii.
Physical plant
iii.
Machinery and equipment
iv.
Names of suppliers of raw materials
Operational plan
i.
Description of the business operation
ii.
Flow of orders for goods/services
iii.
Technology utilization
7. Marketing plan
i.
Pricing
ii.
Distribution
iii.
Promotion
iv.
Product forecasts
v.
Controls
8. Organizational plan
i.
Form of ownership
ii.
Identification of partners
iii.
Authority of principals
iv.
Management team background
v.
Roles and responsibilities of members of organization
9. Financial plan
34
i.
Pro forma income statement
ii.
Cash flow projections
iii.
Pro forma balance sheet
iv.
Break-even analysis
v.
Sources and applications of funds
10. Assessment of risk
i.
Evaluate weakness of the business
ii.
New technologies
iii.
Contingency plans
11. Conclusion
i.
Highlighting main points that indicate the success of the business.
ii.
Reasons that the investor will carry out the plan successfully.
iii.
Be positive and confident without exaggeration.
12. Appendix
35
i.
Permits and licenses
ii.
Leases/contracts
iii.
Insurance documents
iv.
Price lists from suppliers
v.
Market research data
Appendix II
Executive Summary3
Concept
[Company] management has conducted both primary and secondary research into the
[Company’s Industry] market and has identified a significantly underserved segment within
it. [The Company’s] [product/service] is uniquely positioned to serve this segment of the
market because of its [characteristic #1], its [characteristic #2], and its [characteristic #3].
Management estimates that the [Underserved segment] of the market will generate AED
[market estimate] of sales and that [Company] will capture [market share]% of that market by
[Year].
Company description
In [Month, Year] [Names of founder(s)] formed a [Product/Service] company that
manufactured state-of-the-art [product]. This company was located in [City, State]. The
company was formed as a [proprietorship, partnership, corporation]. Others involved in this
business are [names]. The company is currently in the [seed, start-up, growth] stage and
expects to move rapidly towards further growth and profitability.
Mission Statement
[Company] is an [innovative, creative, conservative, aggressive] [maker, provider] of
[product or service] that offers unparalleled [quality, service, value]. We value [integrity,
honesty, creativity, etc] and respect our relationships with each other, our customers, and the
world at large.
Industry Analysis
The [name of industry] industry in [name of appropriate geographic area] generated revenues
of AED [Dirham amount of market] in [most recent full year]. Customers who bought
[product/service] made up [percentage of total market in your segment] of that market
revenue. [Name of research firm, government agency, or other reputable source] estimates
3
This part is taken from Executive Summary Edition of Planigent’s Business Plan Template 2004, which can be
found in the Internet at http://www.planigent.com/html/ExecSum.doc.
36
that the [product/service] market will grow to AED [amount] within in [number] years (or by
[percentage]%).
Products & Services
[The Company]’s main product [service] is [product/service].
The [product/service] is
unique in that it [unique feature #1], it is/has [unique feature #2], and it [unique feature #3].
The [product] is customizable and can be configured to meet a wide variety of customer
needs:
• [Bulleted list of needs the product can fulfil]
The Company provides its [service] at different levels depending on the needs of its clients:
• [Bulleted list of service levels]
Target Market
[Company]’s management recognizes an enormous unmet need in the [product/service]
market. [Percentage]% of customers surveyed recently said they were either very likely or
likely to purchase [product/service] if it were available. This segment of the market has
tremendous potential that has been untapped by any of [Company]’s competitors in the
industry. It is our primary target audience.
.
Marketing & Sales Strategy
[Company’s] marketing strategy is to represent its [product, service] as the best and most
logical solution to customers’ [needs, problems]. We are positioning the company as the
[low-cost, highest quality, best value] [producer, provider] of [product, service] in the
marketplace.
The company will use a variety of marketing approaches and materials
including [brochures, white papers, trade shows, seminars, {list all or others that apply}].
Sales of the company’s [products, services] will be handled by an [internal, external] sales
force [or independent agents/reps]. A [telemarketing, direct mail, advertising] firm will be
hired to assist with building brand awareness and generating sales leads.
Competition
[Company] faces competition from [Competitor #1], [Competitor #2], and other smaller
firms. These companies specialize in [products/services] and do not provide the same
[quality/price/convenience/service] that [Company] does. [Company] distinguishes itself
37
from its competitors through its [Unique Selling Proposition]. Its competitive edge is its
ability to provide [product/service] to its customers [more economically/faster/of better
quality] than any of its competitors.
Management
The core management team of [Company] includes several executives with successful
backgrounds in the [industry name] industry and experience with start-up operations:
[CEO name], [CEO age] is President and CEO. His/Her experience includes [# of years]
with [prominent company name] where he [state one or two noteworthy achievements: grew
sales, cut expenses, launched a new product].
[CFO name], [CFO age] is [Company]’s Chief Financial Officer. Mr./Ms. [CFO Name] has
held financial positions with [Company #1] and [Company #2] and has also served as a
Public Accountant with [name of CPA firm]. His/Her accomplishments include [state one or
two noteworthy achievements: grew sales, cut expenses, implemented tax-saving measures].
[CIO name], [CIO age] is [Company]’s Chief Information Officer. Mr./Ms. [CIO Name] has
extensive experience with innovative technology at [Company #1] and [Company #2] and
also held a consulting position with [name of consulting organization]. His/Her
accomplishments include [state one or two noteworthy achievements: managed
implementation of new software, launched corporate web site].
Operations
[Company] operates from [a facility(ies)] located at [address(es)]. {If applicable} It makes its
products at the [location] facility where it [receives components and assembles final
products] OR [performs all manufacture and assembly]. Key suppliers are [list suppliers'
names]. Quality control and distribution to customers are handled by the [location] facility.
Financials
By achieving its sales targets, [Company] will position itself for exceptional profitability and
self-funded growth. The table below is a brief summary of the [Company] Profit and Loss
Statement for the years 200X-200X.
38
AED 000s
200X
200X
200X
Sales
AED x,xxx.x
AED x,xxx.x
AED
x,xxx.x
Gross Profit
AED x,xxx.x
AED x,xxx.x
AED
x,xxx.x
Operating expenses
AED x,xxx.x
AED x,xxx.x
AED
x,xxx.x
Pre-tax Income
AED x,xxx.x
AED x,xxx.x
AED
x,xxx.x
All figures are expressed in thousands Dirham.
Long-Term Goals
Expansion plans, financial goals, milestones.
Sources & Uses of Funds
Management is seeking an investment of [AED x,xxx,xxx] in addition to the [AED xxx,xxx]
already invested by the founders. Proceeds will be used to finance the Company’s ongoing
start-up expenses, the enhancement of its systems and infrastructure, and the cash shortfall
until cash flow breakeven is achieved [list all other significant uses of the funds being
sought].
Exit Strategy
Given the financial results expressed above, management believes it will be in an excellent
position to capitalize on its success through a [Leveraged Buyout, Management buyout,
rd
Acquisition by Industry leader, Initial Public Offering, Acquisition by other 3 party]. A
reasonable valuation for the Company assuming the sales and profitability outlined above
would be AED xx,xxx,xxx, which would make the shares included in this offering worth
AED x,xxx,xxx, a return on investment of x%.
[For a loan payback, describe how the company will be in a financial position to repay the
loan in the specified timeframe.]
39