MOTOR CARE ACCG308 Business Plan 1 Table of Contents Contents Executive Summary ................................................................................................................................ 2 Business Opportunity ............................................................................................................................. 3 Sales and Marketing Strategy ................................................................................................................. 4 Operational Strategy .............................................................................................................................. 4 Financial Plans ........................................................................................................................................ 6 Conclusion .............................................................................................................................................. 7 References .............................................................................................................................................. 8 2 Executive Summary Technology is ever evolving and a massive step forward in technology is Motor Care. Motor Care is a product that allows people with the lack of motor skills and disability to either walk from one end of the room to the other, grab onto a loved one’s arm or do physical activities with your friends and family. As people get older or when they are in a car crash, there nervous system can deteriorate overtime as a result. Motor Care is part of the emerging industry as there is potential rapid growth in this type of technology and capital is needed to fund manufacturing and research and development for the product. The price set for the product will be high to display that the product is of high quality and the use of high technological materials are used to make the product function efficiently. The product will be available for purchase online and via phone to make it accessible for the target market. To promote the product we will be allowing free testing within many of the malls around Sydney and a picture with the product to help promote the product on social media. The sales force behind Motor Care will be the focus on customer need to help evaluate what a customer wants and maintain a competitive advantage over competitors. One way to evaluate is through a survey to help evaluate the service and product they receive. Motor Care will have a product organisational structure as it helps each division with marketing and accounting within the organisation. Motor Care will also have suppliers that will produce aluminium alloys for production. Motor Care will be using outsourcing its operations online through the website fiverr.com. Not a large amount of capital is needed to start up the business. The methods needed to evaluate the business include asset valuation, capitalised future earnings, earnings multiple, and comparable sales. These techniques are used to evaluate the business’ performance however we will be using asset valuation method. 3 Business Opportunity We all live in the modern age where technology rules all and is considered one of the megatrends that define humanity. Technology consists of space crafts that we see on television to the cars and public transport that the general public has access to. Technology is needed for us to communicate with one another, look farther into the fabrics of space, analyse small micro-organisms we thought never existed hundreds of years ago and finally to get us moving from point A to point B. However moving from point A to point B has become much more difficult as a person gets older. Their nerves become damaged overtime whether it is from natural causes or an accident within their life, and even their muscles have begun to damage itself more than repair itself at a certain age. With these issues fluttering around, we need a product that can help many of these people to start moving again with much more ease and that product is called “Motor Care”. The following table of the censusdata.abs.gov.au 2011 Census of Population and Housing shows that the region of Hornsby has the highest number of people needing of assistance compared to the other local government area (LGA) which much lower numbers: LGA Hornsby (A) Burwood (A) Sydney (C) Waverley (A) Has need for assistance with core activities 5,839 1,685 4,203 1,760 Does not have need for assistance with core activities 146,178 28,859 142,095 54,535 Not stated 4,832 1,880 23,207 7,189 Total 156,849 32,424 169,505 63,484 “Motor Care” is a product that attaches itself to the affected area of the body and assists the person in moving around. The opportunity behind this is that technology is every evolving and that overtime they will become smaller and perform the same way a piece of technology can perform 18 months ago according to Moore’s Law. “Motor Care” is designed to be small enough to ensure that it does not get in the way of many of the customer’s activities but perform smoothly. The strategy behind this would therefore be product differentiation. Many existing products like the wheelchair and the crotches help people move about when the person has a leg disability. With “Motor Care” they can move around as if they were a regular human being with no disability at all. By doing this strategy, we will be able to compete with many of our competitors who will make similar products. The current industry “Motor Care” will be in the emerging industry where there is rapid growth and the technology standard is still pretty unclear. However entering the market may require a large amount of capital just to produce the product as well as some investments into different process such as Research and Development as well as marketing. Finally, the target market of the product will be aimed at the rich elderly people of Sydney who can afford the product and require the assistance in motor movements. It will assist in their physiological need where they need the product to move around to do their daily activities. To help test this market assumption we will run a focus group to test whether the product is perfect for the demographic or not. 4 Sales and Marketing Strategy “Motor Care” will be a new product allowing people to move around much more easily even with the current state of their motor functions. The existence of such a product will allow for convenience to the user, and help increase their motor performance. The price of “Motor Care” will be set pretty high to display that the product is of high quality and performance. Purchasing the product will be made easy for people so that they can purchase either by the web or by phone. After purchase it will be delivered straight to their door. The promotional strategy behind the product will be to allow free testing in shopping malls for passing potential customers to increase awareness that a product like this existed and that they will inform others through different mediums like social media where they can take pictures of the product and post it on Facebook for example or word of mouth to purchase the product for its convenience. “Motor Care” will focus on the customer need of a person as part of the sales force. By focusing on the customer need, we will be able to evaluate what the customer wants and maintain a competitive advantage over the other competitors. Customer need focuses on evaluating our products and services. A way to do this will be through the use of customer feedback which can be done through surveys. The idea of surveys was experienced when I had my car serviced. After a business day, the service provider called me by phone and asked for me to rate their service out of 10. By doing surveys like this example, we can observe and evaluate what aspects of the service we need to improve on. Not only can this evaluate just service but it can also be used to evaluate a product and rate that out of 10. The survey can be done after one business day by a phone call or by the website straight after the purchase via email. We can measure the amount of marketing success of the product through the number of shares through social media of the product. The more shares it gets on social media, the more product awareness there will be creating more potential customers. Even though there is a lot of customer relationship within many of the marketing strategies, we should be careful not to incorporate too many customer interaction and focus more on formal processes of collecting and utilising market information as Song et al. (2010) once said that formal processes will have a positive relationship with the firm’s performance while a negative relationship will be a result of a customer interaction focus. Operational Strategy Advisors are important to any venture because together with the Board of Directors, they create the best quality minds that you can possibly can to help you with your venture. A lot of entrepreneurs are willing to assist you and providing mentorship which could be more valuable to you than financial capital. It is optional to look for advisors so I do not need to spend money on advice. However if I were able to gather 3 key advisers they would be an accountant, investment advisor, and a financial planner. Accountants help provide information for us to make decisions. Investment advisors help manage your investments for you and can provide investment advice on many different types of securities. 5 Motor Care will have a product organisational structure displayed within the graph below: I chose a product organisational structure since it will be in one geographic location which is the northern region of Sydney and will provide plenty of rich, elderly people with the product. Again this structure will help each division since things like marketing and accounting is important for each sector of the organisation. Publishing helps with advertising the product, management systems helps with the distribution as well as information systems used to manage the product, and e-commerce helps with online financial management of resources. The Motor Care’s key supplier will be alloy suppliers since alloys will be needed to make the motor care product, it will be frequently ordered, they should be of high quality to make the product work, and the price should also be reasonably priced. The alloy that would be used in the manufacturing of Motor Care would be aluminium alloy since this is the alloys used in the manufacturing of car wheels. Motor Care needs a material that is both relatively light and is very sturdy so this alloy is probably the best choice of material. As of the 3rd of April the spot price of aluminium alloys is $1685 per tonne. There are also other key supplier’s like supplier’s that sell computer chips so the product is able to function and perform its duties. Outsourcing my operations online, many of your operations within the business will become much cheaper, a site like Upwork can have hundreds or respondents to a file you may have submitted on the website, and overall it would provide the organisation with opportunities. Motor Care will require e-commerce workers and technological expertise so by using fiverr.com, I can purchase different workers for $5 and it will save much more money than the traditional approach. Not only can Motor Care save money, many of the entrepreneurs will be experts in their field and will greatly increase the success of Motor Care. Three biggest ‘company killer’ risks that Motor Care may face include the market need not being there, the lack of innovation, and running out of money. We can try to manage the risk by maybe implementing relative diversification to help expand the market, constant research on the current trends and in turn it will ensure profitability for the company. Introducing rewards, compensation, and performance appraisal will also help increase motivation and ensure high quality production. CEO Publishing R&D MFG ACCT MKT Managment Systems R&D MFG ACCT MKT ECommerce R&D MFG ACCT MKT 6 Financial Plans Motor Care will require a large amount of capital due to the amount of technological expertise and industrial manufacturing machinery needed to create the product. However since it is only a starting business we will have to start with a small amount of capital from the bank. The capital can also be used for marketing, research purposes and distribution a large amount of the product. One way of getting capital that the business can take is crowdsourcing which is allowing the public to invest into your idea and increase awareness about Motor Care. However the business needs to be able to sell its product to the public so that they are interested and willing to invest. If they are not interested, you will receive little to no funding at all. Therefore it is best to The following are projected Profit and Loss, and the Balance Sheet for Motor Care after 3 years in the industry. Motor Care Projected Profit and Loss for the year ended 30 June 2017 2018 2019 Sales $480,000 $540,000 $610,000 Cost of Goods Sold $180,000 $190,000 $210,000 Operating Expenses Salaries & Related expenses: Founders’ payroll $50,000 $70,000 $100,000 Employees’ payroll $0 $50,000 $85,000 Benefits and employee taxes $20,000 $45,000 $70,000 Total Salary and Related Expenses $70,000 $165,000 $255,000 Office Expenses: Rent $15,000 $17,000 $19,000 Communication $7,000 $9,000 $10,000 Advertising $5,000 $7,000 $10,000 Misc. office expenses $1,000 $2,000 $2,500 Insurance and legal fees $5,000 $5,000 $5,000 Depreciation $3,000 $5,000 $7,500 Utilities $1,000 $2,000 $2,000 Other $5,000 $7,000 $8,000 Total Office Expenses $42,000 $54,000 $64,000 Total Operating Expenses $112,000 $219,000 $319,000 Income From Operations 30,000 35,000 65,000 Interest Expenses (5,000) (4,000) (3,000) Net Income 25,000 31,000 62,000 7 Motor Care Projected Balance Sheet as at year ended 30 June Assets 2017 2018 2019 Current Assets: Cash & Cash Equivalents $50,000 $80,000 $120,000 Inventory $23,000 $30,000 $50,000 Account Receivable $25,000 $32,000 $36,000 Other short-term assets $6,000 $6,000 $6,000 Total current assets $104,000 $148,000 $212,000 Fixed assets: Equipment and machinery $50,000 $55,000 $60,000 Less accumulated depreciation $3,000 $7,000 $11,000 Total fixed assets $47,000 $48,000 $49,000 Other Assets: Advances to employees $2,000 $2,000 $2,000 Total Other Assets $2,000 $2,000 $2,000 Total Assets $153,000 $198,000 $263,000 Liabilities & Stockholders’ Equity Current Liabilities: Accounts payable $8,000 $27,000 $36,000 Short-term bank borrowing $0 $0 $0 Other short-term liabilities $0 $0 $0 Total Current Liabilities $8,000 $27,000 $36,000 Noncurrent liabilities: Long-term debt $60,000 $50,000 $40,000 Total Non-current Liabilities $60,000 $50,000 $40,000 Stockholders’ equity: Common stock $60,000 $60,000 $60,000 Retained earning $0 $30,000 $65,000 Income $25,000 $31,000 $62,000 Total Stockholders’ Equity $85,000 $121,000 $187,000 Total Liabilities & Stockholders’ Equity $153,000 $198,000 $263,000 Assumptions: - Owners purchase $60,000 in common stock and guarantee $60,000 loan. - Company pays bills within 35 days and receive payment in 28 days - Income tax paid personally by owner. - Income and expenses spread evenly through the year. We can use the information above to attempt a business valuation through asset valuation. They are used to provide an indication of company value at the end of your projection period. Asset valuation is about finding the net asset which is assets minus liabilities. In this case there is a 76,000 net asset for Motor Care on the third year using the balance sheet. The issue is that the method ignores goodwill so therefore this valuation method is useful if there is little to no goodwill and if they are underperforming. Currently there is no goodwill and they are performing well. Conclusion Motor Care is still in its humble beginnings but it will aim to surpass competitors in their market and will prove to be successful in the future. 8 References Business.gov.au., 2017, Setting payment terms, viewed 6 April 2017, https://www.business.gov.au/info/run/finance-and-accounting/accounting/setting-payment-terms Censusdata.abs.gov.au., 2017, Census TableBuilder - Log in, viewed 10 April 2017, https://www.censusdata.abs.gov.au/webapi/jsf/login.xhtml Fiverr.com., 2017, Fiverr - Freelance Services Marketplace for The Lean Entrepreneur, viewed 4 April 2017, https://www.fiverr.com/ Quandl.com., 2017, Quandl, viewed 7 April 2017 https://www.quandl.com/collections/markets/aluminium