iConnect Computer Shop
TM 251: Business Plan
Submitted to
xxxxxxxxxxxxxxSubmitted by
xxxxxxxxxxxxxxOwners
[Name 1][Name 2][Address]
Table of Contents
2.General Company Description 3
3.Products and Services 4
4.Marketing Plan 6
5.Operational Plan 10
6.Management and Employees 11
7.Startup Expenses and Capitalization 12
8.Financial Plan 13 iConnect computer shop will offer affordable internet access along with providing its customers a hub for single- and multi-player gaming. Furthermore, it will also offer innovative services such as a customer intranet and hosting virtual personal computers (PC) where customers can install applications, save personal data and game files.
iConnect will be established as a partnership and will be located at the main street of Catarman N. Samar. It aims to be the preferred computer shop in town for students and young adults by providing value for money, innovative services, the latest games, high-end computers and a trendy and fun place for computer gaming. iConnect values and understands its customers. It will continually seek to create the fun & entertaining experience that convinces customers to keep on coming back.
The primary strength of the iConnect is derived from the owners’ technical and gaming know-how. By keeping up-to-date in trends in the gaming industry, iConnect is guaranteed not only to have but introduce the latest and hottest games to its customers. Furthermore, the owners’ knowledge on technical specifications of personal computers gives iConnect the edge in acquiring the most appropriate hardware for the least amount of capital. The owners’ technical skills in networking and trouble-shooting will also ensure that the shop runs smoothly at full capacity. Beyond this, innovative services derived from the owners’ technical know-how will differentiate iConnect from its competition and ultimately make it the preferred computer shop in town. Another source of competitive advantage of iConnect will be its prime location. By being the only shop in the town’s main street and surrounded by a large residential area which includes 2 colleges and a dorm within 100 meters, it is expected to attract a constant supply of customers.
Products and Services
- Computer rental for internet access and gaming
This will be the primary source of income of the business. Rentals will be offered at PHP 15.00 per hour, the same rate as its competition. However, at 10 P.M. and onwards the rate will be reduced to PHP 10.00 per hour.
- Printing and photo-printing
Printing will provide a secondary but significant source of income considering that some of the business’ customers are students away from home (dormers) and are expected to be printing school works and papers. Printing will be offered at PHP 6.00 per page. Photo-printing will be offered at PHP 7.00 for 3R and PHP 10.00 for 5R.
- CD / DVD burning
This will be offered as a complementary service. CD / DVD burning is a cheap way for customers to have a copy or backup their data. This will be offered at per PHP 45.00 CD/DVD (inclusive of CD or DVD).
- E-loading
This will be another complementary service. Minimal income is expected to be derived from it. However, by offering it, the business seeks to keep the customers in the shop and allow potential customers to see the shop (those looking for e-loading services will get to see the shop and perhaps, will become shop customers the next time they visit.)
iConnect will also offer the following innovative services for free:
- Virtual PC creation and hosting
This will be powered by a freely available VM Server software. Aside from providing customers, for all intents and purposes, their own PC where they can install any application they need (e.g. a computer science student would want to install a free development platform such as Visual C++ express), having a virtual PC will also encourage them to play long-term single player games that they wouldn’t normally play (e.g. The Sims or The Civilization series) since their saved game files will no longer be tied-up to a physical computer that may not be available when they need it.
- Customer intranet and content management
This service will be provided to foster a community around the shop. Customers will be able to post in forums to give their feedback on the shop’s services, interact with other customers, form groups or clans for multi-player gaming and be updated of new promos such special rates and gaming tournaments. Furthermore, they will have a centralized location where they could share and be served of content such as pics, recordings and videos.
Marketing Plan
Being the provincial capital of Northern Samar and its center of education (it has colleges and the only university in the province), students from neighboring towns continue to flock the town and so, the demand is expected to grow even stronger in the near-term. Thus, there is a definite potential for growth and future expansion.
The primary barrier for entry to the business is the relatively high capital costs. A 10-unit computer shop is expected to cost more than a quarter of a million pesos on computers alone. Add to this the cost of renovation and setup and the total cost could easily top half a million pesos. Other barriers for entry are the limited availability of prime commercial spaces and the technical skills required to operate and run the business (i.e. PC networking, trouble-shooting skills).
The owners of iConnect will generate the funds from their own personal savings and use their IT expertise to setup and operate the business. Furthermore, their uncle has agreed to lease them a commercial space that he owns at a discounted rate.
The medium-term threat to the business is the arrival of affordable broadband internet from major telcos. The current rates are still prohibitive to students, not to mention the cost of acquiring a decent personal computer. Furthermore, it has been observed that even those who own personal computers with internet connection still prefer to play games in computer shops.
Customers
While also catering to casual internet users, the primary target customers of iConnect are the so-called ‘gamers’. Typically, these customers are male, high school or college students around 14-21 years old. They frequent computer shops to hang out with their friends and engage in friendly gaming competitions. Aside from proximity and presence of friends, what attracts them to a particular computer shop is the quality of the games, the quality of PCs (i.e. processor should be fast enough and graphics capability should be good enough to provide a satisfactory gaming experience) and for online games, the quality of the internet connection.Competition
iConnect’s main competitors will be the existing computer shops in town. There are currently 5 of them. All except one seems to be focused on casual internet users since most of their PCs haven’t been upgraded for a long-time and could hardly support the latest games (one does not even have games installed.) They offer the same set of standard services at the same prices. The newest shop was established 2 years ago. Only two of the shops are air-conditioned. As previously noted, competition among the shops are mitigated by the fact that the demand for computer rental continue to outpace supply.Indirectly, iConnect will also be competing with Globe and Smart’s prepaid wireless internet offerings (i.e. Tattoo and Smart Bro). However, competition from these two is mitigated by the following factors: 1) affordability (i.e. USB modems costs around PHP1, 000 + hourly rate of PHP 20 / hour); 2) quality of connection (i.e. generally weak signal, still slow and unreliable compared to wired broadband); 3) collective gaming experience (i.e. by playing “alone”, experience is less satisfying.)
Niche
Aside from network gaming, iConnect seeks to develop a market for single-player games. From the owners’ personal experience, good single-player games are very engaging and take a long time to complete (between 30-100 hours of continuous gameplay.) As such, they can be very lucrative and could turn-out to be a cash-cow. However, the primary impediment to playing single-player games in shops is managing saved games. For most modern single-player games, it is not straight-forward to move a saved game from one PC to another (i.e. for some, it is almost impossible; for others, it is tedious and time-consuming); effectively binding a saved game to a specific PC. Since the availability of a specific PC in a computer shop cannot be guaranteed, customers are discouraged to play long-term single-player games. By hosting these games in Virtual PCs, customers can play them from any physical PC. By guaranteeing that they can save and resume their games on any PC, they will be encouraged to play these very engaging single-player games that take a lot of hours to complete.Strategy
By providing better and faster computers, newer games, a comfortable and trendy place for gaming and an innovative solution for playing single-player games, iConnect seeks to become the preferred computer shops for gamers. By providing 15 computers, it will be the largest computer shop in town; large enough to accommodate several groups of friends at once. Furthermore, the shop will be fully-air-conditioned. It will have a glass front-wall and door. Framed posters of the latest games will used to decorate the shop (they will be replaced periodically as newer games are released and become available.) Outside, the shop will feature a prominent and well-designed signboard displaying the shop’s name and the services provided.
Promotion
Though iConnect expects to attract its customers mainly through referrals and word-of-mouth, it will also supplement these through radio advertising at the town’s local AM and FM stations and by having off-peak and bundle rate promotions. Instead of the usual PHP 15/hour, the rate will be lowered to PHP 10/hour at 10 P.M. onwards. Furthermore, customers will be changed only PHP 30 for every 3 consecutive hours of computer use (regardless of time).Radio advertising will be used for the first 3 months of operation and is estimated to cost around PHP 2,000.00 per month.
Pricing
Except the stated rate promotions, iConnect’s standard rates simply match those offered by its competitors. This is because on one hand, despite offering better services, pricing above the competition will turn-off customers; on the other hand, pricing below the competition could trigger a price war that is disadvantageous to all shops but more so for new entrants like iConnect. So as previously expounded, iConnect intends to compete on quality rather than on price.
Proposed Location
iConnect will be located along the main street of Catarman N. Samar. Along the town's main street are commercial establishments and mixed-use buildings. Specifically, iConnect will be located in a commercial space of a mixed use building surrounded by a large residential area that includes 2 colleges and a dorm within 100 meters. It will be the only computer shop in that area.Sales Forecast
iConnect's monthly sales forecasts are as follows:Table 4-1 – Expected Ave. Monthly Sales
Table 4-2 – Break-even Sales (worst case)
Table 4-1 shows the monthly sales that iConnect is expected to achieve. The price to used compute printing sales is set at PHP 7/page. It is assumed that the weighted average of normal B&W printing (PHP 6/page) & photo-printing (PHP 7 for 3R and PHP 10 for 5R) would average to the said price. E-loading has a 10% margin (i.e. PHP 110 worth of load can be bought at PHP 100) and sales volume per month is expected to be around PHP 5500 (equivalent to 220 persons @ PHP 25 each.)
Table 4-2 shows the sales that iConnect must achieve on a monthly basis if it is to break-even (see section 7 – Financial Plan for details.) The expected scenario corresponds to a PC utilization rate of 50% while the break-even scenario corresponds to a PC utilization rate of 34%.
Operational Plan
Location
iConnect will be located in a 28 (4 x 7) square meter-commercial space of a mixed use building. The space needs to be renovated to suit the needs of a computer shop. Renovation will include construction of PC stalls, electrical works, paint works, installation of a sliding glass door, a roll-up grilles and an air-conditioner and flooring.The renovation is expected to take 2-3 weeks and the cost including materials and labor is estimated at PHP 135,000.00
Supplier
The PCs and other related equipments (printer, routers, network cables, etc.) will be purchased from BuyQube.com as it offers the most affordable prices and generous warranties including a 2-year warranty on major parts (i.e. CPU, graphics card, LCD, hard-disk, e.t.c.) and a lifetime warranty on memory modules. It is located at Gilmore St., Quezon City. The units will be shipped to iConnect's location at PHP 1000 per unit.A typical gaming PC with the following specifications would cost around PHP 24,000.00:
- Core 2 Quad CPU & Motherboard
- 2 GB RAM
- 1 GB Video Card
- 320 GB HDD
- Gigabit Ethernet NIC (Lan Card)
- 18.5 LCD Monitor
- Accessories: Headset, Webcam, AVR
Management and Employees
Shop attendants will be hired to man the shop. One will take the morning shift and the other, the night shift. The attendants will usher and assist the customers, track their computer usage through a pre-installed system and receive their payments. They will report to the general manager at the end of their shift to turn over the day's sales. They are also expected to call him in case of any form of service disruption or failure that they cannot resolve on their own.
The attendants will be paid daily at PHP 150 per day.
Startup Expenses and Capitalization
| Start-up Capital |
800,000.00
|
| Owner's Investment |
800,000.00
|
| Ronald Idjao |
600,000.00
|
| Randy Idjao |
200,000.00
|
| Start-up Expenses |
800,000.00
|
| Renovation Costs |
135,000.00
|
| Sliding Glass Door |
10,000.00
|
| Roll-up Grilles |
15,000.00
|
| Flooring |
15,000.00
|
| Stalls, Chairs & General Renovation Works |
50,000.00
|
| Electrical Works (inc. Norsamelco, DSL & aircon installation) |
25,000.00
|
| Paint Works |
20,000.00
|
| Equipments |
550,000.00
|
| PC (Core 2 Quad, 2 GB RAM, 1 GB Video Card, LCD) x 15 |
360,000.00
|
| Server (i7, 4 GB RAM, 1 GB Video Card, 1 TD HDD, LCD) |
33,000.00
|
| Operating Systems |
64,000.00
|
| Games |
57,000.00
|
| Printer |
5,000.00
|
| Routers |
6,000.00
|
| Air-conditioner |
25,000.00
|
| Supplies |
9,000.00
|
| Paper |
1,000.00
|
| Photo-paper |
1,000.00
|
| Ink |
1,000.00
|
| CDs/DVDs |
1,000.00
|
| E-load (Globe, Smart, Sun, Online Games) |
5,000.00
|
| Others |
26,000.00
|
| Business Permits (Registration, Brgy.'s, Mayor's, etc.) |
4,000.00
|
| Radio Advertising |
6,000.00
|
| Shipping |
16,000.00
|
| Working Capital & Contingency Fund |
80,000.00
|
Table 7-1 Start-up Capital & Expenses
Financial Plan
Projected Monthly Income
Over a period of 2-5 years, the monthly income of iConnect is projected to average out to be as follows:Table 8-1 Projected Ave. Monthly Income
It is expected that during the first month of operation the revenues won't reach the expected average. However, after the first month, the assumptions (as stated in the sales forecasts & in the notes column above) are expected to hold on average. It is expected that there will down months and up months but the assumptions should be valid for any month because for a computer shop business there isn't any long-term growth to be expected. That is, its optimal performance is expected to be reached and normalized within a very short-period (as soon as the second.)
Operating expenses are not expected to increase significantly within the period. Once electricity and DSL rate increases has accumulated significantly, they will be matched by a proportionate increase in prices. In the event that this happens, performance is not expected to deviate significantly from the projections since it will affect other competitors as well and the demand is expected to increase at a steady rate.
Projected Cash Flow
iConnect's typical monthly cashflow statement within a period of 2-5 years would look like this:Table 8-2 Typical Monthly Cashflow
As shown above, total cash inflow will be distributed proportionately to the partners every month. A contingency cash fund amounting to PHP 80,000.00 will be maintained. Any emergency expense or purchase will be taken from this fund. It will be replenished from the next month's cash inflow and only the difference will be distributed to the partners. There will be no expansion or additional equipment acquisition within the period. (Note that within 2 years all PC units are covered by the supplier's warranty.)
As the indicators show, the owners expect to recoup respective their investments after 2 years of operation. From then on, the business rate of return is expected at 50% per annum.
Break-Even Analysis
As shown below, the business breaks even at around 5.5 hours per PC per day.Table 8-3 Break-even Income Statement
Considering the reduced utilization (from 50% to 34%), electricity expense was also reduced by 16% from PHP 6,000 to PHP 5,000.
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