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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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3
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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4
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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5
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