RRR Computing Services Marketing & Competition - Example

RRR Computing Services, LLC CONFIDENTIAL BUSINESS PLAN July 2009 Contact Ellen Diener 269.429.8103 ontherun2_00@yahoo.com www.rrrscomputingservices.com The information set forth in this document includes confidential business information of RRR Computing Services, LLC ("the Company”) and is provided in connection with a potential transaction between the Company and one or more accredited investors or lenders, within the meaning of applicable securities laws. This document does not constitute an offer, or a solicitation of an offer, for the sale of securities. Any such offer, solicitation, or sale shall only be pursuant to definitive documentation, acceptable to the parties of the transaction in their respective discretion. Included herein are certain internal projections of possible future financial results for the Company. The Company does not warrant the accuracy or completeness of the projections or the reasonableness of the assumptions underlying such projections, although the Company believes such assumptions to be reasonable. Any potential investors in the Company are advised to conduct their own investigations, to their satisfaction, with respect to the business and affairs of the Company. Table of Contents Section Page Business Description 3 Store Description 5 Store Location 6 Services 7 Market 7 Marketing & Competition 9 Management & Organization 10 Financial assumptions 11 Financial Projections 13 BUSINESS DESCRIPTION Business Overview RRR Computing Services (“the “Company”) is located in Stevensville, Michigan and aims to provide computer and technical consulting to local small businesses as well as home PC users. In doing so the company will focus on marketing, responsiveness, quality, and creating and retaining customer relations. RRR Computing Services will initially be a sole proprietorship with moderate outside financing. It will be a small office start-up and serving customers in the local Stevensville area. RRR Computing Services will be initially owned by Ellen Diener. Depending on growth, the company will possibly add additional employees and expand operations. Market research indicates an available market niche able to be occupied by additional businesses of this nature. The very nature of the computing industry, with its extraordinary rate of technological development, creates a constant need for businesses skilled in updating and advising customers on computer-related issues. Home PC users will provide the majority of our business revenue. These jobs will typically consist of minor upgrades services and advising. Business Week expects the computing industry to grow at a rate of 12% and the processor speeds to continue to expand for years to come, providing a rich resource for sales. RRR Computing Services has decided to focus mainly on the home PC market for many reasons. These home customers typically request jobs that are easier, faster, and less resource intensive then the opposing small business customer. In addition, this market tends to offer more flexibility for service times allowing a more productive workday. Our target market will focus on Stevensville and the surrounding areas. Market research indicates there is an abundance of business for a small company such as RRR Computing Services. If a need exists for increased business, such promotional mediums as radio or print ads will be explored. There are two main competitors for the computer upgrade business in the Stevensville area. Both of these companies charge rates in excess of RRR Computing Services. Therefore RRR Computing Services expects to be able to attract the price-sensitive market without much work. Total start-up expenses are modest. Since this is a service business and not product oriented, operational costs should remain low through the start-up process. Fixed costs have been set at a reasonably accurate monthly level. This should allow for equipment maintenance, rent of premises and purchase or replacement of basic tools used in performing our services. Variable costs have been set per unit to allow for additional expenses such as gas or other travel costs specific to each job. Mission Statement Through its broad range of services, its unique knowledge and its commitment to consistent, high quality customer service, RRR Computing Services’ mission is to serve the technology and business needs of the community for capital gain. Keys to success The founders believe that they have the right combination of experience, skill and vision to quickly put the Company on a rapid track for growth and profits. The following factors will contribute to the success of RRR Computing Services: RRR Computing Services is a family business where reputation and friendliness count RRR Computing Services has a very strong focus on great customer service and the highest quality in everything that it does RRR Computing Services is a well known in the local community RRR Computing Services enjoys a very broad base of revenue sources which means that it is not dependent on the sale of single service. No sales pressure is ever applied to customers who are always comfortable when visiting the store Short term goals The company has established the following goals for its first twelve months of operation: Increase customer base by 100% Re-launch the Company’s informational web site (www.rrrscomputingservices.com) Compile an in-house mailing list and develop a customer loyalty program Add the sale and service of residential and commercial security systems Identify and expand best selling service categories to increase gross margin Long term strategies During years 2 through 5 of the planning period, RRR Computing Services intends to implement the following strategies: Toward the later part of year 2 become an Internet services provider (ISP) In year 3, add a second location in a neighboring town Add an e-commerce component to the Company’s website Keep an eye on the competition for possible new products and services as well as possible acquisition opportunities Start-up Summary The company will initially be a sole proprietorship. The goal will be to start the venture as inexpensively as possible, with moderate outside financing. It will be a small office start-up. Total start-up expenses are modest. This is composed of mostly equipment costs along with that of research of consumer wants and desires and other preliminary setup. Exact allocations are shown on the table. Since this is a service business and not product oriented, operational costs should remain low through the start-up process. Startup Financing Start-up Expenses Legal $500 Stationery etc. $500 Brochures $500 Consultants $5000 Insurance $1000 Rent $10000 Research and development $5000 Expensed equipment $50000 Other $2500 Total Start-up Expenses $75000 Start-up Assets Cash $5000 Other Current and Long-term Assets $1000 Total Assets $6000 Total Requirements $69000 Store Description Store Overview RRR Computing Services is located in an approximately 1,300 square foot shopping center storefront in Stevensville, Michigan. The store offers local residents and visitors a broad range of computer and business services. Open 6 days a week, the store is known as a busy, comfortable, warm place for customers to engage in the many services that are available. Operating Philosophies As a family owned and operated establishment, the owners have developed operating philosophies that will ensure satisfied customers and encourage patrons to return to RRR Computing Services time and time again. These philosophies include: Providing a business yet relaxed and friendly atmosphere Professional, knowledgeable, and caring staff but no pressure to buy Unique and special items not seen elsewhere Operating Details The store will be open 12 hours per day, six days per week from 7:00 am to 7:00 pm. RRR will close on Sundays. It is expected that hours will be extended during the holiday season. In addition to the owners, the store will have three part-time sales assistants depending upon time of day and day of week. In addition to providing occasional specials, the store will offer its customers special orders, shipping, exchanges, and returns. RRR Computing Services will accept cash, check, travelers check, Visa, Master Card, Discover, and American Express. Store Location RRR Computing Services is located in Stevensville, Michigan in the Martins Plaza Shopping Center across the street from Lakeshore High School. The plaza has easy access and good visibility from the major cross streets of Cleveland Avenue and W. John Beers Road and is an active suburban lifestyle strip center offering well established foot traffic. Surrounding tenants include a video store, a health and fitness center, a supermarket and deli, an insurance agency, a Dollar Store, and a tanning salon, all of which enhance the number of visitors to RRR Computing Services. Shopping at RRR Computing Services is easy and convenient due to the following factors: High visibility from main streets Lighted exterior signage Easy and multiple ingress and egress Large and well lighted parking Stevensville is a farming community located in Berrien County Michigan, southwest of Kalamazoo between Benton Harbor and New Buffalo near the shore of Lake Michigan off of I-94. The area is dotted with beautiful parks for fun and relaxation. Art galleries, antique shops and unique restaurants line Red Arrow Highway leading to and from Stevensville. The village was platted by Thomas Stevens and was incorporated in 1893. Mr. Stevens was a landowner who donated the right-of-way to the railroad running through Stevensville. Stevensville has a population of approximately 1,300 people and is considered part of the Benton Harbor metropolitan area. Services The company will offer computer support and upgrade service to clients of two major categories, home PC users and small office users. These categories will define 95% of our operations. Service Description Our services can be obtained through direct hourly compensation, or if preferred or more applicable, through a contract situation with pre-defined limits. Competitive Comparison Our services are more thorough and precise than any existing competition in the surrounding metro area. Since we have no extravagant overhead we can be focused on delivering exactly what the customer wants, something other computer support providers in this area have a hard time with. Technology RRR Computing Services will operate in an environment with technology that is constantly evolving. Keeping up to date will be of vital importance to the profitability of this venture. Keeping this in mind, we will maintain working, as well as functional, knowledge of all the latest software available to the public. Our customers will receive the most current versions of all software and hardware upgrades requested. The Market RRR Computing Services will provide computer support in both a consulting and technical capacity to home PC users as well as small business owners. Since the company is currently a one man operation it will be limited in growth to the capacity of work able to be completed. Personal market research indicates an available market niche able to be occupied by additional businesses of this nature. The very nature of the computing industry, with its extraordinary rate of technological development, creates a constant need for businesses skilled in updating and advising customers on computer-related issues. Market Segmentation The existing computer service market is so extensive categorizing it is a rather difficult task. For our revenue-oriented purposes we will define the market into home PC users and small business clients. Home PC users will provide the majority of our business revenue. These jobs will typically consist of minor upgrades services and advising. The small business market will be defined as customers with five or more computers or a network requiring service or repair. Market Overview Berrien County Statistics* Estimated 2001 Population 161,820 Private non-farm businesses 4,021 Private non-farm employment 61,186 Major Industries Services, agriculture, manufacturing, tourism Annual Retail Sales $1,300,000,000 Retail Sales per Capital $8,121 Median Household Income $38,567 Homeownership 72.3% High School Graduates 82% Undergraduate Degrees 20% *2000 U. S. Census (www.census.gov) Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Growth CAGR Home PC Users 2% 25,000 25,500 26,010 26,530 27,061 2.00% Small Business Contracts 1% 10,000 10,100 10,201 10,303 10,406 1.00% Other 0% 0 0 0 0 0 0.00% Total 1.72% 35,000 35,600 36,211 36,833 37,467 1.72% Target Market Segment Strategy RRR Computing Services has decided to focus mainly on the home PC market for many reasons. These home customers typically requests jobs that are easier, faster, and less resource intensive then the opposing small business customer. In addition, this market tends to offer more flexibility for service times allowing a more productive workday. Market Needs As reported by ComputingNet magazine, there is a substantial need for individuals capable of performing computer upgrades and repairs in a timely and cost-effective manner in this region. RRR Computing Services is directed specifically at that market niche. Market Trends Both the software and hardware side of the computer industry continue to turn out new and revised computer components at alarming rates. For RRR Computing Services, this means job security well into the future. Market Growth As reported by the Wall Street Journal, there seems to be no end to the development of the computer market. Business Week expects the computing industry to grow at a rate of 12% and the processor speeds to continue to expand for years to come. Service Business Analysis Secondary market research shows computer service customers tend to be very loyal providers that do good work and satisfy their needs. An analysis of RRR Computing Servicess' main competitors shows no overwhelming strengths that would be significant barriers to possible success. Likewise, identifying competitor's weaknesses has illuminated several areas that RRR Computing Services can target as marketing strategies. Marketing & Competition Marketing & Advertising Campaign RRR Computing Services will position itself as the computer services and business services store that customers can rely on for exceptional service and knowledgeable, problem solving employees. The RRR Computing Services brand will be unpretentious, yet represent the highest quality in the products it offers as well as in the service it provides. The brand will always represent a warm, friendly place where customers are always welcome to just stop by. Additionally, the RRR brand will stand for the right products, the right solutions and the best in value. RRR Computing Services will define its brand and create awareness for the store through the following marketing initiatives: Regional advertising in “Mail Max” the local weekly newspaper (Circulation – 41,700) Monthly advertising in The Full Moon advertising mailer (Circulation – 100,000) Limited direct mail to its growing customer list Yellow pages advertising in Berrien County www.rrrscomputingservices.com is an informational website that provides visitors with a variety of information including store address, telephone number, email address, map, directions, new items, articles of interest and special promotions The owners will use the store and signage to create brand awareness RRR Computing Services will create customer evangelists through its great selection and service The store will receive a significant amount of traffic due to its retail location Local Competitive Establishments There are a number of stores that offer products and services similar to those offered by RRR. However, there is no competitor whose menu of products and services is as comprehensive and complete. That notwithstanding, management believes that the store’s unique product and service offerings combined with its location practically limits competition in Berrien County. Stores with a similar inventory include: Competitor Description Helping Hands Similar to RRR, poor services, located in Scottdale PC Services Target big businesses, develop programs Staples Copy center but not in Stevensville The Computer Assistant Located in Berrien Springs, advertise a great deal Best Buy Quality of service is poor and location is not in Stevensville competitive advantages RRR has a number of important advantages over its competition: RRR’s sales approach is solution driven from the bottom up, rather than from a lofty top-down consulting approach. Because RRR has such a diverse revenue base, it is not dependent on one product or service to support its cash flow. Because RRR is so service focused, many leading product manufacturers and retailers prefer to send referrals to the Company. Management believes it will receive more product installation referrals than any competitor. Management & Organization Management Overview RRR Computing Services’s founding management team headed up by an experienced business owner with a complementary mix of backgrounds, experiences and skills. This is the right team to build the Company now, and guide it profitably into the future. Relevant skills among management that benefit the Company include: Extensive knowledge of the retail business Experienced business people with an in-depth understanding of successful business operations Multi-task orientated; able to take on heavy workload Flexible; able to adapt to different circumstances Understand the importance of consistent, high quality customer service Ellen Diener – President, Co-Founder & CEO Mrs. Diener is an experienced MCP Certified Information Technology professional with a broad understanding of computer networking. She is an A+ Certified, Microsoft 2000 Professional Certified, HelpDesk 2000 Certified. Experienced in Novell, GroupWise and Network installation. She is currently working on her Microsoft Certified Systems Engineer for Windows 2000. Mrs. Diener has seven years experience in Windows 3.1, 95, 98 and 2000, internal and remote installation, setup and configuration of PCs, laptops and related peripherals for a network environment and project management. She has owned RRR since 1995 but until recently, the Company limited its services to computer repair, networking and training. She has served as a PC tech, a Computer Tech and a Networking technician for various local companies. In her capacity of President of RRR Computing Services, Mrs. Diener is responsible for all day-to-day activities of the store including staffing, pricing, purchasing, merchandising and marketing. She has the primary responsibility for supplier relationships as well as the Company’s involvement in the community. Denise Gmitter, Office Manager Prior to joining RRR Computing Services, Mrs. Gmitter was employed by Trucker Communications for six years where she handled bookkeeping, inventory control, customer service and other administrative tasks. In addition she is the owner and manager of Copper Zone, a tanning salon in Stevensville. As office manager of RRR, Mrs. Gmitter is responsible for all daily business issues including accounting, bookkeeping, taxes, banking and dealing with the Company’s suppliers. In addition, she serves customer requests when they are in the store. Professional & consulting Service Providers The owners have engaged or intend to engage the following professional service providers: Legal – Laurie Schmidt, Stevensville, MI Accounting – Vickie Gort, Stevensville, MI Financial Advice & Planning – James Lewin, BizPlanIt LLC – Scottsdale, AZ External Issues There are no regulatory issues related to EPA, OSHA, IRS, or other governmental agencies. There are no unions represented at the Company and there is no pending or anticipated litigation. Financial Assumptions The following sections include the annual estimates for the standard set of financial tables. Detailed monthly pro-forma tables are included in the appendix. Important Assumptions RRR Computing Servicess customer base would fluctuate if there was a recess in the economy or other extenuating circumstances that pertain directly to consumer or industry behavior. General Assumptions Year 1 Year 2 Year 3 Plan Month 1 2 3 Current Interest Rate 10.00% 10.00% 10.00% Long-term Interest Rate 10.00% 10.00% 10.00% Tax Rate 25.42% 25.00% 25.42% Other 0 0 0 Break-even Analysis Fixed costs have been set at a reasonably accurate monthly level. This should allow for equipment maintenance and purchase or replacement of basic tools used in performing our services. Variable costs have been set per unit to allow for additional expenses such as gas or other travel costs specific to each job. Break-even Analysis Monthly Units Break-even 28 Monthly Revenue Break-even $834 Assumptions: Average Per-Unit Revenue $29.98 Average Per-Unit Variable Cost $5.70 Estimated Monthly Fixed Cost $675 Financial Projections Pro Forma Profit and Loss Year 1 Year 2 Year 3 Sales $18,289 $24,142 $31,868 Direct Cost of Sales $3,476 $5,677 $9,063 Other $0 $0 $0 Total Cost of Sales $3,476 $5,677 $9,063 Gross Margin $14,814 $18,465 $22,804 Gross Margin % 80.99% 76.48% 71.56% Expenses Payroll $8,102 $12,071 $15,934 Sales and Marketing and Other Expenses $0 $0 $0 Depreciation $0 $0 $0 Leased Equipment $0 $0 $0 Utilities $0 $0 $0 Insurance $0 $0 $0 Rent $0 $0 $0 Payroll Taxes $0 $0 $0 Other $0 $0 $0 Total Operating Expenses $8,102 $12,071 $15,934 Profit Before Interest and Taxes $6,711 $6,394 $6,870 EBITDA $6,711 $6,394 $6,870 Interest Expense $0 $0 $0 Taxes Incurred $1,702 $1,598 $1,746 Net Profit $5,009 $4,795 $5,124 Net Profit/Sales 27.39% 19.86% 16.08% Pro Forma Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash $444 $3,248 $6,283 Accounts Receivable $5,633 $7,435 $9,815 Other Current Assets $0 $0 $0 Total Current Assets $6,076 $10,683 $16,098 Long-term Assets Long-term Assets $0 $0 $0 Accumulated Depreciation $0 $0 $0 Total Long-term Assets $0 $0 $0 Total Assets $6,076 $10,683 $16,098 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities Accounts Payable $787 $598 $888 Current Borrowing $0 $0 $0 Other Current Liabilities $0 $0 $0 Subtotal Current Liabilities $787 $598 $888 Long-term Liabilities $0 $0 $0 Total Liabilities $787 $598 $888 Paid-in Capital $1,000 $1,000 $1,000 Retained Earnings ($720) $4,289 $9,085 Earnings $5,009 $4,795 $5,124 Total Capital $5,289 $10,085 $15,209 Total Liabilities and Capital $6,076 $10,683 $16,098 Net Worth $5,289 $10,085 $15,209 Ratio Analysis Year 1 Year 2 Year 3 Industry Profile Sales Growth 0.00% 32.00% 32.00% 7.20% Percent of Total Assets Accounts Receivable 92.70% 69.60% 60.97% 21.70% Other Current Assets 0.00% 0.00% 0.00% 46.70% Total Current Assets 100.00% 100.00% 100.00% 71.90% Long-term Assets 0.00% 0.00% 0.00% 28.10% Total Assets 100.00% 100.00% 100.00% 100.00% Current Liabilities 12.95% 5.60% 5.52% 51.40% Long-term Liabilities 0.00% 0.00% 0.00% 19.10% Total Liabilities 12.95% 5.60% 5.52% 70.50% Net Worth 87.05% 94.40% 94.48% 29.50% Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 80.99% 76.48% 71.56% 0.00% Selling, General & Administrative Expenses 38.70% 65.72% 64.96% 80.70% Advertising Expenses 0.00% 0.00% 0.00% 1.20% Profit Before Interest and Taxes 36.69% 26.48% 21.56% 1.70% Main Ratios Current 7.72 17.86 18.12 1.27 Quick 7.72 17.86 18.12 1.01 Total Debt to Total Assets 12.95% 5.60% 5.52% 70.50% Pre-tax Return on Net Worth 126.88% 63.40% 45.17% 3.50% Pre-tax Return on Assets 110.45% 59.85% 42.68% 11.80% Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 27.39% 19.86% 16.08% n.a Return on Equity 94.71% 47.55% 33.69% n.a Activity Ratios Accounts Receivable Turnover 3.25 3.25 3.25 n.a Collection Days 55 99 99 n.a Accounts Payable Turnover 6.58 12.17 12.17 n.a Payment Days 27 35 25 n.a Total Asset Turnover 3.01 2.26 1.98 n.a Debt Ratios Debt to Net Worth 0.15 0.06 0.06 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a Liquidity Ratios Net Working Capital $5,289 $10,085 $15,209 n.a Interest Coverage 0.00 0.00 0.00 n.a Additional Ratios Assets to Sales 0.33 0.44 0.51 n.a Current Debt/Total Assets 13% 6% 6% n.a Acid Test 0.56 5.43 7.07 n.a Sales/Net Worth 3.46 2.39 2.10 n.a Dividend Payout 0.00 0.00 0.00 n.a Read More