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BUSINESS PLAN

For

DjibTech.PV.LTD
JUIN 2011

Submitted by:
y Mohamed Omar y Liban Mahamoud

Executive Summary
DjibTech is a one-stop shop for IBM-compatible computer users. We are located in the center of einguela-city. Our location is a major asset, as it is accessible to both the largest concentration of the local community. We will offer a wide selection of latest-technology computer hardware, custom-built computer systems, computer service, and computer rentals by the hour and networking services. We are dedicated to providing consistently high client satisfaction by rendering excellent service, carrying items that are not locally available, and furnishing a warm, pleasant atmosphere at a competitive price. Our work environment will be one of respect for our clients and our community. The timing is right for starting this new venture. Our target area is the North and South districts of Djibouti. Presently, there is only one other computer store in these districts that handles IBMcompatible computers, and that store focuses primarily on computer service, not hardware sales. We have polled the local community and have received an overwhelming response that there is a definite need for a more comprehensive resource for computer sales and service in our target area. We will offer solutions to the community not provided by any of our competitors. With over 13 years of experience in the computer industry, information industry, management and retail, Ali and Amin have the skills necessary to make this venture extremely successful and profitable. To achieve our objectives, Djibtech is seeking a start-up loan. This loan will be paid back from the cash flow of the business within ten years, collateralized by the assets of the company, backed by personal integrity, experience, and a contractual guarantee from the owners. This loan will be used to purchase inventory, increase working capital, and assist in start-up costs.

1.1 Objectives
The objectives for Djibtech are outlined below: 1. To create a service-based company whose goal is to exceed customer's expectations 2. Sales increase to over a quarter-million dollars by end of second year and increase modestly in the third year. 3. To increase the number of customers serviced by at least 20% per year through superior performance and word-of mouth referrals. 4. Have a customer return rate of 90% by end of first year. 5. Become an established community destination by end of first year.

1.2 Mission
To provide to the community with quality brand-name products, computer and networking solutions, reliable and professional technical support, and unparalleled customer service and to earn a fair profit for our employee-owners and stakeholders by embracing sound, ethical business practices.

1.3 Keys to Success


The keys to success in our business are:
y y y

y y

Superior Customer Service: provide reliable, high-quality service and products, and an expedient turn-around time on repairs. Environment: provide a clean, friendly, and comfortable environment conducive to giving professional trusting service. Convenience: offering clients a wide selection of computer products and services in one environment; including custom-built computers, computer diagnosis and repair, networking, and in-store computer stations where clients can buy time to browse the Internet, check e-mail, and download their digital photos from their camera memory cards onto discs. Location: provide an easily accessible location for customer convenience. Reputation: credibility, integrity, and 100% dedication from 13+ years of experience in the computer industry.

Company Summary
DjibTech will sell and service IBM-compatible computers to the local community. It will also offer custom-built computers, networking solutions, and in-store computer stations where customers can buy time to browse the Internet, check e-mail, and download their digital photos from their camera memory cards onto discs. What will set Djibtech apart from the competition is providing our customers all this in one convenient location, our dedication to excellent customer service, and an expedient turn-around time on repairs.

2.1 Company Ownership


DjibTech will be created as an Djibouti Limited Company (LLC) based in Djibouti Country, and privately co-owned by Ali and Amin. Ali has 13 years experience in the computer industry. He was co-owner of DjibTech in Dubai until he moved out of Dubai to live in Djibouti. Ali is a computer technician and also has many years of management and retail experience. Amin has 5 years of experience in the information technology industry. He was most recently employed by Djibtelcom Communications, which is a nationwide provider of DSL service (high speed Internet access). Amin also has management experience and extensive retail experience.

2.2 Start-up Summary


The start-up costs are to be financed by the direct owner investment. The cost, expense, and investment details are included in the following tables and chart.

Start-up Funding Start-up Expenses to Fund $7,975 Start-up Assets to Fund $12,025 Total Funding Required $20,000 Assets Non-cash Assets from Start-up $10,000 Cash Requirements from Start-up $2,025 Additional Cash Raised $0 Cash Balance on Starting Date $2,025 Total Assets $12,025 Liabilities and Capital Liabilities Current Borrowing $0 Long-term Liabilities $0 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities $0 Capital Planned Investment Jim & Judy Johnson $20,000 Investor 2 $0 Other $0 Additional Investment Requirement $0 Total Planned Investment $20,000 Loss at Start-up (Start-up Expenses) ($7,975) Total Capital $12,025 Total Capital and Liabilities $12,025 Total Funding $20,000

Start-up Expenses Business License & Legal Stationery etc. Brochures Insurance Rent Rental Deposit Research and Development Expensed Equipment Display Shelving * Display for Custom-built Systems Display Cabinet * Main Store Sign Store Signs for Windows Installed Security System Storage Shelving for Inventory Workstations (4) Workstation Monitors (4) 2 Additional Circuits for 4 Total Outlets Carpet Painting Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements

$1,200 $100 $25 $150 $0 $1,300 $0 $0 $500 $400 $450 $75 $125 $1,200 $50 $200 $400 $600 $1,100 $100 $0 $7,975 $2,025 $10,000 $0 $0 $12,025 $20

Products and Services


Most people today use computers either at work or at home. It is important that people have a quality resource for buying and servicing those computers. DjibTech will provide the local community with just such a quality resource - a one-stop shop for IBM-compatible computers. DjibTech will offer the following products and services with excellent customer service in a friendly, professional, and pleasant environment:
y y y y y y

Ready-to-Sell Computers - We will sell new and used computer systems in various price ranges that are already built and ready to be used. Custom-Built Computers - We will build and sell computer systems that are customdesigned according to the customer's preferences. Service and Repairs -We will do full-service computer diagnosis and repairs with an emphasis on quality work within an expedient turn-around time. Upgrades - We will offer customers the latest technology available to upgrade the computers they already own. Networking - We will offer full networking solutions for both home and office, including wireless networking. Computer Rental Stations - We will have work-stations set up where customers can browse the Internet, check e-mail, and download their digital photos from their camera memory cards onto discs. These stations will be rented by the hour, but with no minimum time requirement. This will be useful to both tourists and the local community.

Market Analysis Summary


DjibTech will focus on markets on the West side of Djibouti, including consumers, small businesses and home offices (less than 10 employees), and tourists (mainly with the Computer Rental Stations).

4.1 Market Segmentation


Our market segmentation focuses: y y y on residents, small businesses, And tourists of Djibouti.

However, the tourist market segment has very different needs, so the income potential is vastly different than the other two market segments. The income potential analysis is as follows: Though the numbers in our market segmentation scheme show that the tourist segment makes up the largest portion of potential customers, they do not actually represent the largest income potential. The average tourist is in Obock for about a week and will not be in the market to

purchase a computer or have one repaired. However, many tourists want to be able to access the Internet and check their e-mail. We will satisfy this need with our Computer Rental Stations. Tourists will be able to rent time at a Computer Rental Station to browse the Internet, check email, and download their digital photos from their camera memory cards onto discs. The fees we will charge to rent the Stations will be modest, but since there will be no actual product leaving the store for this service, the rental fees are straight profit. We expect these Rental Stations to generate approximately 10% of the business' profit, so the income from the tourist market segment is actually 10%. In terms of income potential, the largest market segment is actually the local consumers. This segment is represented in the market segmentation scheme under the heading "Resident Households". According to the official website for the state of Djibouti, in 2009, 52.4% of Djibouti households had computers. In fact, many households have more than one computer. Consumers need a place to repair and upgrade the computers they already have as well as purchase new computers and parts with the latest technology. Currently, the local residents have very limited resources for purchasing computers or parts. The remaining 40% of our business income will be generated by the small business market segment. 55% of the businesses in Djibouti are small businesses with less than 10 employees. These small businesses are large enough to need the high-quality computer technology we offer, but too small to have a separate computer management staff.

Market Analysis

Year 1 Potential Customers Growth 56,243 2,956 Resident Households 2% Small Businesses 2% Tourists Total 2% 2.05%

Year 2 57,396 3,017

Year 3 58,573 3,079

Year 4 59,774 3,142

Year 5 60,999 3,206

1,123,25 5 1,187,46 1,094,881 1,117,326 1,140,232 1,163,607 0 1,035,682 1,056,913 1,078,580 1,100,691

4.2 Target Market Segment Strategy


Analysis of our market segmentation shows that 90% of our income will be generated by local consumers and small businesses, with the remaining 10% being generated by tourists. Advertising strategy to the local market segments will differ from advertising strategy to the tourism segment in the following ways: Advertising to Local Consumers and Small Businesses:
y y y y

Yellow Pages Local newspapers Radio Internet website

4.3 Service Business Analysis


DjibTech is part of the retail computer industry, which includes several types of businesses: 1. Chain Stores and Computer Superstores: these include major chains such as CompDjib, Best Buy, Sam's Club, Abdul, etc. They are almost always more than 10,000 square feet of space, and are often warehouse-like locations where people go to find products in boxes. They usually offer a wide selection of software as well as the hardware. When purchasing computer systems, customers chose from various as-is computer systems, often without the option to alter the system components. Their products are usually aggressively priced, but little or no support is provided. If they do offer computer repair service, the turn-around time is often lengthy. 2. Small Computer Dealers: storefront computer retailers, usually less than 5,000 square feet. These computer stores are usually privately owned and often owner-operated. Because they are privately owned, the quality of products and service varies greatly from one store to another. They usually focus on a few main brands of hardware, offer a minimum of software, and usually offer some level of service and support. A well run store will offer top-quality products and competent, timely support and repair service; whereas, a poorly run store will provide little or no support and carry products chosen

mainly for their low price point, not quality or reliability. As with quality and service, the prices at these small stores vary between one store and another. Some small stores make a point to compete with the prices of the large chain stores and superstores, and some do not. Small stores have the advantage of a one-on-one relationship between the customer and the sales person, which often results in more personalized service and products that are better matched to the individual customer's needs. 3. Internet/Mail order: mail order businesses from which customers purchase hardware over the phone or Internet, including components and whole computer systems. They typically offer boxed products that are aggressively priced, but usually offer no service or support. This is a viable option for the purely price-driven buyer, who buys boxes and expects no service. There is, of course, always a time delay between purchasing the products and receiving them due to shipping time, and often, the customer has to pay the shipping charges. Also, there is no opportunity for the customer to do a hands-on inspection before a product is purchased. The computer industry has a greater influence on our society all the time. Most people use computers either at work or at home. As the general public becomes more computer savvy, it places a greater value on quality resources to meet their computer needs.

4.3.1 Competition and Buying Patterns


Consumers and small business buyers understand the concept of service and support, and are much more likely to pay for it when the offering is clearly stated. There is no doubt that we compete much more against all the box pushers than against other service providers. We need to effectively compete against the idea that businesses should buy computers as plug-in appliances that don't need ongoing service, support, and training. Research indicates that our target consumers and small businesses think about price but would buy based on quality service if the offering were properly presented. They think about price because that's all they ever see. We have very good indications that many would rather pay 1020% more for a relationship with a long-term vendor providing back-up and quality service and support; they end up in the box-pusher channels because they aren't aware of the alternatives. Availability is also very important. Consumers and small business buyers tend to want immediate, local solutions to problems.

Strategy and Implementation Summary


Our target market consists of consumers, small businesses and home offices (less than 10 employees), and tourists. Our sales and marketing strategy will consist of offering a wide selection of quality products and services, a friendly pleasant atmosphere, and a convenient location in the center of Obock with accessibility to locals and tourists alike. We will establish ourselves in the community through word-of-mouth referrals from our satisfied clients, and various forms of advertising.

5.1 Competitive Edge


Our competitive edge is a combination of our wide range of products and services, outstanding location, and our interaction with our clients. By building a business based on long-standing relationships with satisfied clients, we simultaneously build defenses against competition. The longer the relationship stands, the more we help our clients understand what we offer them and why they should both stay with Djibtech , and refer us to others in the community. In close-knit communities like the Big Island of Djibouti, reputation is extremely important, and word-ofmouth advertising is invaluable.

5.2 Marketing Strategy


Our marketing strategy is a simple one: satisfied customers are our best marketing tool. The first time a customer comes to Djibtech, they will know that they have found a one-stop shop for all of their computer needs, including a friendly personal atmosphere with exceptional customer service. We have talked with many friends and associates who are excited about our plans and are anxious to shop with us and use our services. Word of mouth and a good reputation are the best marketing tools in a close-knit community such as ours. In addition, we will have a website, do radio and newspaper advertising, distribute flyers to local businesses, and advertise in the Yellow Pages. These venues will help us become known as we establish our business.

5.3 Sales Strategy


Our umbrella sales strategy is to sell Djibtech to the West Djibouti community as the best resource for their computer needs, enhancing their lives with our quality, latest-technology products, the convenience of our one-stop shop, affordable pricing and the reliable professional service we offer. We will sell Djibtech through each employee's expertise, courtesy, and warmth, creating a trusting impression on all customers, and establishing loyalty and return visits. We will ensure each visit to Djibtech is a professional and pleasant experience, so that customers can always depend on our brand of service when they arrive. We expect to have a customer return rate of 90% at the end of the first year and for sales to increase to over a quarter-million dollars by end of second year.

5.3.1 Sales Forecast


The important elements of the Sales Forecasts are shown in the chart and table below. Initial sales forecast indicate a healthy first year revenue increasing modestly but steadily in the second and third year. These figures are based on revenue from three main areas:

1. Computer Sales - this includes sales of all hardware components. We estimate a 5% annual increase in this revenue area from new customer acquisition. The sales costs for computer hardware averages 70% of the final sales prices when the hardware is sold. Costs for wholesale computer hardware is expected to have a 2% annual increase. 2. Computer Service - revenue generated strictly from labor fees, so except for payroll, there is no sales cost. We estimate a 10% annual increase in this revenue area from repeat business as a result of customer loyalty. 3. Computer Rental Stations - revenue generated from customers renting the computer stations by the hour. We estimate a 3% annual increase to reflect the projected increase in tourism to Obock. This revenue is all profit since it requires no cost for inventory and it is basically self-service, so requires no labor hours.

Management Summary
The management philosophy of Djibtech is based on respect for each of our fellow employees, respect for every client, and individual responsibility. We believe in listening to our clients and doing our best to embody their vision of a community-minded business dedicated to meeting all their computer needs. Our management team consists of the owners, who are experienced entrepreneurs possessing a breadth of functional experience in computer technology, information technology, management and retail. Both Amin and Ali will share the senior management responsibilities with Ahmed directing the sales, development, operations and production, and Iftin directing the finances and marketing. We still need to find a networking specialist for our clients who require that service, but as the need for that will be on a job-by-job basis, we will use an independent contractor. We already know of a couple of qualified candidates. When the need arises to hire employees, we will hire only employees who demonstrate technical aptitude and a dedication to excellent customer service. The organizational structure and personnel plan reflect our intentions to maintain an organization that is customer oriented and technologically proficient, while efficiently managing cost controls and productivity.

6.1 Personnel Plan


The Personnel Plan below reflects our projected need at opening, and carries through the second year. The need for any additional personnel is not anticipated before the third year.

Personnel Plan ALI AMIN Total People Total Payroll Year 1 Year 2 Year 3 $33,000 $36,000 $40,000 $16,500 $21,000 $25,000 2 2 2 $49,500 $57,000 $65,000

Financial Plan
The following subtopics help present the financial plan for DjibTech.

7.1 Important Assumptions


The key underlying assumptions of our financial plan shown in the following general assumption table are:
y y y y

We assume access to the start-up funding necessary to provide adequate initial capitalization and establish our company. We assume continued steady economic growth in Djibouti as predicted by Bank of Djibouti, and other Djiboutian economists. We assume continued steady population growth of the West Djibouti community. We assume continued steady increase in tourism to the Obock area as predicted by the Department of Business, Economic Development and Tourism for the State of Djibouti. We assume continued usage of IBM-compatible computers in the home and at work.

General Assumptions Year 1 Plan Month 1 Current Interest Rate 10.00% Long-term Interest Rate 10.00% Tax Rate 30.00% Other 0 Year 2 2 10.00% 10.00% 30.00% 0 Year 3 3 10.00% 10.00% 30.00% 0

7.2 Break-even Analysis


For our break-even analysis, we assume running costs which include our full payroll, rent and utilities, and an estimation of other running costs. We will monitor gross margins very closely, and maintain them at or above 50% by taking advantage of all promotions and discounts offered by our manufacturers and by our higher-profit revenue generators of computer service and Computer Rental Stations. The chart shows what we need to sell per month to break even, according to these assumptions. This is about 6% of our projected sales for our first year.

Break-even Analysis Monthly Revenue Break-even $12,868 Assumptions: Average Percent Variable Cost 50% Estimated Monthly Fixed Cost $6,447

7.3 Projected Profit and Loss


There are two important assumptions with our Projected Profit and Loss statement: 1. Our revenue is based on minimum estimated averages against highest expense expectations. 2. Our major expense of rent is fixed for the next three years.

Pro Forma Profit and Loss Year 1 Sales Direct Cost of Sales Other Costs of Goods Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Sales and Marketing and Other Expenses Depreciation Rent Utilities Security Alarm System Insurance Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit $219,550 $109,550 $0 $109,550 $110,000 50.10% $49,500 $280 $0 $15,600 $3,600 $360 $600 $7,425 $0 $77,365 $32,635 $32,635 $3,310 $8,797 $20,527 $232,977 $111,741 $0 $111,741 $121,236 52.04% $57,000 $280 $0 $15,600 $3,600 $360 $600 $8,550 $0 $85,990 $35,246 $35,246 $2,974 $9,681 $22,590 Year 2 $247,333 $113,976 $0 $113,976 $133,357 53.92% $65,000 $280 $0 $15,600 $3,600 $360 $600 $9,750 $0 $95,190 $38,167 $38,167 $2,624 $10,663 $24,880 Year 3

Net Profit/Sales

9.35%

9.70%

10.06%

7.4 Projected Cash Flow


Our projected cash flow includes planned borrowing to increase our capital and thereby ensure a positive cash balance while our business is becoming established. Though the cash flow is negative on and off throughout the year, we will maintain a healthy cash balance, which steadily increases in both the second and third years.

Pro Forma Cash Flow Year 1 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received $219,550 $219,550 $0 $0 $0 $35,000 $0 $0 $0 $254,550 $232,977 $232,977 $0 $0 $0 $0 $0 $0 $0 $232,977 $247,333 $247,333 $0 $0 $0 $0 $0 $0 $0 $247,333 Year 2 Year 3

Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance

Year 1 $49,500 $136,766 $186,266 $0 $0 $0 $3,504 $0 $0 $0 $189,770 $64,780 $66,805

Year 2 $57,000 $156,082 $213,082 $0 $0 $0 $3,504 $0 $0 $0 $216,586 $16,390 $83,195

Year 3 $65,000 $157,370 $222,370 $0 $0 $0 $3,504 $0 $0 $0 $225,874 $21,460 $104,655

7.5 Projected Balance Sheet


Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligations as long as our revenue projections are met.

Pro Forma Balance Sheet Year 1 Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Year 2 Year 3

$66,805 $12,320 $0 $79,125 $0 $0 $0 $79,125

$83,195 $12,566 $0 $95,762 $0 $0 $0 $95,762

$104,655 $12,818 $0 $117,473 $0 $0 $0 $117,473

Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth

Year 1 $15,076 $0 $0 $15,076 $31,496 $46,572 $20,000 ($7,975) $20,527 $32,552 $79,125 $32,552

Year 2 $12,627 $0 $0 $12,627 $27,992 $40,619 $20,000 $12,552 $22,590 $55,142 $95,762 $55,142

Year 3 $12,962 $0 $0 $12,962 $24,488 $37,450 $20,000 $35,142 $24,880 $80,023 $117,473 $80,023