Sample Business Plan gravitywell

q-:heCompany Page 2 of 12 Company Profile Reason for the Company Management Philemon A. Roberts, CEO, CFO and President Lawrence A. Herbert, Vice President & IT Development Ahleak George, Web Development & IT Management Brandon K. Montoya, Marketing and Research Douglas Freeman Jr., Head of Animation & Conceptual Design Kevin Lyon, Director of 3D Animation Concept Driving Forces Strategies Production Plans and Status Financing Requirements Exit Strategy Business Mission Description Statement Product and Idea History The Competition Entry Strategy Market Analysis Marketing Description History and Present Activities of the Industry Operations Production Distribution Merchandise Production Plan Critical Risks Internal Risks Uncertainty of Profitability of GWP's Venture Uncertainty of Adequacy of Financial Resources Industry Competition Market Change Insurance Provisions Plant and Material Insurance Employee Insurance Product Insurance Financials Industry Financial Characteristics http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 The Company Page 3 of 12 Executive Summary Company Profile .... GravitywellProductions(GWP) was foundedin San Diego, September1, 1992 as a sole proprietorship ownedand operatedby Mr. PhilemonA. Roberts,the currentPresident,CEO and CFO. GWP was foundedas a Contentand Creationhousewithfocus towardcomic books,sequentialarts, and entertainmentconsumersas a whole. In Octoberof 1996 GWP moved itsentireoperationontothe web, becomingone of the first professional omicbook c company'sin the worldto take thisstep. Reason for the Company It is our mission to become the largest on-line source of popular art entertainment and merchandise. It is our goal that GWP will lead the internet as a site where visitors come and view animation, read comic books, prose, and short stories for free. This allows GWP to target advertisement and merchandise toward the niche popular art market focused on the GWP website. Through these activities we build a value added website advertisers know consumers will visit and spend time viewing material or soliciting information on a regular basis. Management Philemon A. Roberts, CEO, CFO and President Mr. Roberts earned an A.S. Degree in Computer Science from San Diego City College in 1992. He has been involved in one other entrepreneurial venture; S.R. National, a computer graphics and animation start-up. He has been the head of GWP since 1992. Lawrence A. Herbert, Vice President & IT Development Mr. Herberthas a B.A. in BusinessAdministration and ComputerInformationSystemsfrom San DiegoState University.Besidesbeingthe Vice Presidentof GWP he currentlyholds the positionof Legacy ProductsManager withAltrisSoftwareInc. He has been the Vice Presidentof GWP since 1994. Ahleak George, Web Development & IT Management Mr. Georgeisthe head of Web Developmentfor GWP. He has heldthis position since 1997 and has been in GWP since 1995. Besidesbeing head of Web Developmentfor GWP he holdsthe positionof MultimediaSpecialist- IntermediatewithQualcommInc. Brandon K. Montoya, Marketing and Research Mr. Montoyais the Head of Marketingand Researchfor GWP and has held this position since 1997. He has been withthe companysince1995. Mr. Montoyaalsocurrentlyholds the position MultimediaSpecialist- AssociatewithQualcommInc. of Douglas Freeman Jr., Head of Animation & Conceptual Design Mr. Freeman has been a memberof GravitywellProductions since 1995. At presenthe is usinghistalentsof cell paintingin the creationof portraits and muralsforthe Luisenohis NativeAmericantribe. Educationbackground 2D animation/multimedia, modeling in 3D and animation,Illustrationand fine arts. A community leaderworkingto educate Native AmericansMr. Freeman creates positivereinforcementor NativeAmericanchildren. f Kevin Lyon, Director of 3D Animation Mr. Lyonhas been a memberof GravitywellProductions since 1998. Presentlyattending http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 "(he Company Page 4 of 12 The University of California San Diego. Mr. Lyon has a background rooted in sequential art. He has taken that knowledge into the field of 3D animation and began working on high end platforms such as the Silicon Graphics work station with Alias software. This is the leading software and hardware combination for 3D animation in use by companies such as Lucas Arts, Dream Works and Square Soft Inc. Concept Driving Forces The web community desires the widest range of entertainment possible and it is the mission of GWP to offer an entertainment portal from which multiple forms of content are made continuously available. GWP provides what's sought in the popular arts segment of the web community, therefore securing a volume of traffic flow appealing to the largest of advertisers willing to pay premium prices for ad placement. The full potential of GWP lies in the unprecedented opportunity to become the largest popular art entertainment website in the world. What this means is that the visitor will have the option of reading and downloading short story, prose, comic books, and original graphics based on GWP content. Visitors can also listen to original music, theatrical audio productions as well as watch animations and full motion pictures. Most popular art consumers desire tangible product, therefore GWP will produce printed magazines also based on the GWP on-line material along with original items found only in each given publication. Typical forms of tangible merchandise items include action figures, clothing, posters, calendars, mugs and many other items. Successful on-line content on the GWP website will attract licensed merchandise tie-in's highly desired by a variety of outside producers of consumer goods. The proprietary nature of existing licensed content by the largest multinational, multimedia corporations precludes them from entering the web with the same approach, and this represents the true barrier to entry for competition from these entities. To take advantage in this vacuum, GWP's current business plan calls for the purchase of equipment necessary to design and produce all entertainment items licensed to GWP for web presentation excluding merchandise and printed periodicals. This approach to vertical integration in the current Internet marketplace is rare. The key to success during this infancy of the popular entertainment industry is timeliness. The rapidly growing interest in this form of web entertainment in conjunction with our licensed titles in production and on display at http://www.gravitywell.com, has made GWP a market leader. GWP has taken the principle step; GWP is now the largest and most read comic, cartoon and graphic art website in the world. GWP's next step is to expand on existing success and become the worlds largest popular arts entertainment website. The combined use of multiple hardware platforms ranging from Silicon Graphics work stations, enhanced PC's and the Macintosh Power PC, will give GWP the processing power to create cutting edge animation for this medium. Strategies Vertical Integration The vertical structure of the GWP business model represents a model type seen in very few instances. Lucas Arts is the most popularly recognized corporation using this structure. GWP will use the model to control the elements that disrupted the traditional off-line popular art producers. http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 "(he Company Page 5 of 12 The San Diego Comic-Con International The San Diego Comic-Con International, or The Con as it is popularly known, is the key popular art expo and convention in the United States. The Con showcases all new products for the upcoming year to retailers, consumers and industry press. This a proven and standard method of introducing new content to an audience which has a substantial impact on the general entertainment consuming public beyond the popular art market as well. For further information visit http://www.comic-con.org In accordance with this business plan, GWP will implement a media campaign to build public interest and demand at the convention in summer 2000. GWP's ability to provide high quality popular entertainment in conjunction with the media campaign in this key popular art venue, will initiate the broadening of public awareness. This strategy to build a strong pre-merchandising demand will provide a spring board for even greater exposure for the Con of 2001. GWP's intends to maintain and increase demand in our on-line popular art entertainment and thus provide an incentive for the public to visit http://www.gravitywell.com and then return on a daily basis. The current webs dynamic precludes television type programming. A websites ability to maintain onsite archives of previous animations and other content will allow visitors to view the items at their leisure and thus determine through measurable traffic the on-line popular art entertainment leader. Quality will lead, but quality and volume will win. It is through this that GWP leads the field in popular art entertainment and will focus this strategy in animation and advertising revenue. Animation and Ad Revenue After securing a minimal staff of Flash and 3D animators they will have the task of producing the first in multiple series of animated creations based on existing content under license. This process will take no less than 5 months after which time a sufficient inventory of animated product will be available for on-line presentation. The initial inventory will provide no less than 12 weeks worth of presentations that when released in bi-weekly intervals provides 6 months worth of on-line animation. The multiple hardware platform approach allows various types of animations to be in production simultaneously so at least 1 new animation is run each week, 3 weeks out of each month. During the life of the initial inventory releases a second inventory will have been completed. This strategy provides continuous production of inventories. GWP will build interest in the animations before completion of the first inventory, small samples of animated programming will be made available to site visitors, leading up to the launch of the animations. Based on the current and continuing success of our website's traffic flow this approach will serve to build an audience that through word of mouth alone will cause visitor traffic to rise at an even greater pace. When individual titles associated with the released animations reach hits 200,000 or greater each month, the largest of national advertisers will find it cost beneficial to purchase commercial ad time on GWP animation's streaming content. GWP plans to limit the amount of ad space per animated program, thus making the available lots sell at premium prices. Content is King GWP understand that with the success of this business model the competition will rise to challenge GWP for the lucrative ad revenues we will have proven profitable. At that point a http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 The Company Page 6 of 12 critical barrier for market penetration still remains for our competitor. Content owned by GWP competitors must be sufficient to attract site traffic. GWP has proven its ability to draw, retain and increase visitor traffic through the presentation of appealing content whereas the competition has not. Production Plans and Status The initial production is already underway, with 12 comic and traditional cartoon titles making up the production run with an introduction of 4 more comic titles by the third quarter of 2001. At present all 16 titles are complete and awaiting release. At this time we are averaging 50,000 - 70,000 overall site hits per month. Our data transfer rate is over I Gigabyte per month. The amount of data transfer moving through our site now is a primary goal of all would be major commercial web sites and search engines. Website traffic volume is the first step toward a successful commercial and e-Commerce venture with potential for prime advertising revenue. The trend displayed by the GWP website traffic figures indicate that within the next 12 months we will reach an average monthly traffic rate of over 1 million hits. This projection is based upon visitor reactions toward current content at h_ttp://www_.gravitywell.com without any increased advertising effort by GWP in advertising. If we were to advertise on traditional media (i.e. Television, print) our projections will easily double in the same time frame. To see the unbiased public figures that form the basis of these forecasts visit http;//gravi_tYwell.comJlogslwww2OOO/index.html. These logs are maintained by our hosting service. Each visitor in our projection equals a potential buyer of related merchandise. History shows that the typical buyer of popular art merchandise spends between $2.95 to $50.00 per week. GWP has the content to produce a large number of popular art product including the downloadable animations, comic books, comic strips and cartoons. The downloadable product is available at http://www.gravitywell.com on 24 hours a day 7 days a week. GWP currently holds the rights to all the content and resulting animations, movies, interactive video games, and associated merchandise. Under current projections full color printing of a quarterly specialty magazine will begin in the fourth quarter 2001. Printing, binding and shipping is expected to be performed by Quebecor Printing Inc. Quebecor is recognized as the largest printer of comic graphic art. Distribution of GWP's printed media and selected other items will be handled through both the GWP on line web store and Diamond Comic Distributors Inc.. Diamond reaches over 2,500 comic book and related merchandise retail operations. Their participation would significantly impact the positive exposure of GWP's website in the traditional popular art retail outlets. To further expand the reach of GWP merchandise in 2001 we will attend the annual American International Toy Fair. This fair held in New York City is the largest toy trade show in the western hemisphere. We will attend this fair in order to create strategic alliances with toy and game producers and distributors to help us penetrate the large national retail chains that carry popular arts merchandise. For further information please visit http://www.toy-tma.com/AITF/index.html. GWP will also attend the annual convention National Association of Television Program Executives (NATPE) in 2001. We will attend this convention to create strategic alliances with syndication and cable distributors who would air our on-line animation. Alliances with this form of media will allow GWP to generate new revenue from animated releases that http://gravitywell.corn/!temp!/phil/BPlan2000nu.shtml 7/12/00 q_heCompany Page 7 of 12 would have already paid for themselves with ad revenue attached in their initial web based release. For further information please visit http://www.natpe.com/ Financing Requirements GWP requires 40 million dollars in capital investment sufficient to obtain plant, printing, and computer equipment salaries and operation expenses as the foundation needed for successful execution of our strategies. Exit Strategy After the initial investment GWP plans to make an IPO within 36 months which we estimate will be sufficient time to recover the initial investment as well as a substantial return on investment. iBusiness DescriPtion Mission Statement ............................ It is our mission to become the largest on-line source of popular art entertainment and merchandise. Product and Idea History Gravitywell Productions (GWP) was created in 1992 due to Mr. Roberts' interest and expertise in the area of the popular arts industry concerned with creation, publication, and marketing of comic books. Mr. Roberts felt that the separation of the creative and publishing functions could lead to better quality and choice of product at lower cost to both producers and consumers. GWP was initially founded as a Comic Book publishing and marketing organization. GWP's website http://www.gravitywell.com was created in1996 when Mr. Roberts observed that no individual or company within the traditional popular arts industry had taken advantage of the popular arts consumer market on the internet. With an already extensive archive of content ready for production GWP began creating on-line comic books. A key element that has brought http://www.gravitywell.com to its current position of popular arts website leadership is the content licensed from the founders of the company. Through this structure and the GWP website, a constant pool of talent seeking to sell licensed product has allowed GWP to chose from among professional and amateur talent across the globe. From 1996 to the present GWP has been able to direct the chosen talent through our production and licensing processes making our content attractive to the web popular art consumers. This strategy has also indirectly caused GWP to become one of the first "virtual" corporations. The Competition At present there are 5 main competitors in the field of on-line popular art entertainment. 2 of the 5 competitors do not have content of their own and have not been able to attract and maintain site traffic. http://www.stanlee.net The site consists of cartoons based on Flash technology and streaming animation. There is no direct competition between stanlee.net and GWP because the target audience for their site's existing content ranges between the ages of 11 to 19. GWP caters to a broader range of popular art consumer including the http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 qZheCompany Page 8 of 12 disenfranchised traditional popular art consumer who is now older and ranges between the ages 25 and 45. http://www.digicomix.com - There is no direct competition between digicomix.com and GWP because this site's approach is to build traffic by attracting fans of 2 popular television series using provocative images of its female stars. http://www.toonscape.com - This site showcases original animations. The animations however are based on the visitors using tools supplied by toonscape.com to make the cartoon animations. To date there have been no takers and the site is bare. http://www.cartoonnetwork.com/wpt/index.htmlThe copyrights and propriety nature of the products available on their site does not allow cartoonnetwork to re-release animations meant for television. This is an obstacle that GWP does not have and will take advantage of. http://www.sho.com/whirlgirl/adventures-There and GWP because is no direct competition between whirlgirl this site is geared toward the visitors of stanlee.net, thus they are competing for the same base this site and its content is geared toward their existing television viewer ship. Entry Strategy Entry to the on-line popular art industry has been obtained. The initial production has been ongoing consisting of 12 principal products, which are available at http://www,gr_ayityvyell.com_24 hours a day 7 days a week. To complement the ongoing work, additional advertisement will be needed in traditional ad mediums to inform the traditional popular art consuming market that do not have on-line access as well as those popular art consumer that have recently joined the on-line community. Market Analysis ........ Marketing History and Present Activities Gravitywell Productions successes to date include the GWP Coming Attraction and Promotional Shot (CAPSHOT) of which 2 variations were produced, first a Pre-CAPSHOT, then a CAPSHOT. The CAPSHOT is a marketing tool recognized by the comic book section of the popular arts industry, normally referring to this form of production as an ASHCAN. More than 200 GWP Pre-CAPSHOTs, and CAPSHOTs were sold or given away by GWP for the purpose of generating public awareness of GWP. GWP sold original graphic art at various popular art conventions since November of 1992. GWP steadily increased our inventory of original art as well as it's sales other merchandise at Popular Art conventions between November 1992 through August 1995. These include: • • • • San Diego's Greatest Mini-Con - San Diego, CA Coronado Sports Card and Comics Show - Coronado, CA South Bay Mini-Con - Chula Vista, CA San Diego Comic Con International - Center City San Diego, CA In August 1994 and 1995 GWP was recognized by industry peers at the worlds largest http ://gravitywell.com/!temp !/phil/BPlan2000nu.shtml 7/12/00 The Company popular art convention: The San Diego Comic Con International. Page 9 of 12 From 1996 to the present GWP has utilized the World Wide Web as the primary form for advertising content and product updates. Our advertising success has become more apparent in recent months. Overall visitor view and hit statistics have been increasing at 17% to 43% on a weekly basis during the months of June 1999, through March 2000. This is due in part to the change in our updating schedule (5-7 days each week) and increased content production at http://www.gravitywell.com. An amazing part of this is the fact that no traditional off-line advertising has yet taken place and our growth is due to our on-line promotional tactics and word of mouth. Description of the Industry The general market of Popular Art and related merchandise posted over $800 million in sales in 1993. In 1994 sales were down an estimated 15 to 20 percent. The traditional popular art print market began and has stayed in rapid decline since then. The traditional popular art market is dominated by several major producers which include: • AOL-Time Warner • Walt Disney Corporation • Marvel Entertainment Group • DC Comics, Inc. (a subsidiary of Time/Warner Communications) • Dark Horse Comics These well known companies were listed because they are, or have, subsidiaries that exclusively supply consumers with traditional forms of popular art entertainment. None of the major producers of popular art entertainment has yet to make a substantial impact on the internet. There is no definitive explanation for the lack of impact but production cost, licenses fees, extremely late deliveries, or just the general public disinterest in the stagnant content may have significantly influenced the 7 year decline in the traditional print market sales. Almost all the new entrants into the on-line popular art production are attempting to use the same off-line production methods on the internet. The same production approaches that apparently brought down the traditional popular art market sales. GWP has avoided using this failed approach and as result attained longevity increased recognition and consumer traffic. A substantial list of lesser known competitors with modest finances and reputation have initiated websites for popular art entertainment during GWP's website longevity. However they have failed to generate interest and have closed their websites or reduced them to simply making announcements about their traditionally printed popular art materials. Contrarily GWP has had considerable and measurable success with our popular art website while initiating the venture with no name recognition, and running operations with minimal and sometimes no finances. GWP has spearheaded a movement and proven its leadership. We are ready to take advantage of a growing market and technology well into the future. Operations Production http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 q:he Company Page l 0 of 12 The current business plan calls for the purchase of all equipment necessary to design, produce, and market all of the products licensed to GWP. This approach of vertical integration in the traditional popular art marketplace is unorthodox. However it is a strategy that provides GWP with the necessary tools to remove barriers and ensure dominance in the field of on-line popular art entertainment. Distribution Distribution will initially be in 2 methods. The primary distribution method will be via the internet through http://www.gravitywell.com. The traditional popular art distribution chains will be used as the second method. The largest Distributors established popular art traditional popular art distributor with 55% of the market is Diamond Comic of Timonium, MD.. In the traditional popular art world this organization has an customer base that purchases, on a weekly basis, the majority volume of all material produced. GWP will work in conjunction with Diamond and any other distribution option at the earliest opportunity to insure extensive national penetration of GWP's brand name and popular art merchandise into traditional popular art retail outlets. Merchandise Production Plan The current production plan outlines the introduction of 2 pieces of merchandise in the second quarter of 2001 with introduction of new merchandise every 6 weeks thereafter. Merchandise will be released in timed conjunction with the premier of new GWP animations or other content. GWP will outsource specific items for merchandise production when necessary. Critical Risks ................................ Internal Risks GWP success depends on its key officers, the loss of services from one or more could adversely affect the business. Uncertainty of Profitability of GWP's Venture The top management has been in the comic graphics business for 8 years, and is not new to GWP or its operations. GWP is pursuing a specialty market. GWP may be required to overcome significant obstacles to obtain a major share of that markets ad revenue. Obstacles include GWP's small size, and the general inclination of people to prefer to do business with larger established companies. There is no assurance that sale of GWP's goods and services will increase proportionally to a level necessary to achieve profitability. Uncertainty of Adequacy of Financial Resources If for reasons not now apparent GWP is not able to attain the cash flow needed to achieve profitability, it may be necessary to obtain additional financing to continue operations. There is no assurance that GWP will maintain the required cash flow or that GWP will be able to raise additional funds. Industry Competition Many of GWP's present competitors or potential competitors have or could obtain greater resources than GWP. Although GWP plans to focus attention on expansion in the popular http://gravitywell.com/!temp!/phil/BPlan2000nu.shtml 7/12/00 3"he Company art market there is no assurance that GWP's strategy will be successful. Page 11 of 12 Market Change While GWP believes that information concerning popular art market demand is current, and intends to maintain product quality and type in accordance with that market's interest, acquisitions and mergers by current and potential competitors could diminish GWP's hold on consumer interest. Insurance Provisions Plant and Material Insurance Gravitywell Productions has made provisions in its financial projections to cover costs associated with essential insurance such as general liability, fire, capital equipment and supplies. No firm cost estimates have been provided, but a portion of the G&A shall be set aside for this purpose. Employee Insurance Critical employees of GWP's key operations shall be provided insurance. The insurance promotes an attractive working environment to all potential employees. Freelance and Work For Hire talent shall not be provided any insurance until the venture is operating at a net profit sufficient to provide and maintain such a program. Product Insurance Gravitywell Productions shall insure shipped products at levels dictated by materials outgoing. Financiais ........................... Gravitywell Productions seeks investment of $10,000,000.00 capital in return for a 10% equity stake. This level of investment will allow GWP to vertically integrate the areas of production and marketing. A portion of distribution and merchandise production will be out sourced to eliminate most competition. This strategy ensures GWP's position as leader of popular art entertainment production on the web without additional equity financing within the first five years of operation. The funds sought by GWP they shall be allocated in the following manner: Expenditures i-Amount , i capital equipment (computers, software, etc) i - -- $700,000 --'_ ! Office &storagefaciiities ...... ,_---_-$750,000 --, ;Ad_vertis!ng and promotion ...... $350,000 1 I CapitaiSupplies_& Merchandise _ __ ............ $450,000 i' ! Licenses and fees _ _ $850,_0_.00_I ! Salaries.& oper--atingexpenses for-i2 months i $1,200,000 .. Total $4,300,000 I NOTE: The amounts above are estimates only. The actual allocation of funds will depend on the given business conditions when the funds are received. Therefore the requirements and investment decisions will be made by and at the sole discretion of GWP management. http://gravitywell.corn/!temp!/phil/BPlan2000nu.shtml 7/12/00 • '_he Company Page 12 of 12 Industry Financial Characteristics Due to its infancy it is difficult to judge the financial characteristics of the on-line popular art market. Over time the on-line popular art companies with the greatest ability to adapt within the developing market will be successful. The popular art market place is open for fresh, innovative product. Those companies entering this market unrestricted with traditional popular art production concerns have an unprecedented opportunity for success as the on-line popular art consumer joins the Internet in ever increasing numbers. GWP has demonstrated the ability to grow market share using the Internet as the sole means of advertisement to the existing on-line popular art consumer. Once GWP has the resources to advertise in the traditional popular art's existing channels, it will be considered a standard success that competitors must achieve in order to compete against GWP. http://gravitywell.corn/!temp!/phil/BPlan2000nu.shtml 7/12/00