VCL_Business Plan_CH

Page 1 of 26 Business Plan Value Creators Les Dawson Chris Harrison Business name: Address: Value Creators Ltd Address Line 1 Address Line 2 City, ST 22222 222-333-4444 111-222-3333 xyz@example.com Telephone: Fax: Email: Page 2 of 26 Table of contents I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. Table of contents ........................................................................................................... 2 Executive summary ....................................................................................................... 3 General Company Description ..................................................................................... 4 Products and services .................................................................................................... 9 Marketing plan............................................................................................................. 12 Operational Plan .......................................................................................................... 22 Management and organization...................................Error! Bookmark not defined. Personal financial statement ......................................Error! Bookmark not defined. Startup Expenses and Capitalization .......................................................................... 22 Financial plan .............................................................Error! Bookmark not defined. Appendices................................................................................................................... 22 Refining the Plan ......................................................................................................... 23 Page 3 of 26 Executive summary Write this section last! We suggest you make it 2 pages or less. Include everything that you would cover in a 5-minute interview. Explain the fundamentals of the proposed business: what will your product be, who will be your customers, who are the owners, what do you think the future holds for your business and your industry? Make it enthusiastic, professional, complete and concise. If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment. Page 4 of 26 General Company Description Value Creators is a consultancy which delivers reduced costs by the introduction of electronic markets in client supply chains and/or uses global sourcing expertise to reduce the costs of technical services (e.g. IT, design engineering, back office processes) purchased by clients. Mission Statement: Value Creators‘ mission is the rapid reduction of costs for our clients, enabling improved margins and/or competitive position. Value Creators is a change agent, aiming to share the risks and rewards of delivering change and to provide clients with a set of robust processes for ongoing supply chain management. Company goals and objectives: Goals Value Creators‘ goal for both clients and employees (associates) is to provide flexibility in sourcing. For clients, Value Creators aims to reduce the barriers to entry for both global (offshore) sourcing for IT and engineering services and for electronic sourcing of inputs to the supply chain (auctions). Until now, access to these techniques and technologies has been the preserve of major national or global concerns, often aided by global consulting companies. Value Creators aims to use its experience to bring access to flexible sourcing to companies which have up to now had no means to access the required expertise. For employees (associates) Value Creators will provide an incentive and reward framework which rewards time spent on Value Creators‘ business and enables associates to share in the success of client engagements. Both Value Creators and its associates will participate in the risk and reward aspects of client engagements. Page 5 of 26 Objectives Value Creators‘ objectives in terms of revenue and growth are defined in Section XXX of this plan. Business philosophy: Value Creators will operate in the same way that it advocates to its clients, using flexible, contracted resources to conduct engagements and deliver value to clients, value which in all cases will substantially exceed the cost of Value Creators engagement. Value Creators will work with its clients in an open, honest way. Value Creators‘ aim will be the delivery of value rather than maximizing billable hours. In some cases, Value Creators will ask the client to recognize the value that Value Creators is delivering by sharing risk and reward with Value Creators Value Creators will stick to the knitting. Where clients require services associated with our core activities but outside our core competantcies we will either souce on behalf of, or direct the client to competent and complimentary resources. Value Creators does not wish to be part of any client value change in the long run. Its stated intention will be to realize value for the client through innovation and then self disintermediate once the client has embedded the processes and become self sufficient. However, it is Value Creators intention to repeat business for its clients. Target market Value Creators‘ expertise can be applied to a number of industry sectors. However, to assure focus and to leverage the experience of the directors, Value Creators proposes initially to concentrate on the supply chain of the physical infrastructure industries of the UK i.e. gas, water and electricity distribution and railway infrastructure (see Marketing section for a detailed definition of the target market). UK market for consulting services After the boom period of the late 1990s, the UK market for consulting services entered a steep decline (see chart below). This was a result of the working out of the effects of over-investment in IT systems, the collapse of asset (stock) values and general loss of faith in the benefits of technology investment. Page 6 of 26 Consulting & Integration in the UK UK Market Size & Growth 1998 - 2005 Source: Ovum Holw ay Trends Oct 2002 13.5 13 Market Size $bn 30 Market Growth % 12.5 12 11.5 11 10.5 10 1998 1999 2000 2001 2002 2003 2004 2005 Date/Forecast Zero Growth 25 20 15 10 5 0 -5 -10 Market Size Market Grow th The Ovum Holway study also made the following observations about the IT consultancy market in late 2002: • • • • • • Cost cutting the is the key driver for growth Clients will prioritise cost saving by optimisation of existing IT investment Clients are driven by the need for an immediate bottom-line business impact The market for ‗new projects‘ will remain soft for ‗years to come‘ ‗design-build-run‘/outsourcing projects will remain the firmest sector of the market Any growth in this market is typically only being achieved by ‗niche‘ players Value Creators is aimed squarely at these market concerns and priorities. At the time of preparing this business plan, it should be noted: (a) the consultancy industry is predicted by Ovum Holway to re-enter a phase of positive growth in 2004 and Page 7 of 26 (b) recent (May 2003) remarks by the chairman of the UK Management Consultancy Association were as follows: - although the ―froth‖ has gone from the internet technology and advisory market, the fundamental supply chain changes enabled by the technology are going ahead and there will opportunity in reconfiguring company supply chains for the rest of this decade - global (i.e. a combination of onshore and offshore) sourcing is enabling enterprises once again to consider large projects. -there are signs that consulting and project activity will increase in late 2003 and going into 2004. Value Creators’ core competencies, competitive strengths and critical success factors: Directors’ experience The directors of Value Creators have more than 50 years combined experience of physical network systems engineering and operational management, senior management, IT management, supplier management and industrial sales and marketing across a number of industry sectors. See Section XX ―Directors – Biographical Information‖ for details. First-mover and competitive advantage By concluding a framework agreement with a major offshore services provider(s) and using contractual templates for engagement with clients, Value Creators is lowering the cost of contracting offshore and enabling a number of companies to access a resource they could not previously have accessed. This has not been done before, and Value Creators will have firstmover advantage. Value Creators proposes to concentrate on organizations in the range of (very approximately) 200 to 3000 employees, i.e. below the level where global information technology and consulting organizations focus. Value Creators will also focus on a sector (physical asset networks) where the directors‘ expertise, experience and relationships can be brought to bear with maximum effect. Page 8 of 26 Critical success factors Value Creators will need: - sufficient sales activity and capacity quickly to acquire a (small) number of initial clients - operational (engagement and delivery) capacity to service those clients - cash to fund activities until operations turn cash-positive - supplier contract(s) to support the Value Creators business model Legal form of ownership Value Creators will be a limited liability company. This legal form of ownership has been chosen to allow the company to operate with commercial flexibility while limiting the risk exposure of the directors. Page 9 of 26 Principle of Services Value Creators‘ area of expertise is the use of technology and contracting expertise to bring cost savings in client‘s supply chain operations. Value Creators may work on a fee basis, on a risk reward basis, or on some balance between the two approaches. Value Creators‘ product range will evolve over time, but the initial product offering will lie in four main areas, as outlined in Figure 1: PRINCIPLE PRODUCTS Offshore Development Centres ODC Offshore Engineering Centre OEC B.O Back Office AUCTIONS Electronic Auctions Strictly Confidential L.W. Dawson © Copyright 15/05/03 9 Figure 1 – Value Creators principal products Page 10 of 26 Offshore Development Centres With its offshore framework contract partner(s) and using its specifying and contracting experience, Value Creators can assist clients to access capability in two broad areas, infrastructure management and application development and maintenance. Engagements in this area will proceed as detailed in Figure 2 below: BUSINESS MODEL CLIENTS 1. e.g. McNicholas 2. Discuss at Exec/Snr Exec Product Suitability Engage Review Opportunities Charge Client Present report potential opportunities Introduce to supplier i.e. TCS Assist Client to write contracts Agree rates/length Support work pack process until client self sufficient Then Value Creators Withdraws e.g. Datastream 3. VALUE CREATORS e.g. Kiers 4. 5. 6. 7. e.g. Excel 8. All targets for 1 or all - 4 principle products Strictly Confidential L.W. Dawson © Copyright 15/05/03 11 Figure 2 ODC engagement stages The detailed capabilities which Value Creators can bring to bear in these areas are as follows: Page 11 of 26 Infrastructure management IT infrastructure consulting Consulting services in the areas of servers, security, communication, desktop and enterprise system management. IT infrastructure audit and assessment and recommended optimal solutions to reduce the total cost of ownership (TCO) through an SLA (Service Level Agreement) orientation. IT outsourcing and system integration End-to-end service delivery to clients by understanding both business and application requirements, and architecting an IT infrastructure solution with key performance indicators (KPI). The entire range of operations - from requirements analysis to resource and project planning, implementation (including vendor selection and management), solution acceptance, transition, hand-over and, finally, management — is managed for the client. Communication Services Design, implementation and maintenance of messaging solutions, potentially with real-time data conferencing and video conferencing capabilities. Messaging solutions with encryption, digital signatures, connectivity through VPN, and integration with PDAs are some of the other valueadded service offerings. Expertise in messaging products such as Lotus Notes / Domino R5, MS Exchange 5.5 / MS Exchange 2000, Sendmail, and iPlanet can also be brought to bear on client situations System management The range of service offerings includes system capacity planning, performance monitoring, resources management, storage management, software administration, security, consolidation of systems infrastructure, and continuous monitoring of application systems In addition professional services are offered in areas such as database design and administration, performance tuning, migration and system upgrade, archival, security and backup and recovery involving products such as Oracle, Sybase, MS SQL, DB2 and Informix on various platforms. Other capabilities include site consulting, design and setup, consolidation of data centres and storage networks, migration to new technologies, and managed services backed by SLAs on a 24x7 basis. Page 12 of 26 Networking solutions incorporate technologies such as VoIP, VoFR, ATM, Frame Relay, X.25, ISDN, and VSAT. In the area of user support, the offering includes the design, setup and management of help desk facilities for handling users' requests pertaining to desktops / applications / facilities / products. In the area of disaster recovery planning and management, and business continuity planning, the offering includes the analysis of the need for disaster recovery (DR) and the preparation of a detailed DR plan with backup strategy / site / server recommendations. Security management includes design and implementation; firewall design, implementation and administration; security policy audit and assessment, ethical hacking, vulnerability and risk analysis; intrusion detection systems (IDS); and VPN design and implementation. Application Development and Maintenance Use of SEI-CMM Level 5 and ISO 9001 quality processes to develop applications using scalable and extensible architectures for a wide range of industries. Web-based technologies with a strong orientation towards standards-driven (EJB, COM/DCOM) architecture. Clients are offered scalable and extensible architectures that can support 24/7 business availability to accommodate global customers and reduce development cycles. The ADM offering includes application development, re-engineering and migration, testing, and application maintenance and support. Offshore Engineering Centres Typical project engineering activities include: Pre-project activities (site survey, design studies etc) Design engineering Environment, Health & Safety Activities Procurement activities Project management & coordination Inspection & expediting Construction supervision Commissioning Page 13 of 26 Many of these activities do not lend themselves to remote/global sourcing. However, the area of design engineering is a candidate, and Value Creators will assist its clients to specify and contract for capability from Value Creators‘ framework partner(s) in the following areas Basic studies/engineering Design calculations & drawings Enquiry specifications Technical bid analysis Vendor drawing review Back office – Business process outsourcing An area for development in conjunction with Value Creators‘ framework contract partners, this will involve the provision of back office application functionality on a pay-per-user basis Electronic auctions Value Creators has proven expertise in driving procurement savings by the introduction of electronic auction techniques. Value Creators‘ offering in this area will be defined by one of two approaches (a) a fee-based approach or (b) a contingency approach. The approach is as outlined in Figure 3 below: Page 14 of 26 ELECTRONIC AUCTIONS CLIENT i.e. EXCEL VALUE CREATORS SUPPLIER Package Hosting Facilitation Training Tenderers % Of Auction Savings Sharing Shared between host (Supplier) and Value Creators 15/05/03 14 Strictly Confidential L.W. Dawson © Copyright Figure 3 Electronic auctions Fee-based approach Will involve four phases: 1. 2. 3. 4. Initial feasibility study to determine whether auctions are likely to be worthwhile. Training client and supplier staff in the necessary tools and techniques Setting-up and execution of a number of auctions, using hosted facilities Documenting procedures and assisting client with purchase of hardware and software to carry out auctions after Value Creators has completed the engagement (optional) Contingency approach Value Creators carries out all the above activities, at Value Creators‘ risk, but Value Creators takes a percentage of the first full year‘s realized savings Page 15 of 26 Marketing plan Economics Value Creators has a number of offerings, the most established and defined being the ability to specify and contract for onshore & offshore IT services. The other product offerings, OEC, back office BPO and reverse auctions will need some refinement, probably in conjunction with early clients. For the purposes of discussing the size of the market for Value Creators‘ offerings, it may be most helpful to concentrate on the likely market for offshore IT services. Ovum Holway, an IT market research company, estimates that a total of 20-25,000 jobs in the UK software and services industry will move offshore within the next four years. If we say that the next two years are relevant to Value Creators‘ launch, then say 10,000 jobs will move to offshore sourcing. If we calculate that the average cost of resource will fall from £600/day to say £200/day per head, then roughly £900,000,000 of cost will be avoided by the use of offshore sourcing over the next two years. Another (long range) prediction is that half of all IT services will be sourced offshore within ten years. As the UK systems integration and IT services market is worth approximately £12bn per annum, then approximately £5bn per annum of cost savings over will be reached within the next ten years. Value Creators‘ business is the facilitation of these sourcing shifts. Detailed analysis on offshore sourcing trends is available commercially, but what is apparent is that by any measure, the market opportunity far exceeds Value Creators‘ launch sales and delivery capacity to address. VC therefore proposes initially to address a sector where contacts exist and the experience of the directors will be most relevant i.e. the supply chain of the physical asset infrastructure industries. These industries are scheduled to make very large capital investments over coming years, yet the companies in the supply chain will be constrained to reduce input costs. See Figures 4 and 5 below: Page 16 of 26 CAPITAL INVESTMENT AMP4 (Water Industry) XD4 (Electricity Industry) NGT (Gas Dimension) CIRCA £15bn 2005/2010 CIRCA £6bn 2005/2010 CIRCA £30bn 2030 Rail CIRCA £30bn 2015 Pressure to remain on Utility Opex as Depreciation and interest charges Increases on the P& L Account. 15/05/03 5 Strictly Confidential L.W. Dawson © Copyright Figure 4 Infrastructure industries capital investment FINANCIAL DRIVERS (UTILITIES) Traditional Gearing Ratio = Debt ---------Equity Debt ---------RAV £1.8bn --------£3.00bn 3.00bn Borrow £1bn =   = Up to 200% for Utilities Utility / Regulator Ratio = = 55 – 70% = = 60% £2.8bn ---------£4.0bn = 70% Access to Capital EIB Limiting Factors Covenants on : 1. Interest Charges 2. Dividend Cover Strictly Confidential L.W. Dawson © Copyright 15/05/03 6 Figure 5 Financial drivers Page 17 of 26 Growth potential and opportunity (expand) Barriers to entry (expand) High marketing costs Slow acceptance of proposition Training/skills Unions Other risks to the business (expand) Government regulations on use of offshore labour in UK (expand) Customers Industry sector(s) The formal SIC (2003) classifications of the initial target markets are as follows: Section E Electricity Gas and Water Supply, specifically 40.11 Production of electricity 40.12 Distribution of electricity 40.22 Distribution and trade of gaseous fuels through the mains 41.00 Collection, purification and distribution of water Section F Construction, specifically: 45.23 Construction of motorways, roads, railways, airfields and sports facilities 45.24 Construction of water projects 45.25 Other construction work involving special trades Section G, Group 74.2 Architectural and engineering activities and related technical consultancy, specifically: 74.20/4 Engineering consultative and design activities Page 18 of 26 Size of target firm Value Creators should avoid attention from the “BIG” consulting organizations such as Accenture. Also to reduce the higher cost of sales organizations with over beauracratic procurement functions or those subject to the time frame imposed by E.U. Procurement Regulations at (principally Utilities) should be chosen carefully if at all. The target company size should therefore be between 50 to 500 million turnover with significant IT and Procurement requirements. This SME focus will be predominantly first time conversions for this product and service set. Product In the Products/Services section, you described your products and services as YOU see them. Now describe them from your CUSTOMER'S point of view. Features and Benefits List all your major products or services. For each product/service: Describe the most important features. That is, what will the product do for the customer? What is special about it? Now, for each produce/service, describe its benefits. That is, what will the product do for the customer? Note the difference between features and benefits, and think about them. For example, a house gives shelter and lasts a long time, is made with certain materials and to a certain design; those are its features. Its benefits include pride of ownership, financial security, providing for the family, inclusion in a neighborhood. You build features into your product so you can sell the benefits. What after-sale services will be given? For example: delivery, warranty, service contracts, support, follow up, or refund policy. Competition What products and companies will compete with you? List your major competitors: Names & addresses Will they compete with you in across the board, or just for certain products, certain customers, or in certain locations? Page 19 of 26 Will you have important indirect competitors? (For example, video rental stores compete with theaters, though they are different types of business.) How will your products/services compare with the competition? Use the table called Competitive Analysis, below to compare your company with your three most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors. In the cell labeled "Me", state how you honestly think you will likely stack up in customers' minds. Then check whether you think this factor will be a strength of a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be so, causes many business failures because it scatters and dilutes your efforts. You want an honest assessment of your firm's strong and weak points. Now analyze each major competitor. In a few words, state how you think they compare. In the final column, estimate the importance of each competitive factor to the customer. 1 = critical; 5 = not very important. Table 1: Competitive Analysis Factor Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance Sales Method Credit Policies Advertising Image Me Strength Weakness Competitor A Competitor B Competitor C Importance to Customer Page 20 of 26 Having done the competitive matrix, write a short paragraph stating your competitive advantages and disadvantages. Niche Now that you have systematically analyzed your industry, your product, your customers and the competition, you should have a clear picture or where your company fits into the world. In one short paragraph, define your niche, your unique corner of the market. Strategy Now outline a marketing strategy that is consistent with your niche. Promotion How will you get the word out to customers? Advertising: what media, why, and how often? Why this mix and not some other? Have you identified low cost methods to get the most out of your promotional budget? Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), network of friends or professionals? What image do you want to project? How do you want customers to see you? In addition to advertising, what plans do you have for graphic image support? This includes things like logo design, cards and letterhead, brochures, signage, and interior design (if customers come to your place of business). Should you have a system to identify repeat customers, and then systematically contact them? Promotional Budget How much will you spend on the items listed above? Before startup? (These numbers will go into your Startup budget.) Ongoing? (These numbers will go into your Operating Plan budget.) Page 21 of 26 Pricing Explain your method(s) of setting process. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under-price you anyway. Usually you will do better to have average prices and compete on quality and service. Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why? How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price? What will be your customer service and credit policies? Proposed Location Probably you do not have a precise location picket out yet. This is the time to think about what you want and need in a location. Many startups run successfully from home for a while. You will describe your physical needs later, in the Operational section of your business pla n. Here in the marketing section, analyze your location criteria as they will affect your customers. Is your location important to your customers? If yes, how so? If customers come to your place of business: Is it convenient? Parking? Interior spaces? Not out of the way? Is it consistent with your image? Is it what customers want and expect? Where is the competition located? Is it better for you to be near them (like car dealers or fast food restaurants) or distant (like convenience food stores)? Distribution Channels How do you sell your products/services? Retail Direct (mail order, web, catalog) Wholesale Your own sales force Agents Independent reps Bid on contracts Page 22 of 26 Sales Forecast Now that you have described your products, services, customers, markets, and marketing plans in detail, it is time to attach some numbers to your plan. Use the Sales Forecast spreadsheet to prepare a month-by-month projection. The forecast should be based upon your historical sales, the marketing strategies that you have just described, upon your market research, and industry data, if available. You may wish to do two forecasts: 1) a "best guess", which is what you really expect, and 2) a "worst case" low estimate that you are confident you can reach no matter what happens. For this section, please refer to the Twelve-Month Sales Forecast Spreadsheet. Remember to keep notes on your research and your assumptions as you build this sales forecast, and all subsequent spreadsheets in the plan. This is critical if you are going to present it to funding sources. Operational Plan Initially the business resources will consist of the two founder members. The resources will focus on the one hand on the ODC opportunities led by Les Dawson and the reverse auction opportunities led by Chris Harrison. It is safe to say that it will be a requirement for both to work on each others activities depending on the specific demand at the time and the sheer fact that resources are limited during the start-up. Additional resources will be secured from the market using principle of Business Associates. These Business Associates will be personally known to the owners but will nevertheless be vetted to ensure that they are capable of delivering the right quality to the clients. In order to ensure that this quality is delivered standard procedures and practices will be documents and established to allow the business to scale more rapidly than would otherwise be achieved. Business Associates will not receive payment whilst not working and will receive a mixture of daily rate and commission depending upon success. The Business Associates will be responsible for all of their personal tax, national insurance and pension responsibilities. Startup Expenses and Capitalization Appendices Following is a list of all the spreadsheets required in this business plan in order of appearance: Page 23 of 26 Name of spreadsheet 12-month Sales Forecast Personal Finance Statement Startup Expenses 12-month Profit and Loss 4-year Profit projection 12-Month Cash Flow Opening Day Balance Sheet Breakeven Analysis File No. TBD TBD TBD TBD TBD TBD TBD TBD Include details & studies used in your Business Plan; for example: Brochures & advertising materials Industry studies Blueprints & plans Maps & photos of location Magazine or other articles Detailed lists of equipment owned or to be purchased Copies of leases & contracts Letters of support from future customers Any other materials needed to support the assumptions in this plan Market research studies List of assets available as collateral for a loan Refining the Plan The generic business plan presented above should be modified to suit your specific type of business and the audience for which the plan is written. For Raising Capital For Bankers Bankers want assurance of orderly repayment. If you intend using this plan to present to lenders, include: Amount of loan How the funds will be used What will this accomplish (how will it make the business stronger?) Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate, but may be able to negotiate a longer repayment term, which will help cash flow. Collateral offered, and list of all existing liens against collateral Page 24 of 26 For Investors Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards. Funds needed short term Funds needed in 2 to 5 years How company will use funds, and what this will accomplish for growth. Estimated return on investment Exit strategy for investors (buyback, sale, or IPO) Percent of ownership you will give up to investors Milestones or conditions you will accept Financial reporting to be provided Involvement of investors on the Board or in management Refine for type of business Manufacturing Planned production levels Anticipated levels of direct production costs and indirect (overhead) costs -- how do these compare to industry averages (if available) Prices per product line Gross profit margin, overall and for each product line Production/ Capacity limits of planned physical plant Production/ Capacity limits of equipment Purchasing and inventory management procedures New products under development or anticipated to come on line after startup Service Businesses Service businesses sell intangible products. They are usually more flexible than other types of business, but they also have higher labor costs and generally very little in fixed assets. What are the key competitive factors in this industry? Your prices Methods used to set prices System of production management Quality control procedures. Standard or accepted industry quality standards How will you measure labor productivity? Percent of work subcontracted to other firms. Will you make a profit on subcontracting? Credit, payment, and collections policies and procedures Strategy for keeping client base Page 25 of 26 High Technology Companies Economic outlook for the industry. Will the company have info systems in place to manage rapidly changing prices, costs, and markets? Will you be on the cutting edge with your products and services? What is the status of R&D? And what is required to: 1. Bring product/service to market? 2. Keep the company competitive? How does the company: 1. 2. 3. 4. Protect intellectual property? Avoid technological obsolescence? Supply necessary capital? Retain key personnel? High tech companies sometimes have to operate for a long time without profits, and sometimes even without sales. If this fits you, then banker probably will not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer term financial forecasts to show when profit take-off is expected occur. And your assumptions must be well documented and well argued. Retail Business Company image. Pricing: Explain markup policies. Prices should be profitable, competitive and in accord with company image. Inventory: Selection and price should be consistent with company image. Inventory Level: Find industry average numbers for annual inventory turnover rate (available in RMA book). Multiply your initial inventory investment times the average turnover rate. The result should be at least equal to your projected first year's Cost of Goods Sold. If it is not, then you may not have enough budgeted for startup inventory. Customer service policies: should be competitive and in accord with company image. Page 26 of 26 Location: Does it give the exposure you need? Is it convenient for customers? Is it consistent with company image? Promotion: methods used, cost. Does it project a consistent company image? Credit: Do you extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?