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SUBMITTED TODR. RITESH SRIVASTAVA
Submitted by: Shubhadip Biswas
IILM-GSM PGDM 10-12 SEC- A ROLL NO.-FT-10-948
The satisfaction and euphoria that accompany the successful completion of any task of dream would be incomplete without mentioning the name of the people whose constant guidance and encouragement has crowned all our efforts with success.
Firstly I would like to thank Dr. RITESH SRIVASTAVA for giving me his precious time, encouragement and guidance that helped me a lot to making this proposal compact and meaningful. Last but not least I would like to thank all those people for their immense cooperation who encouraged me in any way and without support of those people this project never be completed successfully. Most specially a special thanks to my family and friends.
1. Executive Summary o Objectives o Mission o Keys to Success 2. Company Summary 3. Products and Services 4. Market Analysis Summary 5. Strategy and Implementation Summary 6. Management Summary 7. Financial Plan 8. Analysis
Executive Summary This business plan outlines the strategy for sales of software solutions to medium-sized companies and franchises. DMAS will act as the direct sales arm of a software manufacturing firm. We expect a high degree of profitability based on our plan to key in on businesses that have already expressed the need for such services and products to the software manufacturer. Our management expertise in dealing with corporate decision makers and our partner's reputation will be the cornerstone of our success. Our new software solution offers four specific versions that, while still being totally customizable, are also specifically targeted to groups such as IT, Finance, Consulting, and Telecommunications.
Market a data management & business analytics software package to corporate managers and achieve profit of rupees 5 lakh in year one. Customize the software to the individual needs of each client. Provide training and follow-up service to each client.
1.2 Mission I want to launch an data management & business analytics software tool which we will customize to the client's individual needs to manage large data and analyzing business process. Although we recognize the intimate relationship between profitability and quality products, we know that our success is ultimately dependent on the well-being of our employees and clients. We will begin development of additional software packages to fill other needs based on our market research in the coming year. 1.3 Keys to Success The success of our company is dependent on our ability to:
Anticipate clients needs. Adapt software solutions to these needs. Identify industries/corporations that need planning tools.
2.Company Summary DMAS provides data management & business analytics software solutions. We identify companies' planning needs and work with a third-party manufacturer to create software to address these needs. Although the actual software is produced out-of-house, we guarantee the customer the right solution.
2.1 Start-up Summary Start-up expenses, which cover phone calls, office furniture, letterhead and business cards come to 200000. We also need 4500000 of cash on hand. These costs will either be financed by owner investment or through financing from the software manufacturing partner. Details and assumptions are summarized in the following chart and table.
Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures 10000 20000 0
Consultants Insurance Rent Research and development Expensed equipment Other Total Start-up Expenses Start-up Assets Cash Required Other Current Assets Long-term Assets Total Assets Total Requirements
0 40000 0 0 130000 0 200000
45,00000 0 0 4500000 47,00000
Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets 200000 4500000 4700000
Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills)
0 4500000 0 4500000 4500000
0 0 5000
Other Current Liabilities (interest-free) 35000 Total Liabilities Capital Planned Investment Investor 1 Investor 2 Other Additional Investment Requirement Total Planned Investment 2520000 2140000 0 0 4660000 40000
Loss at Start-up (Start-up Expenses) Total Capital Total Capital and Liabilities Total Funding
200000 4460000 4500000 4700000
2.2 Company Locations and Facilities The company will be located in a home-based office in KOLKATA, INDIA. This location is ideal, as it is close to the software manufacturer's facilities and several of the first potential clients' home offices.
3.Products and Services DMAS will provide medium- and large-sized companies with enterprise-wide collaborative planning solutions. We will also provide consulting services by helping companies recognize opportunities for using technology to streamline their business processes. Finally, we will provide complete training for the use of solutions purchased from us.
3.1 Product and Service Description Software DMAS software products offering— Analytics Business Analytics Business Intelligence Customer Intelligence Data Integration & ETL Fraud Prevention & Detection IT Management Web Enablement Data Migration/Warehousing Ad Hoc Reporting Meta data management On Demand Solutions Performance Management Risk Management Supply Chain Intelligence Sustainability Management Data Access and Integration Application Development this product is the top-rated and best-selling small business planning package. The enterprise version will be similar to the consumer version however, it will be modified to fit the needs of different clients. The product will allow corporate sales forces and franchises to use planning tools and database management system to achieve tremendous efficiencies in their business processes. In essence, a sales force will be able to write concise business plans for any customer and through the use of an extranet, allow the customer to collaboratively plan their own account. Franchises will be able to create a road map of their
business plans that corporate managers can monitor and adjust accordingly. The possibility exists to customize the product to work with other collaborative tools such as LotusNotes and the clients email applications. Consulting DMAS will perform an analysis of all potential clients' planning strategies and tactics as well as their degree of aptitude with database management + planning software and information technology. The goal of this analysis is to ensure that all clients get a solution that best fits their needs and capabilities. Whether they decide to purchase the product or not they will have an expert analysis of their planning strategies. Training DMAS will provide further value to our customers, and ease the customer service burden on our partner, by ensuring that all product users are properly trained in the use of all software solutions. Interface Through the software manufacturer, DMAS will provide an additional product which will give the client a dedicated service representative--eliminating the need for product updates. This will in essence create a "living" product which can grow and adapt with the clients' needs. The interface representative will function through the clients' established extranet.
3.2 Competitive Comparison Alternative products do not offer a complete package of tools. For example, to get similar results from another product(s) the client
would have to integrate complex spreadsheets, word processing software, database management, instructions and Web based collaboration themselves. 3.3 Technology The software package runs on Windows 95, 98, 2000,Windows 7, Windows NT, Macintosh, and Linux platforms.
4. Market Analysis Summary We will operate in the business-to-business segment of ecommerce. Our market is further segmented into companies with sales forces greater than 50 people and companies with branches, divisions or franchises in excess of 50 units. 4.1 Market Segmentation We segment our market by size of sales force and number of company subunits. Our target customers will have sales operations in excess of 50 direct sales representatives or more than 50 organizational subdivisions or franchises. For the first three years of operation we will focus on Indian companies in the east, north region. Geographically this make sense as our office is close to these regions and management has established key client contacts in each of these areas. Larger clients are more likely to benefit from the efficiencies our product offers and will provide fees that will sustain our profitability. Exact figures for the number of businesses are hard to determine, however, the lean structure of our company will allow us to be profitable by generating two to three new clients per year.
Projected Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Sales Companies Franchises Other Total Growth CAGR
3% 2% 5%
500 800 200
515 812 210
530 824 221
546 836 232
562 849 244
2.97% 1.50% 5.10%
2.49% 1,500 1,537 1,575 1,614 1,655 2.49%
4.2 Target Market Segment Strategy Our strategy is designed to target:
Medium- to large-size organizations whose sales forces provide their clients with proposals and plans that the client either collaborates on, or would benefit from collaboration. Companies that sell franchise rights and take an active role in the success of their franchises. Larger clients that will provide greater revenues through a larger volume of software licensing sales and greater chance of selling client interface solution.
4.2.1 Market Trends The most significant trend affecting our company is the growth of business-to-business e-commerce. More and more firms recognize the need to take advantage of the exchange of information over the Internet and our products and services rely on this. 4.2.2 Market Growth The fastest growing segment of the e-commerce industry is the business-to-business sector. 4.2.3 Market Needs Customization-products that strengthen their brand and address their differences:
We will "Private Label" the solution so as to further strengthen the clients' brand. We recognize that different clients will have varying levels of sophistication and we will design different product templates for each customer.
Speed, efficiency and information:
Our product will allow the client to make better and faster business decisions and receive quicker feedback from their end-customer. Managers will have the ability to monitor the progress and profitability of their staff.
4.3 Service Business Analysis Customers tend to buy enterprise software solutions based on reputation, price and reliability. Also, compatibility with existing or legacy systems is very important. With this in mind, the key decision makers and influencer(s) will be the companies' chief financial officer and chief information officer. 4.3.1 Business Participants There are currently several companies that provide business planning software for desktop applications, but as yet none of these offer enterprise-wide solutions. Additional competitors are companies which provide word processing, spreadsheet and collaborative planning software, as well as publishers of business planning literature.
5.Strategy and Implementation Summary Various strategy/and implementation topics are discussed in the following sections. 5.1 Competitive Edge Our greatest strength and competitive edge will be our honesty and service. This product will be the market leader in sales and consumer ratings. Our success will rely upon building on those strengths. We will also rely on our experience working with decision makers at the corporate level. 5.2 Marketing Strategy We will position DMAS as the best planning consultant for large corporations interested in the software we sell. we need to focus on our understanding of the needs of large corporations and franchises, and how we can translate that into finding the correct software solution. Positioning DMAS will initially be positioned as the premier product for project managers in the IT industries. Our strategy is to build a strong loyalty within this key market before moving on to the phase two and three markets. The product will be promoted as the most technologically advanced on the market of India. Pricing Strategy This is an expensive solution to develop and maintain, and the price will reflect the premium quality of the offering. Set-up costs to the client will run between 10000-15000. The dedicated service option is approximately 5000/year. Software licenses are 1000/year.
Sales Strategy We will first target the corporate offices of franchises with more than 50 units, and companies with sales forces in excess of 50 personnel. The software manufacturer has already provided the names and contact information for several firms which fit this profile. These firms have approached the software manufacturer about enterprise solutions in the past. The software firm has also provided a list of larger businesses that purchased an executive version of their product. We will contact these firms with the idea of helping them take this planning tool to the next level. Management of DMAS has business contacts at the decision maker level for several more prospects as well. These will be our secondary targets. Tertiary targets will come from lists of firms fitting the above criteria which management has generated through Web-based market research efforts. Tactics for approaching these prospects will be indirect, i.e., we will contact sales managers and/or franchisees to establish whether the firm fits our profile and then probe for upper or middle level management contact information. We will attempt to establish a face-to-face meeting with decision makers .where we will present a proposal tailored to their needs. If possible, we will also have this proposal reside on an extranet so that the client can modify the proposal and see first-hand how the product and service work. Sales Forecast Our sales consist of two services--consulting and training, and one product-the software/extranet package (called start-up sales). Our services provide a fraction of the revenue we will receive for the software/extranet solution, but they will sustain our cash flow needs while we develop the enterprise sales. Sales of consulting, training and product are predicted to grow at 45%, 18% and 24% respectively. Costs associated with these sales are estimated at 16% for start-up sales, 38% for consulting fees and
58% for training. We expect these costs to decrease two, five, and ten percentage points respectively in years two and three. Promotional strategy We will begin promoting DMAS to the IT market through several avenues. These include: · Special IT and Project Management Conference sponsorships and demonstrations · Direct mail campaigns · Print advertising campaigns · Email and web promotional campaigns Supplemental to these efforts will be development of the company web site, development of supporting print and electronic literature and multi-media presentations.
6.Management Summary I am SHUBHADIP BISWAS, 26, the founder of the company in Nov of 2010 to take advantage of this fast growing industry. I am pursuing an MBA from IILM-GSM ,INDIA, and have completed M.SC in COMPUTER SCIENCE from SMU,INDIA after completing B.SC in Physics Hons. From Calcutta university. I currently reside in Greater Noida.Up,India.
7.Financial Plan The most crucial issue affecting our financial plan is the receipt of start-up fees for the customization and installation of the software and extranet solution. This drives our cash flow, COST SHEET and all other aspects of our operation. MEANING OF COST ‘Cost’ can be defined as ‘the price paid for something’. But in the management terminology, ‘cost’ refers to expenditure and not to price. ‘Cost’ represents a sacrifice, a foregoing or a release of something of value. The INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS, LONDON, has defined cost as ‘the amount of expenditure (actual or notional) incurred on or attributable to a given thing’. For purchasing an sofware, the expenditure incurred on the purchase of raw-materials, wages paid to the workers , electricity and lighting expenses, depreciation on machinery used , capital cost of owned factory building etc, are a few components of cost. ELEMENTS OF COSTS One of the main objects of cost accounting is to present the analysis of the total cost of production in such a manner as to provide the maximum information useful to the business. The analysis and classification of costs is basically made with
reference to factors on which expenditure is incurred. These factors are known as ‘elements of cost’. The various elements of cost are:1) Material cost 2) Labour cost 3) Expenses MATERIAL COST ‘Material Cost’ refers to the cost of commodities supplied to an undertaking e.g., cost of software which is supplied to IT industries that use them to build the end products is categorized as material cost by the sofwaree company.. Material cost may be further subdivided into a) DIRECT MATERIAL COST:- Direct material cost means the cost of materials which can be identified with and allocated to the cost centres or cost units. The main feature of direct material is that these enter into and form part of the finished product. e.g. cost of wood in case of furniture, cost of cotton in case of cotton yarn, cost of iron in case of machinery etc. b) INDIRECT MATERIAL COST:- It refers to the material cost which cannot be allocated but can be apportioned to or absorbed by cost centres or cost units. These are the materials which cannot be traced as part of the product and their cost is distributed among the various cost centres or cost units on some equitable basis.
LABOUR COST Labour cost refers to the cost of remuneration of the employees of the undertaking e.g., wages, salaries, commission etc. Labour cost may be sub-divided into:a) DIRECT LABOUR COST (or DIRECT WAGES):- It refers to labor cost which can be identified with and allocated to cost centres or cost units. It includes the remuneration paid for converting the raw materials into finished products or for altering the construction composition of the product manufactured by an undertaking e.g., wages paid to factory workers involved in the production of company products. b) INDIRECT LABOUR COST (or INDIRECT WAGES):- It refers to the labor cost or wages which cannot be allocated but can be apportioned to or absorbed by cost centres or cost units eg: Salary paid to factory manager, engineer etc. EXPENSES Expenses refers to the cost of services provided to an undertaking and the notional cost of the owned assets (that is depreciation of owned factory building, office building, showroom building, plant and machinery etc). Expenses are sub-divided into:a) Direct expenses (or Chargeable expenses):- These are the expenses (other than direct material cost and direct labour cost) which can be identified with and allocated to cost centres or cost units. eg., carriage and freight of direct materials purchased if such carriage and freight have not been added to the cost of materials, royalties paid on the basis of output, hire charges of special plant and machinery.
b) Indirect Expenses:- Expenses which cannot be allocated but can be apportioned to or absorbed by cost centres or cost units e.g., rent, taxes and insurance of factory building , factory lighting, repairs to factory building, depreciation of plant and machinery, repairs to machinery etc., are known as indirect expenses. The aggregate of direct cost material, direct labour cost and direct expenses is known as ‘Direct Cost’ whereas the aggregate of indirect material cost, indirect labour cost and indirect expenses is known as ‘Indirect Cost’ or ‘Overhead’. Indirect cost or overhead may again be classified on the basis of functions as follows: FACTORY OVERHEAD OR WORKS OVERHEAD:- Factory overhead includes all the indirect costs incurred in the factory in connection with manufacturing operations. Factory overhead comprises the cost of indirect labour and all other indirect expenses which are incurred in the running of the factory or works. OFFICE AND ADMINISTRATION OVERHEAD:- These includes all indirect costs relating to the direction, control and administration of an undertaking. In other words, office and administration overhead refers to general office expenses and expenses of administration and control of business e.g., office insurance, depreciation of owned office building, office lighting, depreciation of office furniture and stationary, audit fee, director’s remuneration, salary of general manager, bank charges etc. SELLING AND DISTRIBUTION OVERHEAD:- These include all indirect costs which are incurred for promoting sales and retaining the customers and for delivering the goods after their production. e.g., cost of advertisement, toll taxes and commission to dealers, salary of sales manager, salaries and commission of
salesman, carriage on sales, packaging charges, running and maintenance.
CLASSIFICATION OF COSTS FOR THE COMPANY The cost of the company is mainly classified into three parts:1) FIXED COST:- It refers to those costs which tend to remain unaffected by changes in the volume of output or sales. In other words, fixed cost remain unchanged with the increase and decrease in the output or sales. These cost remain fixed in total but their per unit cost changes with changes in output or sales. Rent, taxes, insurance charges, manager’s salary, etc., are typical examples of the fixed cost of the company. It should be remembered that fixed cost are not absolutely fixed for all time. These are fixed only in relation to a certain level of production capacity. 2) VARIABLE COST:- It refers to those costs which vary directly in proportion to changes in the volume of output or sales. These costs tend to increase or decrease with the rise or fall in the production or sales. Variable costs vary in total but their per unit remains constant. Direct material cost, direct wages, direct expenses etc., are typical examples of variable costs. 3) SEMI VARIABLE COST:- It refers to those costs which ten d to vary with changes in the volume of output or sales, but not directly in proportion to such changes. These costs have the characteristics of both fixed and variable costs. A apart
of semi-variable costs remains constant inspite of changes in the volume of output or sales. Repairs and maintenance costs of plant, machinery and building, salary of supervisor, etc., are typical examples of semi-variable costs. Now the company will classify their cost into these different categories and prepare a cost sheet to decide the price at which we will launch their software product in the market. COMPONENTS OF COST A ‘component of cost’ may be defined as the cumulative or aggregate of different elements of cost. By aggregating or grouping the various elements of cost, the following components or types of cost can be obtained:1) PRIME COST:- Prime cost is the aggregate of direct material cost, direct labourcost or direct expenses. Prime cost is also known as ‘Flat Cost’, ‘First Cost’ or ‘Direct Cost’ 2) FACTORY COST:- Prime cost plus factory overhead (or works overhead) is known as factory cost. Thus , factory cost is the aggregate of direct material cost, direct labour cost, direct expenses and factory overhead. Also known as ‘works cost’, ‘production cost’, or ‘manufacturing cost’. 3) OFFICE COST:- Factory cost plus office and administrative overhead is known as ‘Office cost’. Also known as ‘Gross cost’ or ‘Cost of production’. 4) TOTAL COST:- Total cost is made up of cost of production plus selling and distribution overhead. Thus, total cost includes all the elements of cost or all the items of expenditure till the commodity has been , finally sold. Also known as ‘selling cost’ or ‘cost of sales’. EXPLANATION
a) Direct material cost + direct wages +direct expenses = prime cost b) Prime cost + factory overhead = factory cost c) Factory cost +office and administration overhead = office cost d) Office cost +selling and distribution overhead = total cost e) Total cost +profit = selling price COST SHEET ASSUMPTIONS OF THE COMPANY TOTAL TARGET OUTPUT=180 UNIT PER YEAR Particulars Raw materials[computer Software etc….] Direct wages Direct expenses PRIME COST Indirect wages Salary of software engineer Electricity Insurance Maintenance Manager[factory] fee Telephone Computer Furniture Others FACTORY COST Cost per unit 1666.66 138.88 138.88 1944.44 138.89 1111.11 111.11 222.22 222.22 194.44 27.78 277.78 111.11 166.67 4527.78 Total output 300000 25000 25000 350000 25000 200000 20000 40000 40000 35000 5000 50000 20000 30000 815000 250000
Director[executive,financial,operation, 1388.89 Consulting,training,communication]
fee Trainer Stationary Depreciation Bank charges Other office expenses[printing and stationary etc….] COST OF PRODUCTION Sales team salary[50*10000] Distribution Commission Transportation Advertisement Service to the clients Bad debts TOTAL COST NET PROFIT[27.03% OF THE SELLING PRICE] SALE
277.78 111.11 111.11 138.89 222.22 5388.89 2777.78 1111.11 277.78 277.78 1111.11 3777.78 277.78 15000 5555.55 20555.55
50000 20000 20000 25000 40000 970000 500000 200000 50000 50000 200000 680000 50000 2700000 1000000 3700000
The idea of starting DMAS software company in KOLKATA seems to be a profitable business venture. The direct labor charge and cost of procuring raw material in India is very low. Our company emphasized on selling and distribution service more than production. Because our company is in launching phase and to capture market providing service to the clients is the most important thing. We would also try to maintain good reputation in our product sector by creating and developing new features as per demand in the market. The present production capacity is 180 units per year. This can be increased in future as per demand in the market. We have proposed to sell our product at a price of RS 20555.55. thus profit earned from finished product will be RS 5555.55 per unit. As the company is newly established it will take time to develop such a demand, that in future it can earn more overall profit. Significant effort will be placed on research for future product development to continue to build on the DMAS product line. Research will be done both internally through our marketing department and through professional researching firms to determine customer needs outside of our current product offering. Research into new product demands will begin in July of 2011. The new product development cycle will be scheduled to begin in December of 2012 based on findings from the July research. We are hoping to grip total Indian market within the next few years. Thus this proposal seems to be a profitable venture.
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