Business Plan
Online
sales.com
Adam
M.
Céline
T.
Andrei
Z.
Kristaps
K.
March 21, 2007
Table of Contents
2.0 Management and Organizational Structure
2.5 Ownership and Legal Structure
2.6 Intellectual Property and Licenses
3.0 Industry/Market Feasibility Analysis
3.1.1 Current
Market Development
3.2 United States Industry Overview
3.2.1 Current
Market Development
3.4.1 Porters Five
Forces Analysis
4.1 Product/Distribution Strategy
4.2.2 Online Sales
Pricing Strategy
Advertising and
Customer Relationship Management (CRM):
SWOT Conclusion and Risk assessment:
1. How can we use each strength to take advantage of
Opportunities and eliminate threats and risks?
7.2 Balance Sheet projections for 2007
7.3 Balance Sheet projections 2008-2010
7.4 Projected profit and loss – 2007-2008
7.5 Projected Profit and loss – 2008 to 2010
7.8 Revenue Projections 2008-2010
Table 1: Canadian
and US growth
Table 2: AC
Nielsen study for eBay
Chart 2:
Implementation Timeline
1.0 The Business
1.1
Business
Businesses all over the world have inventories they cannot sell. The holding of such inventory until a seller can be located constitute large financial burdens to these organizations. Other companies may not have excess inventory problems, but rather their sales forces are operating at maximum capacity and therefore their potential for sales is diminished. Furthermore, finding new clients within markets away from their home operations is a problem for firms all over the world.
Online Sales meets these opportunities by allowing companies from around the world to list excess inventory for sale, bulk inventory and general products they want sold on the website. The general public uses the website to search for these companies’ products and sell them on their behalf for a commission. In general our business is a virtual consignment and wholesale/liquidation shop. Our business allows companies to quickly and easily sell their excess inventory or to find new clients for their products; thus saving companies’ money and generating extra revenue. Members of the public can earn another source of income. The primary function of our business will be the wholesale/liquidation of inventory.
1.2.1
Company
Online Sales’ mission is to become the largest online wholesale/liquidation/consignment businesses, offering companies a cost effective and efficient way to sell their products and inventories, while empowering the public to sell those products for financial gain.
3-Year
Plan
Online sales will begin operations and plans to generate over $4 millions in revenue within a three year period. Online Sales has also set a goal of reaching 200,000 people visiting the website each month by the end of year three.
Customers
The customers are the general public who uses the website to search for goods to sell to other customers (end users). They find people to buy products listed on the website by our suppliers and earn a commission off the sale. They can also purchase the good themselves and re-sale it to earn a profit.
Customers Customer’s (end users)
These are the end users who purchase the products sold to them by our customers.
Suppliers
Suppliers are companies that have excess inventory to sell or products they want help selling. They list products and ship them to the end user or customer once a sale has been completed. They receive payment once goods have reached their target, minus sales commissions.
Suppliers Supplier’s
These are the companies that make our suppliers products
Online Sales
We allow for customers and suppliers to exchange information and arrange the sale of goods. We earn a commission off of each sale as well as act as the mediator for the exchange of money between the end user, customer and supplier.
1. Products offered on online sales will be discounted lower then they can be found anywhere else on the internet giving end users reason to use our service over dealing directly with the suppliers.
2. The online consignment model Online Sales uses allows companies to quickly sell off excess inventory reducing their costs, moving away from this system would mean greater costs for organizations making them reliant upon Online Sales.
Suppliers and customers have many different ways they can interact with our site and receive value, here are a few examples.
1. The users (customers) of the website will gain value by earning income through commission they earn by selling our suppliers products. A simple $4000 sale would earn them $120 with just a 3%commission.
2.
Savings we
will create for the companies who need to keep their excess inventory in the warehouse
sales force costs. We basically provide
a free (5% commission, but they make commissions anyway) service.
3.
Our
website will contain sections where people can post the lists of things they
are looking which
The company is currently in the planning stages. A new company name is also being considered.
2.0 Management and Organizational Structure
Adam M., CEO. With a family background in entrepreneurship, Adam is up to the task of operating a business. He will be responsible for overseeing the daily operation of the company and future strategic decision making.
Kristaps K., CFO. With over 3 years of experience in accounting roles, Kris is well equipped to take on the challenging role of Chief Financial Officer to control the finances of our company.
Andrei Z, CMO. Andrei will be responsible for business development and online advertising and marketing strategy.
Céline T. Céline will be responsible for identifying customers needs and play a strategic role in the day to day operations, while acting as the administrative help for the executives.
Mohammed S., COO. The Chief Operations Officer will be responsible for the daily operations, upkeep and development of Online Sales website and its servers.
IT
Professional
The IT
Professional will work closely with the
Customer Service Representative
The Customer Service Representative will be responsible for answering customer and supplier inquires either by email or through a dedicated telephone line.
Online Sales’ board of directors will consist of five individuals; the CEO, a member from the law firm representing Online Sales and three CEO’s from Canadian ecommerce firms. The four external members will provide guidance to Online Sales.
2.4 Organizational
Structure 
2.5 Ownership and Legal Structure
The four founding partners will each maintain an equal share and control of the business at 25% each. A founder’s agreement will be signed in order to establish each partners’ responsibilities. The company plans to incorporate as a privately held Canadian corporation.
2.6
Intellectual Property and Licenses
The corporation’s name “Online Sales” will be registered using the “Newly Upgraded Automated Name Search” (NUANS).
Articles of Incorporation are required to be submitted to the Federal Corporations Directorate and registered.[1] The entire process is to be completed online.
The domain name “onlinesales.com” needs to be registered with Internic.ca. The domain extensions .ca and .com and will be registered.
Law Firm
The law firm Osler, Hoskin & Harcourt LLP will represent Online Sales, located in major Canadian metropolises. Osler, Hoskin & Harcourt LLP specialises in business and ecommerce law. Online sales will consult them on any legal matters.
3.0 Industry/Market Feasibility Analysis
Online Sales operates online, however it will operate within the offline wholesale industry, the retail industry and the non-store retail industry since it will source it its vying for the same customers and use the internet simply as a means to facilitate transactions, reduce costs and find clients. Wholesale agents and brokers will buy and sell merchandise owned by others for a fee or commission basis; they do not take title to the goods they buy or sell, and they generally operate at or from an office location.[2] Wholesale merchants do take entitlement; they are still included in the market analysis since the goods that make up this industry can be sold through our business. The retail trade sector comprises establishments primarily engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise[3]. Retail is included in our analysis, however only part of the industry could actually use Online Sales. Given the statistics available, it is impossible to distinguish exactly what industries within the retail sector would use Online Sales.
3.1
3.1.1
Current Market Development
Wholesale
Total sales by all
wholesale trade groups were $501,035 billion in 2006[4].
As of 2006 there were 52,644.8 Canadian wholesale inventories[5].
The wholesale industry in
Retail
Total sales by all retail trade groups were $391 billion in 2006[7] Total non-store retail revenues in 2004 were $11,845,350. Within four years this sector has gown 14%[8]. Total retail sales dropped to $276 million in 2006 when supermarkets, convenience stores and gasoline retail were removed.
3.2
3.2.1
Current Market Development
Wholesale
Total sales by all
wholesale merchants in all trade groups in 2005 were over three trillion
dollars[9].
Total wholesale sales have grown 64.45% in ten years from 1995[10].
In 2004, US$451 million worth of wholesale sales was done through e-commerce[11].
In the
Retail
The retailing
industry is the second largest industry in the
Wholesale
· Retailers are attempting to bypass wholesalers to source cheaper goods directly with the manufacturer[14].
· Wholesalers are increasingly small firms with 50 or less employees[15].
Wholesale sales in
Retail
Increased wages will lead to increased consumer spending.
Workers will continue to leave the retailing sector in search of better work, creating a labour shortage.
Retail sales are climbing in
3.4.1 Porters Five Forces Analysis
Entry Barriers
The construction of a fully operational website will take a large amount of time and of capital, but not enough to be a substantial barrier to entry. Given that the business operates online with little in the way of physical infrastructure, the costs are not a significant issue. Trust is a major concern because new companies will find it difficult to get users to use the service since it is not recognizable.
Competitive Rivalry
The industry in growing but not at a huge rate. There are many wholesalers and retail operations within the North American industry; however not many wholesalers are operating online. This lowers the competitive market for online wholesaling. Retail operations are increasingly moving online however. There are very few barriers to exit for wholesalers since they are made up of offices and warehouses.
Bargaining Power of Suppliers
Since in the case of Online Sales the suppliers will be using the website to reduce their inventory costs or source new clients, the benefit they receive outweighs ours. They do have the option to use offline wholesalers and sales methods; however they can save money and time using this service. There is also little threat of forward integration. Overall the bargaining power of suppliers is low.
Bargaining Power of Buyers
The buyer has little bargaining power since there is low concentration, our service offers them a price benefit, they may buy large volumes but the discount is already applied for them. Switching costs may be moderate because it would be difficult to find some of the products being offered another way.
Threat of Substitutes
There is a great deal of substitute’s offline; however there are not many substitutes for online wholesaling. There are many online retail sites however. Overall substitutes are moderate too high.
3.5 Competitor Analysis
There are few direct competitors to Onlinesales.com. The closest competitor is liquidation.com which is an online wholesale action site. It offers roughly the same service except it relies on the end user to come to the site and requires users to wait out a bidding process. Someone must already know what they want and take the time to attempt to get their products. At the same time prices for goods can continue to increase. Overall the two services have enough differences to not cause any problems. Offline wholesalers are unlikely to be a major competitor since Onlinesales.com offers greater value over their service.
4.1
Product/Distribution Strategy
The core product of Online Sales is its website. Onlinesales.com has two main functions. First it allows companies to list excess inventory or regular products they want sold on the website. Second the general public can come to our website and view the products/inventory that the companies have listed. That person can then attempt to sell any of those products or inventories to someone else, its consignment without any actual product being shipped to the seller. If the person can find another person to buy the product or inventory, the company listing the product ships the goods to the buyer and gives a commission to the seller and to our website for facilitating the transaction. The seller however could also buy the products themselves, consignment with the shipment of goods, and then re-sale them for profit, or keep them.
Suppliers:
The suppliers are companies from all around the world that have excess inventory for sale, or products they need help selling.
Sellers:
Sellers are the general public who come to the website to earn commission by selling the suppliers products/inventories or earn profit off of the re-sale of the goods.
Buyers:
The buyers are the end users of the product. They are the ones who the sellers sell the suppliers products or inventories.
Use of the website begins with the supplier opening an account. Once they have opened an account and provided all the necessary information and agreed to all terms and conditions they can begin listing products. They must decide if they want to list products to be sold continuously or if they are listing excess inventory to be sold off. Once they have decided they upload all the necessary information about their products that someone would need to sell them; this includes and pictures, technical specifications, etc. They upload a price and quantity (if it is inventory) and our website engine tells them the discount required (see pricing strategy). T he price that is listed on the website is minus all the commissions. The next stage of our website involves a member of the public signing up and logging onto our website. They then chose to search our wholesaling section or our consignment section. They chose the products and or inventories they want to attempt to sell and go out and sell them. Once they have made a sale they give the seller the buyers shipping information through our website and the money is collected through our website as well to be distributed to the supplier once the goods have been shipped, minus ours and the suppliers’ commission.
The company supplying the goods for the website will sell their products at their regular price minus a discount determined by if they are listing excess inventory or regular products, regular products require smaller discounts. The amount of discount that must be offered on the suppliers inventories will increase depending on the amount the seller is selling or buying from them. This discount represents the benefit the supplier receives for the selling of their inventory in bulk.
4.2.2
Online Sales Pricing Strategy
The discount that the supplier must pay will only be partially listed on the website. Part of the discount will be absorbed by Online Sales because of their commission for facilitating the transaction and by the commission that will be paid to the seller for selling the product. The final price that is listed on the website for the supplier to see and offer to the end user will be the supplier’s regular price minus the discount with Online Sales and the sellers commission subtracted from that. A discount is required so that the end user does not circumvent our service and deal directly with the supplier; the prices offered to the end user will always be lower on our site then if the consumer dealt directly with the supplier.
The seller receives a commission that is predetermined for the item they are selling. It is listed with the price the end user will pay.
The buyer will pay the price that is listed with the product on the website, it will be lower then if they were to try and purchase the product themselves.
Advertising
and Customer Relationship Management (CRM):
Our attempt is to
target a specific demographic, which has been documented by market research
firm AC Nielsen for the major e-commerce player, eBay. Since this is the only
research result available due to the novelty of the market, we will compensate
for the supplier side of the business with our own investigation.
The AC Nielsen study mentions that there are roughly 212 million buyers and
seller in the e-commerce game. In the
Table 1: AC Nielsen study for eBay (main
findings)
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Buyers and Sellers: |
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•
212 million Worldwide |
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•
128 million in the |
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•
84 million in the other countries |
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•
299,000 eBay stores worldwide |
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•
173,000 stores hosted on the |
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•
|
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Sellers |
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•
|
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•
1.5 million in US; Supplement their income selling
online |
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•
95% of eBay sellers are individuals or small
businesses |
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Source: AC Nielsen
study for eBay, |
The acquisition
strategy will be based on an advertising campaign that will run continuously in
order to receive as much exposure as possible. Our ads will be placed on
websites such as PayPal, Yahoo, Google AdSense, Hot Jobs, and Monster.com. The
reason behind these channels is that the target segment is a heavy user of
these services, which sometimes are bundled together. Another modality for
attracting and populating the website with sales people will be to access
Monster.com’s database and contact all the sales people who posted their
resumes or that have profiles. This could be done either by using targeted
email campaigns or a call center to help us increase awareness of our website
and stimulate sales. The same strategy will be used for Workopolis.com and
other sales focused recruiting agencies in the region. This would ensure a very
low acquisition cost per sales person. A potential problem at this point could
be overlapping advertising messages which could be eliminated by screening
email addresses, or by using services in specific locations only.
Our company will try
to improve retention by offering a strong value proposition, based on a winning
price level. Since we focus on excess inventory sales, we will ask for a
discount rate bigger than that of their best retail or wholesale current offer.
In this way we will add value to the market place and our suppliers and sales
force will have to return due to the fact that the prices are the best in the
market place.
The strategy is to
steadily increase the value of our sales force by increasing the number of
products they are selling through weekly targeted newsletters that contain new
or existing products according to the experience of the sales person. The sales
force will constantly be our main target for expansion, because it represents
the source of our revenue.
One of the most important assets of the organization is its knowledge worker, or the IT personnel. Due to the technologically dependent nature of the business, the IT personnel must be qualified not only to operate the systems in place, but also to design and maintain them. In this way, key competitive factors will be kept in-house and the organization will have more control over its intangible assets. Any changes to the systems in the use, will be executed in a much faster manner, which allows decisions to be quickly implemented and, therefore, results will be easier to achieve.
For the first six months to one year of operations the organization will hire one IT professional, whose main responsibility will be to build and maintain the website and the e-commerce engine behind it. As shown in the financial statements, the cost to develop and maintain the website is evaluated at $12,000 over a period of three to four months.
The website will allow suppliers of goods or services to post their merchandise under certain categories and in quantities they choose. In the same time, the sales force will be able to create their own profiles on the website, so that the suppliers can contact them and vice versa. The main idea is to prevent the supplier and sales person to avoid our website and consequently the payment of commission. To achieve this, our focus will be on forcing suppliers to post products at lower prices than their best retail or wholesale offer. Since the purpose of the website is to sell excess inventory, we believe that obtaining cheaper products that anyone else, will give us the competitive edge, and when combined with an online sales force, will turn our plan into a source of revenue. Having cheaper products in bulk quantities, the sales force will have to return to the website in order to obtain new product offers. This basically represents our value proposition mentioned in the beginning of the report: Offer products for sale in bulk quantities at the lowest price possible, to a world wide network of sales people.
Another duty of the IT employee is to conduct training sessions with the rest of the personnel regarding computing security. This will give our staff the right knowledge on how to prevent data corruption and loss but will also inspire trust to our customers. The data protection and cyber security policies in the internal environment of the organization will represent a key objective and its evolution and effectiveness will constantly be monitored with the help of a balanced scorecard, which will be discussed in the Implementation and Evaluation section of the report.
Several encryption and security software solutions will be acquired and installed on our systems, which have the role of protecting the sensitive data of our company, clients and suppliers. The costs related to the implementation of these solutions are presented in the financial systems.
Another category of software is represented by the office productivity suites and the operating systems that run on our computers. To minimize costs, our company is using a combination of open-source and proprietary software solutions.
Regarding the financial transactions and the computer systems involved in the Finance department, it can be mentioned that our company will use an existing online banking system: PayPal. In this way, we will minimize transaction responsibility and paper work in exchange for a small fee as shown in the financial statements.
When it comes to our clients, our first priority is to ensure their security and privacy are fully respected. To enforce this policy, our company will take all the necessary measures to make sure that we deliver on our promise. Starting with the internal environment and the work philosophy of our employees, the financial processes and on-site interaction, our company will implement the necessary security measures. To protect the data existing on our computers, we will encrypt all hard drives, removable drives and backups. They will also be constantly archived and deposited in a secure place in the end of the day. The assistance of specialized consultants and security providers will be required to develop a consistent security screaming and protection system. Access to information and the transfer or copying of it will be closely monitored on a 24h 365d basis. We fully understand the online security concerns regarding fraud and identity theft of our clients and these issues represent key managerial objectives that will constantly be improved.
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Strengths: · Flexible product and service offer · Scalable business model · Low startup and operations costs · In-house business and IT knowledge · Low financial, product, and service liability · Easy product knowledge transfer between suppliers, company and sales force |
Weaknesses: · Limited advertising budget · Limited revenue streams · Business requires large sales turnover for consistent profit · Reliability on external factors: sales force, product quality · Limited control over advertising channels · Limited personal relationships with suppliers and clients · Limited customer support |
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Threats: · Developing the initial community ·
Improved inventory practices ·
Customer and supplier rejection · Strong competition from similar businesses · Clients default to pay · Target for potential online attacks · Prone to online fraud schemes |
Opportunities: · Growing online commerce · Capitalize on excess inventory and over production levels · Serve various growing markets · Take advantage of existing sales forces to sell excess inventory · Take advantage of network effects: easy to become a client or supplier and to spread the word |
SWOT Conclusion and Risk assessment:
1. How can we use each strength to take advantage of Opportunities and eliminate threats and risks?
Using our in-house knowledge combined with a flexible product offer we can promote the product and service offer to existing online sales force and in this way capitalize on the supplier’s excess inventory. To achieve this goal, a strong and energetic advertising campaign must be launched in order to achieve the critical mass of suppliers and sales people required to create a constantly growing revenue stream.
In order to build a sustainable business, we will focus on developing personal relationships with major suppliers in order to give the business a more personal touch. This will help us to secure a constant source of revenue and will also reduce complete reliability on external factors such as product quality and sales force. Even though the reliability on these factors cannot be eliminated, we will decrease the chances that a potentially unsafe big ticket item will be sold through our website. Due to the nature of the business and its complexity, we cannot take responsibility for every product sold.
To minimize the threat of an online attack targeted at destabilizing our operations and breaching our clients’ privacy, we will focus on developing a strict cyber security system to provide maximum protection possible with as little as possible impact on functionality. This will add to our credibility and image on the market, creating the necessary conditions for a successful online business environment.
Based on the company’s internal and external environment analysis, and taking into consideration the risks involved in starting and operating the business, the company’s position, competition and value proposition are considered acceptable and achievable.
6.0
Implementation and Evaluation
The execution of the business plan will start in early May 2007 and during the following three to four months the website and e-commerce engine will be designed and tested. During this time, the executive will focus on establishing the business and its headquarters location. Also, intensive market research and business development activities will take place, and once the IT aspect of the business is ready to operate the advertising and recruiting effort will begin. The chart presented in the Appendix shows the project’s milestones.
The
evaluation of the company’s activity will be a focused mainly on three levels:
Marketing, Finance and IT. In order to clarify the process, a Balanced Scorecard[i] will be
introduced, having the purpose to monitor the main objectives proposed by the executives.
Since
the present paper addresses the last quarter of 2007, certain values are
missing in the Balanced Scorecard. This is due to the fact that the business is
in the early stages of operation and therefore the beginning values are zero.
The objectives are to be set on a monthly, quarterly and yearly basis by the
management team in cooperation with the rest of the employees. This approach of
measurement-based-management will
improve the evaluation process, providing clear diagnostics on each function of
the organization. The scorecard also gives a clear target for the organization,
which will improve the departments to focus their efforts in a much more
efficient way. For the purpose of the present report we
provided a yearly description of the objective.
7.0 Financial Projections
