BUSINESS PLAN
MARY THOMPSON President mthompson@entill.com CHRIS SCHINDLER Chief Financial Officer chris_schindler@entill.com ENTILL, INC 245 S. Wacker Dr. Chicago, IL 60606 www.entill.com The information contained in this business plan is confidential and is intended only for the persons to whom it is transmitted by Entill, Inc. Any reproduction or divulgence of the contents of this plan, in whole or in part, without prior written consent of the company is prohibited. By accepting this document, the recipient agrees to preserve its confidentiality.
Copy No. ________
TABLE OF CONTENTS
section
page
1 Executive Summary
1
2 Company Overview
3
3 Products 3.1 Current Product 3.2 Product Features
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4 Industry Analysis 4.1 Overview of Industry 4.2 Business Opportunity
5 Market Analysis 5.1 Target Market 5.2 Market Growth Factors
13
6 Competitive Analysis
15 19
7 Marketing Strategy 7.1 Market Penetration Strategy
8 Sales Strategy
26
9 Management Team
28
33
10 Operations Plan 10.1 Staffing 10.2 Service Delivery 10.3 Manufacturing 10.4 Distribution 10.5 Inventory
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11 Milestones
35
12 Risk Analysis
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13 Financial Plan Supporting Documents
28
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14
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EXECUTIVE SUMMARY 1.1 EXECUTIVE SUMMARY
DISTRIBUTION
CAPITAL REQUIREMENTS
With employees using critical software while at work, then taking work home, companies are constantly at risk from unprotected data on an unsecured server. The consequences can be devastating: lost reputation, lost jobs, lost profits. Employee data, financial records, business plans and confidential information are only some examples of the data that are usually stored and transported on these mobile devices. A considerable number of end-users are unaware of their exposure to security risks while using traditional software solutions.
Because time to market is crucial, Entill will outsource auxiliary responsibilities, such as inventory management, shipping and handling and customer service to established firms with existing resources and expertise. We believe our internal team, combined with outsourced third party expertise, creates the ideal foundation for a quick and focused commercial launch.
The Company’s total startup cost has been $463,568 as of January 2010. The Company is requesting an additional $1,000,000 in capital which will be used to complete product development, pilot testing, market introduction and provide working capital to generate, maintain and increase sales velocity online.
COMPANY DESCRIPTION Entill (or “the Company”), a Chicago based corporation, provides software-as-a-service packages for employers across the country and is the inventor of a new way to share information across multiple employees.
PRODUCT DESCRIPTION Entill has developed proprietary technology to manage the way confidential or sensitive data is handled and accessed within any enterprise, government, or small/medium business. The Company’s business model is unique and marries the technological advances smart software technology with America’s growing need for a secure software applications. Its first product, The SoftLink™ is an online software solution that provides secure access to applications and their data while connected to the Internet, to a private network or used in an unconnected state.
PRODUCT USES The SoftLink™ can be used within any environment to transport sensitive data, monitor access to applications, reduce equipment upgrades, host, backup, and disseminate proprietary information and allow employees more flexibility while working off-site.
MARKET OPPORTUNITY In 2009, 45 million people subscribed to software-as-aservice sites such as 37signals. But only a few of those buyers thought about the software’s security implications. An online research report found that 30 percent of these subscriptions are sold to enterprises and about 70–80 percent are sold to individuals.
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Privileged & Confidential
WE BELIEVE OUR INTERNAL TEAM, COMBINED WITH OUTSOURCED THIRD PARTY EXPERTISE, CREATES THE IDEAL FOUNDATION FOR A QUICK AND FOCUSED COMMERCIAL LAUNCH. COMPETITIVE ENVIRONMENT The Company may face competitive threats from major software-as-a-service providers like 37signals, Intuit, Microsoft and Quickbooks should they identify the same opportunity and target market. The Company may also face competition from emerging technology such as Crunchbase and ComputerActive. Despite the number of software packages in the marketplace today, the security and usage of existing products remains limited. While all pose potential threats, they leave gaps in the competitive landscape. These gaps include the lack of encryption, lack of storage space, lack of a central management console which provides users with a number of access privileges. While all pose potential threats, they leave gaps in the competitive landscape. These gaps include the lack of encryption, lack of storage space, lack of a central management console which provides users with a number of access privileges.
MANAGEMENT TEAM Entill’s management team consists of seasoned professionals that possess significant experience in all elements critical to the success of the Company. The management team’s core competencies match those required to successfully bring our product to market. Combined, the founders and management team has over 90 years of direct experience in general management, software development, finance, marketing, and operations.
PROJECTED FINANCIALS The Company’s projected five-year financial statements are found below. Accompanying summary of significant forecast assumptions and notes can be found in the Supporting Documents sections of the business plan.
5-YEAR PROJECTED OPERATING PERFORMANCE CY CY 1 1
CYCY 2 2
CY CY 3 3
Revenue
$230,150
$2,405,862
$6,675,865
$12,913,252
$18,450,234
Direct Expenses
$323,095
$1,462,706
$4,643,065
$4,090,605
$4,804,194
Gross Profit
$184,032
$5,441,156
$9,032,785
$12,822,645
$13,746,044
Gross Profit (%)
39.8%
52.5%
65.2%
75.2%
75.8%
Other Expenses
$836,514
$1,134,968
$1,456,746
$1,360,446
$1,860,446
($649,439)
$4,123,184
$9,774,039
$12,562,156
$15,485,525
Depreciation
$1,300
$6,400
$6,400
$6,400
$6,400
Amortization
$0
$0
$0
$0
$0
Preliminary Exp Written Off
$0
$0
$0
$0
$0
Interest/Dividend Expense
$35,400
$87,600
$96,400
$97,800
$0
$0
$73,200
$4,095,200
$543,000
$936,100
($876,459)
$730,789
$4,577,739
$12,816,499
$15,644,293
EBITDA
Income Tax Expense Net Income
CY CY 4 4
CYCY 5 5
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TARGET MARKET INDUSTRY OUTLOOK
INDUSTRY TRENDS
According to The Saas trade publication survey “the greatest growth over time is in the direct for manufacturer via the internet” in this channel by 2010. The conventional channel, defined as contractors buying via distributors and/or from catalogs is still the “800 lb gorilla” although it will not be growing nearly as fast as the online channel.
Software sales through online direct channels were 10% in 2004, 18% in 2006 and projected to increase to 30% by 2009. Entill is well positioned to capitalize on this trend by providing software-as-a-service to customers based on the following model: Business Model Comparison of Current Models with Entill Model.
ACCORDING TO THE SOFTWARE DISTRIBUTION TRADE PUBLICATION SURVEY “THE GREATEST GROWTH OVER TIME IS IN THE DEMAND FOR MANUFACTURER VIA THE INTERNET” IN THIS CHANNEL BY 2010.
MARKET MIX
MARKET SCOPE
As a Percentage of Software-as-a-Service Sales
The market scope for Entill’s software and services is domestic and shipping is available to 48 states.
Customer Relationship Managment
TOTAL TARGET MARKET
Entill’s total market is valued at $42.35 billion. Entill’s primary market of Electrical Contractors is valued at $17.8 billion in annual sales. Entill’s secondary market is valued at $28.85 billion in annual sales. Of this total market Entill’s target is .0002 percent of the total market share or $5 million in annual sales in 2009. Total market share is projected to increase .00005 percent each year for the next five years.
12.8
Project Management
5.8
Task / Time Management
3.3
Invoicing & Accounting Software
12.2
Communication / Phone Services
4
Industry Solutions
4.1
Other
1.0
Total Market $40,758,510
TARGET CUSTOMERS
Entill’s customers are small to mid size small businesses, entrepreneurs and professional service firms. There are thousands of B2B firms, facility and property mangers, each varying in size. In the small business and entrepreneurial realm our target market is grouped by number of employees.
BUSINESS MODEL COMPARISON OF CURRENT MODELS WITH ENTILL MODEL Package Model 1 Manufacturing in U.S.
1-4
5-9
10 - 19
20 - 49
42288
5920
3085
1939
489
13891
4776
3283
2369
767
Contractor
344
92
55
37
15
Total
56523
10788
6423
4345
1271
1-4
5-9
10 - 19
20 - 49
50 - 99
190
22
11
0
751
366
75
13
3
231
Contractor
1
1
0
0
756523
Total
557
98
24
3
989
No. of Employees
Package Model 2
Small Business Owner
Importing
50 - 99
Entill
Entill Model $30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
Contractor Technology
UNIT PRICE IN DOLLARS
CONTRACTOR
INDEPENDENT SALES REP.
OVERSEAS WHOLESALER
DISTRIBUTOR
U.S. MANUFACTURER
ENTILL WITH ITS CHINESE PARTNER
No. of Employees
INDUSTRY LIFE CYCLE
The software distribution industry, as a whole, is in a growth stage. A number of software products are considered commodities with an increasing demand. The software distribution industry is an ongoing one that will not enter the aging cycle.
Entrepreneur Entill Contractor Technology
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Privileged & Confidential
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FINANCIAL PLAN SUMMARY/ANALYSIS OF FINANCIAL STATEMENTS
EXPENSE PROJECTIONS
REVENUE PROJECTIONS
Sales projections are based on competitors’ (k grace) sales and management’s personal experience in the industry. Although there is tremendous opportunity for entry in the current market, the methodology is based on a very conservative case scenario forecast. Revenue over the next five years is projected as follows: REVENUE PROJECTIONS Year 1
Year 2
Year 3
Year 4
Year 5
Client Registrations
6,200
23,800
22,240
31,922
54,443
Yearly Sales
13,300
53,000
63,800
67,762
93,332
Monthly Sales
1,440
10,240
14,288
14,746
17,655
Individual Sales
620
1,280
1,736
3,283
3,940
Brochures/Literature
Special Engagements
500
860
1,152
1,382
1,659
Total Revenue
28,260
92,280
113,216
139,083
171,091
YEARLY SALES BY SOFTWARE SUBSCRIPTION 120,000
CLIENT REGISTRATIONS
100,000
YEARLY SALES
80,000
MONTHLY SALES
60,000
INDIVIDUAL SALES
40,000
SPECIAL ENGAGEMENTS
Year 2
Entill will generate revenue in five areas: client registrations, yearly subscriptions, monthly subscriptions, individual or one-time/single use subscriptions and special engagements. In its first full year of operations, Entill expects over 80% of its revenue ($23,000) to come from client registration fees and yearly software subscriptions. Entill is assuming that in Year One, 80 small businesses will register and 18 or 20% of registrants will sign up for the yearly subscription. Privileged & Confidential
Year 3
SPECIAL ENGAGEMENTS 2%
MONTHLY SALES 12%
INDIVIDUAL SALES 3% CLIENT REGISTRATIONS 29%
YEARLY SALES 54%
13.8%
ALTHOUGH THERE IS TREMENDOUS OPPORTUNITY FOR ENTRY IN THE CURRENT MARKET, THE METHODOLOGY IS BASED ON A VERY CONSERVATIVE CASE SCENARIO FORECAST. Travel
6.2%
Legal and Professional
4.9%
Auto Expenses
6.5%
Meals and Entertainment
9.4%
Web site
2.9%
Bank Charges
.9%
Office Expense
11.4%
Other
2.7%
Credit Card Processing Fees
1.7%
Mail Box Rental
1%
Database
5.9%
Dues & Subscriptions
2.3%
Telephone
Insurance
3.9%
Miscellaneous
1.7%
16%
6.2% 1.7%
Salaries
CAPITAL REQUIREMENTS
0 Year 1
Direct Marketing
Web Hosting
20,000
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Entill is a home-based business and therefore its startup and monthly expenses are manageable. Marketing, legal and professional, and office expenses make up 15.8%, 16%, and 11.4% respectively of the Company’s budget in Year One. Expenses are projected to grow as sales increase with an estimated average increase of 3 to 7 percent per year. The Company will not incur salary expenses until Year Two at a projected $3k per month. In Year One, expenses expressed as a percentage of total expenses are as follows:
Entill’s total startup cost is $25,000. Owners Thompson and Schindler have contributed $5,000 in owners’ equity and are seeking a business loan in the amount of $20,000 tofinance the company’s business operations. The company is requesting a debt structure tailored to reflect current interest rates and enable them to compete effectively in the future. The level of safety is high for the funding requested based on management’s prior industry experience, owner’s contributed cash and sweat equity to date, and conservative estimates of company growth.
HOW FUNDS WILL BE USED
Entill’s capital requirements of $20,000 will be used to develop its database and website, implement its marketing and advertising plan and for short-term working capital needs. The Start-Up Expense Sheet in
the Supporting Documents provides a detailed breakdown of how requested funds will be used.
CONCLUSION
Entill would like to thank 5th/3rd Bank for the opportunity to share its vision of a software provider firm for Chicago’s affluent communities. Based on the attached financial projections and our market research, we believe this venture represents a sound business investment for both the company and the bank. We are confident that upon review of this document you will recognize our commitment to excellence, and our dedication not only in being a viable entrant into the Chicago childcare field but a premiere provider of safe, high-quality software and a recognized industry leader.
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REPORT PREPARED FOR:
ENTILL INC.
INDUSTRY: 42412 Software and Service Providers
SCORECARD
REVENUE: Less than $1M
LIQUIDITY
BORROWING
LIQUIDITY
Monitor the impact tax payments may have on cash. Keep enough money aside to be able to meet future tax obligations based on earnings.
Pull frequent (weekly) accounts receivable reports in order to examine how effective the business is at collecting funds. Take action to collect any accounts that are overdue.
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1.35
2.14 12.31.07
1.27
1.90
Ratio Score
2.00
Industry
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Industry
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Industry
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45.00 26.35
31.09
Days
45.00
59.25
Accounts Receivable Days
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Industry
31.11
35.00
Accounts Payable Days
Days
Watch the payment terms of credit cards, if they are accepted by the business. For example, some credit cards have payment terms of ten days as opposed to the one day terms of others. Longer terms prevent the business from collecting actual payments until much later.
3.04 68.68
Days
Use a monthly or bi-monthly payroll schedule if possible. This will allow funds to stay in the business longer. Even labor outlays are a form of short-term financing.
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Inventory Days
Here are some ideas/actions that managers might consider in managing liquidity:
The company seems to be proficiently managing its receivables and payables. Both its accounts receivable days and accounts payable days statistics are lower than industry averages. Collecting receivables quickly can have a favorable effect on the cash account over time and paying bills/payables quickly is typically pleasing to creditors. It is also positive that the company may be able to extend its payment period as a source of financing, if need be. Privileged & Confidential
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TIPS FOR IMPROVEMENT
Notice the decline in the firm’s net income margin, which will be discussed more in the next section. For now, it is important to note that margins show how effectively the company is managing its costs, which clearly affect cash flow.
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Quick Ratio
18.19
LIQUIDITY IS ABOUT AVERAGE RIGHT NOW - ANY ADDITIONAL DECLINES HERE MIGHT LEAD TO SOME DIFFICULTIES MEETING OBLIGATIONS.
Ratio Score
EMPLOYEES
OPERATING CASH FLOW RESULTS
The company’s liquidity position remains fairly good, although it has decreased this period. It could be that the firm is moving resources out of the current asset accounts and into resources that will help grow the company. If this is the case, it could be a positive situation. However, the firm probably will not want to see much more depreciation in its liquidity position, particularly in the cash and near-cash accounts. Liquidity is about average right now -- any additional declines here might lead to some difficulties meeting obligations.
Current Ratio
ASSETS
Generally, what is the company’s ability to meet obligations as they come due?
GENERAL LIQUIDITY CONDITIONS
Keep in mind that liquidity conditions are volatile, and this is a general analysis looking at a snapshot in time. Review this section, but do not overly rely on it.
SALES
PERIODS: 12 months against the same 12 months from the previous year
There is a positive relationship between profits and cash flow for this company, which is good. The company is generating strong cash flow from operations at the end of the period. Over the longer run, these types of results can help boost overall liquidity conditions, which will be discussed in more depth in the next section.
LIMITS TO LIQUIDITY ANALYSIS
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Industry 10