MINORITYVENDORS.NET
"The Commerce Center for Minority Businesses" By Triad Fortin and Marc Kramer
519BaintreeRun Downingtown, Pa. 19335 610-873-6978
TABLE OF CONTENTS
Executive Summary Objectives Market Revenue Streams Content Description Marketing Site Sales Retention Competition Management Technology Site Map Spread Sheet Launch Plan Financials 3 6 7 10 12 15 16 17 19 22 23 24 26 27
EXECUTIVE SUMMARY
Problem: According to Bill Larson, director of minority purchasing for Ford Motor Company and a member of the Detroit Chapter of the National Minority Supplier Development Council, there is no destination web site for companies looking/or detailed information on minority vendors to subcontract product and service needs. Mr. Larson, whose company spends almost $3 billion a year with minority vendors, also states there is no web site for minority companies to buy and sell products and services to each other. The NMSDC network includes a national office in New York and 39 regional councils across the country. There are 3,500 corporate members throughout the network, including most of America's largest publicly owned, privately owned, and foreign-owned companies, as well as universities, hospitals, and other buying institutions. There are regional councils that certify and match more than 15,000 minority-owned businesses with member corporations, which want to purchase goods and services. In 1998, member corporation purchases exceeded $41 billion.
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Minorities represent 26% of the population of the United States and minority businesses represent only 11% of total businesses, 6% of gross receipts ~ and 3-4% of total corporate purchases. • 20% is the growth rate of minority businesses, according to the Small Business Administration. • $500 billion is the amount of revenue minority firms generate per year, according to the U.S. Census Bureau. • 3,000 African-American businesses have $1 million or more in sales, according to the U.S. Census Bureau. • 9,200 Hispanic-American businesses have $1 million or more in sales, according to the U.S. Census Bureau. • 12,517 Asian-American businesses have $1 million or more in sales, according to the U.S. Census Bureau. Company Description: Minorityvendors.net will be the first online business community that brings together the five minority business groups as classified by the Census Bureau and Small Business AdministrationAfrican American, Asian American, Indian, Hispanic, and Native American Indian. The site caters to four audiences:
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Private and public sector companies with mandates to buy products and services from minority-owned companies. Minority-owned companies who wish to buy and sell products to each other and partner with each other to go after companies who have on their agendas to buy products and services from minority-owned companies. Non-minority-owned companies would be provided an easier and more cost-efficient way to market products and services to minority-owned companies. Many college students, according to Cheyney University's Career Counseling Center, would like to work for minority-owned companies because they feel culturally comfortable working with people from the same culture. They also believe career advancement has fewer roadblocks with a minority-owned company. Minorityvendors.net will provide an easier way for students to find future employers and for employers to recruit quality employees.
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Competition: Currently there is no destination site for bringing together the five major minorities that corporate America and public entities target for vendor participation. The only potential competition is from the National Minority Supplier Development Council and potentially VerticalNet, if they look at this as a potential offering.
Marketing:
Our marketing will be targeted at the presidents, vice presidents of sales and marketing, CFOs, and minority purchasing managers. We will use traditional means such as direct mail and print advertising and new ways such as direct e-mail, affiliates programs, partnerships, and other viral marketing techniques. Management: The chairman ofMinorityvendors.net is Thad Fortin, president of Haas Corporation, one of the leading outsource chemical management service firms in the United States. Mr. Fortin built Haas from $5 million to $30 million over the last five years. He also started the consumer cleaning products company called Sun & Earth.
Revenue: Minorityvendor.net has 13 sources of revenue. None of its revenue sources requires the company to build distribution centers and take possession of products.
Yr1
Revenue Contract Opportunities investment Capital New Product Show Case Surveys Custom Surveys Online Training Books Travel Employment Opportunities Business Supplies New Product Launches Business Sales Conferences Total Total Expenses Profit (loss) $14,804,50 $16,033,532 (1,229,032 260,00 130,00 5,200,00 585,00 3,900,00 13,00 4,000,00 27,50 39,00 650,00 20,000,000 115,500 117,000 1 ,430,000 330,000 943,800 286,000 1 1 ,440,000 1,415,700 8,580,000 52,000 1 ,980,000 1 ,320,000 $48,010,000 $39,357,558 $8,652,442 75,000,000 509,850
351 ,000
Yr2 Yr3 Yr4 Yr5
281,250,00 2,282,44 1,053,00 6,921,20 798,60 12,436,35 1,384,24 55,369,60 8,290,90 41,527,20 832,00 12,128,73 8,085,82 $432,360,11 $295,548,702 $136,811,405
1,054,687,500 10,256,747 3,159,000 15,226,640 1,756,920 45,143,980 3,045,328 121,813,120 20,063,991 91,359,840 3,328,000 30,018,625 20,012,417 $1,419,872,108 $925,297,68 $494,574,42
3,146,000 726,000 3,425,994 629,200 25,168,000 3,425,994 18,876,000 208,000 4,900,500 3,267,000 $139,633,538 $102,417,379 $37,216, 15£
Capital Needs: Minorityvendors.net is looking for between $2 million and $5 million as startup capital. The money will be used as follows: • • • • 30% salaries 40% marketing 20% Internet development 10% working capital
Exit Strategy: We believe this company has a tremendous chance because of its niche and lack of competition to be a public company. Our goal would be to take this company public within 12 to 18 months of receiving the initial capital to start the company.
OBJECTIVES:
We have five objectives for each of two groups of years and they are as follows: Years 1-2: • • • • • Minority members—1,000 members (a minimum of four users per corporation) Non-minority corporate members~200 members (a minimum of four users per corporation) Public members—100 members (a minimum of four users per institution) Revenue—nearly $47 million by Year 2 Profitable-Year 2
Years 3-5: • • • • • Minority members—3,200 members (a minimum of four users per corporation) Non-minority corporate members—1,600 members (a minimum of four users per corporation) Public members—800 institutions (a minimum of four users per institution) Revenue—Nearly $1.4 billion by Year 5 Profits—50% plus pretax profit margins
MARKET:
Overall Market: The report "Computer Use in the United States: October 1997" was compiled from data collected from the 1997, 1993, and 1984 supplements to the Current Population Survey. It found that about one-half of the U.S. population aged 18 and over used computers in 1997, up from 36% in 1993, and 18% in 1984. Nearly 92 million adults (47%) used a computer in one or more places: 64 million at work, 56 million at home, and 11 million at school. Of the adults who used computers at home, 71% did so for word processing. Other common uses included games (54%) and e-mail and communication (45%). About 80% who used the Internet at home used it for e-mail or finding government, business, health, or education information. The next most common uses were looking for news, weather, and sports (50%); followed by checking schedules, buying tickets, or making reservations (25%). Small Business Usage: The number of small businesses with a web presence has nearly doubled since 1998, and the coming years will see an even more dramatic increase, according to a nationwide survey of companies with fewer than 100 employees by International Communications Research commissioned by Prodigy Biz Corp., a subsidiary of Prodigy Communications Corp. The research found that approximately one-third of small businesses currently have a web presence. Research by International Data Corp. (IDC) found that 19% of small businesses were online one year ago. The Prodigy study also found that 40% more small businesses (approximately 2.1 million) without web sites expect to be on the Internet within an average of the next eight months. While an increasing number of small business owners recognize the global benefits of the Internet, the study found that 66% do not believe the web offers significant opportunities to fuel their growth because they are local businesses. "Small businesses can market to more than just Main Street. Even their local presence can be expanded," said Prodigy Biz president Gary Remy. "A toy maker in Peoria can sell more dolls in her hometown, her home state, or clear across the country. The Internet shatters geographical boundaries, giving all small businesses a virtual local and national sales force with just a few clicks."
Despite perceived geographical barriers, 90% of small businesses anticipate benefiting from the Internet. When asked how the Internet would be used, small business respondents said their primary uses would be promoting to prospects (69%), followed by e-commerce (57%), and providing better customer service (48%). Other top responses included competing with other businesses (46%) and communicating with employees (11%). Nearly 75% of small business owners claim cost is not a barrier to setting up a web site. Forty-four percent of small business owners claim they do not have enough staff for, and 41% report they do not have time to, maintain a web site. Overall, the study showed the likelihood of having an Internet presence declines significantly with the overall size of the company. Only 25% of companies with fewer than 10 employees have an Internet presence. By contrast, half of those with 10 or more employees have taken advantage of this opportunity. "Small businesses no longer have to spend hours toiling over their site design and updates," said Rick Miller, senior analyst of Internet strategies at Cahners In-Stat. "A web site will be mandatory for any business in the 21st century, no matter what their size." Primary Market: The NMSDC Network, which includes 39 affiliated regional councils, matches more than 15,000 certified minority businesses (Black, Hispanic, Asian, and Native American) with its more than 3,500 corporate members, including America's top publicly owned, privately owned, and foreign-owned companies, as well as universities, hospitals, and other major buying institutions. Minorities represent 26% of the population of the United States, but minority businesses represent only 11% of total businesses, 6% of gross receipts ~ and 3-4% of total corporate purchases. Market Interviews: We interviewed the following minority purchasing managers to see if there was a need for a minority vendor web site: • • • • Karl Brockenborough, vice president for financial affairs for Cheyney University Bill Larson, purchasing manager for Ford Motor Company and member of the Detroit chapter board of the National Minority Supplier Development Council Ramon Moya, director of minority purchasing for Bell Atlantic Bill Pebble, purchasing manager for ADC Telecommunications
Through interviews, we have learned the following: • There is no web site where corporations can go to find detailed information on minority vendors, although plans to put the NMSDC database online are being discussed. That database, according to those we interviewed, only provides names and contact information for certified companies. It does not provide detailed information about their revenue, past clients, or references. There is no web site that aggregates minority opportunities. There is no web site that provides minority-owned businesses a way to find other minorityowned businesses with which to partner and with which to buy and sell products and services.
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REVENUE STREAMS:
Minorityvendors.net will have 13 sources of revenue. Sponsorship: Companies will be able to sponsor sections and run banner advertisements that will link to their web sites or to their corporate information on Minorityvendors.net's web site, or to a specific offer. The average sponsorship will cost $1,000 a month. Business Supplies: We will partner with a business supply house to offer discounted office products. An arrangement is being worked out with Staples that will provide Minorityvendors.net with 10% commission with no inventory or marketing costs. Survey Information: Each month we will survey our users to find out the types of products and services they need and their day-to-day business concerns by and across industry. We will develop and implement custom surveys. For in-house surveys we will charge $500, and for custom surveys we will charge $5 per registered web site user. New Product Showcase: Each month new products will be featured in a special section of the web site. They will range from computers to manufacturing hardware and parts. Companies who want to be featured will receive a written description, a picture of their product, and an email link for companies to request additional information. We will charge companies $100 a month to list their products. New Product Launches: We will provide permission-based services that e-mail our users about new products being offered and a link to a one-page description of the product. We will charge $1 per user. Investment Capital: We will develop an investment capital matching service that will match minority-owned companies looking for capital with private investors, venture capitalists, investment banks, and commercial banks. We will charge a processing fee of $150 and 2% of the capital raised. One percent will be taken in capital stock and 1% in cash. Online Training: We will partner with an accredited university to offer business training and seminars. We will charge our partner a 10% commission on gross sales. Business Sales: Companies will be able to list the businesses they want to sell. We will partner with a business broker to offer this service. We will provide the listing for $1,200 a year and will take a 5% commission on the sale of the business. Conferences: We will list conferences and provide online processing capabilities. We will list conferences for $500 and charge 5% commission to the conference for each person that signs up through our service.
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Bookstore: We will offer books through a partnership with Amazon. The books will be selected by and for culture and demographics. We will earn a 10% gross commission on each book sold. Travel: We will offer both business and vacation travel. We will partner with an online travel company. Our commission will be 5%. Employment Recruiting: We will offer a service that allows companies who want to recruit minority students and professionals to advertise for them on our web site. We will charge a placement fee of $100 and 5% commission on people who are hired. Contract Opportunities: We will offer members the opportunity to enter proposals and respond to proposals. We will charge respondents $5 per request for proposal.
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CONTENT DESCRIPTION:
The way we have constructed the web site content should put us at the top of any minority vendor or minority business search conducted, according to interviews with Lycos and Excite search engine managers, that relies on a combination of the following: • • • • Title tags Meta tags Human editors Links to our site
Below is a short description of the content for each section of the web site: Company: There will be background information on the company and names and contact information for sales, customer service, and editorial. Membership: There will be a one-page description of each membership. Companies who decide to become members will fill out an online form that provides the following: • Name • Address • Telephone • Fax • E-mail address • Web site address • Top corporate officer's names • Revenue size • Client references • Certifications Minority Vendor Categories: Purchasing departments and corporate management will be able to access a password-protected database that will allow them to find the type of vendor they want by size, years of experience, and geography. Contract Opportunities: Companies will be able to post vendor needs and we will use software developed by rfpMarket.com that sends proposals to companies that are tagged in our database who are interested in specific opportunities. For example, if a company is looking for a web site, the proposal will only be sent to web developers. Investment Capital: We will provide minority companies with access to bankers, private investors, venture capitalists, and investment bankers. Companies will put in what type of capital needs they have, what structure they would like the investment to be, and, using rfpMarket software, we will send those leads to interested financial parties.
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New Products: We will provide manufacturers with an outlet to directly target products to minority markets by having a picture and description of their product and a link from the description to either the company's web site or to a list of dealers who sell their products. Surveys: Each quarter we will conduct a variety of surveys that our members can buy that focus on the following strategic business areas: • • • • Employment Management Marketing Sales
We will also develop and implement custom surveys for our members. Online Training: We will partner with a major business university such as the Wharton School and offer online courses in the following disciplines: • • • • Human Resources Management Marketing Sales
Books: We will partner with Amazon to offer books specifically targeted to small-to-mediumsized businesses and will select books focused on minority business interests in the following areas: • • • • • • • Computers Customer Service Management Marketing Public Relations Raising Capital Sales
Travel: We will partner with an online travel agency to offer all sources of business travel and accommodations.
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Employment Opportunities: We will partner with an online minority-recruiting firm such as Minority]obsbank or Minorityrecruiter to assist members in finding employees for the following types of positions: • Accounting • Advertising • Computer Sciences • Engineering • Human Resources • Legal • Marketing • Public Relations • Software Development • Web Sites Business News: We will provide news on minority-owned businesses that span across minorities. There will be six types of business news/interviews that we will provide: • CEO Interviews—Each week we will interview a different CEO about the challenges and opportunities they are dealing with. • Company/News—We will post press releases of all of our members on a daily basis similar to what Venturewire.com does. • Human Resources—We will have human resource professionals, executive recruiters, and compensation specialists write and be interviewed about recruiting and retaining personnel. • Financial—We will have investment bankers, venture capitalists, and bankers write about and be interviewed on how to finance companies. • Marketing-We will have marketing professionals write about and be interviewed about marketing and branding strategies. • Sales-We will have sales professionals write about and be interviewed about sales. Events: There are regional, national, and minority-focused business events. We will work with event planners and list events and take enrollment online. We will store the users contact information, so the next time they decide to go to an event they won't have to type in their contact information. They will only have to enter a credit card number.
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MARKETING SITE:
Although the audience is large and fragmented, in terms of marketing we know who we are focused on and the best way to deliver the message. Target Users: Minority Vendors: We will buy mailing lists that contain names of presidents, vice presidents of marketing, vice presidents of sales, and sales people. Private Sector Members: We will target minority purchasing managers and minority human resource recruiters. Public Sector: We will target minority purchasing managers for local, state, and federal governments, school districts, and colleges and universities. Students: We will target business, computer science, science, marketing, and English undergraduates and graduate students.
Building Visibility Tools:
Print Advertising: We will run quarter-page advertisements in newspapers like The Philadelphia Tribune, Asian News, Hispanic News and third of a page advertisements in publications such as Black Entrepreneur, Purchasing Manager Today and with the National Council of Minority Suppliers. We will also look at purchasing advertisements in national magazines such as The Wall Street Journal, USA Today, Business Week, Forbes and Fortune by region Direct Mail: We will buy traditional mailing lists and e-mail above publications. Direct E-mail: We will purchase permission mailing list from Bigfoot.com, one of the leading direct e-mail companies in the United States. Public Relations: We will send press releases to minority publications, radio and television stations, and to targeted public and private sector members. Partner Promotion: We will work with our sponsors and business partners to send out direct mail pieces and to have links from their web sites to our site. Affiliate Programs: We will develop relationships with minority-oriented chambers of commerce and trade associations to promote the site in return for revenue that is derived from those who enter our site through their web sites. Events: We will run events with chambers of commerce and trade associations to promote the site and attend trade shows sponsored by these partners.
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SALES:
Our sales strategy is multifaceted. Our product and service offering varies from sponsorships to sales partnerships to memberships. Therefore we will implement a variety of sales tactics. Memberships—In order to develop a large user group we will give membership away for free for at least one year and consider charging a subscription fee after we see how customers are using the site. Sponsorship Sales-We will have a team of experienced advertising sales people, who will come from minority publications, to sell sponsorship and banner advertising. New Product Show Sales—We will hire people that have Fortune 500 sales experience and large contact databases to encourage companies to promote their products through our site. Contract Opportunities-We will send out broadcast e-mail pieces and link people to the section of the site that will allow them to enter proposals and respond to proposals. By partnering with rfpMarket, they will have sales people that are working with purchasing departments to encourage them to put in proposals. Proposals drive users. Online Training-We will send direct mail and e-mail to promote our educational offering and then allow our partners to handle sales leads. Surveys—We will send direct mail and e-mail to promote our in-house surveys and we will have sales people responsible for contacting companies to promote our custom survey capabilities. Books—We will do broadcast e-mail to promote our bookstore. Travel-We will do broadcast e-mail to promote our travel program. Employment Opportunities—We will do broadcast e-mail to promote our Employment Opportunities section and allow our partners to take leads we receive and convert them into sales. Events—We will have sales people who will contact trade associations, chambers of commerce, and companies to promote their events through our membership and encourage members to sign up for events online.
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RETENTION:
Our long-term success will be based on our ability to retain users. We have a retention plan for each target group: Members: In order to encourage buyers to submit requests, we plan to do the following: Management Interface: Minorityvendors.net has built a management interface to help users easily manage contacting and rejecting vendors, making sure users have a positive experience. Follow-Up Phone Calls: We will follow up with a percentage of our users to make sure they are satisfied. Focus Groups: We will conduct focus groups each quarter to stay in contact with buyers and to find out how we can improve our service. Sweepstakes: Each month we will give away a one-week vacation. Each time a buyer enters a request, they will have an additional chance to win. Example: They enter six requests in a month; they will have six chances to win in that particular month. Market Research: We will provide buyers with information about what products and services are most bought through our service and what is the range and average of those prices. Advisory Board: We will create an advisory board made up of 12 of our users. This group will be charged with advising on how to improve our content and services and what new services and categories we should be adding. The board will be changed every two years. Market Research: We will provide members with monthly statistics on traffic, advertising, and revenue earned. Ongoing Analysis: We will provide ongoing analysis and feedback to help members earn more revenue. Vendor Retention: Focus on Requests: Management believes that to retain vendors we need to get more requests. Therefore we have to focus on getting corporations and public entities that target providing minority vendor opportunities to join. First Reply is Free: To encourage vendors to reply quickly, the first reply to each request will be free of charge. The vendor will not know if they are first until after they make the reply. Education: We try to educate vendors to help them focus their efforts and write good replies.
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Feedback: We make it easy for users to give vendors feedback so that vendors don't blame rfpMarket when they don't close deals. Focus Groups: We will conduct semiannual online and offline focus groups to determine how we can improve the process. Winner Information: We will post information on which companies had won requests. Vendors need to know that the system works.
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COMPETITION:
According to the minority purchasing managers we interviewed, there are no direct competitors. Each manager felt it was a market that was overlooked because people view minority businesses as being "small and retail." They don't realize that there are tens of thousands of minorityowned businesses whose sales are over $1 million. We view only two companies as potential competitors for us. Neither has a destination site for this market. One is well known in the market space and one has the financial ability and experience at building online communities. National Minority Supplier Development Council: The NMSDC network includes a national office in New York and 39 regional councils across the country. There are 3,500 corporate members throughout the network, including most of America's largest publicly owned, privately owned, and foreign-owned companies, as well as universities, hospitals, and other buying institutions. The regional councils certify and match more than 15,000 minority-owned businesses with member corporations, which want to purchase goods and services.
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NMSDC: Nl
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NATIONAL MINORITY SUPPLIER DEVELOPMENT COUNCIL, INC.
Providing a direct link between corporate America and minority-owned businesses is Ihe primary objective of the National Minority Supplier Development Council, one of the Country's leading business membership organizations. It was chartered in 1972 to provide increased procurement and business opportunities for minority businesses of all sizes.
Links to other Internet sites should not be construed as an endorsement of the sites or the information contained therein.
National Minority Supplier Development Council
Strengths: • • Well-established corporate membership base Largest number of minority affiliates 47 regional chapters
Weaknesses: • • Web site lacks "stickiness" No vendor online database
VerticalNet: VerticalNet, Inc. (www.verticalnet.com). owns and operates 53 industry-specific web sites designed as online business-to-business communities, known as vertical trade communities. These vertical trade communities provide users with comprehensive sources of information, interaction, and e-commerce.
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