How-To-Guide Series

How to Develop Business Plan

Dr. Eisa Abdelgalil

Data Management and Research Department

2005

Published by Dubai Chamber – Data Management & Business Research

Tel. 04 2028410 Fax: 04 2028478

www.dubaichamber.ae

ISBN 9948 – 430 – 03 - 4

Table of Contents Table of Contents...........................................................................................................1 1. Introduction................................................................................................................2

1.1 Background..........................................................................................................2 1.2 Objective ..............................................................................................................2 1.3 Methodology and data..........................................................................................2

2. Business Plan .............................................................................................................3 2.1 What is a business plan? ......................................................................................3 2.2 Information needs ................................................................................................4 2.2.1 Market information ...........................................................................................5 2.2.2 Operation information.......................................................................................5 2.2.3 Financial information........................................................................................6

3. Writing Business Plan................................................................................................7 3.1 Introduction..........................................................................................................7 3.2 Executive summary..............................................................................................7 3.3 Industry analysis ..................................................................................................8 3.4 Description of business ........................................................................................9 3.5 Production plan ....................................................................................................9 3.6 Operations plan ..................................................................................................10 3.7 Marketing plan ...................................................................................................10 3.8 Organizational plan............................................................................................11 3.9 Financial plan.....................................................................................................11 3.10 Risk assessment ...............................................................................................13 3.11 Conclusion .......................................................................................................13 3.12 Appendix..........................................................................................................14

4. Sample Business Plan ..............................................................................................15 References....................................................................................................................32 Appendix I ...................................................................................................................33 Appendix II ..................................................................................................................36

1

1. Introduction

1.1 Background

The business planning process helps investors to understand what they want to do,

how and when. Planning is an important task for investors in avoiding fatal mistakes

during the implementation process of a new business. During planning, the process of

thinking, researching and analyzing is as useful as the plan itself. Going through the

planning process can be very beneficial to the new business.

During the business planning process, errors of judgment can easily be rectified and

new options can be explored, but it is too late to do that during the implementation

process of the business. A solid business plan may not necessarily lead to business

success but it is expected to identify the problems that may lie ahead.

A well-prepared business plan demonstrates that the investor knows the business very

well and that he has carefully thought of the new business in terms of product/service,

management and organization, marketing and competition, and financing and risks.

1.2 Objective

Business plan is an important document that any entrepreneur needs when starting up

a new business (the words investor and entrepreneur are used interchangeably in this

guide). It helps the entrepreneur put things into perspective and understands what is

needed to be done. The objective of this guide is to enhance the awareness of those

who are starting their businesses and help them develop step by step their business

plans. This guide answers the following research questions:

1. What is a business plan?

2. What are the information needs for a business plan?

3. How is a business plan developed?

1.3 Methodology and data

A step-wise approach is used to develop step-by-step business plan. Literature

materials are compiled from various sources, including the Internet.

2

2. Business Plan

2.1 What is a business plan? The business plan (BP) is a document which describes the pertinent internal and

external factors and influences that are involved in starting a new business. Ideally,

the BP provides answers to the crucial questions of where is the business now? Where

is the business going? And how does it get there? The PB, as a road map, helps the

investor put things into perspective and understands what is needed to be done.

The BP can be prepared by the investor, but he/she may hire or enlist the help of other

people, such as business consultants and experts. The Internet provides a free source

where samples of BP can be found. Whether the PB is to be prepared by the investor

or a consultant depends on whether the investor has the necessary skills that are

needed for preparing a BP, such as planning, organizing, forecasting, marketing and

sales, etc. Usually, the investor determines which skills he/she possesses and which

are lacking and then look where to find them.

When drawing up the BP, there are three perspectives that are to be considered. These

are namely the investor's perspective, the market perspective, and the lenders'

perspective.

In the first perspective, the investor views the new business through his/her own eyes

and should be able to articulate and crystallize the basic concept of the new business.

In the second perspective, the investor view the new business through the customers'

eyes and therefore needs to think of whether or not the product/service will satisfy the

customers' needs.

In the third perspective, the investor views the business through the lenders' eyes and

therefore needs to think whether or not the business has sound financial projections.

The scope and the level of the details of the BP are determined by several factors.

These are the type of the new business, the growth potential of the business, the

market size of the product/service, and competition, among others. The potential

readers/evaluators of the BP are people such as the business employees, suppliers,

customers, and potential lenders such as bankers and financiers. The BP is supposed

to satisfy the needs of all those who are likely to read and evaluate it. For example,

the potential lenders are usually interested in the so-called four Cs of credit: character,

cash flow, collateral; and capital contribution. In other words, the lenders are mainly

3

interested in that the BP reflects the investor's credit history (character), his ability to

repay debt and interest (cash flow), the tangible assets that secure the loan (collateral)

and the equity that he has invested in the business (capital).

The BP helps determine the feasibility of the new business, provides guidance to the

investor in planning and organizing the business activities, and helps in getting the

necessary financing.

Generally speaking, there are two main types of business plans. These are namely

basic plan and comprehensive plan. The following table summarizes the different

features of these two types of plans, based on survey results:

Table 1: Characteristics of business plans

Purpose of Plan Type of Plan Approx Pages *

Elapsed Months **

External Help?

Number of Drafts

Parts of Greatest Difficulty

Internal/ personal use Basic 10 <2 No 1-3 Market analysis

Raise bank loans Comprehensive 15 1 Probably 2-4 Financial

projections

Seek venture capital/ equity Comprehensive 20+ 2-5 Probably 2-5 Market analysis

Assess viability of business Basic 10 2 Possibly 2-4 Market analysis

Secure approval from shareholders/ directors

Comprehensive 15 2-3 Possibly 2-6 All parts equal

Source: Business Plan Ware, available at http://www.planware.org/insights.htm?source=trpanel#2 * Main sections only - excludes appendices, attachments etc.

** Covering research, writing & redrafting.

2.2 Information needs

The preparation of the BP requires a lot of time and energy. Therefore, before the

investor makes that commitment it is preferable that the investor makes a quick

preliminary feasibility study for the idea of the new business to identify whether there

are obstacles to its success. Before doing the pre-feasibility study, the investor needs

to define the goals of the new business because these goals set the framework of the

production, marketing and financial plans of the new business. The quick feasibility

study needs information and these are marketing, operational, and financial

information.

4

2.2.1 Market information

The information on the target market of the new business product/service is important

element for the investor to know. The definition of the target market (the buyers) of

the product/service helps the investor determine the size of the market and the market

goals of the business. The target market can be defined based on things like income

group, educational level, geographical location, demographic and gender factors, etc.

A good marketing plan needs gathering information on the industry and the market

under consideration. The investor may start gathering broad information on general

environmental and demographic factors and national industry trends (the one in which

the investor will be operating). Then work down to the medium level of the local

environmental and demographic factors, local industry trends, and local competition

strengths and weaknesses. Then finally the investor can narrow down on the actual

market positioning in the competitive environment and market objectives and goals of

the new business, that are quantifiable and measurable.

2.2.2 Operation information

The operational information that the BP plan may incorporate and may need some

search by the investor is as follows (assuming manufacturing business operation):

♦ Location: The accessibility of the new business to customers, suppliers,

distributors, etc. is determined by its location.

♦ Manufacturing operations: The identification of the machine and assembly

operations and which part is sub-contracted.

♦ Raw materials: The source and cost of raw materials and suppliers contact

information.

♦ Equipments: The equipments to be purchased or leased and their cost.

♦ Labour: The different types of labour skills that are needed and their costs and

how to get them.

♦ Space: The space size that is to be rented or bought.

♦ Overhead: The items that are needed to support the activity.

5

2.2.3 Financial information

The investor needs to prepare a budget which includes all possible expenditures and

revenues in the first year of the new business. The expenditures may include capital

expenditure, direct operations costs and other expenses that are likely to be incurred.

The revenues can be forecasted using market data. The industry benchmarks, which

represent the industry history and trends, can be used to prepare the pro forma

financial statements and estimate the costs.

6

3. Writing Business Plan The BP should be comprehensive and convey a full picture and understanding of the

new business to those who will be interested in it. The outline of a BP is shown in

Appendix I at the end of this guide. This section explains in more details the items

that are included in the outline of the BP, which is shown in the appendix. In

principle, the presentation can easily be adapted to fit manufacturing or non-

manufacturing businesses, whether they are producing a product or providing a

service.

3.1 Introduction This introductory page summarizes the basic idea of the new business. Those who are

interested in the BP can read it and form a clear idea of the business. This is the cover

page that gives a short description of the contents of the BP and the page usually

includes the following information:

♦ Name and address of the new business.

♦ Name of the investor, phone and fax numbers, e-mail, website, if there is one.

♦ Short description of the nature of the new business.

♦ Financing needs that can start this new business and keep it running.

♦ Statement on the confidentiality of the report.

3.2 Executive summary

This is an essential part of the BP because it is supposed to encourage and stimulate

the people, who are interested in the BP, to read through the whole plan. Therefore

this part will determine whether or not the BP is interesting enough to read it all. The

executive summary usually puts forward the key points of the BP in a clear and

persuasive manner. The executive summary is not about summarizing every part of

the BP, but highlighting the essential and the crucial issues in the new business idea.

An example of a business plan executive summary is shown in Appendix II at the end

of this guide.

7

Although the executive summary appears first in the business plan, but usually it is

written when the whole plan is finished. It covers the most important facts such as

sales growth and profitability and strategic focus. The contents of the summary

depend on the goals of the plan. If the goal is to sell a business idea to

financiers/investors, then the summary should include the main highlights that will

stimulate potential financiers/investors to read the plan in its entirety. These main

highlights may be growth rates, competitive edge, new technology, etc. On the other

hand, if the plan is for the business internal use only, then the summary is matched to

that purpose.

As a general rule, the first paragraph should include the name of the business, what it

sells, where it is located, the nature and purpose of the plan, and the keys to the

success of the new business. Then the strategic focus of the plan, and any other

important information that other people should know, should be highlighted. Charts

that show sales, gross margin, and profits for at three years can be included, and these

numbers should also be mentioned in the summary text. Always remember that the

executive summary is the key to the rest of the plan. Therefore, keep it short and get it

right.

3.3 Industry analysis

In this section, the BP starts with the description and the assessment of the external

environment of the new business, that is, the variables that are beyond the control of

the business. These are things such as the economy, technology, laws and regulations

and culture. For example, things such as unemployment, average income, interest rate

changes and technological advances, socio-cultural changes in society. In addition,

competition and trends of industry, in which the new business will be operating, are

discussed and analyzed. Usually, this part covers the following important issues:

♦ Economic, technological, legal and cultural issues at national economy level.

♦ Products/services of the industry.

♦ Industry sales over the last three to five years.

♦ Industry expected growth in the foreseeable future.

♦ Entry of other companies into the industry over the last 3 to five years.

♦ Competitors and their strengths and weaknesses.

8

♦ Sales growth of the competitors.

♦ Market trends in the local market of the new business.

♦ Profile of the customers of the new business and that of the competitors.

3.4 Description of business

This section of the BP describes in details the product/service provided by the new

business and the size and the scope of the new business and its operations. Examples

of things to be emphasized here are management team, company technical capability,

products, infrastructure, offices, transport, strengths and weaknesses, and strategic

objectives. Usually this section covers the followings important issues, among others:

♦ Mission statement which describes what the new business attempts to achieve.

♦ Reasons of establishing the new business and the reasons of its likely success.

♦ Description of the product or service provided.

♦ Location of the new business, its accessibility to traffic and parking facilities.

♦ Business premises, their conditions and their legal status.

♦ Utilities available at the premises such electricity, water and sewage.

♦ Personnel and purchased or leased office equipment.

♦ Experience of the investor that is needed for the success of the business.

3.5 Production plan

If we assume the new business is a manufacturing facility, then this part of the

business plan should describe in details the manufacturing process of the product that

is to be produced by the new business. Usually, this part covers the following issues,

among others:

♦ Lay out of the manufacturing process of the product.

♦ Manufacturing machinery and equipment, their costs and suppliers.

♦ Manufacturing raw materials, their costs and suppliers.

♦ Costs of sub-contracting and the sub-contractors and their details.

♦ Product manufacturing costs.

9

If the new business is non-manufacturing operation, then this section can easily be

adapted. For example, for a retail trader he/she needs to think of things like the goods

to be purchased, inventory control, storage space, steps of the business transaction,

flow of goods to customers, and customer service, etc.

3.6 Operations plan

This section of the BP plan describes the flow of a product or a service from the

producer or the provider to the customers. This includes things such as inventory

control, product or service delivery and customer support services, the steps involved

to finalize a business transaction and the role of technology in that transaction

process. For the businesses that provide services, the service delivery quality is

important feature of the new business and therefore it should be detailed in this part of

the BP.

3.7 Marketing plan

♦ The market plan is basically about how the new business will effectively

compete and survive in the market place. This part of the BP describes how a

product/service is promoted, priced and distributed. It describes the market, its

geographical area, consumers' behavior and market segmentation, actual

demand, potential demand, and future demand. Usually, this section of the BP

covers the following critical issues, among others:

♦ Market description

- Customers description: Segmented by consumer demographics such as

age, sex, income, occupation, education, etc.; and consumer

psychographics such as needs, attitudes, interests, life style etc.

- Competitors description: Identify businesses that compete with you

directly, describe their strengths and weaknesses and know their marketing

strategies.

- Marketing objectives and goals

- Marketing strategy and action programmes

- Budget and controls for marketing strategy and action programmes

10

♦ Product/service description

- Product: Describe the benefits of the product/service to the customers.

- Price: Describe how the price is set for the product/service.

- Place: Describe the aspects of getting the product/service to consumers.

- Promotion: Describe how the product/service is promoted.

3.8 Organizational plan

This part of the business plan describes the new business in terms of ownership,

authority and responsibilities. This section of the BP usually covers issues like the

legal form of the new business. The business legal status may be proprietorship,

partnership, joint stock or limited liability company. Also, this section includes the

number of employees and managers of the business and the business organizational

structure with job descriptions and responsibilities for all the key employees of the

business. This is translated into an organizational chart that delineates the authority

lines and who is responsible for what within the new business and how the employees

interact when carrying out their duties.

3.9 Financial plan

This section of the BP describes in details the financial projections of the new

business and its financial and economic feasibility. Also, it describes the investor's

financial commitment to the new business. These financial projections are usually

made for the first three to five years of the new business. For the first year, the

projections are made on monthly basis and for other years they are made on annual

basis. Usually, three financial statements are prepared by the investor and these are

pro forma income statement (also know as profit and loss account), pro forma cash

flow statement, and pro forma balance sheet.

The pro forma income statement (also known as profit and loss statement) describes

projected net income/profit as projected revenue minus projected costs. It consists of

four main sections and these are namely:

♦ Sales revenues: Inflows from the operations of the company

♦ Costs of goods sold: Direct costs of goods produced or services provided.

♦ Expenses: These are costs incurred in the business operations, such as

administrative and selling cost.

11

♦ Net income: Net outcome of revenues minus costs and expenses.

The pro forma cash flow statement or budget describes the projected cash available as

projected cash inflows minus projected cash outflows or disbursements. It consists of

four main sections and these are namely:

♦ Beginning cash balance: Cash available to the business at the beginning of

operation, it can at hand or in bank accounts.

♦ Cash inflows: Cash from sales, collection of accounts receivable, loans

proceeds, and any other cash received.

♦ Cash outflows: Payments to suppliers and employees, capital expenditures,

loans repayments, and any other cash dispersed.

♦ Ending cash balance: It is the beginning cash balance plus cash inflows minus

cash outflows.

The pro forma balance sheet (also known as statement of financial position) describes

the projected assets, projected liabilities and the projected net worth of the new

business. It consists of three main sections, and these are namely:

♦ Assets: Resources of the business for operation.

♦ Liabilities: Claims by outsiders on the business resources.

♦ Owner's equity: What is remaining of the business resources when liabilities

are subtracted from the assets.

Another financial statement that may be needed is known as the sources and uses of

funds statement. This statement is needed if the BP is prepared with the view of

getting funding from financiers or lenders. It shows where the money is coming from

and where it is going to. It consists of two main sections, and these are namely:

♦ Sources of funds: Revenues from operations, increase in debt, sales of assets,

equity contribution, and any other sources of money.

♦ Uses of funds: Debt repayment, purchase of equipment, land and buildings,

operation expenses, and any other expenses incurred by the business.

♦ Changes in financial position: The difference between the inflows and

outflows of funds.

12

The following financial information, among others, is usually needed for drawing up

the financial plan:

♦ Fixed and variable cost projections for 3 to 5 years.

♦ Sales projections for 3 to 5 years.

♦ Projected cash flow for 3 to 5 years.

♦ Projected income statements for 3 to 5 years.

♦ Projected balance sheets for 3 to 5 years.

Also the investor needs to lay out the capital he/she requires to start the new business.

Not only what he/she needs in the start up phase, but also he/she should think of any

investment that may be needed at a later stage.

3.10 Risk assessment

This part of the BP describes the potential risks to the new business and the strategies

to deal them, in case they occur. The potential risks may come from competitors, poor

production, marketing or management performance, and new technology. Therefore,

all risks that the new business is likely to encounter are to be discussed and evaluated.

3.11 Conclusion

In conclusion, the investor needs to emphasize and highlight the main points that may

insure or indicate the success of the new business and why he/she will be able to carry

out the plan successfully. The following factors may be helpful in the preparation of a

good BP, and lead to the success of the new business:

♦ The goals of the new business are specific and measurable.

♦ Full commitment by the investor to the new business.

♦ Prior experience in the field of the new business.

♦ Having sense for the potential risks and weaknesses of the new business.

♦ Establishing customer needs of the product/service.

♦ Strong initial advertising.

♦ Ability to offer low prices.

13

♦ Quality of product/service.

♦ Unique selling points and exclusive distribution channels.

♦ Capacity to innovate and modify product/service quickly.

3.12 Appendix

All the information and the documents that are not essential in the main body of the

BP are moved to this section. Examples of this are permits, leases, contracts,

agreements, market research data, and other supporting materials.

14

4. Sample Business Plan

This section introduces an illustrative example of a sample BP. The sample plan is for

an Internet Café and it has been adapted to Dubai from Business Plan Pro1. The

sample BP follows, more or less, the BP format that is shown in the Appendix.

1. Executive summary

Dubai Net Café, henceforth abbreviated as (DNC), will provide a forum for

communication and entertainment through the Internet. There is an increasing public

demand for access to the methods of communication and volumes of information now

available on the Internet; and access at a cost they can afford and in such a way that

they aren't socially and economically isolated. DNC's goal is to provide the

community with a social, educational, entertaining, and atmosphere for worldwide

communication.

This business plan is prepared to obtain financing in the amount of AED 240,000. The

financing is required to begin work on site preparation and modifications, equipment

purchases, and to cover expenses in the first year of operations. Additional financing

has already been secured in the form of (i) AED 240,000 from the Dubai Economic

Development Fund (ii) AED 190,000 of personal savings from the owner the business

(iii) AED 360,000 from three investors (iv) and AED 90,290 in the form of short-term

loans.

DNC will be registered as a limited liability company (LCC). This will shield the

owner and the three outside investors from issues of personal liability. The investors

will be treated as shareholders and therefore will not be liable for more than their

individual personal investment of AED120,000 each.

The financing, in addition to the capital contribution from the owner, shareholders and

the Dubai Economic Development Fund, will allow DNC to successfully open and

maintain operations through year one. The large initial capital investment will allow

DNC to provide its customers with a fully-fledged Internet cafe. A unique and

1 This sample business plan is adapted from Business Plan Pro, Palo Alto Software, Inc., 2000.

15

innovative environment is required to provide the customers with an atmosphere that

will spawn socialization. Successful operation in year one will provide DNC with a

customer base that will allow it to be self sufficient in year two.

1.1 Objectives

The objectives of DNC for the first three years of operation are:

♦ Creation of unique and innovative environment that differentiates DNC from

other coffee shops.

♦ Educating the community on what the Internet has to offer.

♦ The formation of an environment that brings people with diverse interests and

backgrounds together in a common forum.

♦ Good coffee/tea and bakery items at a reasonable price.

♦ Affordable access to the resources of the Internet and other online services.

1.2 Mission statement

As the popularity of the Internet continues to grow, easy and affordable access is

becoming a necessity of life. DNC provides the community with the ability to access

the Internet, enjoy a cup of coffee/tea, and share Internet experiences in a comfortable

environment. People of all ages and backgrounds will come to enjoy the unique,

educational, and innovative environment that the DNC provides.

1.3 Keys to success

The keys to the success for DNC are:

♦ Creation of unique and innovative atmosphere that differentiates DNC from

other coffee shops and Internet cafes.

♦ Establishment of DNC as community hub for socialization and entertainment.

♦ Creation of environment that does not intimidate the novice user. DNC

positions itself as educational resource for individuals wishing to learn about

the benefits the Internet has to offer.

♦ Great coffee/tea and bakery items.

16

1.4 Risks

The risks involved with starting DNC are:

♦ Will there be sufficient demand for the services offered by DNC?

♦ Will the popularity of the Internet continue to grow?

♦ Will individuals be willing to pay for the service DNC offers?

♦ Will the cost of accessing Internet from home drop so significantly that there

will not be a market for Internet cafes such as DNC?

2. Company

DNC will be located in downtown Dubai in Deira City Centre, and it will offer easy

and affordable access to the Internet. DNC will provide full access to email, World

Wide Web (WWW), File Transfer Protocol (FTP), and other Internet applications

such as Telnet. DNC will also provide customers with a unique and innovative

environment for enjoying great coffee/tea, specialty beverages, and bakery items.

DNC will appeal to individuals of all ages and backgrounds. The educational Internet

classes, and the helpful staff that DNC provides, will appeal to the audience that does

not associate themselves with the computer age. This educational aspect will attract

young people who are rapidly gaining interest in the unique resources that online

communications have to offer.

2.1 Company ownership

DNC is privately owned Limited Liability Company (LLC). Mr. Ahmed Ali, the

founder of DNC, is the majority owner, holds 51% of the shares. Messrs Mohamed

Abdalla, Musa Hilal, and Abbas Mahmoud hold minority positions as private

investors; they hold 20%, 19% and 10% of the shares respectively.

2.2 Start-up

DNC's start-up costs will cover coffee/tea making equipment, site renovation and

modification, capital to cover losses in the first year, and the communications

equipment necessary to get its customers online.

17

The communications equipment necessary to provide DNC's customers with a high-

speed connection to the Internet and the services it has to offer make up a large

portion of the start-up costs. These costs will include the computer terminals and all

costs associated with their set-up. Costs will also be designated for the purchase of

two laser printers and a scanner.

In addition, costs will be allocated for the purchase of coffee/tea making equipment.

One espresso machine, an automatic coffee grinder, and minor additional equipment

will be purchased.

The DNC's site at Deira City Centre will require funds for renovation and

modification. The renovation/modification cost estimate will include the costs

associated with preparing the site for opening the business.

2.3 Company location and facilities

A site has been chosen at Deira City Centre. The location is chosen for the following

reasons:

♦ Heart of Dubai-Deira downtown.

♦ Proximity to trendy and upscale apartments.

♦ Parking availability.

♦ Low cost rent.

♦ High visibility.

All of these qualities are consistent with DNC's goal of providing a central hub of

communication and socialization for Dubai-Deira area community.

3. Services

DNC will provide full access to email, WWW, FTP, and other Internet applications

such as Telnet. Printing, scanning, and introductory courses to the Internet will also be

available to the customer. DNC will also provide customers with a unique and

innovative environment for enjoying great coffee/tea, specialty beverages, and bakery

items.

18

3.1 Service description

NC will provide its customers with full access to the Internet and common computer

♦ Access to external POP3 email accounts.

ail account. This account will be

♦

ons like Microsoft Office.

NC will also provide its customers with access to introductory Internet and email

.2 Competitive comparison

NC will be the first Internet cafe in Deira-City Centre. DNC will differentiate itself

.3 Fulfillment

NC will obtain computer support and Internet access from Etisalat. Etisalat will

been completed with Dubai Bakeries to fulfill this requirement.

D

software and hardware. Some of the Internet and computing services available to

DNC customers are:

♦ Customers can sign up for a DNC em

managed by DNC servers and accessible from outside the DNC network.

FTP, Telnet, and other popular Internet utilities will be available.

♦ Access to Netscape or Internet Explorer browsers.

♦ Access to laser and color printing.

♦ Access to popular software applicati

D

classes. These classes will be held in the evening. By providing these classes, DNC

will build a client base familiar with its services. Good coffee/tea, specialty drinks,

bakery goods, and a comfortable place will provide DNC customers with a cozy

environment where they can enjoy the benefits of Internet and computing.

3

D

from the strictly coffee cafes in Deira-City Centre by providing its customers with

Internet and computing services.

3

D

provide the Internet connections, network consulting, and the hardware required to

run the DNC Network. Smart Coffee Co. will provide DNC with coffee/tea

equipment, bulk coffee/tea, and other supplies. A contract for the bakery items has

19

3.4 Technology

DNC will invest in high-speed computers to provide its customers with a fast and

n to the Internet. The computers will be reliable and fun to work

ith. We will continue to upgrade and modify the systems to stay current with

s DNC grows, more communications systems will be added. The possibility of

been accounted for in the current plan. As the demand for Internet

onnectivity increases, along with the increase in competition, DNC will continue to

NC is faced with the exciting opportunity of being the first-mover in the Deira City

market. The consistent popularity of coffee/tea, combined with

e growing interest in the Internet, has been proven to be a winning concept.

NC's customers can be divided into two groups. The first group is familiar with the

viting atmosphere where they can get out of their offices or

omes and enjoy a cup of coffee/tea. The second group is not familiar with the

efficient connectio

w

communications technology. One of the main attractions associated with Internet

cafes, is the state of the art equipment available for use.

3.5 Future services

A

additional units has

c

add new services to keep its customer base expanding.

4. Market analysis

D

Centre Internet cafe

th

4.1 Market segmentation

D

Internet and desires an in

h

Internet yet, and is just waiting for the right opportunity to enter the online

community. DNC's target market falls anywhere between the ages of 15 and 65. This

extremely wide range of ages is due to the fact that both coffee/tea and the Internet

appeal to a variety of people. In addition to these two broad categories, DNC's target

market can be divided into more specific market segments. The majority of these

individuals are students, professionals and business people.

20

4.2 Target market segment strategy

DNC intends to cater to novice users who want a guided tour around the Internet and

experienced users eager to indulge their passion for computers in a social setting.

or local and traveling professionals who desire to

ork or check their email messages in a friendly atmosphere. These professionals will

data ensure that the high demand for

offee/tea will remain constant over the next five years. The Internet and online

n growing exponentially. The potential growth of the Internet is

normous to the point where one day a computer terminal with an online connection

ers. The following are some key findings:

l customers said they would be willing to pay to access Internet.

on regular basis.

to

Moreover, DNC will be a magnet f

w

either use DNC's PCs, or plug their notebooks into Internet connections. DNC's target

market covers a wide range of ages: from members of young generations who grew

up surrounded by computers, to old generations who have come to the realization that

people today cannot afford to ignore computers.

4.2.1 Market needs

Factors such as current trends and historical sales

c

services have bee

e

will be as common and necessary as a telephone. For the next five years, the online

service provider market is sure to experience tremendous growth. Being the first

Internet-cafe in Deira City Centre, DNC will enjoy the first-mover advantages of

name recognition and customer loyalty. Initially, DNC will hold a 100% share of the

Internet cafe market in Deira City Centre. In the next five years, competitors will

enter the market. DNC has set a goal to maintain a market share of more than 50%.

4.2.2 Market trends

A market survey was conducted in March 2005. Key questions were asked of hundred

potential custom

♦ 70 potentia

♦ Five Dirham an hour is the most popular hourly Internet fee.

♦ 50 potential customers use Internet to communicate

21

4.3 v

he retail coffee/tea industry in Dubai experienced rapid growth at the beginning of

e decade and is now moving into the mature stage of its life cycle. Many factors

/tea in Dubai. The atmosphere in Dubai

umption. Current trends in Dubai reflect

bining a cafe with complete Internet service is the key to success.

proximately 10 coffee wholesalers in Dubai. These wholesalers distribute

offee/tea and espresso beans to over 100 retailers in Dubai-Deira area. Competition

ount of bargaining power between buyers and

ely competitive pricing.

er. Consumers, who do

Ser ice business analysis

T

th

contribute to the large demand for good coffee

City Centre is conducive to coffee/tea cons

the popularity of fresh, quality coffee/tea and specialty drinks.

The popularity of the Internet is growing exponentially. Those who are familiar with

the Internet are well aware of how fun and addictive surfing the Net can be. Those

who have not yet experienced the Internet need a convenient, relaxed atmosphere

where they can feel comfortable learning about and utilizing the current technologies.

DNC seeks to provide its customers with affordable Internet access in a cozy

environment.

Due to intense competition, cafe 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 DNC realizes the need for differentiation and strongly

believes that com

The fact that no Internet cafes are established in Deira City Centre, presents DNC

with a chance to enter the window of opportunity and enter into a profitable niche in

the market.

4.3.1 Business participants

There are ap

c

in both channels creates an even am

suppliers resulting in extrem

There is one online service provider in Dubai. This service provider uses a number of

different pricing strategies. These are charge monthly fee, charge hourly and/or phone

fees. Regardless of the pricing method used, obtaining Internet access through this

service provider can be rather costly for the average consum

not frequently serve the Internet, will not be willing to pay these relatively high costs.

22

4.3.2 Competition

The dual product and service nature of DNC's business faces competition on two

vels. DNC competes not only with coffee/tea retailers, but also with Internet service

ain competitors in the retail coffee segment are Cafe Havana, Swiss

afe, Gloria Beans, and Star Bucks. These businesses are located in Deira City

on from other

t access.

s on attracting novice Internet

sers. DNC plans on attracting these customers by:

♦ Providing a novice friendly environment. DNC will be staffed by

fed. If a customer has any type of

question or concern, a DNC's employee will always be available to assist.

hese key

The second, and m

users. Experienced Internet users serve an

knowledge and web-browsing experience that novice Internet users find attractive and

exciting. DNC plans on attracting these type of customers by:

le

providers. The m

C

Centre, and target a similar segment to DNC's. Heavy competition between coffee/tea

retailers in Deira City Centre creates an industry where all firms face the same costs.

There is a positive relationship between price and quality of coffee/tea.

Competition from online service providers comes from the sole provider Etisalat.

Potential online service providers, after the liberalization of the telecommunication

market, are also a competitive threat to DNC.

The good news is that DNC does not currently face any direct competiti

Internet-cafes in Deira City Centre. There are a total of ten Internet cafes in Dubai-

Deira area, but none of them is located in Deira City Centre. This number is expected

to grow with the increasing demand for Interne

5. Strategy

DNC has three main strategies. The first strategy focuse

u

knowledgeable employees focused on serving the customer's needs.

♦ A customer service desk will always be staf

♦ DNC will offer introductory classes on the Internet and email. These classes

will be designed to help novice users familiarize themselves with t

tools and DNC computer systems.

ost important, strategy focuses on attracting experienced Internet

important function at DNC. They have the

23

♦ Providing the latest in computing technology.

♦ Providing scanning and printing services.

♦ Providing access to powerful software applications.

The third strategy focuses on building a social environment for DNC customers. A

soc e serve to attract customers that

wou . Once on location at DNC, these

custom ill realize the potential

entertainment value the Internet can provide.

NC separates itself from all other cafes

Deira City Centre. In addition, DNC provides a comfortable environment with

ms, distinguishing itself from other Internet providers in Dubai-

eira area.

gh-quality coffee/tea at a competitive price. Due to the number of cafes in

eira City Centre, it is important that DNC sets fair prices for its coffee/tea. DNC will

ain source of promotion. Advertisements (ads) placed in Dubai

aily news papers such Gulf News, Al-Khaleej Times and 7 Days, will help build

e

offee business for many years.

ial nvironment, that provides entertainment, will

ldn't normally think about using the Internet

ers that came for the standard entertainment w

5.1 Competitive edge

DNC will follow a differentiation strategy to achieve a competitive advantage in the

cafe market. By providing Internet service, D

in

coffee and bakery ite

D

5.2 Marketing strategy

DNC will position itself as an upscale coffee house and Internet service provider. It

will serve hi

D

use advertising as its m

d

customer awareness. Accompanying the ads will be a coupon for a free hour of

Internet serving. Furthermore, DNC will give free three hours of Internet use to

beginners who sign up for an introduction to the Internet classes provided by DNC.

5.2.1 Pricing strategy

DNC bases its prices for coffee and specialty drinks on a solid pricing strategy. Our

pricing strategy drew on the experience of those companies who have been in th

c

24

Determining an hourly price for online use is more difficult because there is no direct

ompetition from another Internet cafe in Deira City Centre. Therefore, DNC

eir Internet service. Third, DNC used the market

budget AED 50,000 for promotional activities that will

clude advertising, with coupons for a free hour of Internet use, in local news papers

ns such as offering customers free Internet use if they pay for

n introduction to the Internet course taught by our computer technician.

cient computer

ills when they are hired, they are trained by our full-time computer technician. The

an is also available for the assistance of our customers. DNC's

ommitment to friendly and helpful service is one of the key factors that distinguish

structure. Implementation of this organizational form

alls for the owner, Mr. Ahmed Ali, to make all of the major management decisions in

usiness activities. The three private investors, Messrs

ohamed Abdalla, Musa Hilal, and Abbas Mahmoud, will not be included in

c

considered three sources to determine the hourly price. First, it considered the cost to

use other Internet providers. Second, DNC looked at how Internet cafes in other areas

of Dubai went about pricing th

survey that it has conduced recently. Evaluating these three factors resulted in DNC's

hourly price of five Dirham.

5.2.2 Promotion strategy

DNC will implement a pull strategy in order to build consumer awareness and

demand. Initially, DNC has a

in

and in-house promotio

a

DNC realizes that in the future, when competitors enter the market, additional budgets

must be allocated for promotion in order to maintain its market share.

5.3 Sales strategy

DNC employs staff to handle sales transactions. Computer literacy is an essential

requirement for DNC employees. If employees do not possess suffi

sk

full-time technici

c

DNC from other Internet cafes.

6. Management and personnel

DNC is owned and operated by Mr. Ahmed Ali. The company, being small in nature,

requires a simple organizational

c

addition to monitoring all other b

M

25

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 DNC that are common

within larger organizational chains. This strategy will enable DNC to react quickly to

changes in the market. The staff will consist of six part-time employees working thirty

hours a week. In addition, one full-time computer technician will be employed to

work forty hours a week.

7. Financial plan

Sales:

The projected coffee sales are based on financial information provided by a coffee

onsultant. Internet sales are estimated by calculating the total number of hours each

ive each day and then generating a conservative estimate as to how

any hours will be purchased by consumers.

nternet access is AED 6,600 per month,

aid to Etisalat. The cost of e-mail accounts is 25% of the selling price.

coffee/food

reparation counters = AED10,000, one information display counter = AED10,000,

ating counter = AED 5,000, sixteen stools = AED 10,600, six computer

one, AED 260,400 in year two, and AED 290,040 in year three.

c

terminal will be act

m

Cost of goods sold:

The cost of goods sold for coffee-related products is determined by the "retail profit

analysis" that is carried out by a consultant in the coffee business. The cost of bakery

items is 20% of the selling price. The cost of I

p

Fixed costs:

Fixed costs associated with starting DNC are the following: 11 computers = AED

220,000, two printers = AED10,000, one scanner = AED 5000, one espresso machine

= AED100,700, one automatic espresso grinder = AED7,950, two

p

one drinking/e

desks with chairs = AED 20,400, stationeries = AED 5,000, two telephones = AED

2,000, decoration expense = AED 140,110.

Salaries expense:

The founder of DNC, Mr. Ahmed Ali, will receive a salary of AED 240,000 in year

26

Payroll Expense: DNC intends to hire six part-time employees at AED 57.50/hour

and a full-time technician at AED 100/hour. The total cost of employing seven people

t these rates for the first year is AED 70,240/month.

/month for a total of

tilities expense: As stated in the lease agreement, the lessor is responsible for the

he 13 lines

sed to connect the modems will make local calls to the network provided by Etisalat

he first year.

s revenue increases in the second and third year of business, DNC intends to invest

es: The cost of obtaining legal consultation in order to draw up

e paper work necessary for registering the company as LLC is AED10,000.

a

Rent expense: DNC is leasing a 1,700 square foot facility at AED 85/sq. foot. The

lease agreement DNC signed specifies that it pays AED 20,000

36 months. At the end of the third year, the lease is open for negotiations and DNC

may or may not re-sign the lease depending on the demands of the lessor.

U

payment of utilities including gas, garbage disposal, and real estate taxes. The only

utilities expense that DNC must pay is the phone bill generated by fifteen phone lines;

thirteen will be dedicated to modems and two for business purposes. The basic

monthly service charge for each line provided by Etisalat is AED 170.29. T

u

resulting in a monthly charge of AED 2,247.7. The two additional lines used for

business communication will cost AED 345.8/month plus long distance fees. DNC

assumes that it will not make more than AED 400/month in long distance calls.

Therefore, the total cost associated with the two business lines is estimated at AED

745.8/month and the total phone expense at AED 2,993.5/month. In addition, it is

estimated that there will be an additional utility expense of AED 8,000.

Marketing expense: DNC will allocate AED 50,000 for promotional expenses at the

time of start-up. These will be used for advertising in newspapers in order to build

consumer awareness.

Insurance Expense: DNC has allocated AED 14,400 for insurance for t

A

more money for additional insurance coverage.

Legal and consulting fe

th

27

28

Depreciation: In depreciating capital equipment, computers are depreciated over a

five-year time period and the other fixed assets over seven years.

Accounts Payable: DNC acquired a loan of AED 240,000 from a local bank at a 10%

ents detail the monthly financial position

interest rate. The loan will be paid back at AED 7500/month over the next three years.

A short term loan of AED 92,900 will be paid back at a rate of 8%.

For further financial details, please refer to DNC's financial statements (cash flow

statement, income statement, and balance sheet) in the following pages. For the

business first year 2006, the financial statem

of the business. For the following two years of the business 2007 and 2008, the

business financial position is given annually.

Pro-Forma Income Statement/Profit and Loss (in 000 Dirham): January-December 2006-2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008

Sales 7,600 12,42510,730 20,809 21,613 22,451 23,278 24,137 25,030 25,958 26,923 27,926 248,878 303,549

Direct Cost of Sales 1,900 2,683 3,106 5,202 5,403 5,613 5,819 6,034 6,257 6,489 6,731 6,981 62,220 75,887

Gross Margin 5,700 8,048 9,319 15,607 16,210 16,838 17,458 18,102 18,772 19,468 20,192 20,944 186,659 227,662

Gross Margin % 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75%

Operating expenses:

Advertising/Promotion 5,000 2,500 2,500 2,500 2,500 2,500 2,500 1,000 1,000 1,000 1,000 1,000 25,000 25,000

Travel - - 750 - - - - - - - - - 750 -

Miscellaneous 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 12,000

Payroll Expense 6,800 6,800 6,800 6,800 6,800 6,800 7,610 7,775 7,957 8,156 10,376 10,617 93,291 121,824

Payroll Burden 1,020 1,020 1,020 1,020 1,020 1,020 1,142 1,166 1,193 1,223 1,556 1,593 13,994 18,274

Utilities 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 18,000

Insurance 500 500 500 500 500 500 500 500 500 500 500 500 6,000 6,000

Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 24,000

Contract/Consultants 500 500 500 500 500 500 500 500 500 500 500 500 6,000 3,000

Total Operating Expenses 18,320 15,820 16,570 15,820 15,820 15,820 16,752 15,441 15,650 15,880 18,432 18,710 199,034 228,097

Profit Before Interest (12,620) (7,773) (7,251) (213) 390 1,018 707 2,661 3,122 3,589 1,760 2,234 (12,376) (436)

Interest Expense Short-term 71 65 59 52 46 40 34 27 21 15 9 - 439 -

Interest Expense Long-term 193 187 180 173 167 160 153 147 140 133 127 120 1,880 1,190

Net Profit (12,884) (8,025) (7,490) (438) 177 818 520 2,487 2,961 3,441 1,624 2,114 (14,695) (1,626)

Net Profit/Sales -170% -75% -60% -2% 1% 4% 2% 10% 12% 13% 6% 8% -6% -1%

Please note that the figures in brackets are negative values.

29

Pro-Forma Cash Flow (in 000 Dirham): January-December 2006-2008

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008

Net Profit (12,884) (8,025) (7,490) (438) 177 818 520 2,487 2,961 3,441 1,624 2,114 (14,695) (1,626)

Plus:

Change in Accounts Payable 6,889 1,049 1,048 3,057 (114) 312 103 (700) 288 297 (194) 313 12,348 106

Current Borrowing (repayment) (750) (750) (750) (750) (750) (750) (750) (750) (750) (750) (750) (1,040) (9,290) -

Increase (decrease) Other Liabilities - - - - - - - - - - - - - -

Long-term Borrowing (repayment) (800) (800) (800) (800) (800) (800) (800) (800) (800) (800) (800) (800) (9,600) (5,000)

Capital Input - - - - - - - - - - - - - -

Subtotal (7,545) (8,526) (7,992) 1,069 (1,487) (420) (927) 237 1,699 2,188 (120) 587 (21,237) (6,520)

Less:

Change in Accounts Receivable - - - - - - - - - - - - - -

Change in Inventory (1,525) 196 106 524 50 52 52 54 56 58 60 63 (255) 383

Change in Other Short-term Assets - - - - - - - - - - - - - -

Capital Expenditure - - - - - - - - - - - - - -

Dividends - - - - - - - - - - - - - -

Subtotal (1,525) 196 106 524 50 52 52 54 56 58 60 63 (255) 383

Net Cash Flow (6,020) (8,722) (8,098) 545 (1,537) (472) (979) 183 1,643 2,130 (180) 524 (20,982) (6,903)

Cash Balance 21,201 14,486 8,260 8,914 7,332 6,656 5,547 5,109 6,012 7,281 6,695 6,691 6,691 194

Please note that the figures in brackets are negative values.

30

Pro-forma Balance Sheet (in 000 Dirham): January-December 2006-2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008

Short-term Assets

Cash 21,201 14,486 8,260 8,914 7,332 6,656 5,547 5,109 6,012 7,281 6,695 6,691 6,691 194

Accounts Receivable - - - - - - - - - - - - - -

Inventory 475 671 777 1,301 1,351 1,403 1,455 1,509 1,564 1,622 1,683 1,745 1,745 2,129

Other Short-term Assets - - - - - - - - - - - - - -

Total Short-term Assets 21,676 15,156 9,037 10,215 8,683 8,059 7,002 6,617 7,576 8,903 8,377 8,437 8,437 2,323

Long-term Assets

Capital Assets - - - - - - - - - - - - - -

Accumulated Depreciation - - - - - - - - - - - - - -

Total Long-term Assets - - - - - - - - - - - - - -

Total Assets 21,676 15,156 9,037 10,215 8,683 8,059 7,002 6,617 7,576 8,903 8,377 8,437 8,437 2,323

Liabilities and Capital

Accounts Payable 6,889 7,938 8,986 12,043 11,928 12,240 12,344 11,644 11,932 12,229 12,034 12,348 12,348 12,453

Short-term Notes 8,540 7,790 7,040 6,290 5,540 4,790 4,040 3,290 2,540 1,790 1,040 - - -

Other Short-term Liabilities - - - - - - - - - - - - - -

Subtotal Short-term Liabilities 15,429 15,728 16,026 18,333 17,468 17,030 16,384 14,934 14,472 14,019 13,074 12,348 12,348 12,453

Long-term Liabilities 23,200 22,400 21,600 20,800 20,000 19,200 18,400 17,600 16,800 16,000 15,200 14,400 14,400 9,400

Total Liabilities 38,629 38,128 37,626 39,133 37,468 36,230 34,784 32,534 31,272 30,019 28,274 26,748 26,748 21,853

Paid in Capital 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000

Retained Earnings (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (62,290) (73,311)

Net Worth (16,953) (22,971) (28,589) (28,918) (28,785) (28,172) (27,782) (25,917) (23,696) (21,115) (19,897) (18,311) (18,311) (19,531)

Please note that the figures in brackets are negative values.

31

References Abrams, R. (2000) "The Successful Business Plan: Secrets and Strategies", Running "R" Media, Palo Alto, California. Arkebauer, J. (1995) "The McGraw-Hill Guide to Writing a High-Impact Business Plan: A Proven Blueprint for First-Time Entrepreneurs" The McGraw-Hill, INC.,

ew York. N Covello, J. and B. Hazelgren (1994) "The Complete Book of Business Plans: Simple Steps to Writing a Powerful Business Plan", Source Books, INC., Naperville, Illinois. Covello, J. and B. Hazelgren (1998)"Your First Business Plan: A Simple Question and Answer Format Designed to Help You Write Your Own Plan", Source Books, INC., Naperville, Illinois. Gillman, J. and S. White (2001) "Business Plans that Work", Adams Media Corporation, Holbrook, MA, U.S. Hisrich, R., M. Peters and D. Shepherd (2005) "Entrepreneurship", McGraw-Hill Irwin, Boston. O'Donnell, M. (1991) "Writing Business Plans That Get Results: Step-by-Step Guide", Contemporary books, Chicago. Dethomas, A. and L. Grensing-Pophal, (2001) "Writing a Convincing Business Plan", Borron's Educational Series, New York. Schilit, W. (1990) "The Entrepreneur's Guide To Preparing A Winning Business Plan and Raising Venture Capital", Prentice Hall. Siegel, E., B. Ford, and J. Bornstein (1993), "Business Plan Guide", Ernst & Young Business Guide Series.

Internet sites where there are relevant materials for business plan:

http://www.planware.org/guide.htm

http://planmagic.com/download.html

http://www.ebp.com/en-gb/guide/default.aspx

http://www.fundedplans.com/index.html

www.businesslink.gov.uk/bdotg/action/home?&domain=www.businesslink.gov.uk

http://www.paloalto.com/ps/bp/

http://www.smetoolkit.org/SubCategory.jsp?iCategoryId=45&locale=1

http://www.businessplansource.com

http://www.sba.gov/starting_business/planning/basic.html

32

Appendix I

Outline of Business Plan2

1. Introduction

i. Name and address of the business

ii. Names and addresses of principals

iii. Nature of the business

iv. Statement of financing needs

v. Statement of confidentiality of the report

2. Executive summary (maximum 5 pages summarizing the whole business plan)

i. Brief description of the new business

ii. Opportunity (market, industry, competition, strategy)

iii. Financials (projected sales and profits and growth potential)

iv. People (persons involved in the new business)

3. Industry analysis

i. Future outlook and trends

ii. Analysis of competitors

iii. Market segmentation

iv. Industry and market forecasts

4. Description of the business

i. Product/service

ii. Size of business

iii. Office equipment and personnel

iv. Background of the investors

2 Adapted from Hisrich, Peters and Shepherd (2005).

33

5. Production plan (assuming manufacturing facility)

i. Manufacturing process

ii. Physical plant

iii. Machinery and equipment

iv. Names of suppliers of raw materials

6. Operational plan

i. Description of the business operation

ii. Flow of orders for goods/services

iii. Technology utilization

7. Marketing plan

i. Pricing

ii. Distribution

iii. Promotion

iv. Product forecasts

v. Controls

8. Organizational plan

i. Form of ownership

ii. Identification of partners

iii. Authority of principals

iv. Management team background

v. Roles and responsibilities of members of organization

9. Financial plan

i. Pro forma income statement

ii. Cash flow projections

iii. Pro forma balance sheet

iv. Break-even analysis

v. Sources and applications of funds

34

10. Assessment of risk

i. Evaluate weakness of the business

ii. New technologies

iii. Contingency plans

11. Conclusion

i. Highlighting main points that indicate the success of the business.

ii. Reasons that the investor will carry out the plan successfully.

iii. Be positive and confident without exaggeration.

12. Appendix

i. Permits and licenses

ii. Leases/contracts

iii. Insurance documents

iv. Price lists from suppliers

v. Market research data

35

Appendix II

Executive Summary3

Concept

[Company] management has conducted both primary and secondary research into the

[Company’s Industry] market and has identified a significantly underserved segment within

it. [The Company’s] [product/service] is uniquely positioned to serve this segment of the

market because of its [characteristic #1], its [characteristic #2], and its [characteristic #3].

Management estimates that the [Underserved segment] of the market will generate AED

[market estimate] of sales and that [Company] will capture [market share]% of that market by

[Year].

Company description

In [Month, Year] [Names of founder(s)] formed a [Product/Service] company that

manufactured state-of-the-art [product]. This company was located in [City, State]. The

company was formed as a [proprietorship, partnership, corporation]. Others involved in this

business are [names]. The company is currently in the [seed, start-up, growth] stage and

expects to move rapidly towards further growth and profitability.

Mission Statement

[Company] is an [innovative, creative, conservative, aggressive] [maker, provider] of

[product or service] that offers unparalleled [quality, service, value]. We value [integrity,

honesty, creativity, etc] and respect our relationships with each other, our customers, and the

world at large.

Industry Analysis

The [name of industry] industry in [name of appropriate geographic area] generated revenues

of AED [Dirham amount of market] in [most recent full year]. Customers who bought

[product/service] made up [percentage of total market in your segment] of that market

revenue. [Name of research firm, government agency, or other reputable source] estimates 3 This part is taken from Executive Summary Edition of Planigent’s Business Plan Template 2004, which can be found in the Internet at http://www.planigent.com/html/ExecSum.doc.

36

that the [product/service] market will grow to AED [amount] within in [number] years (or by

[percentage]%).

Products & Services

[The Company]’s main product [service] is [product/service]. The [product/service] is

unique in that it [unique feature #1], it is/has [unique feature #2], and it [unique feature #3].

The [product] is customizable and can be configured to meet a wide variety of customer needs: • [Bulleted list of needs the product can fulfil] The Company provides its [service] at different levels depending on the needs of its clients:

• [Bulleted list of service levels] Target Market

[Company]’s management recognizes an enormous unmet need in the [product/service]

market. [Percentage]% of customers surveyed recently said they were either very likely or

likely to purchase [product/service] if it were available. This segment of the market has

tremendous potential that has been untapped by any of [Company]’s competitors in the

industry. It is our primary target audience.

. Marketing & Sales Strategy

[Company’s] marketing strategy is to represent its [product, service] as the best and most

logical solution to customers’ [needs, problems]. We are positioning the company as the

[low-cost, highest quality, best value] [producer, provider] of [product, service] in the

marketplace. The company will use a variety of marketing approaches and materials

including [brochures, white papers, trade shows, seminars, {list all or others that apply}].

Sales of the company’s [products, services] will be handled by an [internal, external] sales

force [or independent agents/reps]. A [telemarketing, direct mail, advertising] firm will be

hired to assist with building brand awareness and generating sales leads.

Competition

[Company] faces competition from [Competitor #1], [Competitor #2], and other smaller

firms. These companies specialize in [products/services] and do not provide the same

[quality/price/convenience/service] that [Company] does. [Company] distinguishes itself

37

from its competitors through its [Unique Selling Proposition]. Its competitive edge is its

ability to provide [product/service] to its customers [more economically/faster/of better

quality] than any of its competitors.

Management

The core management team of [Company] includes several executives with successful

backgrounds in the [industry name] industry and experience with start-up operations:

[CEO name], [CEO age] is President and CEO. His/Her experience includes [# of years]

with [prominent company name] where he [state one or two noteworthy achievements: grew

sales, cut expenses, launched a new product].

[CFO name], [CFO age] is [Company]’s Chief Financial Officer. Mr./Ms. [CFO Name] has

held financial positions with [Company #1] and [Company #2] and has also served as a

Public Accountant with [name of CPA firm]. His/Her accomplishments include [state one or

two noteworthy achievements: grew sales, cut expenses, implemented tax-saving measures].

[CIO name], [CIO age] is [Company]’s Chief Information Officer. Mr./Ms. [CIO Name] has

extensive experience with innovative technology at [Company #1] and [Company #2] and

also held a consulting position with [name of consulting organization]. His/Her

accomplishments include [state one or two noteworthy achievements: managed

implementation of new software, launched corporate web site].

Operations

[Company] operates from [a facility(ies)] located at [address(es)]. {If applicable} It makes its

products at the [location] facility where it [receives components and assembles final

products] OR [performs all manufacture and assembly]. Key suppliers are [list suppliers'

names]. Quality control and distribution to customers are handled by the [location] facility.

Financials

By achieving its sales targets, [Company] will position itself for exceptional profitability and

self-funded growth. The table below is a brief summary of the [Company] Profit and Loss

Statement for the years 200X-200X.

38

AED 000s 200X 200X 200X

Sales AED x,xxx.x AED x,xxx.x AED x,xxx.x

Gross Profit AED x,xxx.x AED x,xxx.x AED x,xxx.x

Operating expenses AED x,xxx.x AED x,xxx.x AED x,xxx.x

Pre-tax Income AED x,xxx.x AED x,xxx.x AED x,xxx.x All figures are expressed in thousands Dirham.

Long-Term Goals

Expansion plans, financial goals, milestones.

Sources & Uses of Funds

Management is seeking an investment of [AED x,xxx,xxx] in addition to the [AED xxx,xxx]

already invested by the founders. Proceeds will be used to finance the Company’s ongoing

start-up expenses, the enhancement of its systems and infrastructure, and the cash shortfall

until cash flow breakeven is achieved [list all other significant uses of the funds being

sought].

Exit Strategy

Given the financial results expressed above, management believes it will be in an excellent

position to capitalize on its success through a [Leveraged Buyout, Management buyout,

Acquisition by Industry leader, Initial Public Offering, Acquisition by other 3rd party]. A

reasonable valuation for the Company assuming the sales and profitability outlined above

would be AED xx,xxx,xxx, which would make the shares included in this offering worth

AED x,xxx,xxx, a return on investment of x%.

[For a loan payback, describe how the company will be in a financial position to repay the

loan in the specified timeframe.]

39