Essay/Term paper: Business plan

Essay, term paper, research paper:  Management

Business Plan


Business Plan: Progressive Consulting


What follows is a complete business plan for a hypothetical company. Please
copy or save to your disk and use as an example in developing your own
business plan. If you would like to read a series of articles jump to Web
Marketing . For additional business aids click on The Practical Tools of
Consulting


1. 0 Executive Summary



Progressive Consulting will be formed as a consulting company specializing in
marketing of high technology products in international markets. Its founders
are former marketers of consulting services, personal computers, and market
research, all in international markets. They are founding Progressive
Consulting to formalize the consulting services they offer.



1. 2 Mission



Progressive Consulting offers high-tech manufacturers a reliable, high
quality alternative to inhouse resources for business development, market
development, and channel development on an international scale. A true
alternative to in house resources offers a very high level of practical
experience, know how, contacts, and confidentiality. Clients must know that
working with Progrssive Consulting is a more professional, less risky way to
develop new areas even than working completely in house with their own
people. Progressive Consulting must also be able to maintain financial
balance, charging a high value for its services, and delivering an even
higher value to its clients. Initial focus will be development in the
European and Latin American markets, or for European clients in the United
States market.


1. 3 Keys to Success



•Excellence in fulfilling the promise completely confidential, reliable,
trustworthy expertise and information.

•Developing visibility to generate new business leads.

•Leveraging from a single pool of expertise into multiple revenue generation
opportunities: retainer consulting, project consulting, market research, and
market research published reports.


2. 0 Company Summary



Progressive Consulting is a new company providing high-level expertise in
international high-tech business development, channel development,
distribution strategies, and marketing of high tech products. It will focus
initially on providing two kinds of international triangles:


•Providing United States clients with development for European and Latin
American markets.

•Providing European clients with development for the United States and Latin
American markets.


As it grows it will take on people and consulting work in related markets,
such as the rest of Latin America, and the Far East, and similar markets. As
it grows it will look for additional leverage by taking brokerage positions
and representation positions to create percentage holdings in product
results.


2. 1 Company Ownership



Progressive Consulting will be created as a California C corporation based
in Los Angeles County, owned by its principal investors and principal
operators. As of this writing it has not been chartered yet and is still
considering alternatives of legal formation.



2. 2 Startup Summary



Total start up expense (including legal costs, logo design, stationery and
related expenses) come to $73,000. Start up assets required include $3,000 in
short term assets (office furniture, etc.) and $1,000,000 in initial cash to
handle the first few months of consulting operations as sales and accounts
receivable play through the cash flow. The details are included in the table.





Start-up Plan
_______________________________
Start-up Expenses
Legal $1,000
Stationery etc. $3,000 Brochures $5,000
Consultants $5,000
Insurance $350
Expensed equipment $3,000
Other $1,000
_______________________________
Total Start-up Expense $18,350

Start-up Assets Needed
Cash requirements $25,000
Start-up inventory $0
Other Short-term Assets $7,000
Total Short-term Assets $32,000
Long-term Assets WORD DOCUMENT HAS NO NUMBER HERE
Capital Assets $0
_______________________________
Total Assets $32,000

Total Startup Requirements: $50,350
Left to finance: $0

Start-up Funding Plan

Investment
Investor 1 $20,000
Investor 2 $20,000
Other $10,000
Total investment $50,000

Short-term borrowing
Unpaid expenses $5,000
Short-term loans $0
Interest-free short-term loans $0
Subtotal Short-term Borrowing $5,000
Long-term Borrowing $0
Total Borrowing $5,000


Loss at start-up ($23,000)
Total Equity $27,000
Total Debt and Equity $32,000


2. 3 Company Services



Progressive offers expertise in channel distribution, channel development,
and market development, sold and packaged in various ways that allow clients
to choose their preferred relationship: these include retainer consulting
relationships, project based consulting, relationship and alliance
brokering, sales representation and market representation, project-based
market research, published market research, and information forum events.


2. 4 Company locations and facilities



The initial office will be established in A quality office space in the Los
Angeles County " Dearborn Valley" area of California, the heart of the U.S.
high tech industry.


3. 0 Services



Progressive offers the expertise a high-technology company needs to develop
new product distribution and new market segments in new markets. This can be
taken as high-level retainer consulting, market research reports, or project-
based consulting.


3. 1 Service Description



1. Retainer consulting: we represent a client company as an extension of its
business development and market development functions. This begins with
complete understanding of the client company's situation, objectives, and
constraints. We then represent the client company quietly and confidentially,
sifting through new market developments and new opportunities as is
appropriate to the client, representing the client in initial talks with
possible allies, vendors, and channels.



2. Project consulting: Proposed and billed on a per-project and per-milestone
basis, project consulting offers a client company a way to harness our
specific qualities and use our expertise to solve specific problems, develop
and/or implement plans, develop specific information.



3. Market research: group studies available to selected clients at $5,000 per
unit. A group study is packaged and published, a complete study of a specific
market, channel, or topic. Examples might be studies of developing consumer
channels in Japan or Mexico, or implications of changing margins in software.




3. 2 Competitive Comparison



The competition comes in several forms:

1. The most significant competition is no consulting at all, companies
choosing to do business development and channel development and market
research in-house. Their own managers do this on their own, as part of their
regular business functions. Our key advantage in competition with in-house
development is that managers are already overloaded with responsibilities,
they don't have time for additional responsibilities in new market
development or new channel development. Also, Progressive can approach
alliances, vendors,and channels on a confidential basis, gathering
information and making initial contacts in ways that the corporate managers
can't.



2. The high-level prestige management consulting: High-Tec, San Diego
Consulting Group, etc. These are essentially generalists who take their name-
brand management consulting into specialty areas. Their other very important
weakness is the management structure that has the partners selling new jobs,
and inexperienced associates delivering the work. We compete against them as
experts in our specific fields, and with the guarantee that our clients will
have the top-level people doing the actual work.



3. The third general kind of competitor is the international market research
company: International Electronic Data Corporation (IEDC), Dataquest,
Stanford Research Institute, etc. These companies are formidable competitors
for published market research and market forums, but cannot provide the kind
of high-level consulting that Triangle will provide.



4. The fourth kind of competition is the market-specific smaller house. For
example: Nomura Research in Japan, Select S.A. de C.V. in Mexico (now
affiliated with IEDC).



5. Sales representation, brokering, and deal catalysts are an ad-hoc business
form that will be defined in detail by the specific nature of each
individual case.



3. 3 Sales Literature



The business will begin with a general corporate brochure establishing the
positioning. This brochure will be developed as part of the start-up
expenses.



Literature and mailings for the initial market forums will be very important,
with the need to establish a high-quality look and feel for... ...[truncated
because this plan is provided for purposes of illustration only]



3. 4 Sourcing



•The key fulfillment and delivery will be provided by the principals of the
business. The real core value is professional expertise, provided by a
combination of experience, hard work. and education (in that order).

•We will turn to qualified professionals for free-lance back-up in market
research and presentation and report development, which are areas that we
can afford to contract out without risking the core values provided to the
clients.



3. 5 Technology

Progressive Consulting will maintain latest Windows and Macintosh
capabilities including:


•1. Complete Email facilities in Internet, Compuserve, America Online, and
Applelink, for working with clients directly through email delivery of drafts
and information.

•2. Complete presentation facilities for preparation and delivery of
multimedia presentations on Macintosh or Windows machines, in formats
including on-disk presentation, live presentation, or video presentation.

•3. Complete desktop publishing facilities for delivery of regular retainer
reports, project output reports, marketing materials, market research
reports.


3. 6 Future Services



In the future Progressive will broaden the coverage by expanding into
coverage of additional markets (e.g. all of Latin America, Far East, Western
Europe) and additional product areas (e.g. telecommunications and technology
integration). We are also studying the possibility of newsletter or
electronic newsletter services, or perhaps special on-topic reports.



4. 0 Market Analysis Summary



Progressive will be focusing on high-technology manufacturers of computer
hardware and software, services, networking, who want to sell into markets
in the United States, Europe, and Latin America. These are mostly larger
companies, and occasionally medium-sized companies.



Our most important group of potential customers are executives in larger
corporations. These are marketing managers, general managers, sales managers,
sometimes charged with international focus and sometimes charged with market
or even specific channel focus. They do not want to waste their time or risk
their money looking for bargain information or questionnable expertise. As
they go into markets looking at new opportunities, they are very sensitive
to risking their company's name and reputation. Professional experience...
[truncated because this plan is provided for purposes of illustration only]



4. 1 Market Segmentation



•Large manufacturer corporations: our most important market segment is the
large manufacturer of high-technology products, such as Apple, Hewlett-
Packard, IBM, Microsoft, Siemens, or Olivetti. These companies will be
calling on Progressive for development functions that are better spun off
than managed in-house, and for market research, and for market forums.


•Medium sized growth companies: particularly in software, multimedia, and
some related high growth fields, Triangle will be able to offer an attractive
development alternative to the company that is management constrained and
unable to address opportunities in new markets and new market segments.



4. 2 Industry Analysis



The consulting "industry" is pulverized and disorganized, thousands of
smaller consulting organizations and individual consultants for every one of
the few dozen well-known companies.



Consulting is a disorganized industry, with participants ranging from major
international name brand consultants to tens of thousands of individuals. One
of Progressive's challenges will be establishing itself as a "real"
consulting company, positioned as a relatively risk free corporate purchase.



4. 2. 1 Industry Participants



The consulting "industry" is pulverized and disorganized, thousands of
smaller consulting organizations and individual consultants for every one of
the few dozen well-known companies.



At the highest level are the few well established major names in management
consulting. Most of these are organized as partnerships established in major
markets around the world, linked together by interconnecting directors and
sharing the name and corporate wisdom. Some evolved from accounting companies
(e.g. Arthur Anderson, Touche Ross) and some from management consulting
(McKinsey, Bain). These companies charge very high rates for consulting, and
maintain relatively high overhead structures and fulfillment structures based
on partners selling and junior associates fulfilling. At the intermediate
level are some function specific or market specific consultants, such as the
market research firms (IEDC, Dataquest) or channel development firms
(ChannelCorp, Channel Strategies, ChannelMark).



Some kinds of consulting is little more than contract expertise provided by
somebody looking for a job and offering consulting services as a stop-gap
measure while looking.



4. 2. 2 Distribution Patterns



Consulting is sold and purchased mainly on a word-of-mouth basis, with
relationships and previous experience being by far the most important factor.


The major name-brand houses have locations in major cities and major markets,
and executive-level managers or partners develop new business through
industry associations, business associations, and chambers of commerce and
industry, etc., even in some cases social associations such as country clubs.


The medium-level houses are generally area-specific or function specific, and
are not easily able to leverage their business through distribution.



4. 2. 3 Competition and Buying Patterns



The key element in purchase decisions made at the Progressive client level is
trust in the professional reputation and reliability of the consulting firm.



4. 2. 4 Main Competitors



•The high-level prestige management consulting:

Strengths: international locations managed by owner-partners with a high
level of presentation and understanding of general business. Enviable
reputations which make purchase of consulting an easy decision for a manager,
despite the very high prices. Weaknesses: General business knowledge doesn't
substitute for the specific market, channel, and distribution expertise of
Triangle, focusing on high-technology markets and products only. Also, fees
are extremely expensive, and work is generally done by very junior-level
consultants, even though sold by high-level partners.



•The international market research company:



Strengths: International offices, specific market knowledge, permanent staff
developing market research information on permanent basis, good relationships
with potential client companies.



Weaknesses: market numbers are not marketing, not channel development or
market development. Although these companies compete for some of the business
Triangle is after, they cannot really offer the same level of business
understanding at a high level.



•Market specific or function-specific experts



Strengths: expertise in market or functional areas. Triangle should not try
to compete with Normura or Select in their markets with market research, or
with ChannelCorp in channel management.



Weaknesses: the inability to spread beyond a specific focus, or to rise
above a specific focus, to provide actuial management expertise, experience,
and wisdom beyond the specifics.



The most significant competition is no consulting at all, companies choosing
to do business development and channel development and market research in-
house. Strengths: no incremental cost except travel; also, the general work
is done by the people who are entirely responsible, the planning done by
those who will implement. Weaknesses: most managers are terribly overburdened
already, unable to find incremental resources in time and people to apply to
incremental opportunities. Also, there is a lot of additional risk in market
development and channel development done in house from the ground up.
Finally, retainer-based antenna consultants can greatly enhance a company's
reach and extend its position into conversations that might otherwise never
hanve taken place.




4. 3 Market Analysis



As indicated by the illustrations, we must focus on a few thousand well-
chosen potential customers in the United States,Europe, and Latin America.
These few thousand high-tech manufacturing companies are the key customers
for Progressive.



Potential Customers Customers Growth rate
____________________________________________________
U.S. High Tech 5,000 10%
European High Tech 1,000 15%
Latin America 250 35%
Other 10,000 2%
____________________________________________________
Total 16,250 n.a.




5. 0 Strategy Summary



Progressive will focus on three geographical markets, the United States,
Europe, and Latin America, and in limited product segments: personal
computers, software, networks, telecommunications, personal organizers, and
technology integration products. The target customer is usually a manager in
a larger corporation, and occasionally an owner or president of a medium-
sized corporation in a high-growth period.




5. 1 Pricing Strategy



Progressive Consulting will be priced at the upper edge of what the market
will bear, competing with the name brand consultants. The pricing fits with
the general positioning of Triangle as high-level expertise.



Consulting should be based on $5,000 per day for project consulting, $2,000
per day for market research, and $10,000 per month and up for retainer
consulting. Market research reports should be priced at $5,000 per report,
which will of course require that reports be very well planned, focused on
very important topics very well presented.



5. 2 Sales Forecast



The sales forecast monthly summary is included in the appendix. The annual
sales projections are included here in the following table.


Sales Forecast

Sales 1995 1996 1997
__________________________________________________________________
Retainer Consulting $200,000 $250,000 $325,000
Project Consulting $270,000 $325,000 $350,000
Market Research $122,000 $150,000 $200,000
Strategic Reports $0 $50,000 $125,000
Other $0 $0 $0
Total Sales $592,000 $775,000 $1,000,000

Cost of sales 1995 1996 1997
__________________________________________________________________
Retainer Consulting $30,000 $20,000 $30,000
Project Consulting $45,000 $25,000 $31,000
Market Research $84,000 $45,000 $50,000
Strategic Reports $0 $20,000 $40,000
Other $0 $0 $0
Total Cost of Sales $159,000 $110,000 $151,000




5. 3 Strategic Alliances



At this writing strategic alliances with Smith and Jones are possibilities,
given the content of existing discussions. Given the background of
prospective partners, we might also be talking to European companies
including Siemens and Olivetti and others, and to United States companies
related to Apple Computer. In Latin America we would be looking at the key
local high-technology vendors, beginning with Printaform.




6. 0 Management Summary



The initial management team depends on the founders themselves, with little
back-up. As we grow we will take on additional consulting help, plus graphic/
editorial, sales, and marketing.



6. 1 Organizational Structure



Progressive should be managed by working partners, in a structure taken
mainly from Smith Partners. In the beginning we assume 3-5 partners:


•Ralph Sampson

•At least one, probably two partners from Smith and Jones



•One strong European partner, based in Paris.



The organization has to be very flat in the beginning, with each of the
founders reponsible for his or her own work and management.


•One other strong partner





6. 2 Management Team



The Progressive business requires a very high level of international
experience and expertise, which means that it will not be easily leveragable
in the common consulting company mode in which partners run the business and
make sales, while associates fulfill. Partners will necessarily be involved
in the fulfillment of the core business proposition, providing the expertise
to the clients.



The initial personnel plan is still tentative. It should involve 3-5
partners, 1-3 consultants, 1 strong editorial/graphic person with good staff
support, 1 strong marketing person, an office manager, and a secretary.
Later we add more partners, consultants and and sales staff.

Founders' resumes are included as an additional attachment to this plan.




6. 3 Personnel Plan



The detailed monthly personnel plan for the first year is included in the
appendices. The annual personal estimates are included here as Table 5.


Personnel Plan
1995 1996 1997
_________________________________________________________________

Partners $144,000 $175,000 $200,000
Consultants $0 $50,000 $63,000
Editorial/graphic $18,000 $22,000 $26,000
VP Marketing $20,000 $50,000 $55,000
Sales people $0 $30,000 $33,000
Office Manager $7,500 $30,000 $33,000
Secretarial $5,250 $20,000 $22,000
Other $0 $0 $0
Subtotal $194,750 $377,000 $432,000




7. 0 Financial Plan



We will maintain a conservative financial strategy, based on developing
capital for future growth.




7. 1 Important Assumptions



The table in this section summarizes key financial assumptions, including
45-day average collection days, sales entirely on invoice basis, expenses
mainly on net 30 basis, 35 days on average for payment of invoices, and
present-day interest rates.



General Assumptions

1995 1996 1997
_


Collection days 43 45 45
Payment Days 35 35 35


1995 1996 1997
_
Short Term Interest Rate 8.00% 8.00% 8.00%
Long Term Interest Rate 10.00% 10.00% 10.00%
Payment days 35 35 35
Tax Rate Percent 0.00% 0.00% 0.00%
Expenses in cash% 25.00% 25.00% 25.00%
Sales on credit 100.00% 100.00% 100.00%
Personnel Burden % 14.00% 14.00% 14.00%




7.2 Key Financial Indicators



The chart summarizes key financial benchmarks. Unfortunately, as we increase
sales we will have to show a decline in performance of collection days and
gross margin.



7. 3 Break-even Analysis



Break Even Analysis:
___________________________________________________
Monthly Units Break-even 125,000
Monthly Sales Break-even $125,000

Assumptions:
Average Unit Sale $1.00
Average Per-Unit Cost $0.20
Fixed Cost $100,000





7. 4 Projected Profit and Loss



The detailed monthly pro-forma income statement for the first year is
included in the appendices. The annual estimates are included here.


Pro-forma Income Statement
1995 1996 1997
_
Sales $592,000 $775,000 $1,000,000
Cost of Sales $159,000 $110,000 $151,000
Other $1,000 $0 $0
_________________________________________________

Total Cost of Sales $160,000 $110,000 $151,000
Gross margin $432,000 $665,000 $849,000
Gross margin percent 72.97% 85.81% 84.90%
Operating expenses:
Advertising/Promotion 10.00% $36,000 $40,000 $44,000
Public Relations 10.00% $30,000 $30,000 $33,000
Travel 10.00% $90,000 $60,000 $110,000
Miscellaneous 10.00% $6,000 $7,000 $8,000
Payroll expense $194,750 $377,000 $432,000
Leased Equipment $6,000 $7,000 $7,000
Utilities 20% $12,000 $14,000 $17,000
Insurance 20% $3,600 $2,000 $2,000
Depreciation $0 $0 $0
Rent 25% $18,000 $23,000 $29,000
Payroll Burden $0 $0 $0
Contract/Consultants $0 $0 $0
Other $0 $0 $0
_________________________________________________


Total Operating Expenses $396,350 $560,000 $682,000
Profit Before Interest and Taxes$35,650 $105,000 $167,000
Interest Expense ST $3,600 $12,800 $12,800
Interest Expense LT $5,000 $5,000 $5,000
Taxes Incurred $0 $0 $0
Net Profit $27,050 $87,200 $149,200
Net Profit/Sales 4.57% 11.25% 14.92%




7. 5 Projected Cash Flow



Cash flow projections are critical to our success. The monthly cash flow is
shown in the illustration, with one bar representing the cash flow per month
and the other the monthly balance. The annual cash flow figures are included
here. Detailed monthly numbers are included in the appendices.




Pro-Forma Cash Flow
1995 1996 1997
____________
Net Profit: $27,050 $87,200 $149,200
Plus:
Depreciation $0 $0 $0
Change in Accounts Payable $49,413 $16,799 $13,764
Current Borrowing (repayment) $60,000 $100,000 $0
Increase (decrease) Other Liabilities $0 $0 $0
Long-term Borrowing (repayment) $50,000 $0 $0
Capital Input $0 $0 $0
Subtotal $186,463 $203,999 $162,964
Less: 1905 1905 1905
Change in Accounts Receivable $94,000 $5,750 $50,500
Change in Inventory $0 $0 $0
Change in Other ST Assets $0 $0 $0
Capital Expenditure $0 $0 $0
Dividends $0 $0 $0
Subtotal $94,000 $5,750 $50,500
Net Cash Flow $92,463 $198,249 $112,464
Cash balance $117,463 $315,712 $428,176





7. 6 Projected Balance Sheet



The balance sheet shows healthy growth of net worth, and strong financial
position. The monthly estimates are included in the appendices.


Pro-forma Balance Sheet
1995 1996 1997
____________
Short-term Assets Starting Balances
Cash $25,000 $117,463 $315,712 $428,176
Accounts receivable $0 $94,000 $99,750 $150,250
Inventory $0 $0 $0 $0
Other Short-term Assets $7,000 $7,000 $7,000 $7,000
Total Short-term Assets $32,000 $218,463 $422,462 $585,426
Long-term Assets
Capital Assets $0 $0 $0 $0
Accumulated Depreciation$0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0
_________________________________________________
Total Assets $32,000 $218,463 $422,462 $585,426


Debt and Equity
1995 1996 1997
____________
Accounts Payable $5,000 $54,413 $71,212 $84,976
Short-term Notes $0 $60,000 $160,000 $160,000
Other ST Liabilities $0 $0 $0 $0
Subtotal Short-term Liabilities
$5,000 $114,413 $231,212 $244,976

Long-term Liabilities $0 $50,000 $50,000 $50,000
Total Liabilities $5,000 $164,413 $281,212 $294,976

Paid in Capital $50,000 $50,000 $50,000 $50,000
Retained Earnings ($23,000) ($23,000) $4,050 $91,250
Earnings $0 $27,050 $87,200 $149,200
Total Equity $27,000 $54,050 $141,250 $290,450
Total Debt and Equity $32,000 $218,463 $422,462 $585,426
Net Worth $27,000 $54,050 $141,250 $290,450




7. 7 Business Ratios



Progressive Consulting will be formed as a consulting company specializing in
marketing of high-technology products in international markets. Its founders
are former marketers of consulting services, personal computers, and market
research, all in international markets. They are founding Progressive to
formalize the consulting services they offer.


Ratio Analysis

Profitability Ratios: 1995 1996 1997
____________________________________________________________________
Gross margin 72.97% 85.81% 84.90%
Net profit margin 4.57% 11.25% 14.92%
Return on Assets 12.38% 20.64% 25.49%
Return on Equity 50.05% 61.73% 51.37%

Activity Ratios:
AR Turnover 6.30 7.77 6.66
Collection days 29 45 45
Inventory Turnover 0.00 0.00 0.00
Accts payable turnover 7.67 7.06 7.35
Total asset turnover 2.71 1.83 1.71

Debt Ratios: 1995 1996 1997
____________________________________________________________________
Debt to net Worth 3.04 1.99 1.02
Short-term Debt to Liab. 0.70 0.82 0.83

Liquidity Ratios:
Current Ratio 1.91 1.83 2.39
Quick Ratio 1.91 1.83 2.39
Net Working Capital $104,050 $191,250 $340,450
Interest Coverage 4.15 5.90 9.38

Additional Ratios: 1995 1996 1997
____________________________________________________________________
Asset