Australian Legal Funding Company Business Strategies - Example

AUSTRALIAN LEGAL FUNDING COMPANY BUSINESS PLAN Student Name Course Tutor Date Table of Contents Executive Summary 4 Chart 1: Anticipated Cash Flows 5 Objectives 5 Keys to Success 5 Company Ownership 5 TECHNICAL FEASIBILITY 6 Startup Summary 6 Location and Facilities 7 Services 7 Marketing Plan 7 MARKET FEASIBILITY 8 Summary Market Analysis 8 Market Segmentation 8 Market Needs 9 Industry Analysis 9 Competition 9 TECHNICAL FEASIBILITY 10 Summary of Strategy and Implementation 10 Competitive Edge 10 Sales Strategy 11 Sales Forecast 11 HUMAN RESOURCE FEASIBILITY 11 The Management Team 11 Personnel Plan 12 FINANCIAL FEASIBILITY 12 Financial Plan 12 Table 1: Key Assumptions 12 Projected Cash Flow 12 Projected Profit and Loss 13 Projected Balance Sheet 13 Appendices 13 Appendix A: Start-up Expenditure Worksheets 13 Appendix B: Target and Potential Number of Customers 15 Appendix C: Sales Forecast for the Next Three Years 16 Appendix D: Personnel Plan 17 Appendix E: Projected Cash Flow 17 Appendix F: Projected Profit and Loss 19 Appendix G: Projected Balance Sheet 20 References 21 Word Count: 2965 Excluding Appendices and TOC Australian Legal Funding Company Business Plan Executive Summary Australian Legal Funding Company (ALFC) strives to be the leading company in providing financial assistance to the residence of Queensland in matters to do with settling legal expenses and medical bills. Apart from just offering finances to people, ALFC would put itself forward as the leading firm in offering any form of legal aid that residents of Queensland may need. The assistance would begin with small legal firms in the city of Queensland and then later spread over to the rest of other cities in Australia. The large number of small legal firms in Queensland would offer a suitable opportunity for the company to launch its services. The formation of this company has been facilitated by the fact that many people who face legal charges in the courts of law are unable to raise the full amount required to hire the services of a legal counsel. Some who are able enough to do this find another hurdle in raising finances to settle other bills in the form of fines and bails. Such are the same challenges that come to people who have been admitted to health institutions.. ALFC will be located in Queensland and will be operating in a small office room within the city. The office room will be rented with rent payable monthly as will be agreed between the owner of the company and the owner of the room. The funds to be used for the payment of the rent will be obtained from initial startup capital provided by the owner and founder. The company expects the revenues to grow from $342,000 in the first year of operation to $421,000 in its second year of operation. In this same period, ALFC expects to obtain a gross profit of about $12,000 in the first year and this is expected to grow to $24,000 in the second year and more than double to $49,000 in the third year. The steady growth in profit is expected to continue in the subsequent year and thus the company is anticipated to break-even in the fourth year of operation. The chart below indicates the expected revenue, gross margin and the net profit for the next three years of operation: Chart 1: Anticipated Cash Flows Objectives ALFC aims to achieve the following in its first few years in operation: Become the leading institution offering financial grants to the firms and individuals in need. Effectively conduct its operations with diligence so as to attract and retain clients. Ensure a steady flow of revenue by offering the best option for those seeking to get financial aid. Keys to Success ALFC will ensure success by: i. Providing the shortest procedure required for one to secure grant from the institution. ii. Conducting extensive advertisement so as to create awareness among the clients in Queensland. iii. Developing a clear and transparent procedure in all areas of operation in order to command the confidence of its clients. iv. Hiring competent and experienced personnel to manage the running of the affairs of the company. Company Ownership ALFC is formed as a Limited Liability Company with its headquarters located in the area where it is founded, that is, Queensland. This will also serve as the head office if the company will grow to other states. This company is solely owned and the owner will double up as the overall manager of the company. Unless the owner decides to cede some of his shares in the company, he shall remain the sole owner of this company. TECHNICAL FEASIBILITY Startup Summary The expenditures that will be incurred when starting the business include: i. Consultant fees of about $3,200 paid for the purpose of getting advice on the setting up of the business. ii. Business permits and licenses will be obtained by the payment of up to $1,800 as legal fees. iii. Marketing activities expenses incurred for creating awareness among civilians amounted to $4,000. iv. Deposit amount for rent paid for the next two months amount to $8,000 v. Insurance expenses for the employees, office furniture and general liability paid in the amount of $1,000 vi. Renovation conducted on the office buildings in terms of giving it a facelift amount to $6,000 vii. Additional expenses including prepaid telephone, electricity and other utility deposits as well as stationery equipment amount to $3,000. The startup assets required are not much as the major asset is the funds required for startup purposes. The amount would be provided in the amount of $120,000 and the rest would be acquired as loan from a local bank. $32,000 would be used as salaries for the owner and employees and $25,000 would be cash reserves. These would total as the operating capital for the first three months. The total amount of the funds required for the startup and take off of the business totals to $270,000. The amount would ensure the company operations go on smoothly and no shortage would be experienced before the company can make profits in the first month. The above assumptions can be summarized as in the chart and table contained in Appendix A. Location and Facilities The company will be located on one office room in the city of Queensland. The office space is a medium size building with the capacity to hold four partitioned sections that will act as the reception, owner’s office, sales manager’s office and finance manager’s office. The office room was acquired on rental basis with rent payable every month. Agreement on rent amount will be as agreed between the owner of the building and the owner of the business. Furniture is to be installed in the offices with the reception only having a single table and two chairs, one chair for the receptionist and another for the client. The finance and sales managers’ offices will have a shelf each, for holding clients’ files for the purposes of reference. These offices will however be equipped with a desktop computer each for the storage and processing of customer information. The premise is at the proximity of a local magistrate’s court. The location enables the company to be easily noticeable from a distance by individuals accessing the court. This will ensure easy access by clients and in the long run will bring with it the ease of marketing. The manner in which the interior of the whole office is arranged gives the picture of order and professionalism. Any client accessing our offices will be assured of good customer service. Services ALFC will strive to offer its clients with the best form of financial aid that can be found in the market. The company plans to come up with more friendly terms for application and qualification for the financial aid. The institutions already operating within Queensland, lack the requisite friendly procedure to carry out this exercise. ALFC will capitalize on this weakness to build its customer base. The efficacy and urgency with which ALFC strives to offer its services will leave the other players in the market only following in our footsteps. The company will furthermore offer incentives to loyal customers in order to encourage their loyalty and cultivate a culture of reward. Marketing Plan The proximity of the company to a court of law will make it easier to reach out to clients who may need financial aid. The company will furthermore liaise with the court to help identify persons with such needs as stated. The same will be done with hospitals so as to ensure a wide outreach. The company will design a large sign board to be installed along the nearby highway to direct clients to the premises. Brochures will also be made and distributed to the masses. These brochures will be bearing information about the company’s activities and simple procedures that one will have to follow so as to get the required service.The company will also seek to hire a few sales representatives, although such a plan will only be of use once the company considers expanding. ALFC will create a website with a simple interface that any client can visit to get the information they require. The website will contain the same information as contained in the brochures. This website will serve as a marketing tool and a medium to communicate with clients who cannot at that particular time access our premises. MARKET FEASIBILITY Summary Market Analysis The need for financial assistance has always been there with the need rising with each passing day. It is projected that this trend will continue rising as the available institutions grapple to keep up with the demand. The established businesses have continued to amass income even with clients complaining of their strict criteria of offering such assistance. This company will seek to build on the gaps in the industry to build a strong and loyal customer base. This will not however be done at the expense of the customers comfort. Market Segmentation ALFC will focus the marking activities on reaching out to the less than stable legal firms which still seek to stay afloat in the legal profession. These firms must already be in practice and not those that want to use the funds to start business. The firms to be funded must also be having legal proceedings in courts of law. These legal proceedings must also be among those stipulated in the criteria formed. The out of pocket assistance will also be extended to those individuals with pending medical bills and legal fees. The funds provided must be used for the purpose stipulated and by following the laid down procedure. Proximity of the company to the magistrate court will be a very big advantage in locating the target market. The target and potential number of customers can be represented in the chart and table in Appendix B (legal firms in need of financial assistance in legal matters, individuals in need of financial assistance in legal matters and individuals in need of financial assistance in settling hospital bills) Market Needs The general trend towards transparency, honesty and ease of access are the major factors that contribute towards one seeking to do business with certain companies that offer the same services. Most clients desire those companies that have not adopted too many strict policies that will end up locking out many people or small firms that would require the services of a financial company. Industry Analysis The growth of demand for these services has grown tremendously in the recent years in Australia. The total number of individuals seeking the services of institution like ours numbered well in to thousands. Out of these, Queensland formed the area with the largest number of such people with the trend showing that the numbers are still swelling. Clients are however discouraged with the long levels of bureaucracy that they have to go through in order to get such help. Majority of them simply give up and drop their quest when the conditions become too much. There has therefore been the need to cut down on these criteria to encourage more people and firms to access the financial aid that they most require. With the access to these services even much easier, client numbers are expected to show a continued upward trend. Honesty and transparency would form the pillars on which ALFC is formed. This will help build on customer confidence. Competition Research conducted within the jurisdiction of Queensland shows that the area consist of more than eighty seven registered legal firms and companies. Out of these, sixty nine legal firms conduct their operations in small scale while the rest are fully fledged companies with operations stretched well to the other parts of Australia and beyond. ALFC would target these minor legal firms as their customers since the larger firms appear more stable and even if they were to require financial aid, their demands would appear too much to be handled by ALFC. Companies that offer direct competition to ALFC around Queensland are only five. The number is still low as this is a new concept in this area and it is yet to be exploited fully. Of the similar firms offering the services, none has terms as friendly as those offered by ALFC. Although most financial institutions like banks and insurance companies do not offer such kinds of financial aid, that is, legal financial aid and aid towards the settlement of medical bills, this sector exploitation still remain below par. This therefore creates a gap in the market that leaves a certain sector of financial provision unexploited. The major player in the sector is the Government of Australia. It seems from the trends that many people trust the services offered by the government although some smaller sector players also have a share of the market. ALFC would come with a better policy and rates to attract a modest number of clients and try to wrestle some from the government institution. We believe this will still be a tall order but with policies in place, things are expected to show up. TECHNICAL FEASIBILITY Summary of Strategy and Implementation The strategy to be applied by ALFC is to employ extensive marketing exercise to acquire new customers as we strive to keep the already acquired ones in order to create a sense of loyalty. The practice of keeping customers coming back or even referring other clients to our premises is our goal. This would be a good gesture and would give an indication that quality service is actually being offered in ALFC. Competitive Edge ALFC will offer itself as the financial company in town that has the customer’s interest at the heart of its operations. The customer service offered in our offices will serve to give our customers the most required peace of mind especially when it comes to financial matters. We believe that clients who come to seek financial aid have already gone through too much turmoil and all they need is the peace of mind. ALFC offers itself as the listening financial partner. Our criteria for qualification for the aid are not so bloated so that we can be able to bring in as many clients as possible. Sales Strategy All sales matters will be handled by the sales manager who will as well determine the number of sales persons that would be needed to carry out sales activities. The sales manager will adjust the activities of these sales persons to conform to the goals of the company. The person at the reception desk will handle new customers and those that are coming in to enquire about the services of ALFC. Further questions about the activities of the company will be dealt with by the sales manager through referral by the receptionist. Financial questions will be handled by the finance manager while more sensitive matters touching on the core of the company will be referred to the owner of the company. Be is the overall decision maker. The company will use brochures as the primary marketing media. These brochures will contain much of the activities that the company specializes in and much more information about the company. A company website will also serve as a marketing tool where clients will be kept informed on what the company is up to. In addition to these, the company will rely on the word of mouth as spread by satisfied customers. With this in mind, the customer will have to be accorded the utmost respect and their satisfaction will be the main interest of the company. Any complain brought to the attention of the company will be handled amicably and professionally. Sales Forecast The company expects an upward trend in sales activities. The proximity of the company to a legal institution will serve to predict the trends in the short term and long term as well. Sales for the next three years are as presented in the chart and tables in Appendix C. HUMAN RESOURCE FEASIBILITY The Management Team The company will in the beginning years of the business operate under the overall management of the owner. When the right time comes that the management may see the need to expand to other areas, a more professional manager will be hired on a full time basis to steer the activities of the company. The manager hired should have expansive knowledge in both legal and financial matters. He/she should also have the interest of the company at heart, and be conversant with the goals and objectives of the company. Personnel Plan The personnel plan for ALFC is as outlined in Appendix D. FINANCIAL FEASIBILITY Financial Plan ALFC will grow its revenues by capitalizing on the need for a financial entity that listens and acts on customers concerns. The major concern in the market is the strictness with which other companies offer their funds. This company will bank on this to create a more lax but yet effective measures to ensure that it attracts many customers. The funds provided by the owner and the borrowed capital will provide sufficient amount for the company to carry out its operations effectively. Table 1: Key Assumptions ASSUMPTIONS YEAR 1 YEAR 2 YEAR 3 Month 1 2 3 Current Interest Rate 12.00% 12.00% 12.00% Long term Interest Rate 12.00% 12.00% 12.00% Tax Rate 20.00% 20.00% 20.00% Other 0 0 0 Projected Cash Flow The chart and table in Appendix E shows the projected cash flow and the retained cash in the company account. Projected Profit and Loss The company expects to make profit right from the first financial year. This trend is expected to continue as can be projected in the statement in Appendix F. Projected Balance Sheet The net worth of the company is expected to increase from $270,000 in the first financial year to $492,000 in the third financial year as illustrated in Appendix G. Appendices Appendix A: Start-up Expenditure Worksheets Chart 2: Start-up Amounts Table 2: Startup Expenses STARTUP EXPENSES Legal $1,800 Utility & Other Expenses $3,000 Consultation $3,200 Marketing $4,000 Rent $8,000 Insurance & Other Liabilities $1,000 TOTAL STARTUP EXPENSES $21,000 Table 3: Start-up Assets STARTUP ASSETS Required Cash $32,000 Reserve Capital $25,000 Other Assets $0 TOTAL ASSETS $57,000 TOTAL FUNDING REQUIRED $88,000 ASSETS Cash Requirements on startup $92,000 Additional Cash Raised $0 Cash Balance on Starting Date $92,000 TOTAL ASSETS $92,000 LIABILITIES Long-term Borrowing $150,000 Accounts Payable $0 Other Current Liabilities $0 TOTAL LIABILITIES $150,000 Table 4: Start-up Capital CAPITAL Owner $120,000 Other Investors $0 Additional Investment $150,000 TOTAL INVESTMENT PLANNED $270,000 Startup Expenses $21,000 TOTAL CAPITAL $249,000 CAPITAL & LIABILITIES $150,000 Total Funds $220,000 Appendix B: Target and Potential Number of Customers Chart 3: Market Analysis Table 5: Market Analysis MARKET ANALYSIS YEAR 1 YEAR 2 YEAR 3 Potential Clients Growth CAGR Legal Firms 1% 50 56 62 1.00% Legal Assistance (individuals) 3% 400 520 620 3.00% Medical Bills (Individuals) 2% 300 400 480 2.00% Total 2% 750 976 1162 2% Appendix C: Sales Forecast for the Next Three Years Chart 4: Sales Forecast Table 6: Sales Forecast YEAR 1 YEAR 2 YEAR 3 SALES Legal Firms $420,000 $450,000 $500,000 Medical Bills (Individuals) $120,000 $150,000 $180,000 Legal Fees (individuals) $80,000 $110,000 $150,000 TOTAL SALES $620,000 $710,000 $830,000 DIRECT COST OF SALES Legal Firms $92,000 $100,000 $108,000 Medical Bills (Individual) $36,000 $50,000 $68,000 Legal Fees (Individual) $30,000 $46,000 $55,000 TOTAL COST OF SALES $158,000 $196,000 $233,000 Appendix D: Personnel Plan Table 7 PERSONNEL PLAN YEAR 1 YEAR 2 YEAR 3 Owner $40,000 $44,000 $45,000 Receptionist $15,000 $16,000 $17,000 Sales Manager $30,000 $32,000 $36,000 Finance Manager $30,000 $33,000 $36,000 TOTAL PERSONNEL 4 4 4 TOTAL PAYROLL $115,000 $125,000 $134,000 Appendix E: Projected Cash Flow Chart 5 Table 8 PROJECTED CASH FLOW YEAR 1 YEAR 2 YEAR 3 Cash Income $784,000 $800,000 $905,000 SUBTOTAL CASH INCOME $784,000 $800,000 $905,000 Additional cash Received VAT Received $0 $0 $0 New Borrowing $0 $0 $0 Other Liabilities $0 $0 $0 New Long term Liabilities $0 $0 $0 Sales of Assets $0 $0 $0 New Investment Received $0 $0 $0 SUBTOTAL CASH RECEIVED $784,000 $800,000 $905,000 Expenditures YEAR 1 YEAR 2 YEAR 3 Cash Spending $144,000 $148,000 $152,000 Bill Payments $160,000 $168,000 $170,000 SUBTOTAL SPENT $204,000 $316,000 $322,000 Additional Cash Spent VAT $0 $0 $0 Repayment on Current Borrowing $0 $6,700 $7,000 Repayment on Other Liabilities $0 $0 $0 Purchase on Long term Assets $5,000 $6,,000 $7,000 Purchase on Other Assets $0 $0 $0 SUBTOTAL CASH SPENT $209,000 $328,700 $336,000 Net Cash Flow $254,000 $260,000 $284,000 Cash Balance $284,000 $356,000 $620,000 Appendix F: Projected Profit and Loss Table 9 PROFIT AND LOSS YEAR 1 YEAR 2 YEAR 3 Sales $784,000 $800,000 $905,000 Cost of Sales $340,000 $345,000 $450,000 Other $0 $0 $0 COST OF SALES TOTAL $340,000 $345,000 $450,000 Gross Margin $444,000 $455,000 $455,000 Percentage Margin 66% 65% 66% Expenses Payroll $120,000 $125,000 $132,000 Marketing Expenses $30,000 $35,000 $38,000 Rent $24,000 $24,000 $24,000 Maintenance $3,000 $2,550 $3,500 Other Expenses $0 $0 $0 OPERATING EXPENSES $177,0000 $186,550 $197,500 PROFIT BEFORE TAX $267,000 $268,450 $257,500 Interests $3,000 $3,200 $3,500 Taxes Paid $54,000 $54,500 $35,000 Net Profit $210,000 $$210,750 $220,000 Net Profit Percentage 22% 21.75% 22% Appendix G: Projected Balance Sheet Table 10 PROJECTED BALANCE SHEET YEAR 1 YEAR 2 YEAR 3 Assets Current Assets Cash $220,000 $300,000 $415,000 Other Current Assets $0 $0 $0 TOTAL CURRENT ASSETS $220,000 $300,000 $415,000 Long term Assets $24,000 $26,000 $27,000 TOTAL LONG TERM ASSETS $24,000 $26,000 $27,000 TOTAL ASSETS $244,000 $326,000 $442,000 Current Liabilities Accounts Payable $35,200 $35,300 $36,500 Current Borrowing $5,000 $4,500 $1,000 Other Liabilities $0 $0 $0 SUBTOTAL CURRENT LIABILITIES $40,200 $39,800 $37,500 Long term Liabilities $150,000 $120,000 $90,000 TOTAL LIABILITIES $190,200 $159,800 $127,500 Paid in Capital $120,000 $120,000 $120,000 Earnings $101,000 $134,000 $156,000 Total Capital $270,000 $378,000 $492,000 Total Liabilities and Capital $298,000 $401,000 $523,000 Net Worth $270,000 $378,000 $492,000 References Berry T (2016) A Simple Business Plan. 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