Business Plan Template

Business Plan June 27, 2000 Confidentiality Statement This business plan and the information contained herein is proprietary property of ABC Company, Inc. and is intended for only those people authorized by ABC Company or it’s agents. The company expressly disclaims any and all liability for representations and warranties, expressed or implied, contained or omitted for this plan. Any reproduction or distribution of this information in whole or in part, or divulgence of any of it’s content, is strictly prohibited without the written consent of the Company. Upon request, the recipient agrees to return this document and any other material received from the Company within retaining any copies thereof. INTRODUCTION On December 9th, 1999 President Clinton announced that he was leading a program to draw national attention to the effects of what he calls the “Digital Divide”----- the growing division in the United States between the information “haves and have nots” 1 THE IMPORTANCE OF BRIDGING THE DIGITAL DIVIDE Access to computers and the Internet and the ability to effectively use this technology are becoming increasingly important for full participation in America’s economic, political and social life. People are using the Internet to find lower prices for goods and services, work from home or start their own business, acquire new skills using distance learning, make better informed decisions about their healthcare needs, and become more involved in the education of their children by communicating more frequently with teachers. According to the administration there is strong evidence of a "digital divide" -- a gap between those individuals and communities that have access to these Information Age tools and those who don’t. In some instances, this divide is actually widening. A July 1999 report from the Department of Commerce, based on December 1998 Census Department data, revealed that:  Better-educated Americans are more likely to be connected. Between 1997 and 1998, the technology divide between those at the highest and lowest education levels increased 25%. In 1998, those with a college degree were more than eight times as likely to have a computer at home and nearly sixteen times as likely to have home Internet access as those with an elementary school education. The gap between high- and low-income Americans is increasing. In the last year, the divide between those at the highest and lowest income levels grew 29%. Households with incomes of $75,000 or higher are more than twenty times more likely to have access to the Internet than those at the lowest income levels, and more than nine times as likely to have a computer at home. Whites are more likely to be connected than African-Americans or Hispanics. The digital divide is also persistent and growing along racial and ethnic lines. Whites are more likely to have access to the Internet from home than African-Americans or Hispanics have from any location. African-American and Hispanic households are roughly two-fifths as likely to have home Internet access as White households. The gaps between White and Hispanic households, and between White and African-American households, are now more than six percentage points larger than they were in 1994 1.   1 White House Press Release December 9, 1999 THE ABC COMPANY PHILOSOPHY Every working family deserves a computer, with access to the Internet and the economic and educational benefits it provides . The primary factor preventing a higher percentage of Internet usage among working people is the initial cost of the system. The less obvious, but nearly as relevant, issue is the intimidation factor associated with hardware, software, and “tech terms”. The longer people wait to get online the more they miss out on the vast opportunities the Internet has to offer to improve their quality of life through access to information, products, services, and communication. Working people understand that access to computers and the Internet is one of the best ways they can prepare their children for the future In summary, the critical barriers to entry for many people are a combination of cost, training and support. ABC Company, Inc provides the technology, financing, training and the helpdesk support to allow working people to compete in the new economy. COMPANY HISTORY ABC Company principals have operated insurance and health care plans as voluntary benefits for governments and unions in Maryland, Washington DC, and Virginia. These businesses have been successful by building strong relationships in the community and providing consistent high quality service. Over their seventeen-year tenure, our founders have developed a solid understanding of the unions and the government entities as organizations. In addition they have developed an equally thorough understanding and close relationship with members and employees in these groups. Before any media attention was given to the subject, the founders of ABC Company realized that working people were missing the Internet revolution. In 1998 the ABC Company principals participated in an education program for city of Baltimore employees, called Baltimore city Employee Solutions for financial problem Training (B.E.S.T.). The B.E.S.T. program offered free training on a variety of topics ranging from “How To Manage Your Check Book” to “Basic Computers and the Internet”. ABC Company principals donated the training facility and later donated computers and trainers as part of their commitment to the community. The training was offered as a voluntary benefit and employees were permitted to attend sessions during business hours. Shortly after the program was announced, the computer / Internet course became the most popular class, with attendance exceeding 80% of capacity. Working people saw computers and the Internet as a value to them and their families. Here was an untapped market that was being overlooked by major computer manufacturers and no one was offering the essential training that this group needed. Realizing the potential of the idea, the principles developed a test market strategy. ABC Company was founded in March of 1998, as UnionNet LLC to define and execute the UnionNet test concept. In September, the plan was successfully launched in Baltimore, Maryland to the Baltimore Teachers Union and members of the Municipal Employees Credit Union (MECU). Marketing efforts included a combination of mailings and onsite sales / demonstrations. Between October and December the response was overwhelming. From a mailing to fewer than 10,000 people and a booth at the credit union, UnionNet received 1600 applications. Demand was so great that 20 part-time installers were hired to maintain acceptable delivery lead-times. The test marketing confirmed that the product proposition was truly unique and meaningful to the target audience. The proposition included: Basic Desk Top PC Financing Home Installation Training Internet Access Help Desk Support Although financing and Internet access were available through numerous sources, no one was addressing the need for basic assistance and training to get these customers over the fear and intimidation of computers. By offering the computer and services package at a low monthly payment through payroll deduction, customers saw no barrier to entry. Throughout the course of 1999 demand was steady with another seasonal surge around Christmas. UnionNet has 1,573 active clients today. As a result of the success of the trial, UnionNet raised $2.2 Million in investment capitol to refine the business plan, build the organization, and take the model nationwide. The company name was changed to Personal Choice Benefits, Inc. and the business plan was developed in May of 2000 to addresses a national growth strategy. THE TARGET MARKET As of January 1, 2000 only 51% of US citizens have access to the Internet from home or work (www.strategisgroup.com, March 2000) In addition; the current household penetration of computers is only 46%. 2 Based on these figures, there are over 100 million people in the US who do not have access to the Internet at home or work. According to the Georgia Tech 1999 Internet user survey, 69% of current web users make over $40,000 annually while the median annual income of an American worker is $29,5003. Our target audience is the 50% of Americans with average or below average incomes who are in danger of becoming part of the “digital have-nots”. The targeted ABC 2 3 Jupiter Communications E Commerce Presentation February 2000 Bureau of Labor Statistics, Labor Force Statistics from the Current Population 1999 Company customer has twelve years of education (high school), makes $30,000 per year or less, and is a first time computer buyer with little or no computer experience. Most Internet portals target those people who are currently online. Since our target user community is a different demographic, their content interests will be different. This offers ABC Company the opportunity to create portal content that will appeal to our audience, thus assuring loyalty and allowing us to generate high usage of the ABC Company portal. Specifically, we will target government employees at the local, state and federal levels. The unionization rate of government employees is the highest among any industry identified by the Bureau of Labor Statistics (37.5%) 4 . We have targeted this group for three reasons: 1) Market Size 2) Accessibility 3) Reliability Market Size Government employees account for 19% (18.4 million) of the total American work force. In addition, they have an average annual income of $32,240 3 and the home PC penetration level is only 14.9%. Because of the high government worker unionization and ABC Company’s experience with unions and government workers, ABC Company will be able to consolidate marketing activities and attract clients through two vehicles with which they feel allegiance: their work and their union. Accessibility One of the unique differences in the ABC Company business model is an identifiable targeted market. It is a market with which we are familiar and have numerous contacts. Our objective is to reach a large number of people efficiently with a clear message that is communicated with consistency. We will use grass roots marketing strategies aimed at the prospective customer in his or her work place. The 18.4 million people in ABC Company’s target market have a common thread of employment-----they all work for the government or have union affiliation. Reliability The target group represents solid citizens who are the backbone of our country. Their average length of employment on the same job is 7.3 years, while the average worker tenure is 3.2 years. Products and Services 4 Tenth Annual Georgia Tech University WWW User Survey www.cc.gatech.edu/gvu/user_surveys The ABC Company objective is to develop a loyal community that has been overlooked by most Internet companies. We will provide them the technology, the financing, the training, the support they need, and the content relevant to their everyday lives. Our revenues are based upon sales of computers, ISP services, and e-commerce through the ABC Company portal. By providing the total package we will capture the loyalty and confidence of the client. We will provide a free web based email account for each member of the family and set them up during installation. Each person will come to our portal every time they send or receive an email. In this way we guarantee traffic on our site and greatly increase ecommerce opportunities. The ABC Company proposition starts with a product bundle including the following basic components: 1) 2) 3) 4) 5) 5) 6) Brand name PC, printer, and monitor ABC Company ISP E-mail accounts In home installation Class room training Access to ABC Company Portal 24/7 Help desk support Hardware Bundle Hardware is a critical component of our model and also the most expensive. Since ABC Company is focused on the first time buyer, offering numerous options or customization will not be necessary. However, even first time users have shown signs of varying demands on hardware specifications. The ABC Company solution will be to offer four different product bundles. Each bundle will contain the same basic components of installation, training, help desk support, portal, Microsoft Work Suite, email and unlimited Internet access. The only difference will be the hardware platforms: Web Appliance Web Box Desk Top Lap Top To address the critical issue of cost, the entire suite of products are bundled together and offered at a low monthly payment over a fixed term of three to four years. Our objective is to get monthly payments for the entry-level bundle under $20/ month so that all families can afford to participate. Financing Financing or leasing computers is not revolutionary in the marketplace. However, most propositions today are not available to many members of our targeted population. ABC Company’s financial experience with current clients has been exceptional, during the two-year beta test only three out of 1500 people have defaulted. Based upon this history ABC Company will establish relationships with lending partners who will guarantee 100% financing at reasonable rates. A low default risk combined with ecommerce opportunities on ABC Company’s portal will make the partnership mutually beneficial. ABC Company is presently in negotiations with two lending institutions. In addition, ABC Company’s lending partners will have opportunities to offer select products and services to our customers based on needs identified through the application and data collection process. In partnership with the lending institution ABC Company will offer free checking, and debt consolidation. Specialized products that promote transactions online, such as e-wallets and online bill paying, will also become revenue streams for ABC Company and it’s partners. The highest percentage of our cost is for hardware. Many of the major PC makers have multi-billion dollar relationships with lenders, or have their own in-house financing. ABC Company will select a hardware partner who can help leverage those relationships to achieve our objectives. Installation Few computer resellers offer in-home installation. We believe that installation is very important for first time computer owners. This is even true for people who use a computer at work where professional computer staff configures their system. A recent random sample survey of our 1500 clients has shown that installation was very important in their decision to purchase from ABC Company. In addition, all those interviewed indicated that their installation experience was very positive. We have found that installation establishes a positive impression for the customer and helps cut the number of help desk calls dramatically. A small portion of the installer’s time is actually spent connecting the hardware. The rest of the time will be dedicated to setting up an email for each person in the house, showing the customer how to load and start the ABC Company CD ROM, and walking the customer through the log-in process. Before the installer leaves, the customer will know how to log on, where to find online training to prepare for the class, and have at least one email account for everyone in the family. In addition, there will be some user data collected during the installation interview. The CD-ROM will be specially configured with a start up program that simplifies the user desk top with fewer icons and simple descriptions of what each one does. In addition, the CD ROM will contain some pretraining material to help get people started. Since the installation of the PC itself is very simple, the profile for the installer role is not technical in nature. Instead, ABC Company will focus on recruiting college graduates with very good people skills. This position will be used as an entry-level position that may advance into sales and marketing positions for the best candidates. As a result, people who have spent time directly with the customer will populate our marketing organization. This is another ABC Company difference. Training One of the major barriers for many first time computer buyers in our target audience is a fear of technology. Many do not use a computer at work and those that do only use it for a specific task such as updating a database. They rarely use word processing, email or the Internet. The basic training they need is hands on and covers:     Basic hardware familiarity (some have never used a mouse) Basic Windows Basic Internet Explorer How to use the ABC Company Portal  Fill out forms online  Send/Receive email  Make transaction online  Personalize home page How to use on-line training Valuable sites on the Internet   Each 4 hour training session will accommodate 12-15 people and be staffed by an instructor who has been trained to the specific ABC Company pedagogy. The training will integrate with, and build on, the preliminary training provided on the ABC Company CD used for ISP set up and introduced to users during installation. Customer Support and Service Another feature of the ABC Company model is a first class help desk. Our toll-free help desk will answer questions and resolve problems with hardware, software or the Internet service. By providing assistance for all three, customers will not be subjected to the frustration of having to contact multiple sources to get their questions answered. The cost of this component of our model will be lower than similar industry models since few calls will require more than level 1 or level 2 assistance. In our recent user survey our help desk personnel were given an average rating of five on a scale from one to five with five being the highest. Since training and service are very important to new users, the help desk support will be a critical component of our premium service commitment. This call center will be designed and staffed to support level 2 calls on all aspects of our product offering without having to transfer a customer to another source to re-explain the problem that has already aggravated them. The center will support basic hardware, software, Internet browsing, and ABC Company portal questions. All calls will be logged in a web based reporting system that will provide feedback on problem areas that may impact other aspects of our business like training or installation. Because we train during installation and during the class we expect our help desk costs to be lower than the national average. Analysis of the current help desk log indicates that this is the case. In addition to logging each call to provide meaningful reporting, support staff will collect a few data points at the end of each call that will be feed directly into the database. The database will incorporate data collected from each contact with the customer, allowing us to customize content on the portal. The Portal As our user community grows our objective is to have the portal provide a higher percentage of total revenue. We do not expect these revenues to be significant the first year. As we add features useful to our audience and the ability to individualize content, we expect to attract a large numbers of users who have not purchased their hardware or Internet connection from ABC Company. Our portal will be VisitorCentric (focused on the individual) with content specific to our demographic. We will offer e-commerce opportunities that match the needs of our clients. Based upon preliminary client analysis we have determined that we will likely offer an online coupon service that will allow the consumer to print coupons for items they can purchase at the local market or store. We may also offer online banking and checking and other financial services. It is our intent to conduct focus groups on a regular bases to identify new services and products offered through our portal. Many of these services will be offered through partnerships with other web-based companies who specialize in a specific product or service. For example we may establish an agreement with Amazon.com to offers books specific to our client group. All clients will be linked with the ABC Company Internet portal. This portal will be the starting point for the customer to reach the Internet. During installation we set the ABC Company portal as the home page. In addition all email accounts will be web based and go through the ABC Company portal. We recognize that there is a cluttered online environment and that portals and web sites are fighting for the eyes of the existing online population. We are targeting the new Internet user and are not trying to attract the same users as all other portals. In an attempt to keep people interested, many portals offer a variety of content that changes daily. Most of the early portals were general information portals. Over the last year Microsoft’s MSN and Yahoo! have risen to the top of the heap for traffic. These players have incredible market capitalization and buy any and all features, functionality, or competitive traffic that they want on their site. As a result, they are getting bigger and the other general information portals are slowly slipping away with reduced subscriptions and mounting losses. In contrast to the general information portals, a new wave of more specialized portals has emerged. These portals are either affinity based or genre based, focusing solely on the interests of a particular group. Affinity groups are defined by a commonality such as age, race, membership in an organization etc. Genre based groups are centered on a specific interest like sports, fashion, or music. Many of these portals have had early success as a result of their targeted approach. Although their traffic is considerably less than MSN or Yahoo, the visitors to these sites go more often and stay longer, resulting in greater ad revenue and more transactions. We will develop our portal so that it will offer specific features for each user based upon their preferences. For example the husband in a family might be interested in sports and banking so when he logs on to the portal, using his email address as a password, he will be presented with a view that includes those items of interest to him. In addition he will see advertising that matches his interests. As our client base increases the e-commerce revenue will increase and become a larger portion to our total revenue. The ABC Company portal will be an affinity-based portal in the early stages since all the customers share a common view based upon general interests. However, once the users become active on the site, sub segments of genre based groups will emerge. Example: After three months ABC Company user content managers notice a very high volume of traffic on the genealogy section. They alert the marketing team and a promotional idea is developed. Upon further inspection, the traffic is actually a combination of fire fighters, teachers, and nurses. When each of these groups enters the portal, we address them in a unique way, but they still have access to many of the same features. Since these users found the genealogy feature useful and return frequently, they now become a sub genre group for a hot new promotional idea. One of the truly unique aspects of the ABC Company model is that we know a lot about our users before they ever log onto the portal. As a result, we will be able to greet each customer by name when they log on and provide him or her specific pertinent information. As we gather more data on each customer, that information will be used to make the portal faster and more effective for the individual by showing them content specific to their needs and interests. This type of technology is being utilized by some of the more sophisticated e-commerce sites. The challenge is not technological-- it is collecting enough data to personalize the site. Because we are targeting people who do not have a computer, and have not been online, we will be able to collect the needed information. We will have three sets of data before the customer ever logs on. Information is collected during the loan application, during installation, and during training. We will hold this information in confidence and will only use it to personalize the ABC Company portal. We will guarantee privacy to our clients. The ABC Company portal will have multiple revenue streams: Advertising The most traditional online advertising is banner ads. Advertisers pay a rate based upon: 1) per impression – fractional cost for each time an ad is shown. 2) per click – slightly larger cost based only on clicking a specific ad. 3) per action – largest cost based on ad resulting in a transaction. We will have advertising for each measurement. The key to generating advertising revenue is traffic and targeted execution. Because ABC Company’s customers are from a very specific, identifiable group, the value of each individual ad placement will be higher since advertisers will be able to target a more reliable and condensed audience. General information portals and sites serve the masses and need the help of complex optimization technology to target advertiser efforts more effectively. Partnerships Partnership agreements will also provide a revenue stream. Partnerships will be formed based on mutual benefit in the following potential scenarios: 1) Sell products or service on portal a) Partner shares percentage of revenue with ABC Company b) ABC Company provides access to membership and transaction capabilities on portal 2) Offer links to other sites based on specific customer profiles a) ABC Company provides link for target profile customers in agreed location b) Partner pays a transaction fee based or sponsorship for an agreed timeframe 3) Access to union organizations leadership for business development a) ABC Company provides access to organization key personnel b) Partner provides product or services to ABC Company customers at reduced rates or free of charge c) Partner pays percentage of proceeds from resulting transactions to ABC Company 4) Access to solicited feedback or research from ABC Company membership a) ABC Company provides specific feedback on a targeted subject, company, or product via portal b) Partner pays flat fee for compiled information c) Partner pays per response d) Partner sponsors section of portal for an agreed period of time ECommerce Because there are many established players in the very competitive eCommerce arena, ABC Company’s strategy will be to focus on very specific opportunities that are unique and meaningful to our customer base. Instead of trying to compete with major players like Amazon.com or Etoys who have billions of dollars for product development and national advertising, ABC Company will focus on providing products, through strategic alliances, that address the unique requirements of our customers. Examples include voluntary benefits, continuing education, financial planning, and counseling. By providing simple access to these products and services, ABC Company will be performing a significant role in giving our customers important choices that can improve the lives of their families now and in the future. ABC Company and each selected partner will share revenues based upon usage. Since ABC Company will not engage in direct competition with eTailers that have established distribution channels, we will provide customers with some simple and brief “best of the web” options to find the right sites for specific general merchandise needs. In each case we will share revenues. Additional Services Web Site Development During the beta test of the ABC Company business model, a high demand for local web sites developed. Local unions wanted to be able to communicate more effectively with their members to encourage membership growth and participation. Hiring their own web site developer, finding a host, and maintaining the site were all outside the realm of their understanding, expertise, and budget. As a result, ABC Company hired freelance developers to develop a few sites and link them to the ABC Company portal for a nominal initial fee. This not only helped forge relationships with the locals to get access to their membership, but also presented opportunities to get unions at the local level linked into our portal. ABC Company will develop a template for local sites and provide hosting on the same platform as the ABC Company portal. The template will allow remote publishing with a password. The local government entity or union will select the desired features from a menu, provide a logo, and assign an employee to maintain content from their own desk top. The site execution, application hosting, and domain name registration will be handled by ABC Company for an initial fee of $2000 and $125 per month (a fraction of even the smallest web site initiative). With 45,000 local unions and thousands of municipalities this can become a relationship- paving device and a substantial revenue stream. Members Already Online For people who already have access to the Internet, we will offer a free password and user name upon completion of a small form. This information will allow us to identify the specific interests of each user that visits the Portal. There will be an incentive for these users to log on and sign up for a feature, such as an additional -mail account or an online wallet with $25 free for purchases. The objective of these and all others features will be a focus on the unique needs of this customer base with features and functionality that keep them coming back. As the portal is developed, and our market share increases, we expect this group to grow and provide a significant part of the portal revenue. MARKETING STRATEGY The target audience is well defined with an infrastructure that is well known to ABC Company personnel. The ABC Company two-year beta test of the strategy has targeted local unions and municipalities with great success. ABC Company personnel understand union and government procedures and have established numerous personal contacts. In addition, ABC Company directors and investors have years of experience conducting business with unions and government entities. The marketing strategies developed during the beta test period are proven and will be duplicated and expanded in new market areas. The foundation of the ABC Company marketing strategy is to address each of the key reasons that have prevented our target audience from buying a computer and getting online. COST: Medium income families have little disposable income for large upfront investments. Financing options may not be visible or accessible to this group. Uncertainty about how a computer or the Internet can effect their daily lives. Lack of exposure to computer hardware, or software may cause reluctance, fear, or intimidation. Lack of “down to earth” help on all subjects related to the use of he computer. Being transferred to multiple help desks or unfamiliarity with “tech terms.” AWARENESS: FAMILIARITY: SUPPORT: By committing to the customer through the entire process of financing, installation, training, and support, we eliminate the obstacles and fears associated with technology. ABC Company is committed to developing content that will address the different interests and expectations of this group. As mentioned in a recent article, there is a “severe gap”5 in online content for our target audience. Their expectations and desires center around self-help, job opportunities, and other fundamental resources. The Internet is seen as a way to get ahead and level the playing field for their children and themselves. ABC Company will focus sales and marketing activities through concentrated channels. Our marketing objective is focus our resources to reach large numbers of customers effectively and efficiently. We will not use national advertising campaigns. Instead we will focus on local marketing efforts and endorsements. This approach will humanize the subject matter for our prospects and create credibility through familiar sources such as unions, elected officials, and financial institutions. In addition, this approach is much less expensive. Following are examples of our channel marketing strategy: Local Government ABC Company will focus on direct access to the target market through the employer, the municipality or government entity. Through existing contacts, ABC Company will present the product proposition to appropriate government officials as a voluntary benefit to the employee. The justification for establishing ABC Company’s service as a voluntary benefit will be built around core elements of the product proposition. The employees will receive financing, training, home installation, and support that will allow them to participate in the information age and learn critical skills that will improve upward mobility and earning potential. ABC Company and the government officials will announce this great new benefit in a press release, which will also announce the new training center, discussed later in this document. Voluntary benefit status will allow ABC Company to request a direct payroll deduction slot from the municipality. Since payments will be collected automatically each month and are very difficult to cancel, the default risk is reduced substantially for ABC Company’s lending partners. With the advantage of reduced default risk, ABC Company will seek 100% guaranteed approval for all applicants. An additional incentive will be offered to the government official in the form of aggressive public relations support and coverage on their behalf. As part of the agreement, ABC Company will be permitted to organize groups of employees during normal business hours to explain the new voluntary benefit. During these sessions ABC Company will explain the product bundle, conduct a demonstration, suggest real world applications, and share stories from satisfied customers. To ensure that a high percentage of the audience will complete an application, we will offer additional incentives such as guaranteed approval, 30 day no risk guarantee, and free premiums (shirts, hats, etc). To provide further incentive for potential customers ABC 5 Report by the Children’s Partnership on the Digital Divide Company will negotiate with the government entity to give the employee time off during normal business hours for training. Credit Unions ABC Company will establish partnerships with state and local credit unions to co-market our product as a member benefit. ABC Company will develop marketing materials for distribution to members in their monthly statements. In addition, marketing representatives will participate in on site promotions during key events such as payday and Christmas. If we do not establish an exclusive relationship with a lending institution then we will offer the Credit Union the opportunity to extend the financing and offer automatic payments through direct debit. Labor Unions ABC Company will present the product bundle to the local president as a union benefit. This will be accomplished through endorsements from current satisfied union leaders in other regions. With the president’s permission, ABC Company will use the shop stewards or field representatives to distribute printed materials to union members at their place of employment. Shop stewards and field reps are the voice of the union and the closest link in the chain to the members. The shop steward or field rep will be recognized for the total number of applications he/she brings in and ABC Company will share a percentage of the proceeds with the local union. Each union member will be able to use payroll deduction through the unions existing payroll slots. Establishing a relationship with the shop steward or field rep is essential because they work side by side with our target audience. Many times these are close communities that gather socially and have established friendships and family ties. This is the key to reaching the membership. In order to gain the acceptance of the shop stewards, ABC Company will offer them free training sessions to introduce the idea. Once the stewards and field reps understand the benefit, and we have permission from the local president, we will ask them to share local union schedules and identify opportunities for ABC Company to participate in union events. With a few successful events, and shop stewards endorsement and incentives in place, word of mouth will assist our growth. Through sustained customer support ABC Company will strengthen these endorsements and leverage them in new territories geographically and organizationally. When talking to each group we will emphasize the following features and benefits of the ABC Company proposition: 1) Provide an attractive and reasonably priced computer, monitor and printer (four options). 2) Finance the system to achieve a low monthly payment (no money down). 3) 4) 5) 6) 7) 8) 9) Provide payroll deduction to simplify payment. Provide three years of free, unlimited internet. Install the system and setup email accounts for the entire family. Provide free classroom training Provide one year warranty (three year warranty optional for a fee) Provide premium help desk support for hardware, software, and Internet. Provide personalized Internet portal. Payroll Deduct A major part of the ABC Company advantage is the automatic payroll deduction program. ABC Company will negotiate with a government agency, financial institution or municipality to include the ABC Company Computer Program as a voluntary benefit for employees, which will make it eligible for a payroll deduction slot. This will be negotiated directly with the government entity or through an agreement with the local union to use an existing slot. In either case the benefit is extended to all participating employees. Most current ABC Company customers have taken advantage of the direct payroll deduction program and identify it as a major reason they purchased their computer from ABC Company. Automatic payroll deduction is one of the reasons that the current customer default rate is less than 0.3%. State and municipal governments negotiate access to payroll deduction slots individually. ABC Company sister companies currently have payroll deduction slots for the state of Maryland, all Maryland counties, the city of Baltimore, the Commonwealth of Virginia, Washington D.C. and the Federal Government. We can offer ABC Company products and services through payroll deduction to all of these employees. Payroll deduction is not given to everyone. Most businesses with slots have developed them through long term relationships that span many years. ABC Company will expand the model through contacts made by ABC Company principals. The principals have related business activities with municipalities throughout the USA. We will leverage the relationships we have established with city and state government officials. In addition ABC Company will offer products, in new markets, through local benefit providers who have payroll slots. Because of our current successful track record and contacts with insurance and healthcare benefits providers throughout the nation, we will expand the model by utilizing slots already negotiated. This partnering approach will be mutually beneficial, giving ABC Company access to a shared slot and the provider access to our portal as a preferred partner for their service. In addition, ABC Company’s portal will have a dedicated space for local advertising to ensure these special partners advertising space outside the space given to the automatic feed advertising brokers. Training Facility Our training facility will also be used as part of our marketing strategy. Our relationship with the City of Baltimore through the B.E.S.T. program has proven to be beneficial to the community and to ABC Company. By allowing city workers to attend classes in a facility we provided, with computer equipment we provide and our using our instructors, we have become known as the company who can help. This has increased our marketing opportunities and helped the community. To further promote participation and accommodate family requirements, the city allows city employees to attend sessions during business hours. The strategy has proven to be very successful and we intend to continue the policy when we go to new municipalities. We will develop: 1) Classroom locations near major metropolitan areas 2) A network of instructors and training partners 3) Content sources on relevant subjects 4) Customized ABC Company Portal training 5) An extensive library of fee based on-line training (all topics) In many cases we will contract for some of these services, when it makes economic sense and maintains our relationship with the customer. As we expand to new regions, one of our strategies is to secure authorized access to targeted channels by offering a free classroom session for leadership in a targeted geographic area. During this session the following subjects will be addressed: 1) Basic Windows / Internet training 2) ABC Company’s product proposition and benefits 3) Explanation of the benefits to members and employees In summary, the training facility will be a key marketing tool used to build relationships, access potential customers, sell products, and provide a community service. Stimulating Early Online Transactions During installation the ABC Company portal is setup as the default home page for the client and their email is sent and retrieved from that site. Our long-term growth strategy requires that we maintain the interest and the loyalty of each client to the site. To do so, we will create a portal that is individualized to the user. The banners and advertising will be appropriate for the individual. Our marketing strategy is to direct specific ads to the user and to encourage them to purchase through the site. Studies have shown that, with the exception of early adopters, it takes users an average of 2-3 years online before they are making regular transactions. Most of the current Internet population has higher median income and education level than our target market. Lower income users typically have less experience online and are making fewer transactions. Part of the ABC Company marketing strategy is to shorten this “comfort curve” through a combination of in-home training during installation and actual classroom training. During these interactions, users will be introduced to making transactions online with the help of a ABC Company representative. Furthermore, an electronic wallet will be offered with a free petty cash fund of $50 for the first few transactions. This wallet can be refilled online (credit card), over the phone (credit card), or by mail (check). The ability to send checks or cash to their e-wallet, via mail, will allow customers without credit cards or checking accounts to participate. Our target market has less disposable income than the average person online today and they show hesitation to try unfamiliar brands. Familiarity will be important to ensure trial, frequency, and loyalty. ABC Company will build that familiarity by introducing critical, high frequency of use features early in the training process that will keep users coming back for more. Example: During home installation, ABC Company representatives will voluntarily set up an email address for everyone in the family and talk to customers about the ABC Company partners and our endorsement of their products. Members trust the union. With the endorsement of the local Presidents and shop stewards, we become the trusted entity and improve on that status during the training process. The final result is ABC Company being established as the trusted brand and a familiar place online. ABC Company has that loyalty from current clients. In a recent customer survey over half of the respondents said they would buy a ABC Company brand computer if we were to offer one. Data Collection Understanding each one of our customer’s individual requirements, challenges, and interests is critical to providing them with the most meaningful, customized version of the ABC Company portal. Data collection will be an integral part of every aspect of our business. The following list outlines some of the opportunities to collect data in small digestible chunks. 1) Credit Application (a few extra questions) 2) In Home Installation (during initial log in) 3) Portal Log in 4) Email set up 5) Class room training 6) Every help desk call (a progression of new questions each time) 7) Service & Warranty service calls To avoid misuse of customer’s personal data or concerns stemming from customers about privacy, ABC Company will publish a policy statement about the use of such data. Included in this policy will be a statement against selling or authorizing access to data by any third parties and limit use of data to activities and campaigns on the ABC Company portal. Strategic partners that will utilize our database to execute targeted campaigns will utilize ABC Company program managers as the only allowable access to our database. Expansion Strategy ABC Company will expand aggressively without jeopardizing the quality of the hands-on service that attracts the targeted customer. Every six months ABC Company will open two new major metropolitan initiatives. As volume starts to stabilize in the new markets, sales and marketing efforts will be expanded to include surrounding areas to sustain growth. Therefore, as explosive growth is generated from new market launches, established markets will expand operations with the existing infrastructure. The new market launches will be timed to maximize seasonality and avoid inherent lull periods. A spring launch in April will avoid low post-Christmas spending and September launches will capitalize on Christmas gift giving and national television focus on the Internet The specific order of cities and states targeted for expansion will be based on a combination of the following variables: 1) Population currently not online 2) Number of government employees 3) Existing relationships with municipal, union, or financial institution leadership 4) Competitive activity 5) Proximity to existing markets Since government employees have the lowest Internet penetration rate of any sector (14.9%), the number of government employees will be a key variable in assessing a city’s opportunity for new business. The Competition All computer outlet companies such as BestBuy or CompUSA are indirect competitors. However, there are two primary competitors targeting our market. Workingfamilies.com Working families.com has targeted unions and union members. Their strategy is a top down approach. They have built the workingfamilies.com website in affiliation with the AFL/CIO. Though they offer a computer package and ISP service to union members their concentration is on members who already have Internet access. Their objective is to develop a portal for the unions, not the union members. They are attempting to get each of the 70 national unions to link through the workingfamilies.com site. The expectation is that national, regional, and local union leaders and ultimately the members will buy into the strategy by either logging on to the portal, using the ISP, or signing up for the entire package. (PC & ISP) Workingfamilies and ABC Company offer similar product packages. Each offers a computer in the homes of working families at a price they can afford and provides all the tools needed to get on line. Once on line customers will have the Workingfamilies portal set as their home page. The portal promises to achieve a unique place for unions to accelerate the communication and sharing of information so critical to the evolution and effectiveness of the labor movement. In addition, they offer links to several major union sites, some of which are contained under the umbrella of the workingfamilies template. The site is designed from the union’s perspective, not the individual. On the whole, the portal is professional and is fairly easy to navigate. There is an option to personalize the home page and see a variety of different news, entertainment, weather and other general information. Workingfamilies.com has created generic portal that provides the same information as thousands of others. The site was developed under contract by ibelong, which specializes in designing generic portals. The client provides the graphic design and the navigation and ibelong provides the generic content. The risk with this model is trying to compete with the major general information portals like Yahoo! and AOL. Only union members can participate in the program and Workingfamilies.com does not offer in-home installation, training or payroll deduction. Their marketing approach is through mailers and the website. Their strategy, like many Internet start-ups, is to get people to come to them. They have no sales staff at the local level. People PC Although People PC is not directly targeting government employees or union members, they are focused on the first time buyer. Their program launched in 1999 with a national television campaign and a bundle of products that includes: Desk Top Computer (Brand Name) Unlimited Internet Access 24/7 Help Desk Support In Home Warrantee The unique component of their offering is a monthly price of $24.95 paid over 36 months. This is a shorter term than the large PC makers are promoting and reduces the risk of obsolete technology. During the term of the agreement, customers have full use of the services offered by the help desk and in home warrantee service. At the end of their term customers have the option to continue the agreement and get a new PC or simply discontinue the service and keep the PC. If customers choose to renew, they are given the opportunity to donate their machine to schools in need. Late last year Ford Motor Company and Delta Airlines announced that they would be subsidizing computers for their entire staff. This announcement came with a $100 M per year price tag for Ford and an undisclosed amount for Delta. People PC was awarded these programs. While the People PC model is making great inroads with large subsidized corporate programs, it fails to address all the fundamental perceived barriers to entry (cost, familiarity, awareness, and support). COST: FAMILIARITY: AWARENESS: SUPPORT: Requires an average of $136 upfront to sign on. No payroll deduction No classroom training National advertising approach fails to individualize message Call center does claim to support all needs 24/7 In addition to the gaps above, People PC charges customers just under $100 to cancel their service within the seven-day grace period. As a result, the combined cost of initial set up and potential cancellation, looks like a $236 out of pocket risk up front. ABC Company’s model helps break down the perceived barriers to entry with a powerful combination of products that are communicated locally through familiar channels like employers and unions. ABC Company Product Differentiation There are two significant factors that differentiate the ABC Company business model from the competition and will prove to have much greater success in establishing a customer base quickly. The approach taken by one competitor, workingfamilies.com, relies on senior union leadership to convince the members to take a specific personal action. Although this may seem like the easiest way to manage such a large organization quickly, it will prove to be very difficult to stimulate trial of the product on such an impersonal level. ABC Company believes that the average person trusts friends, family, and coworkers with such personal decisions. In addition, the high percentage of members that do not currently have a computer at home may not be swayed by the promise of a low monthly payment if they have bigger concerns about familiarity with the hardware and require fundamental training to get started. In addition our model targets government employees who are not union members as well as those who are. The ABC Company model focuses on the needs of the user who is making the purchase decision. The most important component of the product proposition will be a combination of unparalleled service, training and support, that promises even the most inexperienced users will be on line in a matter of hours. With personal in home installation, which includes a brief tutorial and setting up email for the family, there will be no concern about connecting all the “boxes” when they arrive. The classroom training will start with basic familiarity with the hardware and move through Windows, Internet Explorer, and the ABC Company portal. At this point the customer has the system set up, they know the basics of how to use it, and understand the benefits of our portal. If all else fails there is a help desk that will provide answers to basic hardware, software, and Internet related topics. This last component of call center support will be absolutely unique since it will not require calling multiple numbers and different companies to answer these questions. In summary, ABC Company’s focus is on the individual users and we market to them at the local level through trusted and familiar agents (unions, employers, financials institutions). Barriers to Competitive Entry There are four factors that will prevent competitive entry into the ABC Company market. 1) The first barrier faced by others trying to enter our market is relationships. Relationships are necessary to conduct business with unions and municipalities. As a result, distributors like CompuUSA or Best Buy would have to completely change their business model. ISP’s like Yahoo! or AOL can only target current computer owners. 2) The second significant barrier is the strategy to reach the members. Our competitors have taken a top down approach starting with union leadership and filtering down to the members. The ABC Company approach starts at the local leadership level for approval but focuses on the individual. This approach will be difficult to replicate since it requires people and training. 3) The third significant barrier to entry revolves around our product proposition. The “hand holding” ABC Company provides will be more important than any other incentive for users to get online and stay with ABC Company. Even if others offer free Internet access the client still needs to know how to use it. This clientele is historically loyal. If we provide solid installation, training, and help desk support other companies will have a difficult time entering our market. 4) The fourth barrier is payroll deduction. Payroll deduction is a major benefit to our clients. Establishing payroll deduction requires knowledge of the process and contacts. Few other companies have the contacts and the knowledge necessary to accomplish the task. To our knowledge no other Internet company has used this approach. Success with government organizations and unions is based on personal relationships and trust. ABC Company has that trust in the Baltimore market and the contacts to expand to other markets. Once we have achieved significant market share it will be very difficult for a competitor to duplicate our model The Organization ABC Company is a sales, marketing, and top tier service company. Wherever possible we will work with partners to license the most pertinent features, applications, products, and service for our customer’s specific and unique requirements. We will hire and train personnel for the following functions: 1) 2) 3) 4) 5) Field Sales and Event Marketing Product / Channel Managers Content Development / Management Customer Care and Support Services Portal Development and Technical Management The senior management team: CEO Executive Sec. HR COO Accountant CFO CTO Sales Marketing Comm. Product Management Legal Partners Automation Infastructure Web Site Recruiting/ Training Branding Content Managers Install / Training Investment Bankers Counsultancy Sales LAN Template Development Event Coordinators PR Call Center ASP Content Managment Database Execution Group Sales Collateral Materials User Group Specialists Application Call Center Application Advertsing Chief Executive Officer () Chief Operating Officer () Chief Financial Officer (TBD ) Chief Technical Officer (). For a complete biographical summary of each executive see “Appendix A” The Advisory Council In order to gather the best possible data from experts in critical business strategies, ABC Company has formed an advisory council. This council will include members representing a variety of expertise’s including, but not limited to: 1) Investment Banking 2) Marketing Strategy 3) Content Management 4) Information Technology 5) E Commerce / Internet Strategy 6) Industry Related General Counsel 7) Call Centers Management 8) Training & Education A similar council has been formed to solicit feedback from Union leaders. This advisory board will assist us to develop our Union strategy and make contacts. The following unions have been identified as potential members of the union advisory council: 1) CWA 2) FOP 3) Fire Fighters 4) AFSCME 5) AFT 6) UAW Financials ABC Company will derive revenue from a variety of sources including the following: Product Bundle Sales The most regular source of revenue for the company will be from the sale of the product bundle. (Computer with software, monitor, and printer; home installation; email; Internet connection; training; and help desk). Advertising & Sponsorship A secondary source of revenue will be derived from advertising, partnership and sponsorship. Advertising revenue will be generated from a variety of vehicles including banners, buttons, view bars, and email attachments. Partnerships will be formed to achieve certain desired features, functionality, or product offerings for our members. Such offerings may include training or job hunting. Revenue will be generated based on an agreed percentage of each sale. Sponsorships will generate revenue based on a fixed annual dollar amount. Sponsors will have dedicated advertising space on a special section of the ABC Company portal page template that will guarantee exposure to chosen users on specific page views. Membership Fees Each client will receive Internet connection and email addresses for each member of the family as part of the bundle price. After the bundle has been paid for the client will have the option to pay a fee to continue the email and Internet service. In addition people who have a PC may contract with ABC Company to get email and Internet connection on a fee basis. Web Site Development and Hosting ABC Company will develop a website template for local government entities and local unions and provide hosting on the same platform as the ABC Company portal. The template will allow remote publishing with a password. The local government entity or union will select the desired features from a menu, provide a logo, and assign an employee to maintain content from their own desktop. The primary revenue stream is from the sale of the product bundle. As the number of members increase, portal revenue from advertising and sponsorships will become a more significant, and more profitable part of the revenue mix. Year one shows a loss due to the cost of infrastructure and portal development. UNIONNET.NET INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, Actual 1998 Actual 1999 Projected 2000 Projected 2001 Projected 2002 Projected 2003 Projected 2004 INTERNAL USERS EXTERNAL USERS TOTAL: % YEARLY USER GROWTH ISP REVENUE COMPUTER PACKAGE REVENUE PORTAL REVENUE WEBSITE DEVELOPMENT REVENUE OTHER REVENUE TOTAL REVENUE % YEARLY REVENUE GROWTH TOTAL COST OF REVENUE GROSS MARGIN MARKETING, SALES AND MEMBER SERVICES PAYROLL & RELATED EXPENSES GENERAL & ADMINISTRATIVE EXPENSES TOTAL OPERATING EXPENSES EARNINGS BEFORE INTEREST, TAXES DEPRECIATION AND AMORTIZATION (EBITDA) INTEREST EXPENSE DEPRECIATION & AMORTIZATION EARNINGS BEFORE TAXES (EBT) INCOME TAXES NET INCOME 714 0 714 N/A 0 802,345 13,750 2,000 1,250 819,345 N/A 626,947 192,397 18,969 98,919 130,057 247,945 1,476 0 1,476 106.7% 79,757 1,411,098 41,250 16,850 4,215 1,553,170 89.6% 1,160,411 392,759 36,506 265,214 216,584 518,304 3,676 11,028 14,705 896.2% 155,287 4,633,165 35,981 3,855 0 4,828,288 210.9% 4,525,070 303,218 366,136 1,471,407 671,082 2,508,625 22,144 177,152 199,296 1255.3% 93,594 35,854,663 579,756 56,700 0 36,584,714 657.7% 25,151,260 11,433,454 1,463,389 2,901,037 4,490,166 8,854,591 52,730 632,762 685,492 244.0% 50,407 61,765,770 4,718,562 79,380 0 66,614,119 82.1% 43,624,379 22,989,740 2,664,565 4,137,172 7,427,553 14,229,290 83,901 1,342,418 1,426,319 108.1% 45,730 71,134,197 14,228,396 83,349 0 85,491,672 28.3% 50,711,773 34,779,900 3,419,667 5,507,005 8,681,167 17,607,839 104,994 2,099,874 2,204,867 54.6% 172,074 81,520,964 30,110,140 87,516 0 111,890,694 30.9% 58,747,026 53,143,669 4,475,628 6,638,194 10,766,896 21,880,718 (55,547) 2,693 11,434 (69,674) 0 (69,674) 0 (125,545) 5,352 20,181 (151,078) 0 (151,078) 0 (2,205,406) (74,379) 65,573 (2,196,601) (878,640) (1,317,961) 0 2,578,863 (264,538) 143,412 2,699,990 1,079,996 1,619,994 0 8,760,450 (593,850) 227,662 9,126,638 3,650,655 5,475,983 0 17,172,061 (1,008,805) 316,881 17,863,984 7,145,594 10,718,390 0 31,262,951 (1,938,679) 397,483 32,804,146 13,121,658 19,682,488 See Appendix B for complete financials. Appendix A Senior Management Team Biographies Chief Executive Officer Chief Operations Officer Chief Technology Officer Appendix B Financials