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Business Plan for Startup Business

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                                Business Plan




Christopher Pratt
Dan McKean

Plonkshop, Inc.
4325 243rd Ave NE
Salmonberg, WA 98053
Phone      +1 425 985 1079
Fax        +1 425 555 1212
E-Mail     root@plonkshop.com
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                                                 I.            Table of Contents



I.      Table of Contents.......................................................................................................................................... 2

II.     Executive Summary...................................................................................................................................... 3

III.    General Company Description .................................................................................................................. 4

IV.     Products and Services................................................................................................................................. 6

V.      Market Analysis ............................................................................................................................................. 8

VI.     Sales and Marketing .................................................................................................................................. 12

VII.        Management and Organization ......................................................................................................... 14

VIII.       Startup Expenses and Capitalization ............................................................................................... 15

IX.     Financial Plan .............................................................................................................................................. 16
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                                 II.     Executive Summary

Plonkshop provides easy to use, affordable Web site and E-commerce services to wineries around
the world.

Plonkshop was founded and is run by two veterans of the commercial software industry, both of
whom have extensive experience with Internet technologies, E-commerce, and wine.

Our customers include every winery who wants to improve their visibility and profitability by
leveraging the Internet without spending a fortune.
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                         III.    General Company Description

Plonkshop, LLC is a company dedicated to working with wineries and small wine shops to facilitate
Internet wine sales and Web site hosting.

Mission Statement: Plonkshop provides high quality, high availability, low cost, easily maintained
managed hosting solutions for wineries’ Web site and E-commerce needs.

Company Goals and Objectives: Plonkshop’s goals are as follows:

                  Provide state-of-the-art E-commerce solutions to wineries and other retailers
                   through build-out of our own facilities – without it costing them a fortune

                  Inspire fierce customer loyalty through excellent customer service

                  Attain net promoter numbers of nearly 100% - we want our customers to recruit
                   our next customers for us

                  Achieve profitability within the first 3 years of business

Business Philosophy: If you started a winery, you started it to make wine – not to waste endless time
trying to write your own software solutions, maintain Web servers, etc. We’re here to make it as
painless as possible for you to enhance your brand marketing by leveraging Internet tools – and to
make it easy, painless, and cheap to sell your wine to customers online.

Plonkshop will market its products to two primary audiences:

                  Wineries. Too many wineries have wasted time and money on custom, one-off
                   Web sites that don’t allow for easy reusability and which appear stale and
                   unappealing just weeks after launch. Plonkshop’s easy to use tools make it easy
                   for small business owners to maintain a fresh, high quality Web site that’s
                   attractive to their customers.

                  Wine retailers [including wineries that wish to sell online]. Wine shipping laws
                   change on a near-daily basis, and inventory management systems are often too
                   complex and expensive to be used effectively by small retailers. By leveraging our
                   E-commerce expertise to bring you high quality, low cost solutions, we can make
                   it easy to sell your wine online. You can use our software for both tasting room
                                                                                        Page 5 of 17




                   and Internet sales as well as managing your inventory; we take our commission
                   on a per bottle basis, so you don’t pay unless customers by your wine.

The industry in which we work is constantly evolving. E-commerce and Web site hosting business are
historically neglected areas in the wine industry; we believe that our groundbreaking innovation in
this area gives us an excellent chance of success. Our online community and blogging software add-
ons also provide our customers with additional tools to improve customer loyalty and wine sales.

The company’s core competencies lie in wine industry knowledge, retail experience, and technology
skills. Plonkshop stands to succeed thanks to its unparalleled combination of wine industry
knowledge, retail experience, and technology skills. The two founds of Plonkshop share between
them thirty years’ experience in IT; both of them have worked on Internet related software since the
mid 1990s, shipping such products as Microsoft Internet Explorer for Mac, Netscape, Mozilla, and
Firefox – all highly innovative, groundbreaking products that enabled the consumer Internet as we
know it today.

Mr. Pratt has been directly involved with online community building sites as well as inventory
management and database systems software. He is also the vigneron at Salmonberg Cellars just
east of Seattle, where he grows Riesling and Pinot noir.

Mr. McKean has worked on innovative E-commerce solutions such as Microsoft Commerce Server
for many years; his deep knowledge of and expertise is unparalleled.

Plonkshop will begin doing business as an S corporation so that the co-owners are not double taxed
on any income realized from Plonkshop. As the business grows, we will consider switching to a
limited liability corporation [LLC] if we wish to take on outside investors.
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                                IV.     Products and Services

Web hosting and E-commerce: Companies such as Yahoo! and Microsoft have long provided basic E-
commerce and Web site hosting solutions to small businesses, but none have as of yet provided
these service specially tailored to the wine industry. Given the hugely important online component of
the entire Plonkshop business model, we will be building these services for our own business – but it
will not take significantly more effort and resource to build these services in a repurpose-able form
so that we can resell them to wineries and other business involved in the manufacture and sale of
alcoholic beverages.

Utilizing products such as Microsoft Commerce Server and Microsoft BizTalk Server, we can provide
centrally hosted solutions that can then be resold to individual wineries, getting them out of the
difficult, expensive Web hosting business and into a strong business relationship with Plonkshop.
Over time, our IT and consulting business can continually refine our offerings to include additional
services such as wine club management, tasting room sales management, credit card and other
electronic payments processing, and so on.

Our main competitive advantage here stems from our being first to market as well as our proprietors’
extensive experience in this area. A small winery such as Samaniego Cellars stands to benefit hugely
from our services: for a monthly fee only marginally more than that of a rudimentary Web hosting
service such as Yahoo! Small Business, they can work with us to get an easily maintained, always up
to date site including basic E-commerce and community outreach functions.

The pricing structure of our E-commerce offerings is as follows:

Basic site: This package costs $249 to set up and runs $99 a year after that. This includes a custom
domain name, 1 GB Web site space, 200 MB bandwidth, basic site reporting, Microsoft FrontPage,
and our set of templates you can use to roll your own Web site. This is aimed at low traffic sites and
very small wineries for which cost is the most important factor in going online.

It is important to position the basic offering so that customers are well aware that it is just pretty
front door hosting level service – there are no commerce features here.

The basic site does however include the basic functionality needed to manage your customer mailing
list online, complete with direct mail features. It can also print mailing labels on a locally attached
printer – most important for the business, however, is that we stand to benefit from locking the
customer in to our database system, as an upgrade to the higher price [and higher margin] Custom
offering would make great sense for a winery with rapidly expanding business.
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Enhanced service: Custom domain name hosted on our servers, dedicated SQL Server databases to
keep customer mailing list information, custom E-mail list solution, E-commerce application tied in to
SQL Server using Commerce Server, inventory control for your winery’s end-user wine sales: $999
set-up fees, $399 a year, with commission on sales starting at $0.30 per bottle [sold either online or
through your tasting room] and going down to $0.05 per bottle with volume discounts. This is aimed
at somewhat larger wineries that expect to do medium- to high-volume business both through tasting
room sales and online.

Note that our up-front costs are very low: if the services aren’t actually used by your customers, you
don’t pay more than you ordinarily would to maintain a very simple Web site. If on the other hand
customers see what you have on offer and use it, you then pay a very low fee on a per-unit basis.
This pricing structure has historically been very successful for companies such as eBay and PayPal.

Other functionality included at the Enhanced service level is as follows:

    -   Merchandising functionality such as simple discounts (per product or category for a certain
        date range), targeted discounts (targeted at specific customers), cross-selling (ie, related
        products on a specific page).

    -   Orders functionality such as gift certificates, flexible payment methods, and custom shipping
        methods

    -   Ability to support multiple categories per product, and multiple catalogs (such as separate
        catalogs for a low-end brand vs a mid-range brand)

    -   Analytics to show where browsers are coming from, their click-path through the site, and
        most importantly sales per month/year or by specific user properties)

Custom consulting: For larger wineries without an in-house IT staff, Plonkshop’s founders can custom
create a solution for you from scratch. Costs are in line with industry standards such as IBM
WebSphere; typically, this is a high margin business that can be very profitable. Plonkshop can
partner with VARs and other resellers for mutually beneficial arrangements. This solution is ideal for
medium- to large-scale wineries looking to do in-place upgrades or rip-and-replace solutions for their
Web 1.0 operations.

Training and seminars: For customers looking to design their own Web sites and leave the hosting up
to us, we offer one-day intensive training on an ad-hoc basis. Customers can spend eight hours with
Plonkshop’s two founders and learn anything they’d like about graphic design, Web site hosting, E-
commerce, wine marketing, and general computer knowledge. The cost of this is $1,000 per day and
includes a one-hour follow-up teleconference one month later.
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                                   V.     Market Analysis

Market research
Unfortunately, all market research materials that I have been able to access as a Microsoft employee
– these are paid services available through the Microsoft library - are not usable for purposes
outside of Microsoft business. As a result, I do not have access to information that would help this
anemic business plan become solid enough to actually use in business. That being said, I do have
experience in the industry and know that many, many small businesses – such as Yakima Cellars –
have sub-par Web sites that have cost them a lot of money.


Market research – To be done
Before going ahead with this business plan, the proprietors propose to do their own informal market
research based on contacts in the wine industry in Washington State. We will put together a basic
research plan, working with ten small to medium-size wineries across the state to best assess what
capital outlays are being spent on Internet technology, what the actual and perceived ROI are, what
customers feel is missing from their online experience, and so on. Our aim here is to better
understand the current strengths and weakness experienced across the industry so that we can
come up with a better, more cost effective way to help wineries move product.

Additionally, we will do research from secondary materials – for example, searching through industry
publications and online resources to attempt to determine if the market for this sort of work even
exists already.


Economics
Facts about your industry:

      There are nearly two thousand wineries in the western United States. Of these, most do have
       Web sites, but very few have what could be described as well-functioning Web sites.

      The current demand in our target market is moderate, but we believe we can influence by
       demand by demonstrably proving the business value of our business proposition. As wineries
       see that they can improve their market share and sales through sensible investment in
       online services using Plonkshop, we expect demand to increase significantly by 2008.

      Overall trends in the North American consumer market show increased broadband
       penetration in US households, with higher income households more likely than ever before to
       have high speed Internet access at home. At the end of 2005, nearly 35% of all US
       households had high speed Internet connections, and nearly 50% of all US households had
       at least a dial-up connection to the Internet.
                                                                                           Page 9 of 17




       The growth potential for our business is finite due to the finite nature of the North American
        wine producing market. However, given our low costs – we are mostly a reseller of other
        companies’ goods and services with a reusable software application layer of our own make
        included – any incremental growth is nearly 100% profitable for Plonkshop. These sorts of
        margins are typical for the software industry.

       The barriers to entry in this market are few due to the fluid nature of software and services in
        general. However, these are worth noting:

            o   Initial start-up costs for custom software development; these are high compared with
                eventual returns
            o   Availability of proprietors to do software work: Because this is a part time business,
                the proprietors may not be available to work full time until such a time as Plonkshop
                becomes financially successful
            o   Consumer acceptance; some wineries may still be uncomfortable with the idea of an
                Internet presence, even in 2006
            o   Shipping costs; if these continue to rise, demand for shipped wine may decline
            o   National, state, and local regulations may affect our customers’ need for E-commerce
                services


Competition
Plonkshop’s major competition comes from widely geographically dispersed individual consultants as
well as nationwide companies in the Web hosting business

Our major competitors are (to name a few):

Yahoo! Small Business

MSN Small Business

Various ISPs and Web hosting providers, e.g. Speakeasy and ReadyHosting

Many small VARs, ISVs, and individuals doing ad hoc consulting for wineries

In a nutshell, Plonkshop is highly competitive due to economies of scale. Our custom software and
applications are deployable by anyone and involve minimal customization for new customers. It may
help to think of our business as a cooperative of sorts – if we have fifty customers, all fifty of them
are essentially paying for a share of the same solution to their business needs, which means that
each winery is only paying for 1/50th of the cost that they historically would have had to expend.

Here is a competitive analysis of Plonkshop vs. some of our competitors. In the final column, we have
estimated the importance of each competitive factor to our customers. 1 = critical; 5 = not very
important.
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Table 1: Competitive Analysis

                                                                      Yahoo,          Consultant,
                                                                                                       Importance to
 FACTOR           Plonkshop         Strength         Weakness        Microsoft        Web hosting
                                                                                                         Customer
                                                                   bCentral, etc.      provider

 Products

                                     No more                                          Bare bones
                                                                     Microsoft
                                    expensive                                            hosting
                                                                     bCentral:
                   $99/year       than the least                                     providers: $99
 Price                                                 None         $159/year                               1
                 (basic) and up     expensive                                            and up
                                                                      Yahoo:
                                   Web hosting                                         ISPs: $120
                                                                    $144/year
                                     provider                                            and up
                 We partner to                                     Good to very      Good to very
                                  “Five nines” –
                  resell high-                                     good, but no      good, but no
 Quality                            99.999%            None                                                 1
                  availability                                     wine-specific     wine-specific
                                      uptime
                   services                                            help              help
                 Basic E-mail                       Cost is more
                                                                   Good to poor;     Good to poor;
                 support plus     Wine-specific      expensive
                                                                     long hold         long hold
 Service         per-incident       industry        than generic                                            2
                                                                    times, but        times, but
                   custom          expertise          technical
                                                                       cheap             cheap
                   support                             support
                                                                                      Very good;
                 “Five nines” –                                                       consultant
 Reliability       99.999%         Very reliable       None          Very good        may not be            2
                     uptime                                                            reliable
                                                                                        though
                                  As a VAR we
                 “Five nines” –      will only
 Stability         99.999%        partner with         None             High              High              3
                     uptime       highly stable
                                    providers
                                                                                      Potential for
                                                                     No wine
                                  Unparalleled                                         some wine
 Expertise           High                              None          industry                               2
                                  in this space                                         industry
                                                                     expertise
                                                                                        expertise
                                  Will take time,
 Company                              but our
                   Unproven                          Unproven        Very good           Good               2
 Reputation                       background is
                                        good
                                                                                     Local, but may
                                  US owned and                     Call centers in
 Location         Washington                           None                            be foreign           4
                                    operated                            India
                                                                                       operated
                 High quality,    The best your                                      Good, but may
                                                                   Good, but not
 Image             subject        business can         None                           not be wine           2
                                                                   wine specific
                   experts             get                                              specific



Our main competitive advantage is that we can offer Web hosting and E-commerce solutions at or
below the pricing offered by our competitors. More importantly, our offerings are all custom tailored
                                                                                       Page 11 of 17




and specific to the wine industry: small business such as microbreweries and wineries should feel
more comfortable doing business with us as we truly understand their business. We’re not an
enormous multinational corporation providing generic small business solutions [such as Microsoft
bCentral]; we’re a small family-owned business providing the same high quality service, but at better
prices and with domain knowledge our competition just can’t provide.

Our main competitive disadvantage lies in our small size and focus on low costs. Often, customers
may have higher expectations than we can afford to meet. For example, some customers may think
that $99/year buys them unlimited informal customer support and consulting; this is not the case.
We must be very careful to set expectations so that our customers know that low prices come with
reduced expectations for support – and that we can provide them quality support for less money
than the competition, but that it’s also going to cost them extra.
                                                                                             Page 12 of 17




                                       VI.      Sales and Marketing

Plonkshop is a virtual business run out of the proprietors’ home. Minimal capital will be spent on
remodeling the erstwhile violin workshop1 into a small office so as to keep the business separate for
tax purposes. Equipment is limited to two desks, two computers, a high speed Internet connection, a
phone, a fax machine, and a space heater. Plonkshop is located in rural Redmond, Washington –
just minutes away from companies such as Amazon.com and Microsoft.


Production
As our products are all entirely virtual, all production exists only online. Care has been made to invest
in a high quality backup system so that none of our work is lost due to hard drive failure, power
surges, and so on.


Location
The most important thing we need in terms of location is availability of high speed Internet access.
Thankfully, we were able to source this through Speakeasy.net.

As Plonkshop expands, we may need to take on part- or full-time staff for technical support and
marketing purposes. This is easily taken care of by leasing office space in nearby downtown
Redmond at reasonable market rates. Additionally, the large number of skilled high tech workers in
the area means that it will be easy for us to find staff by utilizing the services of temporary staffing
companies such as Volt and Excell Data.

Eventual office space requirements:

          Individual cubicles with data and voice connections; these are sometimes rentable by the
           united [e.g. at the TechMart temporary office space facility in Santa Clara, California; there is
           likely something similar in the greater Redmond area]

Access:

It is not important that customers be able to access the physical location of our corporate
headquarters. Plonkshop anticipates that sales and marketing visits will be made on-site if at all.




1   Our house was built by a Swiss violinmaker. Honest!
                                                                                        Page 13 of 17




Suppliers
These are our key suppliers:

      Microsoft Corporation. Plonkshop will sign up for the Microsoft Small Business Solutions
       Provider program, which will allow us to resell Microsoft applications for use by our
       customers. Similarly, we will use Microsoft products on our back end servers.

      ReadyHosting and/or other hosting providers. Plonkshop will function as a reseller of hosting
       services – not as a primary hosting service. This absolves us of the cost and responsibility of
       running our own data center. That being said, however, Plonkshop is open to the idea of
       running our own data center at a co-location facility if that becomes advantageous cost-wise
       in the future.


Credit Policies
      All services must be paid in advance. No credit will be extended; this is not customary in the
       IT industry.
                                                                              Page 14 of 17




                   VII. Management and Organization

   The business will be managed on a day-to-day basis by the two proprietors. Both are
    proficient with commercial software accounting packages such as QuickBooks and are more
    than capable of handling the necessary small business accounting.
                                                                                          Page 15 of 17




                      VIII. Startup Expenses and Capitalization

Our startup expenses are surprisingly low – but this is typical for businesses in the IT consulting
space. Here is a rough estimate of what it will take to get our business going:

2 PC workstations         $800 each

1 Windows server          $2000                      Used to mock up solutions before transferring to
                                                     hosting provider

1 Mac OS computer         $1200                      Used to verify compatibility before deploying
                                                     solutions

High speed Internet       $200/month                 Includes VOIP solution so that we don’t need to
access                                               pay for POTS service

MSDN subscription         $300/year                  Used to get Microsoft software at low cost for
                                                     development and testing purposes

Business cards,           $400                       Basic office equipment
letterhead, etc.

Fax machine / printer /   $300                       Basic office equipment
scanner

Ad in Wine Business       $4,068 [black and          Other advertising may be useful as well; this is just
Monthly                   white 1/8 page ad run      a sample for one publication
                          for 12 months]

Remodel of workshop       $4000                      Includes carpeting, basic furniture, disposal of old
into office space                                    junk, etc.

Total                     $16,800                    This covers our first year’s worth of expenses.

Ongoing expenses per      $3000                      Expenses are low because we don’t need to pay
year                                                 ourselves. This will change if we go full time with
                                                     Plonkshop, or if we need to hire additional staff.
                                                                                        Page 16 of 17




                                     IX.     Financial Plan

These numbers are all estimate only: real numbers would involve performing actual market research
that is outside the scope of this assignment.


12-Month Profit and Loss Projection
I do not expect that we will be able to turn a profit over the first twelve months. Given the baseline
expense of the company after the first year is about $3,000, that means that we must have at the
very least 60 paying customers; that assumes that all 60 customers have signed up for our most
basic plan, which yields approximate profit of $50 per customer [they pay $99, but $49 of that goes
to our contracted hosting service].

Going forward, however, as the proprietors develop more attractive propositions such as winery
specific Web site starter kits, more comprehensive managed solutions, E-commerce solutions, and
the like, we expect to break even by the end of the third year:

Year 1                             Costs $16,800                      We’ll spend this year
                                   Income nil                         developing our offerings
                                                                      working in tandem with a small
                                                                      winery.

Year 2                             Costs $3,000                       If we can sign up 60 customers
                                   Income $3,000                      by the end of the year, we will
                                                                      break even. In the meantime,
                                                                      we can expand our offerings in
                                                                      preparation of selling higher
                                                                      margin solutions to bigger
                                                                      customers

Year 3                             Costs $3,000                       Assuming 100 basic and 50
                                   Income $15,000+                    custom customers, we stand to
                                                                      have net income of $15,000
                                   We may have recouped our           plus commissions; this number
                                   initial investment costs at this   reflects theoretically zero
                                   point.                             commissions.
                                                                                     Page 17 of 17




Please note that these projections do not include marketing expenses that may be necessary to grow
the business to the projected numbers. Additionally, we assume that we will be able to convince at
least 150 customers to switch to Plonkshop’s services within the first three years of business – and
we assume that the proprietor’s software design skills are up to the task of developing a
comprehensive, attractive solution.

				
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