Business plan on Bangladesh Corporate Software Sales
This business plan outlines the strategy for sales of enterprise software planning solutions to medium-sized companies and franchises in Bangladesh.
Bangladesh Corporate Software Sales (BBCSS) will act as the direct sales arm of a software manufacturing firm based in Oregon. We expect a high degree of profitability based on our plan to key in on businesses that have already expressed the need for such services and products to the software manufacturer. Our management expertise in dealing with corporate decision makers and our partner’s reputation will be the cornerstone of our success.
Company Summery
BCSS provides enterprise-corporate planning software solutions. We identify companies’ planning needs and work with a third-party manufacturer to create software to address these needs. Although the actual software is produced out-of-house, we guarantee the customer the right solution.
Objectives
- Market a business planning software package to corporate managers and achieve Tk1000 in commission fees in year one.
- Customize the software to the individual needs of each client.
- Provide training and follow-up service to each client.
Mission
The employees of BCSS recognize that information is vital for management and presenting that information in an efficient and easily understood framework is crucial. Also, not every business manager requires similar tools; what works for a service based company might be useless for a manufacturer. That’s why we market an already proven third-party software planning tool which we will customize to the client’s individual needs. Although we recognize the intimate relationship between profitability and quality products, we know that our success is ultimately dependent on the well-being of our employees.
Keys to Success
The success of our company is dependent on our ability to:
- Anticipate clients’ needs.
- Adapt software solutions to these needs.
- Identify industries/corporations that need planning tool
Start-up Summary
Start-up costs, which cover phone calls, office furniture, letterhead and business cards, come to Tk 3,050. These costs will either be financed by owner investment or through financing from the software manufacturing partner. Details and assumptions are summarized in the following chart and table.
Start-up
| Start-up | |
| Requirements | |
| Start-up Expenses | |
| Legal | Tk300 |
| Stationery etc. | Tk250 |
| Brochures | Tk0 |
| Consultants | Tk0 |
| Insurance | Tk1,000 |
| Rent | Tk0 |
| Research and development | Tk0 |
| Expensed equipment | Tk1,500 |
| Other | Tk0 |
| Total Start-up Expenses | Tk3,050 |
| Start-up Assets Needed | |
| Cash Balance on Starting Date | Tk11,000 |
| Other Current Assets | Tk0 |
| Total Current Assets | Tk11,000 |
| Long-term Assets | Tk0 |
| Total Assets | Tk11,000 |
| Total Requirements | Tk14,050 |
| Funding | |
| Investment | |
| Investor 1 | Tk9,000 |
| Investor 2 | Tk4,550 |
| Other | Tk0 |
| Total Investment | Tk13,550 |
| Current Liabilities | |
| Accounts Payable | Tk500 |
| Current Borrowing | Tk0 |
| Other Current Liabilities | Tk0 |
| Current Liabilities | Tk500 |
| Long-term Liabilities | Tk0 |
| Total Liabilities | Tk500 |
| Loss at Start-up | (Tk3,050) |
| Total Capital | Tk10,500 |
| Total Capital and Liabilities | Tk11,000 |
Highlights
Company Locations and Facilities
The company will be located in a home-based office in Portland, Oregon. This location is ideal, as it is close to the software manufacturer’s facilities and several of the first potential clients’ home offices.
Business environment
The business environment that affects our venture is characterized below-
Demographical environment:
Now it’s a world of increasing technology and our country is about to adjust its step with it. People of all age are increasingly dependent on the Internet and it helps to communicate with outer world.
Economical environment:
The current GDP growth rate is 6.5% and expected to grow at a higher than this rate in year 2006. So, the economic growth is very excellent in the country and hence we can capitalize upon the fact i.e. demand for goods increasing.
Political environment:
There is huge political uncertainty in the country. So we have to face the political uncertainty to be successful. It is our of our risk of the on going business.
Legal environment:
Legal environment is about good because the order and law situation is quite good with the activity of “QUICK JUDGEMENT TRIBUNAL” and “RAB”.
Cultural and social environment:
The city and sub-urban life of the country is very much dependent on internet and communication technology. But the urban area is not likely to that extent. So the culture of the country is not enough to judge the venture.
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BCSS will provide medium- and large-sized companies with enterprise-wide collaborative planning solutions. We will also provide consulting services by helping companies recognize opportunities for using technology to streamline their business processes. Finally, we will provide complete training for the use of solutions purchased from us.
Product and Service Description
Software
BCSS software products consist of a business planning software package that is proven in the consumer market. In fact, this product is the top-rated and best-selling small business planning package. The enterprise version will be similar to the consumer version however; it will be modified to fit the needs of different clients. The product will allow corporate sales forces and franchises to use planning tools to achieve tremendous efficiencies in their business processes. In essence, a sales force will be able to write concise business plans for any customer and through the use of an extranet, allow the customer to collaboratively plan their own account. Franchises will be able to create a road map of their business plans that corporate managers can monitor and adjust accordingly. The possibility exists to customize the product to work with other collaborative tools such as Lotus Notes and the clients email applications.
Consulting
BCSS will perform an analysis of all potential clients’ planning strategies and tactics as well as their degree of aptitude with planning software and information technology. The goal of this analysis is to ensure that all clients get a solution that best fits their needs and capabilities. Whether they decide to purchase the product or not they will have an expert analysis of their planning strategies.
Training
BCSS will provide further value to our customers, and ease the customer service burden on our partner, by ensuring that all product users are properly trained in the use of all software solutions.
Interface
Through the software manufacturer, BCSS will provide an additional product which will give the client a dedicated service representative–eliminating the need for product updates. This will in essence create a “living” product which can grow and adapt with the clients’ needs. The interface representative will function through the clients’ established extranet.
Competitive Comparison
Alternative products do not offer a complete package of tools. For example, to get similar results from another product(s) the client would have to integrate complex spreadsheets, word processing software, instructions and Web based collaboration themselves.
Technology
The software package runs on Windows 95, 98, 2000, Windows NT, and Macintosh platforms.
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We operate in the business-to-business segment of e-commerce which recent research estimates transactions in excess of Tk160 billion (www.e-commerceguide.com). Our market is further segmented into companies with sales forces greater than 100 people and companies with branches, divisions or franchises in excess of 100 units.
Market Segmentation
We segment our market by size of sales force and number of company subunits. Our target customers will have sales operations in excess of 100 direct sales representatives or more than 100 organizational subdivisions or franchises. For the first three years of operation we will focus on U.S. companies in the Pacific Northwest, California and the Southwest. Geographically this make sense as our office is central to these regions and management has established key client contacts in each of these areas. Larger clients are more likely to benefit from the efficiencies our product offers and will provide fees that will sustain our profitability. Exact figures for the number of businesses are hard to determine, however, the lean structure of our company will allow us to be profitable by generating two to three new clients per year.
Market Analysis (Pie)
Market Analysis
| Potential Customers | Growth | 2000 | 2001 | 2002 | 2003 | 2004 | CAGR |
| Sales Companies | 3% | 500 | 515 | 530 | 546 | 562 | 2.97% |
| Franchises | 2% | 800 | 812 | 824 | 836 | 849 | 1.50% |
| Other | 5% | 200 | 210 | 221 | 232 | 244 | 5.10% |
| Total | 2.49% | 1,500 | 1,537 | 1,575 | 1,614 | 1,655 | 2.49% |
Target Market Segment Strategy
Our strategy is designed to target:
A Medium- to large-size organization whose sales forces provide their clients with proposals and plan that the client either collaborates on, or would benefit from collaboration.
Companies that sell franchise rights and take an active role in the success of their franchises.
Larger clients that will provide greater revenues through a larger volume of software licensing sales and greater chance of selling client interface solution.
Market Needs
Customization-products that strengthen their brand and address their differences:
We will “Private Label” the solution so as to further strengthen the clients’ brand.
We recognize that different clients will have varying levels of sophistication and we will design different product templates for each customer.
Speed, efficiency and information:
Our product will allow the client to make better and faster business decisions and receive quicker feedback from their end-customer.
Managers will have the ability to monitor the progress and profitability of their staff.
Market Trends
The most significant trend affecting our company is the growth of business-to-business e-commerce. More and more firms recognize the need to take advantage of the exchange of information over the Internet and our products and services rely on this.
Market Growth
The fastest growing segment of the e-commerce industry is the business-to-business sector. This segment has gone from less than Tk50 billion to more than Tk160 billion in three years.
Service Business Analysis
Customers tend to buy enterprise software solutions based on reputation, price and reliability. Also, compatibility with existing or legacy systems is very important. With this in mind, the key decision makers and influencer(s) will be the companies’ chief financial officer and chief information officer.
Business Participants
There are currently several companies that provide business planning software for desktop applications, but as yet none of these offer enterprise-wide solutions. Additional competitors are companies which provide word processing, spreadsheet and collaborative planning software, as well as publishers of business planning literature.
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Various strategy/and implementation topics are discussed in the following sections.
Competitive Edge
Our greatest strength and competitive edge is the reputation and success of the desktop software product. This product is the market leader in sales and consumer ratings. Our success will rely upon building on those strengths. We will also rely on our experience working with decision makers at the corporate level.
Marketing Strategy
We will first target the corporate offices of franchises with more than 100 units, and companies with sales forces in excess of 100 personnel. The software manufacturer has already provided the names and contact information for several firms which fit this profile. These firms have approached the software manufacturer about enterprise solutions in the past. The software firm has also provided a list of larger businesses that purchased an executive version of their desktop product. We will contact these firms with the idea of helping them take this planning tool to the next level.
Management of BCSS has business contacts at the decision maker level for several more prospects as well. These will be our secondary targets.
Tertiary targets will come from lists of firms fitting the above criteria which management has generated through Web-based market research efforts. Tactics for approaching these prospects will be indirect, i.e., we will contact sales managers and/or franchisees to establish whether the firm fits our profile and then probe for upper or middle level management contact information. We will attempt to establish a face-to-face meeting with decision makers (CFO, CIO, and COO) where we will present a proposal tailored to their needs. If possible, we will also have this proposal reside on an extranet so that the client can modify the proposal and see first-hand how the product and service work.
Positioning Statement
This is an expensive solution to develop and maintain, and the price will reflect the premium quality of the offering. Set-up costs to the client will run between Tk100K-Tk200K. The dedicated service option is approximately Tk5K/year. Software licenses are Tk100/year.
Sales Strategy
Our sales consist of two services–consulting and training, and one product-the software/extranet package (called start-up sales). Our services provide a fraction of the revenue we will receive for the software/extranet solution, but they will sustain our cash flow needs while we develop the enterprise sales. Sales of consulting, training and product are predicted to grow at 30%, 20% and 10% respectively. Costs associated with these sales are estimated at 10% for start-up sales, 40% for consulting fees and 50% for training. We expect these costs to decrease two, five, and ten percentage points respectively in years two and three.
Sales Monthly
Sales Forecast
| Sales Forecast | |||
| Sales | FY 2001 | FY 2002 | FY 2003 |
| Start-up fees | Tk150,000 | Tk165,000 | Tk189,750 |
| Consulting fees | Tk2,400 | Tk3,120 | Tk4,368 |
| Training fees | Tk2,550 | Tk3,060 | Tk3,978 |
| Total Sales | Tk154,950 | Tk171,180 | Tk198,096 |
| Direct Cost of Sales | FY 2001 | FY 2002 | FY 2003 |
| Start-up fees | Tk15,000 | Tk13,200 | Tk15,180 |
| Consulting fees | Tk960 | Tk1,092 | Tk1,529 |
| Training fees | Tk1,275 | Tk1,224 | Tk1,591 |
| Subtotal Direct Cost of Sales | Tk17,235 | Tk15,516 | Tk18,300 |
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Ronald Ivanhoe, 33, founded the company in September of 2000 to take advantage of a partnership opportunity with a highly successful Pacific NW software company. He has an MBA in marketing and e-commerce from the University of Arizona, and has designed numerous successful business plans for companies in the manufacturing, e-commerce and entertainment sectors. He consults with insurance brokers, e-commerce, and manufacturing companies in marketing strategies. He has lived in Asia for five years, speaks Japanese fluently and currently resides in Portland, OR.
Personnel Plan
Payroll expenses reflect the salary of Mr. Ivanhoe.
Personnel
| Personnel Plan | |||
| FY 2001 | FY 2002 | FY 2003 | |
| Name or title | Tk0 | Tk0 | Tk0 |
| Other | Tk0 | Tk0 | Tk0 |
| Total People | 0 | 0 | 0 |
| Total Payroll | Tk0 | Tk0 | Tk0 |
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The most crucial issue affecting our financial plan is the receipt of start-up fees for the customization and installation of the software and extranet solution. This drives our cash flow, and all other aspects of our operation.
Important Assumptions
This table summarizes the general assumptions used to project our balance sheet.
General Assumptions
| General Assumptions | |||
| FY 2001 | FY 2002 | FY 2003 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 8.00% | 8.00% | 8.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Sales on Credit % | 50.00% | 50.00% | 50.00% |
| Other | 0 | 0 | 0 |
Key Financial Indicators
The chart below shows the relative relationships, year-to-year, of four business indicators; sales, gross margin, operating expenses, collection days of accounts receivable.
Benchmarks
Break-even Analysis
We include salary and fixed overhead as fixed costs above and beyond start-up costs. This requires a break-even in sales/month for year one of Tk8,680.
Break-even Analysis
| Break-even Analysis: | |
| Monthly Units Break-even | 8,680 |
| Monthly Revenue Break-even | Tk8,680 |
| Assumptions: | |
| Average Per-Unit Revenue | Tk1.00 |
| Average Per-Unit Variable Cost | Tk0.25 |
| Estimated Monthly Fixed Cost | Tk6,510 |
Projected Profit and Loss
Monthly P&L fluctuate drastically due to the work required before a sale is closed. One to two months prior to closing a sale, we will incur travel costs and other miscellaneous expenses associated with our consulting service. Expenses are approximately 40% of fees. Set-up costs to the client (our commission), drive revenue in the period a sale is made, as do training fees. Associated direct costs are 10% and 50% respectively; however, as we anticipate a learning curve in training costs, these decrease to a flat rate in year two of eight percent. The direct cost of start-up fees is our major expense. As the client prepares to go live with the product, we will need to travel more frequently to the site, bring in their key end-customers, and travel to the manufacturer more frequently as well. We have anticipated that start-up fees will grow 10% in year two and 15% in year three. Consulting fees are projected to grow at a steady rate of 20% and training fees at 30%. As a result, net profit is projected to grow at a conservative and realistic three percent for the first three years.
Profit and Loss
| Pro Forma Profit and Loss | |||
| FY 2001 | FY 2002 | FY 2003 | |
| Sales | Tk154,950 | Tk171,180 | Tk198,096 |
| Direct Costs of Goods | Tk17,235 | Tk15,516 | Tk18,300 |
| Other | Tk0 | Tk0 | Tk0 |
| ———— | ———— | ———— | |
| Cost of Goods Sold | Tk17,235 | Tk15,516 | Tk18,300 |
| Gross Margin | Tk137,715 | Tk155,664 | Tk179,796 |
| Gross Margin % | 88.88% | 90.94% | 90.76% |
| Expenses: | |||
| Payroll | Tk0 | Tk0 | Tk0 |
| Sales and Marketing and Other Expenses | Tk4,000 | Tk5,000 | Tk6,000 |
| Depreciation | Tk0 | Tk0 | Tk0 |
| Leased Equipment | Tk0 | Tk0 | Tk0 |
| Utilities | Tk480 | Tk0 | Tk0 |
| Insurance | Tk1,440 | Tk0 | Tk0 |
| Rent | Tk4,200 | Tk4,200 | Tk4,350 |
| Payroll Taxes | Tk0 | Tk0 | Tk0 |
| Other | Tk0 | Tk0 | Tk0 |
| ———— | ———— | ———— | |
| Total Operating Expenses | Tk10,120 | Tk9,200 | Tk10,350 |
| Profit Before Interest and Taxes | Tk127,595 | Tk146,464 | Tk169,446 |
| Interest Expense | Tk0 | Tk0 | Tk0 |
| Taxes Incurred | Tk31,888 | Tk36,616 | Tk43,068 |
| Net Profit | Tk95,707 | Tk109,848 | Tk126,378 |
| Net Profit/Sales | 61.77% | 64.17% | 63.80% |
Projected Cash Flow
Our cash flow assumptions are dependent on the start-up fee. We will receive 15-20% of the total fee in commission. Historical values of start-up fees are from Tk150K to Tk200K and the accounts have taken from one to four months to close. Conservative estimates lead us to believe that we can attain sales revenue from start-up fees of between Tk135K and Tk240K in year one.
Cash
Cash Flow
| Pro Forma Cash Flow | |||
| FY 2001 | FY 2002 | FY 2003 | |
| Cash Received | |||
| Cash from Operations: | |||
| Cash Sales | Tk77,475 | Tk85,590 | Tk99,048 |
| Cash from Receivables | Tk77,195 | Tk85,561 | Tk98,999 |
| Subtotal Cash from Operations | Tk154,670 | Tk171,151 | Tk198,047 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | Tk0 | Tk0 | Tk0 |
| New Current Borrowing | Tk0 | Tk0 | Tk0 |
| New Other Liabilities (interest-free) | Tk0 | Tk0 | Tk0 |
| New Long-term Liabilities | Tk0 | Tk0 | Tk0 |
| Sales of Other Current Assets | Tk0 | Tk0 | Tk0 |
| Sales of Long-term Assets | Tk0 | Tk0 | Tk0 |
| New Investment Received | Tk0 | Tk0 | Tk0 |
| Subtotal Cash Received | Tk154,670 | Tk171,151 | Tk198,047 |
| Expenditures | FY 2001 | FY 2002 | FY 2003 |
| Expenditures from Operations: | |||
| Cash Spending | Tk15,702 | Tk16,033 | Tk19,405 |
| Payment of Accounts Payable | Tk39,957 | Tk45,213 | Tk51,436 |
| Subtotal Spent on Operations | Tk55,659 | Tk61,246 | Tk70,840 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | Tk0 | Tk0 | Tk0 |
| Principal Repayment of Current Borrowing | Tk0 | Tk0 | Tk0 |
| Other Liabilities Principal Repayment | Tk0 | Tk0 | Tk0 |
| Long-term Liabilities Principal Repayment | Tk0 | Tk0 | Tk0 |
| Purchase Other Current Assets | Tk0 | Tk0 | Tk0 |
| Purchase Long-term Assets | Tk0 | Tk0 | Tk0 |
| Dividends | Tk0 | Tk0 | Tk0 |
| Subtotal Cash Spent | Tk55,659 | Tk61,246 | Tk70,840 |
| Net Cash Flow | Tk99,011 | Tk109,905 | Tk127,207 |
| Cash Balance | Tk110,011 | Tk219,916 | Tk347,123 |
Projected Balance Sheet
Balance sheet is a result of key assumptions and estimated sales/cash flows.
Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | |||
| Current Assets | FY 2001 | FY 2002 | FY 2003 |
| Cash | Tk110,011 | Tk219,916 | Tk347,123 |
| Accounts Receivable | Tk280 | Tk309 | Tk358 |
| Other Current Assets | Tk0 | Tk0 | Tk0 |
| Total Current Assets | Tk110,291 | Tk220,226 | Tk347,481 |
| Long-term Assets | |||
| Long-term Assets | Tk0 | Tk0 | Tk0 |
| Accumulated Depreciation | Tk0 | Tk0 | Tk0 |
| Total Long-term Assets | Tk0 | Tk0 | Tk0 |
| Total Assets | Tk110,291 | Tk220,226 | Tk347,481 |
| Liabilities and Capital | |||
| Current Liabilities | FY 2001 | FY 2002 | FY 2003 |
| Accounts Payable | Tk4,085 | Tk4,171 | Tk5,048 |
| Current Borrowing | Tk0 | Tk0 | Tk0 |
| Other Current Liabilities | Tk0 | Tk0 | Tk0 |
| Subtotal Current Liabilities | Tk4,085 | Tk4,171 | Tk5,048 |
| Long-term Liabilities | Tk0 | Tk0 | Tk0 |
| Total Liabilities | Tk4,085 | Tk4,171 | Tk5,048 |
| Paid-in Capital | Tk13,550 | Tk13,550 | Tk13,550 |
| Retained Earnings | (Tk3,050) | Tk92,657 | Tk202,505 |
| Earnings | Tk95,707 | Tk109,848 | Tk126,378 |
| Total Capital | Tk106,207 | Tk216,055 | Tk342,433 |
| Total Liabilities and Capital | Tk110,291 | Tk220,226 | Tk347,481 |
| Net Worth | Tk106,207 | Tk216,055 | Tk342,433 |
Business Ratios
The following table outlines important business ratios for pre-packaged software, as described by the standard industry classification (SIC) index, 7372.
Ratios
| Ratio Analysis | ||||
| FY 2001 | FY 2002 | FY 2003 | Industry Profile | |
| Sales Growth | 0.00% | 10.47% | 15.72% | 9.70% |
| Percent of Total Assets | ||||
| Accounts Receivable | 0.25% | 0.14% | 0.10% | 21.50% |
| Inventory | 0.00% | 0.00% | 0.00% | 3.00% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 45.70% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 70.20% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 29.80% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 3.70% | 1.89% | 1.45% | 42.40% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 19.20% |
| Total Liabilities | 3.70% | 1.89% | 1.45% | 61.60% |
| Net Worth | 96.30% | 98.11% | 98.55% | 38.40% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 88.88% | 90.94% | 90.76% | 100.00% |
| Selling, General & Administrative Expenses | 65.84% | 64.01% | 60.68% | 79.40% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.30% |
| Profit Before Interest and Taxes | 82.35% | 85.56% | 85.54% | 2.20% |
| Main Ratios | ||||
| Current | 27.00 | 52.80 | 68.84 | 1.51 |
| Quick | 27.00 | 52.80 | 68.84 | 1.16 |
| Total Debt to Total Assets | 3.70% | 1.89% | 1.45% | 61.60% |
| Pre-tax Return on Net Worth | 120.14% | 67.79% | 49.48% | 3.50% |
| Pre-tax Return on Assets | 115.69% | 66.51% | 48.76% | 9.20% |
| Additional Ratios | FY 2001 | FY 2002 | FY 2003 | |
| Net Profit Margin | 61.77% | 64.17% | 63.80% | n.a |
| Return on Equity | 90.11% | 50.84% | 36.91% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 276.70 | 276.70 | 276.70 | n.a |
| Collection Days | 45 | 1 | 1 | n.a |
| Inventory Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Accounts Payable Turnover | 10.66 | 10.86 | 10.36 | n.a |
| Payment Days | 32 | 33 | 32 | n.a |
| Total Asset Turnover | 1.40 | 0.78 | 0.57 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.04 | 0.02 | 0.01 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | Tk106,207 | Tk216,055 | Tk342,433 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.71 | 1.29 | 1.75 | n.a |
| Current Debt/Total Assets | 4% | 2% | 1% | n.a |
| Acid Test | 26.93 | 52.73 | 68.76 | n.a |
| Sales/Net Worth | 1.46 | 0.79 | 0.58 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | |