Business Plan For An E-mail Provider Company Contact Information: 3500 Spur Avenue Columbus, OH 42874 Tel# (513) 555-4345 email@example.com This document contains confidential information. It is disclosed to you for informational purposes only. Its contents shall remain the property of Business Plan For An E-mail Provider Company and shall be returned to Business Plan For An E-mail Provider Company when requested. This is a business plan and does not imply an offering of securities. Table of Contents 1. Executive Summary Business Opportunity Product/Service Description 2. Company Background Business Description Company History Current Position and Business Objectives 3. Business Plan For An E-mail Provider Company 1 3 5 4. Services 6 5. The Industry, Competition, and Market Market Definition Primary Competitors Customer Profile 6. Marketing Plan 7 10 7. Financial Plan Investment Plan Break-even Analysis Liquidity Plan Earnings Plan Risk Analysis 8. Conclusion 12 19 Business Plan For An E-mail Provider Company 1 1. Executive Summary The e-mail platform provides a service that makes it possible to send and receive e-mails. Users have access to a 1000MB e-mail storage, their own signatures, HTML compatible editors, and further services. The company will provide all these products for a low fee without advertisement. The goal of this start-up is the operation of an e-mail provider company that develops new electronic e-Mail products and services. Additional to this core business concept the company offers a strong mobile service which will help to increase sales and utilize the personnel capacity. 1.1 Business Opportunity The internet has emerged as the fastest growing communication medium in history. With over 97 million users at the end of 1998, growing to 520 million users by 2006, the internet is dramatically changing how businesses and individuals communicate, buy products and share information. The company is a provider of internet products and services. The core product will be an e-mail service for private and business customers with different features and additional tools. The comprehensive technology platform is comprised of proprietary server software and internet tools. The company expects that the emergence of the internet as a global communications medium has increased the demand for efficient e-mail products. The company intends to develop a marketing program aimed at potential visitors to the web site by seeking to create awareness of the company name and web site by promoting the website through traditional advertising media. In this manner, the company intends to provide more content on the web site. It believes that in order to generate revenue from advertising and e-commerce on the web site, it must increase the number of members who visit the web site and remain on the web site for an extended period. It will be expected that more than 1,000,000 users will access the web site. The considered market is projected to remain a fast growing segment of the online market over the next five to ten years. It is estimated that the market will increase from approximately $1.0 billion in 2004 to approximately $2.5 billion in 2008, representing a compound annual growth rate of approximately 40% over the five year period. On this basis, this market would represent approximately 2% of the global online service market in 2008. The required investment for the business is relatively high compared to other companies in the industry. For the future there will be further substantial investments in fixed assets required. This will be financed through retained earnings. 1.2 Product/Service Description The company plans to be a full e-mail solutions provider for small- and medium-sized business enterprises as well as private customers. The company operates several internet Business Plan For An E-mail Provider Company servers. The company monitors and controls its network through its own operation center. People increasingly rely on the internet to communicate with each other and to share information. The e-mail service will offer a gigabyte of free storage for each user, along with e-mail search capabilities, protection features, and business tools. 2 Most of the revenues are generated by advertising. Of the total revenue, 10% is based on advertising services. Advertising revenue is linked to the level of traffic on the web sites, so if traffic is less than the level expected by the advertising customers, revenue from this source could be reduced. The company will have some advertising contracts that include a guaranteed minimum number of impressions on the web sites. Figure 1.1 shows the distribution of revenues. Business Plan For An E-mail Provider Company 3 2. Company Background The company offers its users a free personalized web-based e-mail account that can be accessed using an easy-to-use interface from any computer with an internet connection. As users do not need to change their e-mail addresses when they move or change internet service providers, the same e-mail address can be used indefinitely. The company also provides a vast array of services for its users to locate other individuals, businesses, products, and places. For instance, the company provides a comprehensive home address, e-mail address and phone number directory, assisting users in locating individuals worldwide. 2.1 Business Description The company's performance is substantially dependent on the efforts and performance of its senior management. The expansion of operations into international markets will require substantial management attention. The company has a strong management team with significant experience in the online industry, technology industry, e-commerce, and customer support. The senior management team is responsible for executing the strategies and developing the business. This team averages more than 10 years of industry experience, and has a demonstrated track record of acquiring, integrating, and operating companies in this industry. 2.2 Company History The company was incorporated on 2006 under the laws of California. The company begins commercial distribution of the services in the fourth quarter of 2006. The net revenue will increase from $0.2 million in 2006 to $1.2 million in 2007. The success also depends upon the ability to attract and retain additional highly qualified management, technical, sales and marketing, and customer support personnel. Locating personnel with the combination of skills and attributes required to carry out the strategy is often a lengthy process. In addition, competition for qualified employees is intense, specifically in the areas of web site development, design and integration. The loss of key personnel, or the inability to attract and retain additional, qualified personnel, could have a material adverse effect on the results of operations. Figure 2.1 shows the current distribution of labor costs for each segment. Business Plan For An E-mail Provider Company 4 2.3 Current Position and Business Objectives The company delivers enhanced branded services and content with a growing emphasis on services that take advantage of internet technology and broadband access. The company expects that the core services will provide the foundation for a next-generation e-mail, internet and media company whose e-commerce and community orientation will reach a diverse user base through a variety of interactive services. The company expects that establishing and maintaining the a brand is a critical aspect of its efforts to attract and expand its internet audience and that the importance of brand recognition will increase due to the growing number of competitors and the relatively low barriers to entry. Promotion and enhancement of the brand will depend largely on the company's success in providing high quality products and services. Business Plan For An E-mail Provider Company 5 3. Business Plan For An E-mail Provider Company The company predicts that enhanced internet services, such as e-mail, web hosting, security, e-commerce, virtual private networks and advanced internet applications are expected to grow from approximately $8 billion in 2003 to over $17 billion in 2009. Internet access and enhanced internet services represent two of the fastest growing segments of the telecommunications services marketplace. The company offers its users a free personalized web-based e-mail account which can be accessed using an easy-to-use interface from any computer with an internet connection. As users do not need to change their e-mail addresses when they move or change internet service providers, the same e-mail address can be used indefinitely. The company is heavily focussed on enhancing its product offerings with additional web information and content, features, and functionality in order to maintain its position as one of the most popular e-mail and web service destinations on the web. The company aggressively pursues a strategy of partnering with web business industry leaders, which enables the company to increase content, traffic and revenues and to extend the brand internationally and to develop new properties. Business Plan For An E-mail Provider Company 6 4. Services The market in which the company competes is characterized by rapidly changing technology, evolving industry standards, frequent new service and product announcements, introductions and enhancements, and changing customer demands. This means that a core focus will be placed on the detection of new trends and the development of new services. The company plans to expand its operations by developing and promoting new and complementary services. The company plans to expand its sales efforts nationally by focusing on targeted areas where there is a large concentration of businesses and favorable demographics. The company intends to initially target customers through advertising, promotions, public relations, telemarketing and customer referrals. Once the company attains critical mass in selected locations, it intends to establish its own technology and customer service center and begin targeting business and private customers with its broad array of communications products and services. Business Plan For An E-mail Provider Company 7 5. The Industry, Competition, and Market A careful analysis of the market and competitive forces in this industry is a key element in assessing the business potential of the project. This analysis will provide marketing and sales data that are indispensable to optimally develop the business potential. Market is defined as the market where the company plans to operate in the next four years. 5.1 Market Definition According to several research institutes, in 2004, there were over 273 million online households worldwide. The growth of the Internet has far exceeded the growth of any other communication medium in the 20th century. In just under four years the Internet has reached penetration rates that took the television 13 years to reach and the radio over 30 years. The management believes that the company should benefit significantly from a growing number of internet users and companies that operate in the internet market. The company expects also to benefit from the continuing improvement in internet technology. In addition, since the company expects the greatest continuing improvements in demand to occur in the business user segment, the company intends to focus its acquisition activities primarily on business services. The size of the whole web service market worldwide, which includes web hosting, e-mail and additional services, is estimated to amount to $49 billion. The U.S. dominates the market, but is not growing as rapidly as the European or Asian markets, which account for 24.5% of the total market. Germany is the third largest market with an 14% market share and dominates the European market. The e-mail market is a growing segment in the whole internet service provider market. The expected growth rates are between 30% and 40% depending on the specific products and target groups. Overall, the global online service market has experienced rapid growth. The company expects that this has principally been the result of the high level of internet penetration. As internet, and particularly broadband internet, penetration increases across the world, it is estimated that online service revenue growth rates in regions such as Europe and Asia will exceed those of the United States. Figure 5.1 shows average growth figures in revenues of all available companies in the specified market during the past five years. The overall e-mail services market is expected to continue significant growth, despite the economic downturn. The company expects growth rates of more than 35%. For 2005 a growth rate of 40% is expected with a strong development in the third and fourth quarters. Business Plan For An E-mail Provider Company 8 5.2 Primary Competitors The web hosting market is a fast growing industry and has attracted thousands of providers. Competition is growing. The company currently faces measurable competition from other service and development companies. While there are over 2000 internet services in operation, the market is dominated by a small number of large operators. For the current year, the top three operators had an estimated combined market share of 95%. Several new companies have emerged producing similar services. Competition might come from the use of existing service platforms and technologies but also from the development of new services. To further examine the competitive environment it is necessary to define the players in that environment. Figure 5.3 shows the size of businesses in this market segment. The numbers are based on average revenues of companies that have run their business more than five years. The company believes that the products and services are not easily substitutable with the products of the competitors due to the level of technology, but nonetheless the company must constantly maintain the technology developments. Business Plan For An E-mail Provider Company 9 5.3 Customer Profile The company markets and sells the services worldwide through a combination of its own Internet platform and third-party companies. The company will reach the market leading position in the internet service segment by selecting a large group of business customers. The demand for internet and e-mail services typically comes from all types of companies. Figure 5.2 shows the industries with the highest demand for the described internet services. Numbers are based on average revenues per business customer of a particular group multiplied by the number of customers in the respective group. This gives total demand share per group. The primary target market for the segment are large retail companies with a lot of required web space. Business Plan For An E-mail Provider Company 10 6. Marketing Plan Effective marketing together with consistent promotion are the keys to success online. The company focuses on a comprehensive web marketing and classical marketing strategy designed to attract new customers, convert leads into sales, and maximize the revenue. In the start-up phase it is a central task of the marketing concept to establish a name recognition and own trade mark. Several marketing and sales promotion strategies are available in the online industry. Figure 6.1 shows different marketing elements and their use in marketing strategies as well as their estimated potential success factor. Later on the strategy will primarily be targeted to gain new customers and create customer loyalty of repeat customers. The figure can serve as a direction for the planning of a marketing and sales promotion strategy. The numbers are based on comparable businesses. Online marketing The company has the budget and strategy that allows it to use dozens of traffic providers to link to its core web site. It carefully tracks not only expenditures but also the ROI from each source. The online marketing strategy will continue to play an important and reliable part of the whole marketing efforts as its traffic needs continue to expand over the coming years. The quality of the traffic will also be improved over time, which will result in a higher conversion rate. Print advertising Newspaper advertising is an integral and desired part of the marketing strategy. Print media advertising is a mass communication tool. Printed advertisements will be used in national and international game magazines to increase the number of customers. Marketing cooperation This strategy is very important. The company wants to decrease its cost per customer acquisition (CPA) and increase its customer base. Sales promotion Sales promotion strategies have temporary effects only. Sales promotion will be used for a limited time to increase the number of customers. The strategy will include special offers with opening discounts for new customers. The initial prices will be reduced by 50% for the first three months. This strategy is expected to continue for 1 to 2 years. Direct marketing The company uses direct marketing campaigns with e-mail and mailing lists as well as newsletters. This strategy will be used to increase the revenue per customer. Since spreading costs of such mailing are very low this marketing element provides a useful and efficient tool. On the other hand, acquiring data about customers and prospects will be time consuming and expensive. Business Plan For An E-mail Provider Company 11 Business Plan For An E-mail Provider Company 12 7. Financial Plan The financial plan is the key factor for the success of a business start-up. Investors and banks will base their funding decision on the information given in this plan. Besides a plan of the financial needs, this plan must insure that the business is always liquid and ultimately profitable. Since the sales and earnings projections in the business plan are based on expectations, the financial plan has to be revised and refined on a constant basis so that discrepancies can be uncovered and solved instantly. The inputs for this financial plan are based on other companies that serve as a group of comparable firms as well as the company's own estimates based on the planned business environment. Revenue estimates are conservative and expense projections include a cushion for unforeseen contingencies. All figures are refined by statistical simulations. The most important features of the financial plan and the financial strategy can be summarized by the following points. The initial capital requirement is estimated to be $300,000 to $350,000. This is comparable to other businesses in the segment. Cash used in investing activities for the next year will be constant. There will be further capital requirements in the following years. The ability to make new investments will depend on the ability to generate cash in the future. Capital expenditures for the following years will include higher spending on technology and licenses as the company continues to develop new functionalities. The company expects to invest in new technology in a variety of ways, including: software technology upgrades in the form of product updates and replacements and the installation of new servers. The growth rates of the whole company are expected to be very strong in the first three years of the business. Revenue and profitability for the company is reliant on, among other things, the level of acceptance of the company’s products in international markets. The estimates for all revenues and costs are based on the historical experience, as well as current facts and circumstances. The company uses third-party specialists to assist management in financial estimations. Different estimates could result in different amounts of cost, profit and revenue over different time periods. Based on the business plan, the company currently projects that cash provided by operations will be adequate to meet foreseeable operational liquidity needs for the next 12 months. The gross margin is high for all four years while the net margin will decrease. The sales margin is expected to be 50% to 55%. The net profitability is driven by the ability to control fixed operating expenses, which have not significantly declined in past years. Depending on the initial investment, sum cost and revenue estimates vary. Figure 7.1 shows the expected relationship of cost and revenues. As can be seen the relationship is not linear everywhere but costs decrease relative to sales. This effect is due to the better utilization of capacities in personnel at rising revenues at constant cost. Business Plan For An E-mail Provider Company 13 The details of the financial plan are laid out in more detail as follows: Section 7.1 gives an investments schedule. This includes all investments necessary during the start-up phase. Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Every additional sales dollar adds to profit and vice versa. Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimates from Section 7.2. Liquidity must always be positive. Section 7.4 contains a long-term profit projection for the first four years of business. The projection shows that the critical amount of revenues at which the business is profitable and how profit develops over time. Section 7.5 provides a risk analysis. The risk analysis contains critical factors that may impact the financial numbers presented in this plan. 7.1 Investment Plan The investment plan comprises primary capital needs for the foundation and operation of the business. The plan also includes initial marketing and sales promotion expenses. The figures are based on comparable businesses. Business Plan For An E-mail Provider Company 14 7.2 Break-even Analysis The break-even analysis shows how earnings rise as a function of sales. The break-even point is the point at which revenues from sales cover total costs (fixed costs and variable costs rising with sales). This analysis is important for the development of the liquidity plan and the pricing policy. If the break-even point is not achieved in the long run, the business loses liquidity and may become insolvent. This requires that a critical amount of revenues must be generated. At a sales revenue of $1,600,000 and given total costs the business will begin to generate a profit. Fixed costs of this business are estimated at $600,000 to $700,000 and variable costs are estimated at $900,000. In this case, fixed costs are expenses that do not vary with sales volume. These costs have to be paid regardless of sales. Variable costs vary directly with the sales volume. At an estimated revenue of about $1,900,000 after two to three years profits are expected to rise to $200,000. This represents a revenue margin of about 11%. These estimates are realistic in this market segment and comparable to similar businesses. Business Plan For An E-mail Provider Company 15 Increasing sales volume will increase pre-tax earnings margins but this development reverses when administrative costs begin to rise sharply. Up to a sales volume of $3,000,000 earnings margins rise to 12.5% after which the margin decreases to constant 11.5%. Figure 7.2 shows at which critical sales volume the business generates a profit. This serves as a base for a business and pricing strategy. Additionally the graph shows the amount of sales at which a marketing campaign can be run profitably. 7.3 Liquidity Plan The liquidity plan shows the amount of finances necessary to assure permanent liquidity of the complete business. The liquidity plan is based on four representative months of a typical business. Revenue estimates and costs are simulated from a standard normal distribution. Cash is constant at $1,000 for every month. Business Plan For An E-mail Provider Company 16 7.4 Earnings Plan The earnings plan shows the results from ordinary operations. The plan is based on the first four years of business. Revenue estimates are drawn from a normal distribution with a strong estimated growth rate. Figure 7.3 shows net income. Business Plan For An E-mail Provider Company 17 7.5 Risk Analysis The risk analysis considers critical factors that may lead to a failure of the business concept. Such factors can involve failures during the implementation phase as well as during operations. Such potential factors are ordered according to the probability at which they can arise. Shown are the key factors that led to the failure only. Data are drawn from surveys from 12 businesses with different services as well as revenue and cost structures. 1. The company might lose liquidity if its credit rating falls, it experiences sudden unexpected cash outflows, or some other event causes counterparties to avoid lending to the company. Thus, one common reason for bankruptcy is in sufficient liquidity. In that case it is possible that all liquid funds are used to cover losses or that liquidity needs were planned too tight. To be able to flexibly react to changing liquidity needs, it important that sufficient funds be planned even during the start-up phase, thus 5% to 10% of the investment sum should be held as liquidity reserve permanently. Of insolvent businesses, 15% reported liquidity as the reason for bankruptcy. Over-indebtedness: Many business are run on a small equity base. The majority of 2. Business Plan For An E-mail Provider Company 18 investments are funded by debt. If the business becomes unprofitable, debt obligations cannot be covered. Little more than 12% of insolvent firms reported over-indebtedness as the reason for going bankrupt. It is therefore important that a share of earnings is retained for debt service. 3. A change of the business process could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Many of the competitors have similar services that have already been approved or are in development. Wrong Business Decisions: Often wrong business decisions and difficult situations go unnoticed for some period that can lead to a failure of the business. A critical and independent reflection of a decision is a critical factor to determine the value of a management decision and evaluate the business' profitability. Studies have shown that many businesses fail in their start-up phase because of management’s inability to make sound business decisions. Once a business is settled, such mistakes are very rare. A critical management instrument is the ability to detect potential failures and problems. Certain key figures can help measure this ability and allow to objectively determine a decision's chance for success. Small businesses should use such indicator ratios to assess their business outlooks. The company has never generated positive annual cash flow from the core operating activities, and it may not generate or sustain positive cash flows from operations in the future. The ability to generate sufficient cash flow will depend on the ability to successfully develop new services and to sell these services. Insufficient demand and customer loyalty: This is a common reason why businesses fail. This includes permanently low demand as well as a temporary collapse in demand. Often demand estimates were too optimistic at the outset. Such failures might also come from external shocks instead of operating deficiencies. Of businesses with insufficient demand, 25% go bankrupt. While the expected frequency of business demand during the start-up phase is low, a critical success factor is to focus promotional effort so as to generate customer loyalty early on, which will help minimize the effects of demand fluctuations. This is also important for the future development of the business. The future success of the company will also depend in large part on the ability to attract and retain highly qualified service and management personnel. The company faces competition for personnel from other companies, academic institutions, government entities and other organizations. Behavior of Competition: Due to low entry barriers additional businesses can enter the market at low cost. Approximately 16% of insolvent businesses were driven out of the market by that competition. A better service concept, innovative ideas, and concentration on core businesses are easy means for an entrant to gain a competitive edge. 4. 5. 6. 7. 8. 9. Business Plan For An E-mail Provider Company 19 8. Conclusion The business of an e-mail provider requires a comprehensive technology. Because the competition is high, it is required to develop new solutions and to find profitable market niches. Unless millions of dollars are available to launch the business, the only chance of winning against a big competitor like Yahoo is to focus on niche possibilities. Niche entails offering unique services to a few concentrated markets. It is a less risky strategy and provides the best opportunities for small businesses throughout any marketplace. Market conditions in this segment change constantly as do customer demands. This is the chance for new businesses with innovative ideas and new offerings to secure a large customer basis. Service and technology are factors that can earn a competitive edge. The initial investment is comparable to other businesses in this segment. The expected investment margin is between 15% and 20%. For a successful operation of an e-mail provider company four factors are critical and central to the business strategy: The system has to be very reliable. Special features like external e-mail systems to get access to any other e-mail accounts and a spam-guard system that redirects any spam mail to a separate mail folder are required. A complete anti-spam and anti-virus scanning on every e-mail is required. The system has to be free of advertising. Cost management and new services are a critical success factor for businesses in industries where margins are low.
Pages to are hidden for
"Business Plan for an Email Provider Company"Please download to view full document