business plan writing guidemodule school

8/13/2019 Business Plan Writing Guidemodule School

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PolyU Innovation & Entrepreneurship

Student Challenge

A Global Competition

Business Plan Writing Guide Module

Secondary School Students Version

Copyright Di & Cooke Company Limited

Disclaimer:

This content is provided and written by Di & Cooke Company Limited. We are

pleased to provide permission to the Hong Kong Polytechnic University for the

use of this material on both of its intranet and internet to support the learning

and development of all the challengers who have entered the 2009 PolyU

Innovation and Entrepreneurship Student Challenge

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Chapter 1 Introduction What is a Business Plan?

The basic role of a business plan is to produce an outline that evaluates all

aspects of the economic feasibility of the business project including an

explanation and analysis of the business prospects.

Functions of a Business Plan:

It can focus on your business objective.

It can be used as a selling tool to seek for finance.

It can show weaknesses in the planning process.

It can be used to get opinions and advice from experts about your business.

In order to write a successful business plan, the following steps are important to

notice before you start:

Write out the prime business concept.

Collect all the necessary information on the feasibility and the specifics of

your business concept.

Focus and perfect your concept based on the data you have collected.

Draft the particulars of your business. Put your plan into a convincing form.

The course starting from the next chapter will help you create a business plan,

which is divided into seven key elements through chapter two to chapter eight,

including descriptions, guidelines for creation and tips for avoiding common

mistakes, together with a business plan sample and financial statements formats

in the appendices.

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Chapter 2 Introductory Elements

The first part of your business plan includes the introductory elements, which is

the cover page, executive summary, and table of contents. It gives first

impression to your readers. In such case, the introductory elements, especially

the executive summary, decide whether your readers will read the rest of your

plan or not. Furthermore, the table of contents indicates your organization.

Therefore, all of your introductory elements must be of good quality.

A) Cover Page

The cover page should be a simple page that contains the project name and

the presenting teams name. Dont forget to write the words Business Plan

on the page.

B) Executive Summary

The executive summary is an introduction to your project. Most readers will

go through this section first. Investors will read it first to get a picture of

your project and to assess whether you are professional or not. Also, they

will test the feasibility of your business through reading this section.

As the executive summary is the most important part in your business plan,

prepare it when you have finished the whole plan. When you write on other

sections of your plan, write a few sentences in summary to put into this

section. The executive summary should be kept in short, to the point and

interesting, and should consist of the followings in brief:

A description of your company, including your products or services

Your mission statement

Your businesss management team

The market and your target customers

Marketing and sales strategy

Financial plans

The executive summary will end with a summary statement, usually a

persuasive sentence, which are designed to convince the readers that your

business is a winner.

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It is very important to know that the executive summary is the first thing all

readers will examine. If your executive summary is written badly, then it

will be the last thing these people will read.

C) Table of Contents

The purpose of the table of contents is to provide readers a quick and easy

reference to find different sections of the plan. Number all pages of your

business plan. Then, the table of contents should include page numbers.

After you have finished your plan and numbered your pages, go back to the

table of contents and fill in the page numbers. Make sure you have created

headings for all major sections and subsections.

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overcome these risks.

B) Company Summary

The purpose of this section is to give the readers a clear point of view about

your company. Start with a mission statement on who do you want to sell

your product or service to. Then write more on the technical points of your

company. Keep your writing in a story telling form to keep it interesting.

Good points for discussion are:

What kind of role is the company playing? Wholesaler? Retailer?

Manufacturer? Service Provider?

What is the legal structure for the business? Sole proprietorship?Corporation? Partnership?

Who are the companys principal owners and what experience do they

bring to benefit the company?

What market needs will you meet? Who will you sell to? How will

your products or services be sold?

What kind of support systems will be used? Customer service?

Advertising? Promotion?

Overall, this section of your business plan should give the readers a better

idea of what your company is about. Again, keep it brief and avoid

unrelated personal information.

C) Products or Services

In this section, provide in details of each of your products or services.

Describe who are the end users. Highlight the special features or functions

of your products.

Here, you have to emphasize your USP, Unique Selling Point. This is

very important to investors. Without a Unique Selling Point, your products

or services will not be interesting and you will not be able to get people to

buy them.

Examples of USP for several different products:

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Your pricing strategy shows how you will make a profit when facing

competition. When calculating the price, spot out fixed costs and variable

costs. Find out a breakeven point, that is, how many products do you have

to sell in order to cover your fixed costs. These can be derived from the

financial section later in the plan. You may have to consider constructing

your financial section before completing this topic.

Tell the readers whether your price will be lower or higher than your

competitors. Explain why you can maintain your market share in the

competition. For example, a souvenir shop sets higher prices since it thinks

its products are luxury items. A caf in an expensive location can sell more

expansive coffee than other restaurants.

However, investors will not believe some business plans if the products or

services are higher in quality and lower in price than those of their

competitors. They think this is simply not real. If your product really has a

better quality, it is more likely that you will sell in a higher price.

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Chapter 4 Market Analysis

This section is to provide facts to persuade readers that your business has enough

customers in an industry. It is one of the most important parts of the plan. Before

writing on this section, you have to carry out a lot of research work. Many

information like manufacturing and marketing costs, and the amount of capital

that you need, will be based on your sales estimation here.

A) Customer Analysis

This is about the characteristics of your customers. In here you will describe

whether your customers are sensitive to price or quality of the product.

Before analyzing your customers, research work is necessary. Use the

following questions to start with your analysis:

How old are they?

What gender are they?

Where do they live?

What is their family structure? (Married? Number of kids?)

How much do they earn? What do they do for a living?

What is their lifestyle like?

What will they do during their spare time?

When writing on this section, dont just simply put in all people who want

to buy cars or anyone who needs a mobile phone. You may also need to

include details of what geographic region you plan to sell in. Is your market

national, regional, international, or local?

B) Market Size and Trends

This section describes the total market size and the part of the market your

business will target. You may use numbers as well as trend information to

show its potential growth.

Follow these questions to find out the size of the market:

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What percentage in the market has already bought on a similar product

to yours before?

How much of your product or service might your target market buy?

(In terms of sales amount and/or in units of products sold.)

What proportion of your target market will buy again?

How might your target market be affected by economic events (e.g.

during stock market crash)?

How might your target market be affected by government policies (e.g.

changes in tax rates)?

Once you have all this information, you can start writing on this section in

short paragraphs. Describe whether these events will have a positive or

negative impact on your business. If you have several target markets for

different products, you will have to divide them into sub-sections. Again,

remember to quote your sources of information within the section.

C) Competition

No one can avoid competition. Presenting your business with competition

proves that you understand your market. New invented technology can

force another company to fall down in a nights time. Because of thisuncertainty, it is important to know your competitors well.

Questions like these can help you identify your competitors:

Who are your nearest direct competitors?

Who are your indirect competitors (e.g. substitute products)?

How are their businesses? Stable? Increasing? Decreasing?

What are their strong point and weak point?

How are their products different from yours?

Who is the price leader in the market?

Who is the quality leader?

Who has the largest market share?

Furthermore, pay attention to your competitors sales and promotion

strategies. When did they reduce prices for sales? Using this technique can

help you understand your competitors better on how they operate their

businesses.

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When writing on this section, begin with a short discussion for each of your

main competitors. If possible, include their annual sales and their market

shares. Explain why you can obtain a share from their business.

Even if your product or service is truly innovative, you need to look at what

else your customers could buy instead (substitute products). Remember, the

first personal computer competed with calculators and typewriters; the first

calculator competed with abacuses.

Use a table to show your analysis so that readers can read easily. Columns

are the names of your competitors and rows are their market share, annual

sales (if available), strengths, weaknesses, and comments, etc.

D) Sales Forecast

The sales forecast is based on the estimation of the size of your market and

your market share. This should include sales in units and dollars for the first

five years. Break down the first year into months, and the second year into

quarters, if applicable. These numbers are very important to the financial

sections later in the plan.

For projecting a sales forecast, you may have to find out answers like:

How many customers will buy the same kind of product as yours?

How much will the customer spend on these items annually?

What percentage of their spending will you get, comparing to

competitors?

Generate the forecast into three different figures: pessimistic, optimistic,

and realistic. Then put the figures in by months, as depending on your

business, there could be big difference by seasons. In fact, a good method to

do forecasting is to obtain the average sale per customer from trade

associations.

Once you have made assumptions on the inflation rates and your annual

growth rates, you will be able to forecast the sales from the second year to

the fifth year by multiplying your first year sales with these factors. Besides

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Chapter 5 Start-up Summary

This section will describe the start-up plan for your products development. It

gives details of how your product is being developed and what resources are

required to get it produced. You should include details of development costs,

location and labor requirements.

A) Start-up Process

Before launching your product into the market, your product has to be

developed and produced. Demonstrate with a schedule showing when this

work will be completed. Include time necessary for obtaining a patent or a

trademark where applicable.

In detail, also project a timeline you will need to set up factories and offices.

This may include renovations, purchasing necessary machinery and

furniture, and other important stages in this development cycle. Then

describe in small paragraphs for the whole development process.

B) Start-up Cost

For every item described in (A) above, construct a simple budget table and

put in numbers for the amount of capital that will be required for these

expenses. This budget may include rent (if factory and/or office are hired),

insurance, labor, materials, patents, and the cost of professionals such as

accountants and lawyers, etc. It should also include the cost of the design of

sample products as well as the expense to produce the samples.

C) Operating Requirements

In day-to-day operations, you may have to explain about the industrys

standards and regulations for your product. Then describe which industry

organizations or associations you will prepare to join, and what you should

do to fulfill with the laws and regulations in your industry.

Secondly, give details of your suppliers and their prices, terms, and

conditions. Describe if there are any other arrangements you have to make

if these suppliers are not delivering the material. Also explain the quality

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control system that you are going to set up on your suppliers material and

your own finished products.

The aim for writing this section of the business plan is to show your

understanding of the manufacturing and operating process of your business.

Therefore you should carefully plan every part of the operation on a

step-to-step basis.

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Chapter 6 Marketing Plan

This section explains how you are going to get your customers to buy your

products and/or services. Strong marketing plans can show readers that you have

good ideas for promoting and selling your products.

A) Marketing Strategy

The marketing strategy defines what customers you want to sell to and how

you are going to approach them. This includes the method of educating

them about your product. Refer again to your Unique Selling Point and

explain that you will get your customers to notice about this.

Describe if you have any new sales technique, such as online sales ordering

system through the Internet while your competitors are still using ordinary

retail methods.

Remember, the theme of your marketing strategy is the message you want

your customers to receive about your products or services. The marketing

plan is all about sending this important message to your customers. So you

aim here is to explain to readers on how you can emphasize your sellingpoint to your customers.

B) Distribution Plan

In this section you will describe how you get the products to the end users.

Explain what kind of salespersons and how many of them you will employ.

Are they on commission basis? Are they product promoters? Are they

telemarketing personnel? Describe how helpful do you expect from these

salespeople.

You may also expand on the management system of your sales team such as

whether a sales training program is needed, any incentives they will get to

encourage their work, as well as any reviewing method for their results.

If you are use another party such as sales agents or a sole distributor to do

the sales for you, describe the benefits of using these parties and the special

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knowledge that they can bring to your business.

C) Advertising and Promotion

This section describes how youre going to deliver the message of your

Unique Selling Point to your target customers. This involves both

advertising and sales promotion plans.

For advertising, describe which media will be the most effective in reaching

your target market and how much you have prepared for your annual

advertising budget on each medium such as the Internet, television, radio,

newspapers, magazines, subway banners, direct mails, etc. Also, put down

how much sales you will expect to make from this advertising.

As for sales promotion, you may want to include marketing materials into

your plan, such as free samples, coupons, displays, brochures and pamphlets,

etc. Any publicity activities like press releases, product launches and trade

shows can also be introduced in this area.

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Chapter 7 The Management Plan

The Management Plan describes your management team and staff and how your

business is structured. Readers will expect to see not only who is in your

management team but also how their skills will input into the business.

A) Ownership Structure

This section describes the legal structure of your business. You have to

explain whether your business is a sole proprietorship, a partnership or a

limited liability company. For partnership and limited liability company,

you have to show who will hold what percentage of ownership in the entity.

B) Internal Management Team

The Internal Management Team section will describe the key positions

required to manage the core business within the organization, identify who

are responsible for these positions, and explain their special skills. These

people may include the board of directors, the chief executive officer, the

chief financial officer, and controllers for different departments.

Most businesses have different departments to carry out different functions

such as sales, marketing, administration, production and accounting, etc.

Some companies may need extra departments such as research and

development as well as human resources. In fact, some key management

people, especially directors, may fill up more than one of these roles as

department heads. In this section therefore, you will have to identify these

key people and explain which role each of them will fill. Sometimes you

may wish to present this by using an organizational chart. You can also

attach complete resumes for each member of the management team as

appendices to your business plan.

Furthermore, You can talk about how much salaries your management team

will be paid. Do they have any profit sharing or any other benefits? Indicate

if there is any work contract the business may offer to any of these key

members.

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C) External Management Team

Apart from your internal management team, your business may use external

management resources. These resources somehow act as your internal

management teams backup. Usually there are two main types of external

resources you will use, which are Professional Services and an Advisory

Board.

The Professional Services represent external expertise that most businesses

will use such as accountants, bankers, lawyers, IT consultants, business

consultants, management trainers, etc.

An Advisory Board is like a brain to the management. The members of this

board will provide your organization advice to run the business effectively.

They may be some senior or retired executives or entrepreneurs who have

run this type of business for years and are only helping your company in

part-time or ad-hoc basis. Their function is simply to provide skills that

your internal management team doesnt have. List out their names, titles

and experience, and explain how each advisor will input to assist you to run

a profitable business.

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Chapter 8 Financial Plan

This is the last part of your business plan. The financial plan is the section that

determines whether or not your business is feasible, and is an important element

to show whether your business will attract any investor.

The financial plan will contain three financial statements: the cash flow

statement, the profit and loss statement and the balance sheet. You will also

indicate in this section that you have considered the risks related to your business

and the funding capital that you require.

Before creating the three financial statements, mention about the risks that your

organization will face during the course of your business as an opening scene.

A) Risks

All businesses contain their own risks. The way to determine these risks in

your plan shows that you have carried out a lot of market research work and

this will make your plan look real and attractive to the readers.

Things listed below are possible risks that a business would face typically:

A large cut or promotion by a competitor

An important customer leaves you

The economy goes bad

Your suppliers increase their prices

Your suppliers fail to deliver on time

A better product launched by your competitor

Lack of qualified labor

Put in all assumptions about the risks that you may face during the course of

business. List out the actions that you are prepared to take in order to handle

these risks. This will increase your credibility in front of the readers since

you have shown that you are aware to these issues and be able to treat them.

B) Profit and Loss Statement

The Profit and Loss Statement is the very first statement you have to create

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out of the three financial statements in the Financial Plan section. This

statement records revenues, expenses and cost of goods sold. The result is

how much profit or loss your business will make at the end of the

accounting period.

First, input your revenue from which you have done in the Sales Forecast

section earlier in the business plan. If you are in a manufacturing business,

the revenue will be called sales, and cost of goods sold will need to be

calculated. Next, you will need to gather the financial data on all expenses,

including your start-up cost and your operating expenses. When you

subtract the revenues by the expenses you will get the gross profit before

taxation. Net profit will be the result after subtracting taxation and/or

dividends from the gross profit.

Appendix 1 is a worksheet of a standard Profit and Loss Statement

structure.

C) Cash Flow Statement

A cash flow statement shows how much cash will come into the business

and how much cash will be used during the financial period. In anothersense, it shows readers how much cash you will need and when you will

need it during the course of business.

Generally, only cash items will be included in the correct accounting period.

For example, Sales made last month in credit (account receivables) may be

collected this month and the statement will only record an inflow for such

when it is received.

The cash flow projection is an important tool for cash flow management,

letting you know when you might want to borrow some short-term loans as

well as to look for long-term capital injections.

There are three elements included in the cash flow statement: the cash

revenues, the cash disbursements, and the reconciliation of cash revenues to

cash disbursements. The reconciled balance will be exactly equal to the cash

balance recorded in the balance sheet at the end of the financial period.

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See Appendix 2for a worksheet of the Cash Flow Statement Outline.

D) Balance Sheet

The balance sheet is created only once a year to determine the net worth of

a business. It is the last part of the three statements in the Financial Plan

section. The balance sheet represents the businesss financial position at a

particular point of time. It is divided into three main categories: the assets,

the liabilities, and owners equity. Assets are tangible and intangible objects

that are in the ownership of the company. Liabilities are debts owed to

creditors and suppliers. Owners equity is the net difference when the total

liabilities are subtracted from the total assets.

Once you have your balance sheet completed, you can write a brief analysis

for each of the three financial statements. Keep them concise and cover the

highlights. The financial statements themselves can be either displayed in

this section or in the appendices.

Appendix 3is a worksheet of a Balance Sheet outline.

E) Funding Request and Return

This comes to the last part of the business plan. In this section you will

clearly state the amount of funding for the investment you will need, and

how do want these funds to come in as, e.g. loans or capital. Indicate when

the money is needed in different phases, and tell the investors what they will

receive in return for their capital.

Lastly, suggest an attractive exit strategy that you will apply, that is, how

investors will get their money back. Often, it can be achieved either by a

cash-out option in five years or an IPO (Initial Public Offer) plan to get it

listed in the stock exchange.

As you can see, writing a business planning is not easy at all. However, by following

these important steps provided from all of the chapters above, you will ensure your

business has a fine chance at seeking funds from investors and success in the future.


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Appendix : Profit and Loss StatementInsert your company's figures into this template to prepare an income statement for your business.

Page 1

January February March April May June July August September October November December Year Two 1ST QTR 2ND QTR 3RD QTR 4TH QTR Year Three Year Four Year Five

VENUE

VENUE: Product Sales

oduct 1

oduct 2

oduct 3

TAL REVENUE: Product Sales

VENUE: Miscellaneous

nk Interest

TAL REVENUE: MISCELLANEOUS

TAL REVENUE

ST OF SALES

RECT COSTS

rect Material

rect Laborctory Overhead

TAL DIRECT COSTS

NERAL AND ADMINISTRATION

counting and Legal Fees

vertising and Promotion

d Debts

nk Charges

pr eciation and Amortization

surance

terest

fice Rent

laries (Owner or Directors)

laries (Staff)

elephone

ilities

TAL GENERAL AND ADMINISTRATION

TAL EXPENSES

OSS PROFIT BEFORE TAX

OFITS TAX

T PROFIT


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Appendix : Cash Flow StatementInsert your company's figures into this template to prepare a cash flow statement for your business plan.

Page 1

January February March April May June July August September October November December Year Two 1ST QTR 2ND QTR 3RD QTR 4TH QTR Year Three Year Four Year Five

SH REVENUES

enue from Product Sales

enue from Service Sales

TAL CASH REVENUES

SH DISBURSEMENTS

h Payments to Trade Suppliers

nagement Draws

aries and Wages

motion Expense Paid

fessional Fees Paid

t/Mortgage Payments

urance Paid

ecommunications Payments

ties Payments

TAL CASH DISBURSEMENTS

CONCILIATION OF CASH FLOW

ENING CASH BALANCE

D: TOTAL CASH REVENUES

DUCT: TOTAL CASH DISBURSEMENTS

OSING CASH BALANCE


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Appendix : Balance SheetInsert your company's financials here to create a balance sheet for your business plan.

Page 1

Year One Year Two Year Three Year Four Year Five

sets

Long-Term Assets

Capital/plant

Investment

Miscellaneous assets

Total long-term assets

Current Assets

Cash

Accounts receivable

Inventory

Total current assets

Total Assets

bilities

Current LiabilitiesAccounts payable

Accrued expenses

Taxes payable

Total current liabilities

Long-Term liabilities

Bonds payable

Mortage payable

Notes payable

Total long-term liabilities

Total Liabilities

ner's Equity

Share Capital (For Ltd Co)

Retained Earnings

Total Owner's Equity


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1

CYBER CAF BUSINESS PLAN

JEDI CAF


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2

TABLE OF CONTENT

1. Executive Summary 3

2. Company Summary 5

3. Services 7

4. Market Analysis 8

5. Marketing Strategy 11

6. Management Summary 13

7. Financial Plan 14


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1. Executive Summary

Jedi Caf, a cyber caf located in Happy Valley, Hong Kong Island, offers a perfect spot

for the public in social gathering and leisure. It provides customers free access to the

Internet as well as an area for to meet together in a casual environment under aneconomical manner.

The business intends to obtain finance from external equity in the amount of USD61,538,

for which the application will be for commencing work on shop renovation, equipment

purchases, and as operating cash flow. Preliminary capital injection has already been

secured by the initial owners, Obewon Kinobi and Alex Skywalker, in the amounts of

USD24,359 and USD15,385 respectively.

Jedi Caf will be incorporated as a limited liability company. The two initial owners will be

the shareholders and their personal liabilities will be subject to a ceiling at the amount of

their respective investments.

The finance acquired through this business proposal will allow Jedi Caf to successfully

open and operate as a cyber caf. A comfortable and innovative environment is provided

to the customers with a casual atmosphere. Operations in year one will generate Jedi

Caf a regular customer base that will allow it to be self-maintained in year two.

1.1 Objectives

Jedi Cafs objectives for the first year of operation include:

The creation of an exclusive, stylish, innovative environment that will

distinguish Jedi Caf from other coffee shops.

The creation of a comfortable and casual environment that will bring people

with different interests and backgrounds together for socialization.

High-quality coffee and bakeries at a reasonable price.

Free access to online services.

1.2 Mission

As Internet has become more popular and grown at an expeditious pace, easy

access has become a part of life. Jedi Caf provides the public free access to the

Internet, high-quality food and beverages in a comfortable environment. People

from different backgrounds will come to enjoy the exclusive, stylish, and innovative

environment that Jedi Caf offers.

1.3 Risks

The risks involved with Jedi Cafsbusiness are:


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Insufficient demand for the services provided by Jedi Caf in Happy Valley.

The popularity of the Internet stops to grow.

The opening of new cafs in the same area which offers the exact services

that Jedi Caf provides.


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2. Company Summary

Jedi Caf, soon to be opened at Shing Wo Road in Happy Valley, Hong Kong Island, will

provide the public free access to the Internet and a special and innovative environment

for enjoying top quality coffee and bakeries.

Individuals of all ages and backgrounds will find Jedi Caf appealing. The staffs of Jedi

Caf provide not only top quality service but also helpful instructions to customers in

computer usage. This educational aspect will attract elderly customers and youngsters

who do not own computers at home. The easy access location also provides residents in

the same area convenience to their gourmet and online needs.

2.1 Company Ownership

Jedi Caf will be privately owned by Obewon Kinobi, the founder and CEO, and

Alex Skywalker, a second shareholder.

2.2 Start-up Summary

Jedi Cafs start-up costs will cover renovation, furniture, computers, coffee

machines and cooking equipment, and running capital to cover expenses in the first

year.

The equipment provided to Jedi Cafs customers with high-speed connection to

the Internet forms a large portion of the start-up costs. These costs will include

computers, two laser printers and a scanner.

Besides, the start-up costs will comprise the coffee machines such as one espresso

machine, one automatic coffee grinder, and other additional equipment. The shop

will also require funds for renovation and modification. Breakdown of the start-up

costs is illustrated as follows:

Start-up Costs USD

Legal Fee 641

Stationeries 641

Tableware 641

Consultants 2,564

Insurance 897

Rent 1,853

Coffee Machines 13,718

Bean Grinder 1,019

Computer Systems (x11), Software, Printer, Scanner 31,167

Internet Lines 1,077


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Fixtures/Renovation 25,641

Total Start-up Costs 79,859

Start-up Assets

Running Cash 30,769

Start-up Inventory 2,564

Total Assets 33,333

Total Requirements 113,192

2.3 Company Location

A site has been chosen in Shing Wo Road in Happy Valley for the following

reasons:

Nearness to the close-by residents.

Proximity to stylish, upscale restaurants in the same area.

High visibility.


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3. Services

Jedi Caf will provide free access to the Internet and computer services such as printing,

scanning to customers. It will also provide customers with a unique and innovative

environment for enjoying top quality coffee and bakeries.

3.1 Service Description

Jedi Caf will provide its customers free access to the Internet and common

computer software and hardware. Some of the Internet and computing services

available to Jedi Cafs customers are listed below:

Internet browsers.

Laser color printing, copying and scanning.

Popular software applications.

Also, top quality food and beverages, and a comfortable environment will provide

Jedi Cafs customers with a second home, a place to enjoy the benefits of

computing in a comfortable environment.

3.2 Competitive Comparison

Jedi Caf will be the first cyber caf in Happy Valley. It will differentiate itself from

other ordinary coffee shops in the same area by providing its customers with free

Internet and computing services.

3.3 Technology

Jedi Caf will invest in high-speed computers to provide its customers with a fast

and efficient connection to the Internet. The computers will be reliable and fun to

work with. Jedi Caf will continue to upgrade and modify the systems to stay with

current technologies.


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4. Market Analysis

Jedi Caf is facing the opportunity of being the pioneer in the Happy Valley cyber caf

market. The consistent popularity of coffee, combined with the growing interest in the

Internet, has been proven to be a winning concept in other markets and will produce thesame results in Happy Valley.

4.1 Market Segmentation

Jedi Cafs customers can be divided into two groups. The first group is familiar

with the Internet and desires a progressive and inviting atmosphere where they can

get out of their offices or bedrooms and enjoy a great cup of coffee. The second

group is not familiar with the Internet, yet, and is just waiting for the right opportunity

to enter the online community. Jedi Cafs target market falls anywhere between

the ages of 15 and 70. This extremely wide range of ages is due to the fact that

both coffee and the Internet appeal to a variety of people. In addition to these two

broad categories, Jedi Cafs target market can be divided into more specific

market segments. The majority of these individuals are students and business

people. See the Market Analysis table below for more specifics.

Market Analysis

2009 2010 2011 2012 2013

Potential Customers Growth

University Students 4% 1,923 2,000 2,080 2,163 2,250

Office Workers 3% 3,205 3,301 3,400 3,502 3,607

Seniors 5% 2,372 2,490 2,615 2,746 2,883

Teenagers 2% 1,603 1,635 1,667 1,701 1,735

Others 0% 3,205 3,205 3,206 3,205 3,205

Total 2.68% 12,308 12,631 12,968 13,317 13,680

4.2 Target Market Segment Strategy

Jedi Caf intends to cater to people who want a guided tour on their first spin

around the Internet and to experienced users eager to indulge their passion for

computers in a social setting. Furthermore, Jedi Caf will be a magnet for local and

traveling professionals who desire to work or check their email messages in a

friendly atmosphere. These professionals will either use Jedi Cafs PCs, or plug

their notebooks into Internet connections.

4.2.1 Market Trends

A market survey was conducted recently with key questions asked to fifty


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potential customers in Happy Valley. Some key findings include:

40 people said they enjoyed free access to the Internet.

44 subjects use the Internet to communicate with others on a daily basis.

4.2.2 Market Needs

Factors such as current trends, addiction, and historical sales data ensure that

the high demand for coffee and Internet access will remain constant over the

next five years. Being the first cyber caf in Happy Valley, Jedi Caf will enjoy

the pioneer advantages of name recognition and customer loyalty. Initially,

Jedi Caf will hold a 100 percent share of the cyber caf market in Happy

Valley. In the next five years, competitors will enter the market. Jedi Caf has

set a goal to maintain greater than a 50 percent market share.

4.3 Service Business Analysis

The retail coffee industry in Happy Valley experienced rapid growth from the 1990s

and is now moving into the mature stage of its life cycle. Many factors contribute to

the large demand for high-quality coffee in Happy Valley. The yuppies is a main

source of demand for coffee retailers. The climate in Happy Valley is extremely

favorable to coffee consumption. Current trends in this high-spending residential

area reflect the popularity of fresh and strong coffee. Happy Valley is a haven for

coffee lovers.

The popularity of the Internet is growing exponentially. Those who are familiar with

the Internet are well aware of how fun and addictive going online can be. Those

who have not yet experienced with the Internet need a convenient, relaxed

atmosphere where they can feel comfortable learning about and utilizing the current

technologies. Jedi Caf seeks to provide its customers with affordable Internet

access in an innovative and supportive environment.

Due to intense competition, caf owners must look for ways to differentiate their

place of business from others in order to achieve and maintain a competitive

advantage. The founder of Jedi Caf realizes the need for differentiation and

strongly believes that combining a caf with complete Internet service is the key to

success. The fact that no cyber cafs are established in Happy Valley, presents

Jedi Caf with a great opportunities to enter into a profitable niche in the market.

4.3.1 Competition and Buying Patterns

The main competitors in the retail coffee segment within the same location are

StarBugs and Cathay Coffee. These businesses target a similar segment to


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Jedi Cafs (i.e. educated, upwardly-mobile students and business people).

However, Jedi Caf will offer substantial computing services to its customers

which these competitors are not providing at the moment.

4.3.2 Distributing a Service

The dual product/service nature of Jedi Cafs business faces competition on

two levels. Jedi Caf competes not only with coffee shops, but also with

Internet service providers. The good news is that Jedi Caf does not currently

face any direct competition from other cyber cafs in the Happy Valley market.

Heavy competition between coffee shops in Happy Valley creates an industry

where all firms face the same costs. There is a positive relationship between

price and quality of coffee. Some coffees retail at USD2.56/cup while other,

more exotic beans may sell for as high as USD3.85/cup. Wholesalers sell

beans to retailers at an average of a 50 percent discount. For example, a

pound of Sumatran beans wholesales for USD8.97 and retails for USD17.95.

And as in most industries, price decreases as volume increases.


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5. Marketing Strategy

Jedi Caf will position itself as a stylish coffee house and Internet service provider. It will

serve high-quality coffee and specialty beverages at competitive prices. Due to the

number of cafs in Happy Valley, it is important that Jedi Caf sets fair prices for itsproducts. Jedi Caf will use advertising as its main source of promotion. Ads placed in

food magazines will help build customer awareness. Accompanying the ad will be a

coupon for discounted coffee and nice bakeries.

5.1 Promotion Strategy

Jedi Caf will implement a pull strategy in order to build consumer awareness and

demand. Initially, Jedi Caf has budgeted USD6,410 for promotional efforts which

will include advertising with food magazines and in-house promotions such as

offering customers free drinks.

Jedi Caf realizes that in the future, when competition enters the market, additional

revenues must be allocated for promotion in order to maintain market share.

5.2 Pricing Strategy

Determining a fair market for cyber caf is more difficult because there is no direct

competition from another cyber caf in Happy Valley. Therefore, Jedi Caf has to

base its prices for coffee and specialty drinks on the retail profit analysi s providedby our supplier, Jenson Coffee, which has been in the coffee business for over 50

years and has developed a solid pricing strategy.

5.3 Sales Strategy

As a retail establishment, Jedi Caf employs people to handle sales transactions.

Computer knowledge is a prerequisite for Jedi Caf employees. If an employee

does not possess basic computer skills when they are hired, they are trained by our

full-time technician. Our full-time technician is also available for customers in need

of assistance. Jedi Cafs commitment to friendly, helpful service is one of the key

factors that distinguishes itself from other cyber cafs.

5.4 Sales Forecast

Cost of Sales: The cost of goods sold for coffee-related products was determined

by the "retail profit analysis" we obtained from Jenson Coffee. The cost of bakery

items is 20% of the selling price. The cost of Internet access is USD846 per month,

paid to PC-Net for networking fees.


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2009 2010 2011

Unit Sales

Coffee 53,844 64,990 71,490

Specialty Drinks 40,136 48,352 49,708

Baked Goods 20,420 26,342 23,180

Total Unit Sales 114,399 139,684 144,378

Unit Prices USD USD USD

Coffee 2.56 2.56 2.56

Specialty Drinks 3.21 3.21 3.21

Baked Goods 2.56 2.56 2.56

Sales USD USD USD

Coffee 137,841 166,374 183,014

Specialty Drinks 128,837 155,210 159,563

Baked Goods 52,275 67,436 59,341

Total Sales 318,953 389,020 401,918

Direct Cost of Sales USD USD USD

Coffee (based on average) 34,515 41,659 45,827

Specialty Drinks (based on average) 32,160 38,744 39,828

Baked Goods (based on average) 13,090 16,887 14,862

Subtotal Direct Cost of Sales 79,765 97,290 100,517


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6. Management Summary

Jedi Caf is owned and operated by Mr. Obewon Kinobi. The company, being small in

nature, requires a simple organizational structure. Implementation of this organizational

form calls for the owner, Mr. Kinobi, to make all of the major management decisions inaddition to monitoring all other business activities.

Personnel Plan

The staff will consist of six part-time employees working thirty hours a week at USD7.05

per hour. In addition, one full-time technician (who is more technologically oriented to

handle minor terminal repairs/inquiries) will be employed to work forty hours a week at

USD12.82 per hour. The other shareholder, Alex Skywalker, will not be included in

management decisions. This simple structure provides a great deal of flexibility and

allows communication to disperse quickly and directly. Because of these characteristics,

there are few coordination problems seen at Jedi Caf that are common within larger

organizational chains. This strategy will enable Jedi Caf to react quickly to changes in

the market.

2009 2010 2011

Total People 9 9 9

USD USD USD

Owner 30,769 33,846 37,231

Part Time 1 10,154 10,154 10,154

Part Time 2 10,154 10,154 10,154

Part Time 3 10,154 10,154 10,154

Part Time 4 10,154 10,154 10,154

Part Time 5 10,154 10,154 10,154

Part Time 6 5,077 10,154 10,154

Technician 27,860 30,646 33,710

Manager 5,128 30,769 33,845

Total Payroll 119,604 156,185 165,710


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7. Financial Plan

The following sections lay out the details of our financial plan for the next three years.

7.1 Start-up Funding

This business plan is prepared to obtain financing in the amount of USD61,538.

The supplemental financing is required to begin work on site preparation and

modifications, equipment purchases, and to cover expenses in the first year of

operations. This amount is planned to be repaid by USD15,385 each year by four

years.

Ownersinvestments has already been secured as follows:

1. USD24,359 of personal savings from owner Obewon Kinobi.

2. USD15,385 from the second shareholder, Alex Skywalker.

3. USD11,190 in the form of short-term bank loans.

USD

Start-up Expenses to Fund 79,859

Start-up Assets to Fund 33,333

Total Funding Required 113,192

Assets

Inventory 2,564

Cash Balance 30,769

Total Assets 33,333

Liabilities

Short Term Bank Loans 11,910

Funds Needed to Raise 61,539

Total Liabilities 73,449

Capital

Obewon Kinobi 24,359

Alex Skywalker 15,385

Total Planned Investment 39,744


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7.2 Projected Profit and Loss

Payroll Expense:The founder of Jedi Caf, Obewon Kinobi, will receive a salary of

USD30,769 in year one, USD33,846 in year two, and USD37,185 in year three.

Jedi Caf intends to hire six part-time employees in year one at USD7.05/hour anda full-time technician at USD12.82/hour.

Rent Expense:Jedi Caf is leasing a 400 square foot facility at USD2,564/month

for a total of 36 months. At the end of the third year, the lease is open for

negotiations and Jedi Caf may or may not re-sign the lease depending on the

demands of the lessor.

Utilities Expense: As stated in the contract, the lessor is responsible for the

payment of utilities including gas, garbage disposal, and real estate taxes. The only

utilities expenses that Jedi Caf must pay are electricity and the phone bill

generated by fifteen phone lines; thirteen will be dedicated to broadband and two

for business purposes.

Marketing Expense:Jedi Caf will allocate USD43,269 for promotional expenses

over the first year. This amount will be used for advertising in food magazines in

order to build consumer awareness.

Insurance Expense:Jedi Caf has allocated USD1,846 for insurance for the first

year. As revenue increases in the second and third year of business, Jedi Caf

intends to invest more money for additional insurance coverage.


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Projected Profit and Loss data is presented in the table below:

2009 2010 2011

USD USD USD

Sales 318,953 389,020 401,918

Direct Cost of Sales 79,765 97,290 100,517

Gross Margin 239,188 291,730 301,401

Expenses

Payroll 119,604 156,185 165,710

Marketing/Promotion 43,269 51,282 55,128

Rent 30,769 30,769 30,769

Utilities 11,692 11,692 11,692

Depreciation 14,309 14,308 14,309

Start-up Cost 8,314 0 0

Insurance 7,693 7,693 7,693

Total Operating Expenses 235,650 271,929 285,301

Profit Before Interest and Tax 3,538 19,801 16,100

Interest Expense 2,981 1,885 1,410

Taxes Incurred 100 2,708 2,226

Net Profit 457 15,208 12,464


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7.3 Projected Cash Flow

2009 2010 2011

USD USD USD

Cash Received

Cash from Operations

Cash Sales 318,953 389,020 401,918

Subtotal Cash from Operations 318,953 389,020 401,918

Additional Cash Received

Capital Investment 39,744 0 0

Short Term Bank Loan 11,910 0 0

Long Term Funding 61,538 0 0

Subtotal Cash Received 432,145 389,020 401,918

Expenditures

Expenditures from Operations 375,732 359,503 375,145

Additional Cash Spent

Repayment of Short Term Loan 11,910 0 0

Long-term Liabilities Repayment 15,385 15,385 15,385

Subtotal Cash Spent 403,027 374,888 390,530

Net Cash Flow 29,118 14,132 11,388

Cash Balance 29,118 43,250 54,638


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7.4 Projected Balance Sheet

2009 2010 2011

USD USD USD

Assets

Fixed Assets 57,236 42,927 28,619

Current Assets

Cash 29,118 43,250 54,638

Total Current Assets 29,118 43,250 54,638

Total Assets 86,354 86,177 83,257

Liabilities

Long-term Liabilities 46,154 30,769 15,385

Total Liabilities 46,154 30,769 15,385

Net Assets 40,200 55,408 67,872

ShareholdersEquity

Paid-in Capital 39,743 39,743 39,743

Retained Earnings 457 15,665 28,129

Net Worth 40,200 55,408 67,872

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