VIEWS: 40 PAGES: 17 POSTED ON: 5/17/2012
Page 1 of 17 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 email@example.com Page 2 of 17 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 Page 3 of 17 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. Page 4 of 17 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. Page 6 of 17 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. Page 7 of 17 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. Page 8 of 17 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. Page 10 of 17 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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