Connect with us

Professional Services

High-Tech Marketing Sample Business Plan

This sample business plan will provide you with the ideal guidelines for starting your high tech marketing business.

Entrepreneur

Published

on

Click here to view this full business plan

High-Tech Marketing Business Plan

Executive Summary

Acme Consulting will be a consulting company specializing in marketing of high-technology products in international markets. The company offers high-tech manufacturers a reliable, high-quality alternative to in-house resources for business development, market development, and channel development.

Acme Consulting will be created as a California C corporation based in Santa Clara County, owned by its principal investors and principal operators. The initial office will be established in A-quality office space in the Santa Clara County “Silicon Valley” area of California, the heart of the U.S. high tech industry.

Within the US and European high tech firms that Acme plans to target,we will focus on large manufacturer corporations such as HP, IBM & Microsoft. Our secondary target will be the medium-sized companies in high growth areas such as multimedia and software. One of Acme’s challenges will be establishing itself as a real consulting company, positioned as a relatively risk-free corporate purchase.

Industry competition comes in several forms, the most significant being companies that choose to do business development and market research in-house. There are also large, well known management consulting firms such as Arthur Anderson, Boston Consulting Group, etc. These companies are generalist in nature and do not focus on a niche market. Furthermore, they are often hampered by a flawed organizational structure that does not provide the most experienced people for the client’s projects. Another competitor is the various market research companies, such as Dataquest and Stanford Research Institute. Acme Consulting’s advantage over such companies as these is that Acme provides high level consulting to help integrate market research data with the companies goals.

Acme Consulting will be priced at the upper edge of what the market will bear, competing with the name-brand consultants. The pricing fits with the general positioning of Acme as providing high-level expertise.

The company’s founders are former marketers of consulting services, personal computers, and market research, all in international markets. They are founding Acme to formalize the consulting services they offer. Acme should be managed by working partners, in a structure taken mainly from Smith Partners. In the beginning we assume 3-5 partners.

The firm estimates profits of approximately $65,000 by Year 3 with a net profit margin of 6%. The company plans on taking on approximately $130,000 in current debt and raise and additional $50,000 in long-term debt to invest in long-term assets. The company does not anticipate any cash flow problems arising.

1.1 Objectives

  • Sales of $550,000 in Year 1 and $1 million by Year 3.
  • Gross margin higher than 70%.
  • Net income more than 5% of sales by Year 3.

1.2 Mission

Acme Consulting offers high-tech manufacturers a reliable, high-quality alternative to in-house resources for business development, market development, and channel development on an international scale. A true alternative to in-house resources offers a very high level of practical experience, know-how, contacts, and confidentiality. Clients must know that working with Acme is a more professional, less risky way to develop new areas even than working completely in-house with their own people. Acme must also be able to maintain financial balance, charging a high value for its services, and delivering an even higher value to its clients. Initial focus will be development in the European and Latin American markets, or for European clients in the United States market.

1.3 Keys to Success

  1. Excellence in fulfilling the promise–completely confidential, reliable, trustworthy expertise and information.
  2. Developing visibility to generate new business leads.
  3. Leveraging from a single pool of expertise into multiple revenue generation opportunities: retainer consulting, project consulting, market research, and market research published reports.

Company Summary

Acme Consulting is a new company providing high-level expertise in international high-tech business development, channel development, distribution strategies, and marketing of high-tech products. It will focus initially on providing two kinds of international triangles:

Providing United States clients with development for European and Latin American markets.
Providing European clients with development for the United States and Latin American markets.

As it grows it will take on people and consulting work in related markets, such as the rest of Latin America, the Far East, and similar markets. It will also look for additional leverage by taking brokerage positions and representation positions to create percentage holdings in product results.

2.1 Start-up Summary

Total start-up expense (including legal costs, logo design, stationery and related expenses) comes to $18,350. Start-up assets required include $7,000 in short-term assets (office furniture, etc.) and $25,000 in initial cash to handle the first few months of consulting operations as sales and accounts receivable play through the cash flow.

2.2 Company Locations and Facilities

The initial office will be established in A-quality office space in the Santa Clara County “Silicon Valley” area of California, the heart of the U.S. high tech industry.

2.3 Company Ownership

Acme Consulting will be created as a California C corporation based in Santa Clara County, owned by its principal investors and principal operators. As of this writing, it has not been chartered yet and is still considering alternatives of legal formation.

Services

Acme offers the expertise a high-technology company needs to develop new product distribution and new market segments in new markets. This can be taken as high-level retainer consulting, market research reports, or project-based consulting.

3.1 Service Description

  1. Retainer consulting: We represent a client company as an extension of its business development and market development functions. This begins with complete understanding of the client company’s situation, objectives, and constraints. We then represent the client company quietly and confidentially, sifting through new market developments and new opportunities as is appropriate to the client, representing the client in initial talks with possible allies, vendors, and channels.
  2. Project consulting: Proposed and billed on a per-project and per-milestone basis, project consulting offers a client company a way to harness our specific qualities and use our expertise to solve specific problems, develop and/or implement plans, and develop specific information.
  3. Market research: Group studies available to selected clients at $5,000 per unit. A group study is a packaged and published complete study of a specific market, channel, or topic. Examples might be studies of developing consumer channels in Japan or Mexico, or implications of changing margins in software.

3.2 Competitive Comparison

The competition comes in several forms:

The most significant competition is no consulting at all, companies choosing to do business development, channel development and market research in-house. Their own managers do this on their own, as part of their regular business functions. Our key advantage in competition with in-house development is that managers are already overloaded with responsibilities, they don’t have time for additional responsibilities in new market development or new channel development. Also, Acme can approach alliances, vendors, and channels on a confidential basis, gathering information and making initial contacts in ways that the corporate managers can’t.
The high-level prestige management consulting: McKinsey, Bain, Arthur Anderson, Boston Consulting Group, etc. These are essentially generalists who take their name-brand management consulting into specialty areas. Their other very important weakness is the management structure that has the partners selling new jobs, and inexperienced associates delivering the work. We compete against them as experts in our specific fields, and with the guarantee that our clients will have the top-level people doing the actual work.
The third general kind of competitor is the international market research company: International Data Corporation (IDC), Dataquest, Stanford Research Institute, etc. These companies are formidable competitors for published market research and market forums, but cannot provide the kind of high-level consulting that Acme will provide.
The fourth kind of competition is the market-specific smaller house. For example: Nomura Research in Japan, Select S.A. de C.V. in Mexico (now affiliated with IDC).
Sales representation, brokering, and deal catalysts are an ad-hoc business form that will be defined in detail by the specific nature of each individual case.

3.3 Sales Literature

The business will begin with a general corporate brochure establishing the positioning. This brochure will be developed as part of the start-up expenses.

Literature and mailings for the initial market forums will be very important.

3.4 Fulfillment

The key fulfillment and delivery will be provided by the principals of the business. The real core value is professional expertise, provided by a combination of experience, hard work, and education (in that order).
We will turn to qualified professionals for freelance back-up in market research and presentation and report development, which are areas that we can afford to sub-contract without risking the core values provided to the clients.

3.5 Technology

Acme Consulting will maintain the latest Windows and Macintosh capabilities including:

  • Complete e-mail facilities on the Internet, Compuserve, America-Online, and Applelink, for working with clients directly through e-mail delivery of drafts and information.
  • Complete presentation facilities for preparation and delivery of multimedia presentations on Macintosh or Windows machines, in formats including on-disk presentation, live presentation, or video presentation.
  • Complete desktop publishing facilities for delivery of regular retainer reports, project output reports, marketing materials, and market research reports.

3.6 Future Services

In the future, Acme will broaden the coverage by expanding into coverage of additional markets (e.g., all of Latin America, Far East, Western Europe) and additional product areas (e.g., telecommunications and technology integration).

We are also studying the possibility of newsletter or electronic newsletter services, or perhaps special on-topic reports.

Market Analysis Summary

Acme will be focusing on high-technology manufacturers of computer hardware and software, services, and networking, who want to sell into markets in the United States, Europe, and Latin America. These are mostly larger companies, and occasionally medium-sized companies.

Our most important group of potential customers are executives in larger corporations. These are marketing managers, general managers, sales managers, sometimes charged with international focus and sometimes charged with market or even specific channel focus. They do not want to waste their time or risk their money looking for bargain information or questionable expertise. As they go into markets looking at new opportunities, they are very sensitive to risking their company’s name and reputation.

4.1 Market Segmentation

Large manufacturer corporations: Our most important market segment is the large manufacturer of high-technology products, such as Apple, Hewlett-Packard, IBM, Microsoft, Siemens, or Olivetti. These companies will be calling on Acme for development functions that are better spun off than managed in-house, for market research, and for market forums.

Medium-sized growth companies: particularly in software, multimedia, and some related high-growth fields, Acme will offer an attractive development alternative to the company that is management constrained and unable to address opportunities in new markets and new market segments.

4.2 Target Market Segment Strategy

As indicated by the previous table and Illustration, we must focus on a few thousand well-chosen potential customers in the United States, Europe, and Latin America. These few thousand high-tech manufacturing companies are the key customers for Acme.

4.3 Service Business Analysis

The consulting “industry” is pulverized and disorganized, with thousands of smaller consulting organizations and individual consultants for every one of the few dozen well-known companies.

Consulting participants range from major international name-brand consultants to tens of thousands of individuals. One of Acme’s challenges will be establishing itself as a real consulting company, positioned as a relatively risk-free corporate purchase.

4.3.1 Competition and Buying Patterns

The key element in purchase decisions made at the Acme client level is trust in the professional reputation and reliability of the consulting firm.

4.3.2 Main Competitors

1. The high-level prestige management consulting:

Strengths: International locations managed by owner-partners with a high level of presentation and understanding of general business. Enviable reputations which make purchase of consulting an easy decision for a manager, despite the very high prices.

Weaknesses: General business knowledge doesn’t substitute for the specific market, channel, and distribution expertise of Acme, focusing on high-technology markets and products only. Also, fees are extremely expensive, and work is generally done by very junior-level consultants, even though sold by high-level partners.

2. The international market research company:

Strengths: International offices, specific market knowledge, permanent staff developing market research information on permanent basis, good relationships with potential client companies.

Weaknesses: Market numbers are not marketing, not channel development nor market development. Although these companies compete for some of the business Acme is after, they cannot really offer the same level of business understanding at a high level.

3. Market specific or function specific experts:

Strengths: Expertise in market or functional areas. Acme should not try to compete with Nomura or Select in their markets with market research, or with ChannelCorp in channel management.

Weaknesses: The inability to spread beyond a specific focus, or to rise above a specific focus, to provide actual management expertise, experience, and wisdom beyond the specifics.

4. Companies do in-house research and development:

Strengths: No incremental cost except travel; also, the general work is done by the people who are entirely responsible, the planning is done by those who will implement it.

Weaknesses: Most managers are terribly overburdened already, unable to find incremental resources in time and people to apply to incremental opportunities. Also, there is a lot of additional risk in market and channel development done in-house from the ground up. Finally, retainer-based antenna consultants can greatly enhance a company’s reach and extend its position into conversations that might otherwise never have taken place.

4.3.3 Business Participants

At the highest level are the few well-established major names in management consulting. Most of these are organized as partnerships established in major markets around the world, linked together by interconnecting directors and sharing the name and corporate wisdom. Some evolved from accounting companies (e.g. Arthur Andersen, Touche Ross) and some from management consulting (McKinsey, Bain). These companies charge very high rates for consulting, and maintain relatively high overhead structures and fulfillment structures based on partners selling and junior associates fulfilling.

At the intermediate level are some function-specific or market-specific consultants, such as the market research firms (IDC, Dataquest) or channel development firms (ChannelCorp, Channel Strategies, ChannelMark).

Some kinds of consulting are little more than contract expertise provided by somebody who, while temporarily out of work, offers consulting services.

4.3.4 Distributing a Service

Consulting is sold and purchased mainly on a word-of-mouth basis, with relationships and previous experience being, by far, the most important factor.

The major name-brand houses have locations in major cities and major markets, and executive-level managers or partners develop new business through industry associations, business associations, chambers of commerce and industry, etc., and in some cases social associations such as country clubs.

The medium-level houses are generally area specific or function specific, and are not easily able to leverage their business through distribution.

Click here to view this full business plan

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Professional Services

Security Guard Business Plan Sample

Protect your community by starting a security business using a security guard business plan similar to this one.

Entrepreneur

Published

on

83-security-guard-business-plan

Protect your community by starting a security business using a security guard business plan similar to this one to compile your own.

1. Executive Summary

Batten-Hatchez Security is a start-up security company founded by Chindit Batten, an experienced former police sergeant and security company manager.

Located in Coastalburg at its launch, the business will provide security guards, security audits, and referrals to equipment providers to commercial buildings, retail businesses, and, eventually special event venues and other clients.

The business seeks to acquire capital from an angel investor and will expand to additional cities in our state and beyond if successful.

Related: Free Business Plan Template Download

In the current political climate, with increasing fears of terrorist activity, and the current economic climate, which promises an upswing in general and in outsourced services especially, this business is launching at the right time.

The business will target large retail stores and building management companies first in order to establish a strong base of clients in Coastalburg.

Batten-Hatchez will grow its employee base of security guards carefully, based on client contracts, and use both full-time and part-time guards. The business expects respectable sales of in the first year, almost doubling by the end of the third year. Gross margins will be similar to the industry average, based on guard labor costs vs. billings.

Related: How To Start A Business With (Almost) No Money

After the initial investment and launch, a lean first year, and the establishment of an office and training space in the second year, the business will be poised to expand through its own financing after three years. After the business is proved replicable in additional cities, the business may be sold to provide an exit for the initial investor and founders.

Objectives

Batten-Hatchez Security will base its success on meeting the following objectives:

  • Employ 25 full-time equivalent security guards by the end of the third year of operation
  • Supply security guards to 15 buildings on a full-time basis by the end of the third year of operation
  • Earn $2 million in revenue with net profit over $300,000 in its third year of operation

Mission

Batten-Hatchez Security will remove worries for clients who require security guards for their buildings, facilities, and events by providing excellent customer service for clients and in-depth training for their employees.

Keys to Success

Batten-Hatchez Security believes the keys to success in its industry include:

  • Listening carefully to client concerns and objectives to create customized security guard packages
  • Knowing what the client does not know (bringing deep security expertise as well as knowledge of legal regulations and liability to the table)
  • Training security guards carefully and maintaining their training and certifications (e.g. to carry firearms)
  • Monitoring the quality of security guard service to offer quality assurance

6 SAB Entreprenurship Programmes That Provide Business Management And Support

The creation of SAB KickStart, SAB Foundation, SAB Accelerator and SAB Thrive, provides the opportunity for a tangible and sustainable future for South Africans by providing invaluable guidance and support to new business.


2. Company Summary

security-company-summary

Batten-Hatchez Security is a startup security company founded by Chindit Batten, a former police sergeant and security company manager with fifteen years in law enforcement and ten years in security work.

Related: 21 Steps To Start-Up

The business will provide security guards to commercial buildings, retail businesses, and special events. The business will launch in Coastalburg but will expand to additional cities if successful.

Company Ownership

Chindit Batten is CEO and founder of Batten-Hatchez Security.

He currently owns 60% of the business and the remaining 40% of shares are owned by his partner and co-founder, Viipuri Hatchez, COO. The business is incorporated as an S Corporation to enable additional investment for its launch.

The founders shares will be diluted as up to 40% of shares will be given to investors.

Start-up Summary

Batten-Hatchez Security will launch as a home-based business out of the home office of Chindit Batten. Initially, this will reduce the cost of rent and equipment.

Related: Conducting a Business Plan Market Analysis

Training for security guards will be provided in temporarily rented office space as needed.

Other start-up costs include the costs of incorporation and permits, such as concealed weapons permits, business license, and police clearances (legal fees), the initial website and brochure design and printing, and the first insurance premium for the business, including liability insurance for the guard’s work and carrying of firearms.

Long-term assets include mobile phones and headsets for all guards and employees, as well as two-way radios for guards working as teams.


3. Services

security-company-camera

Batten-Hatchez Security will provide well trained guards for one or more of the following purposes:

  • To guard entrances and screen guests/employees
  • To monitor clients’ premises with video surveillance equipment
  • To protect clients’ assets, employees and guests
  • To deter crime with visual presence
  • To organize response in the case of fire, evacuation, or other emergency
  • To respond to customer and employee health emergencies and accidents
  • To eject unwanted customers or trespassers
  • To liaison with police and city emergency responders

In addition, the principals of the firm will offer the following:

  1. Security audits and recommendations for security plans
  2. Referrals to providers of security technology (camera systems, etc.)

Batten-Hatchez will be a licensed, insured, and bonded business and will offer both armed and unarmed guards, based on client needs and budgets.

Related: Are You Building A Business Or Creating A Job For Yourself?

All guards will be certified for security work and to carry firearms. Whenever possible, the same guards will be sent consistently to the same clients. However, substitutes will be necessary from time to time and the business will ensure that detailed data about the job is transmitted to substitute guards on those occasions.

Batten-Hatchez Security will build trust with clients as a partner, rather than simply in the specific guard or guards they grow comfortable with. Guards will keep in constant communication with their team via portable two-way radios and with the Batten-Hatchez office, as necessary through mobile phones.

The Batten-Hatchez office will be not be staffed full-time at launch, but the CEO and COO will be within reach by phone wherever they work. Guards who encounter criminal activity will alert the authorities immediately rather than going through a communications centre.

Once the Batten-Hatchez office is established outside of the home of Chindit Batten, it will be staffed full-time with a rotation of three call centre personnel who will cover the dispatches. Guards will either be stationed at desks or patrol on foot at all facilities.

Clients must provide vehicles if their jobs require vehicle patrol (i.e., a facility with several buildings), but this will not be a focus of Batten-Hatchez Security.


How to Write a Funding Proposal

Knowing how to write a funding proposal properly can make or break your business idea before it even gets off the ground.


4. Market Analysis Summary

security-market-analysis-summary

The market for security guard services includes building management companies, retail businesses, event venues, and other businesses. IBISworld.com reports that the security services industry as a whole was $29.7 billion in 2008.

While this number includes investigative services and armoured car services, it is estimated that security guards accounted for $22.3 billion. This represents approximately 540,000 employees in the security guard industry.

While market revenue has dropped 2% in 2008 due to the recession, it is expected that the market will rise again due to increasing outsourcing of security services by companies who will delay hiring their own full-time employees as the recession ends.

The continuing and growing concerns about security brought on by international terrorism are also expected to contribute to growth in the industry.

Of the potential targets available in Coastalburg Batten-Hatchez Security will focus on building management companies and retail businesses at the outset.

Related: 3 Key Law Areas To Know When You Launch That Start-up

These businesses require steady security needs and serving them is simpler than serving special events.

Market Segmentation

The market analysis table shows the market segmentation for Coastalburg among the major market segments for security guard services. Growth is slow among these markets as new development is not prevalent in Coastalburg currently.

Building management companies generally install surveillance equipment and employ security guards to monitor that equipment, to staff front desks/security checks, and sometimes for general patrol.

These companies often work with a number of commercial or residential buildings and look to establish a relationship with one reliable vendor for all of their security guard needs. While some buildings require night-shift guards, others require only day coverage.

Large retail businesses use security guards to deter theft and to provide safety. These include department stores and other retail stores over 4,000 square feet, although some smaller stores may use security guards if they sell high-priced items (designer fashion, jewelry, technology, etc.).

Retailers require more guards during the day. Some simply lock the store at night while some larger department stores use night patrols as well.

Related: How Do You Hit The Right Target Market For Your Business?

Event venues use security guards to monitor guest lists and fire capacities and to organize emergency response. Nightclubs and bars may be included in this category. However, most nightclubs and bars employ their own security personnel (or “bouncers”) directly and do not use vendors.

Event security has the same risks as other security, but there is limited time for security audits and situations change fast, making this a higher stress business that requires better trained guards. Events tend to happen in the evenings with weekday nights for corporate events and weekend nights for private events.

Educational institutions, such as primary and secondary schools and colleges, generally employ security officers to guard and patrol their buildings and campuses. Often these institutions employ their own in-house security staff, but they will sometimes use outsources security vendors. These institutions require night and day patrols.


How Do I Start A Security Company?

There are two kinds of security companies, one that sells products and one that sells services or you can combine both.


Target Market Segment Strategy

Batten-Hatchez Security will target the first two of these target markets initially, building management companies and retail businesses. Both segments require ongoing security vendors and are eager to establish long-term relationships.

Once relationships are established, good customer service, quality assurance, and competitive pricing can ensure that the relationships are retained and that the security provider is considered a true partner in the protection of the building or businesses’ assets and people.

Furthermore, the other two target markets listed will be taken on at a later date, if at all. Event venues require more specialised services and may be a slower market to tackle.

Related: Target Market Worksheet

Educational institutions are often eager to establish their own security staffs, making this a difficult market to establish a strong foothold in as well.

Service Business Analysis

According to IBISWorld, there were 41,000 security services firms in the U.S. in 2008 running 56,000 establishments. The average size of a firm was $700,000 revenue per year based on these numbers, meaning that the industry includes both small and larger companies.

There are few barriers to entry, as long as basic legal requirements are met, as the capital investment in the business is very low. The industry depends on a supply of labor, often using retired police officers as security guards.

As security guard services are sold business-to-business, marketing and advertisement is generally targeted on the markets and industries the security companies seek to serve. Businesses generally search for security guard providers on the Internet or through referrals from other companies they trust.

Competition and Buying Patterns

Top players in the industry include Securitas AB, Allied Security LLC, The Brink’s Company, and G4S plc.

Huge players provide services for a huge range of markets, including governments, chemical and petrochemical, colleges and universities, commercial real estate, financial institutions, health care facilities, manufacturing and industrial, residential communities, shopping centers, and temporary security services.

Smaller security companies achieve success based on the expertise and reputation of their founding managers and the growth of a team with a similar track record. The continued success of a company depends on client satisfaction, leading to referrals.

Larger institutions and governments may receive several bids for security contracts, while smaller businesses (such as many that Batten-Hatchez Security will target) often prefer to try out security companies and move on if they do not meet expectations.

The smaller the amount of assets being protected, the more willing a company will be to risk their security on educated hunches about a security company without feeling the need to do due diligence on a number of options.

IBISworld reports the following about the security industry:

  • While the public’s perception of the rising crime rate assists revenue, the most significant factor which increases the demand for this industry’s services is a breach of an existing security system, a break-in or a near break in. The economic crisis has hurt demand over the past two years but things will soon begin to improve.
  • In Coastalburg, security guard service competitors include securityguard.com, Top Guard Security, US Security Guard Services, and Trend Security Corporation.

Click here to view this full business plan


Related: 10 SA Entrepreneurs Who Built Their Businesses From Nothing

Continue Reading

Professional Services

Plastics Recycling Sample Business Plan

Using this sample plan will provide you with guidance when drawing up your own plastics recycling business plan.

Entrepreneur

Published

on

Click here to view this full business plan

Plastics Recycling Business Plan

Executive Summary

The growing utilization of plastics in industrial and consumer applications, combined with increased consumer awareness surrounding solid waste recycling, has led to an increased demand for recycled plastic resins and products. One of the fastest growing types of collected plastic materials for recycling is polyethylene terephthalate (“PET”) from post-consumer beverage and water bottles. Replay Plastics will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division.

The Company will create a PET cleaning and refining plant located in the western United States (all 16 major North American PET recycling plants are currently located in the eastern United States or Canada). Its initial capacity will be 46 million pounds, and it will utilize post-consumer bottle feed stock presently collected in California, Oregon and Washington States, which collect over 200 million pounds per year. The Company will be vertically integrated, and use almost all of its recycled material in its Packaging Division. Any surplus materials (clean flake) produced will be sold to outside companies. The extruded sheet may then be sold to manufacturers, who will thermoform it into high-visibility packaging or use it in other high value added manufacturing operations. The strapping will be sold to companies who ship large packages or pallets, such as the lumber milling industry. The Company currently has commitments available from customers to purchase all of the product produced.

MANAGEMENT

Ben Braddock, President, has a 30-year history of experience encompassing all aspects of Polymer Raw Material, Plastic Conversion Methods, and Venture Development. He has founded successful ventures in the plastic converting industry, and assisted in the launch of five plastic converting manufacturing plants. Sam McGuire, Executive VP and COO, is a graduate Engineer with over 20 years experience in the post-consumer plastics recycling industry and is the inventor of the primary cleaning & refining technology used in the process for this project. He has received a patent for his technology and has been directly involved in over twenty-five major post consumer plastics recycling projects. Carl R. Smith, CFO, has over 30 years investment and merchant banking and management experience. He has assisted in raising over $500 million and served as board member and/or officer in over 40 public and private companies.

1.1 Objectives

  • Sales passing $15 million in first year, $31 million in year 2, growing to $43 million.
  • Gross margin of 35% or more in first year, 45% in second year then 50% or more.
  • Net profit of 13% in year one, then exceeding 20% annually starting in year two.

1.2 Mission

Replay Plastics is a manufacturing company dedicated to converting waste plastic materials into commercially viable products, utilizing environmentally friendly recycling and manufacturing methods. We intend to make enough profit to generate a significant return for our investors and to finance continued growth and continued development in quality products. We will also maintain a friendly, fair, and creative work environment, which respects diversity, new ideas and hard work.

1.3 Keys to Success

The main keys to the success of the Company are:

  1. Secure Supply- Contract for supply of post-consumer bottles and post-industrial manufacturing waste for PET raw material feed stock.
  2. Marketing –  Contractual arrangements for the sale of virtually all initial production.
  3. Management – Strong senior management with extensive, broad-based, industry-specific experience.

1.4 Potential Risks

Unavailable or scarce raw material feed stock for production

  • Replay is confident that it has secured good availability of low cost post-consumer PET bottles (feed stock) derived from post-consumer beverage bottles from California based recycling collectors, and has back up sources identified.

Technology employed may be unreliable or unprovenReplay will use a proven, patented technology that was developed by one of its principals for the cleaning and recycling phase. The extrusion division will employ commercially proven technology – the industry is employing unique recycled PET technology which is used by prominent eastern U.S. manufacturers of PET extrusions.

  • There may not be a market for the Company’s products

The Industry-wide experience of the Management Team has allowed them to identify markets for the Company’s products. Their expertise and reputations have allowed them to obtain commitments for virtually all of the planned initial production.

  • The location may not be near enough to markets

The markets that have been identified are primarily in the western U.S., which will provide a distinct advantage to the Company because of freight costs and delivery timing.

  • The Company may not be able to attract top management

The Company has assembled a world class management team with proven ability and direct experience in the Company’s market segments.

  • Company may not meet environmental standards

This environmentally-favorable venture provides for the development of technically feasible and economically viable solutions to PET plastic beverage bottle recycling, as well as environmentally aware in-house re-use practices which filter and return nearly all of the process water to the production lines.

  • The Company may not be able to sell all of its production capability

Through the Senior Management’s industry-wide contacts, the Company has identified potential customers and received commitments for all of the production potential of the initial facility.

Company Summary

The Company will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division.

Recycling Division

Using a patented process, the Company will create a PET cleaning and refining plant located in the western United States; we have chosen this region because all 16 major North American PET recycling plants are currently located in the eastern United States or Canada, despite western states’ favorable recycling attitudes among consumers. Its initial annual capacity will be 46 million pounds and it will utilize bottle feed stock from California, Oregon and Washington States, which collect over 200,000,000 pounds per year. The Company will become totally vertically integrated, and use all or almost all of its recycled material in its Packaging Division.  Any surplus material produced will be sold to outside companies.

Packaging Division

We will create a plant (actual facilities to be shared with the Recycling Division) to manufacture extruded plastic roll stock sheet or high-strength strapping, employing state-of-the-art technology developed to utilize recycled PET resin. The extruded sheet will be primarily sold to thermoformers who will convert it into high visibility packaging, as well as laminators and fabricators. The strapping will be sold to commercial users for use as package or pallet strapping. The Company currently has commitments from customers to purchase all of the initial production capacity.  Excess flake will be sold to outside customers.

2.1 Company Ownership

Replay Plastics is owned by the initial founders, B. Braddock, S. McGuire and C. Smith, who are the proposed three executives of the operating entity. The plan was conceived and developed by these individuals, with the intent to apply their extensive experience and contacts in the industry to building a successful profitable corporation.

2.1.1 Potential Conflict

Our COO, Mr. Sam McGuire, the inventor and patent holder of the recycling process to be used by the Company, is a principal in Company A of Chicago, IL. For many years, Company has designed, manufactured and assembled plastic recycling equipment, and has given us quotes on meeting our needs in this area.

After a thorough investigation, Replay has found that Company A is able to source or supply the required equipment at considerably lower cost than any other company from which a quote was available. Mr. McGuire has disclosed that Company A has included a smaller than normal margin in their quote on goods they will manufacture, to cover overhead, contingency and profit which might result in a small benefit to him. They have agreed to source all of the equipment possible with no added margin.

Replay has concluded that the savings available outweigh any other consideration and that we will purchase the cleaning and refining equipment from Company A.

2.2 Start-up Summary

Our start-up expenses are budgeted at $210,000, which is mostly for on-site contractor services during facility preparation. $50,000 has been set aside for legal and accounting, $25,000 for special consulting that may be required during start up and $50,000 each for local engineering and lab equipment and supplies. $30,000 has been set aside as a contingency for the start up period.

Our largest Start-up Requirement is the building of the recycling and extrusion facility. Its final value at completion is listed below as a long-term asset of $3,620,000 (excluding expensed items like consultants and engineering listed above). Aside from the building itself, we need $25,000 in machinery and fixtures, $500,000 of inventory (plastic bottle feed stock) and cash to cover us through the initial year.

Products

Replay Plastics will utilize two processes in the same facility to produce:

  • Cleaned and recycled plastic PET flake (RPET), recovered from post-consumer beverage bottles and manufacturing waste produced by its sheet customers
  • Extruded roll stock sheet PET.
  • Extruded PET high-strength strapping for securing large packages or pallet loads; each using 100% RPET produced in-house

3.1 Product Description

Roll stock sheet will be sold to custom thermoformers primarily to be used to produce high-visibility packaging. It will also be sold to manufacturers of laminates and fabricated plastic products.

High strength PET packaging strapping is used to secure packages or pallets in such industries as lumber milling and corrugated and other paper production.

Both products will be extruded from post-consumer polyethylene terephthalate (PET) bottles. The recycling programs in California, Washington and Oregon collect in excess of 200,000,000 pounds of PET bottles per annum. Replay’ initial capacity will be 46,000,000 pounds.

Using a patented process, Replay will clean and refine the PET material from the post-consumer bottle stock and post-industrial manufacturing waste. The PET flake resin produced will be extruded into roll stock sheet or high-strength strapping.

Although the Company expects to convert all of its bottle feed stock into extruded products, any surplus flake will be sold to outside manufacturers.

3.2 Competitive Comparison

While quality and delivery are important factors to our potential clients, price is most often the determining factor in a buying decision. Good-quality packaging products manufactured from recycled (less expensive) resins, as close as practical to the end customer’s operations, will be most competitive and achieve a significant market share. These factors have helped to determine the business parameters of Replay Plastics.

3.3 Sourcing

In excess of 200,000,000 pounds of post-consumer PET beverage bottles are collected and available as feed stock for manufacturers who can re-process this material into commercial products. The Company has excellent relations with the firms and associations that collect and distribute these materials and has been assured that its requirements will be available for the foreseeable future.

The Company has entered negotiations with a California based source of post-consumer bottles and is confident that sufficient volumes are available on a contract basis from this source to satisfy its requirements. In addition, the Company intends to purchase production waste from its sheet customers and blend it into its feed stock.

Currently, the majority of the post-consumer PET bottles collected in California, Oregon and Washington are exported to China. The Chinese have absorbed the amounts surplus to the use in North America. Their interest has kept the industry in the position of being able to maintain a steady price range for this bottle stock. A significant percentage of all sales of such bottle stock are managed by Plastics Recycling Corporation of California (PRCC), an industry funded marketing agency which operates similarly to a co-operative. They accept bids from potential buyers on behalf of the firms which act as “consolidators,” which accumulate stocks from the smaller, individual bottle-recycling depots. Some amount of the available stocks are regularly bought by recyclers in eastern North America who focus on the carpet manufacturers who use RPET resin in their process, but the high cost of transport from the western U.S. makes eastern sources more desirable.

Replay has a good relationship with Company B, one of the larger consolidators in California. Company B has indicated a desire to contract to supply Replay with all of its raw material needs. They prefer to deal with a local consumer such as Replay, rather than the uncertainty and extra preparation requirements of the export market.

There are other sources of post-consumer feed stock known to Replay, and we are confident that we will have sufficient materials available for our production needs.

3.4 Technology

Sam McGuire, a key member of our Management team, is one of the original innovators of cleaning and refining technology for post-consumer PET, and we will be utilizing his patented process in our recycling facility. Sam has worked in the establishment and operation of facilities employing similar technologies over the last several years.

On the manufacturing side, Management has been an integral part of the advancement of industry practices over the last twenty years or so, and includes in their knowledge base most, if not all, of the state-of-the-art available equipment and manufacturing techniques.

Market Analysis Summary

Strong demand for recycled plastics is working in the industry’s favor.  Major users of plastic packaging, apparently responding to consumer desires, have begun incorporating at least some recycled plastic content in their products as part of the growing interest in recycling.  Recycled resin demand is on the rise as prices for the two major recycled resins, PET and HDPE, continue to hold value or appreciate against their virgin counterparts.

In volume, PET is currently the number one recycled resin. Supply of recycled PET is in excess of 800 million pounds per year. This figure is expected to grow, reaching over 1 billion pounds during the next few years. The plastics industry has developed new markets and applications for recycled resins from both post-consumer and post-industrial sources.

PET leads the recycled recovered resins as the most visible and valuable, and its use is increasing. Of the total 3.7 billion pounds of PET consumed in 1997, just 16% was from recycled sources. Of the more than 90 billion pounds of plastics produced annually in the United States, less than 5% is from recycled sources. Plastics, after aluminium, represent the second highest value material in the waste stream and have the highest projected growth rate.

Markets and uses for recycled plastics are rapidly expanding. Plastic containers are being collected at the curb for recycling in nearly 500 communities, representing more than 4 million households. U.S. demand for recycled plastic will continue to expand and new markets will develop as technologies permit the efficient segregation and reprocessing of high-purity resins. Improved quality of resins, environmental issues and higher prices for virgin resin will contribute to growth.

Packaging is expected to be the largest market segment for recycled plastics, with sheet and lumber following. Surveys indicate that Americans are increasingly willing to collect and separate discarded packages, foregoing a degree of convenience to make products more disposable, and even paying a premium for a recycled item.

Increasingly, communities are refusing to consider incineration until every effort is made first to recycle; public sentiment is strongly in favor of products that can be recycled or are made of recycled materials.  In recent years, the household recycling rate of PET bottles has more than doubled to 30% of all PET soft drink bottles sold.  In fact, PET’s recycling rate is the fastest growing among all beverage containers. The future of PET recycling is even brighter than it has been in the past. PET intrinsic scrap value is second only to aluminium among container materials. The plastics industry has launched a research and development program aimed at increasing PET recycling. According to the U.S. Environmental Protection Agency (EPA), plastic soft drink bottles account for approximately 2% of the solid waste discarded in America. The EPA has set a national goal to recycle 25% of the municipal solid waste stream and the industry is committed to achieving its share of that important goal.

The recycling industry intends to accelerate the rate of plastic recycling as part of its commitment to develop solutions to the solid waste problem. Industry analysts have projected that 50% of all PET containers will be recycled by the year 2007. More plastics will be recycled annually than any other recyclable material. Replay believes a significant answer to America’s waste problem lies in creating high value, recycled thermoformable sheet and other extruded products for the packaging market.

Although more than 200 million pounds of PET post-consumer materials are collected in the western United States each year, there is presently no local cleaning and refining facility converting the bottles into resins suitable for re-manufacturing. Originally, recycled PET (RPET) was used primarily in the carpet fiber industry, which is located along the eastern seaboard. The early development of the RPET industry was therefore focused in the eastern USA, with eastern states adopting the first bottle deposit laws that resulted in collection of post-consumer bottles that can be recycled. Recently, California, Oregon and Washington have adopted bottle deposit programs, and accumulation of recyclable materials in those states has begun. With all of the cleaning and recycling plants and the majority of consumers traditionally located in the eastern part of the country, development of consumers of recycled flake and down-line products, such as film and sheet, has been slow to develop in the West. A strong demand for post-consumer bottles from Asia has prevented the buildup of inventories and reduced the pressure for the collection industry to find or develop western markets.

There is currently no independent extrusion plant of recycled polyterephthalate (PET) sheet in the western United States or Canada that services the roll stock requirements of major custom and proprietary formers. With the development of the recycling industry for PET starting in the eastern part of the country, and the preponderance of consumers of sheet there as well, development of independent extrusion facilities using RPET has been slow to develop. It appears that in order to attract such companies, local sources of RPET would have to available. While there are customers in the West for the products, contracting a supply and shipping it from the East makes the venture unattractive.

Our founders recognize that an opportunity exists and propose a vertically integrated conversion facility that will employ state-of-the-art technologies to produce extruded sheet and high strength strapping from 100% recycled PET post-consumer bottle stock, cleaned and refined in our own facility.

4.1 Target Market Segment Strategy

The Company has chosen its target markets because recycled PET (RPET) is in high demand as flake resin by converters,  as roll stock sheet used to produce high visibility packaging and as high strength strapping for the lumber industry.  Sales are price-sensitive, so that proximity to markets and feed stock source provide a competitive edge. Replay Plastics identified an opportunity to take advantage of both circumstances in the western United States.

RPET Flake

Total market demand is reported as 1.2 billion pounds per year. Since only 800 million pounds are processed in the USA, consumers are forced to look at wide spec virgin PET (virgin resin that is outside of spec but still usable) which is normally sold at a discount to virgin prices, but still higher than recycled (RPET) pricing. Some manufacturers are also forced to import materials from Mexico, India and South America. Some converters are being forced to use more expensive virgin resin.

The current pricing for virgin resin is $0.65-0.73 per lb. and $0.42-.53 for RPET flake.  The spread between the two has traditionally been maintained at approximately $0.20 per lb.

PET Film & Sheet

The total reported market of extruded film and sheet is 872 million pounds, of which identified industry usage of RPET is 160 million pounds.

The reported market demand (to replace virgin PS, PVC and PET) if RPET was available is estimated at 1 billion pounds.

Current pricing for RPET sheet is $0.70-0.79 per lb.

RPET Strapping

The total reported domestic plastic strapping market is 240 million pounds. Of this market, industry usage of virgin polypropylene is 132 million pounds and of PET is 108 million pounds.

It is generally accepted in the industry that less expensive strapping made from RPET could not only take over the polypropylene strapping market, but convert as much of the much larger and more expensive steel strapping market as RPET strapping was available.

Current pricing for RPET strapping is $0.90 -1.08 per lb.

4.2 Market Segmentation

The primary market can be broken down as follows.

Consumers of PET in:

California: 62
Oregon: 8
Washington: 9

Consumers of HDPE in:
California: 73
Oregon: 10
Washington: 12

4.3 Industry Analysis

Currently there is no direct competition in the western United States for either of the two divisions of the Company. Any production in the trading area remains captive and not available to our target market.

The ability of the Company to obtain a source of post-consumer bottle stock is an integral component of the strategy to vertically integrate operations and manufacture products in demand by western consuming industries. Without the cleaning and refining division, it would be difficult to source sufficient RPET flake resin at costs that would allow the Company to be competitive.

4.3.1 Barriers to Entry

Limited Supply of raw material
Recycled PET (RPET) resins are in high demand, and demand is currently under-supplied. Many manufacturers are delaying expansion because of uncertainty of supply. Entrants would have to consider sourcing post-consumer or post-industrial waste and clean and refine it rather than attempting to purchase flake on the open market. Even at that, there is not an over-abundance of post-consumer or post industrial material in the marketplace.

Equipment costs are high and industry specific, resulting in a high exit cost.
Because of the scarcity of RPET flake, entrants may be forced to establish cleaning and refining facilities for post-consumer bottles. The equipment required is costly and very industry specific. It would not easily be re-sold as a system.
There is a market for used extrusion equipment, which normally sees 60-70% of new value being realized.

Vertical integration is an important consideration and difficult to accomplish successfully.
Because of the scarcity of RPET resin, and to maximize profit potential, entrants must consider a two-stage production facility. Cleaning and refining post-consumer bottles and extruding the resulting flake into commercial products requires a management team such as Replay has, with a broad range of expertise, experience, industry contacts and knowledge in both areas.

Firm contracts for supply and sales.
Replay Management’s industry contacts will allow us to secure contracts for both supply of feed stock and sale of finished goods.

Freight is a major cost of operations; proximity to source of supply and markets is crucial.
Hauling plastic materials is expensive so entrants will have to consider establishing facilities close to materials and markets. Entrants with existing operations would have to consider new separate facilities in many cases, reducing economies of scale and making management more difficult.

4.3.2 Competition and Buying Patterns

There has been a strong demand (sellers’ market) for our products for several years. Traditional buying patterns in this industry are based on quality, price, reputation of manufacturer, freight costs, delivery times and proximity to markets. During such a sellers’ market, buying patterns are often more influenced by availability.

4.3.3 Main Competitors

Currently in the western United States, there is no direct competition for cleaning and refining post-consumer or post-industrial PET. Nor is there any non-captive extrusion of roll stock sheet.

The extruded sheet required by thermoformers is currently supplied by:

  • Advance Extrusion, Becker, MN
  • Kama, Pittsburgh, PA
  • Plasti-Shell Packaging, Gonzales, LA
  • Petco, Montreal, Canada
  • Klockner, VA

In a news release dated September 10, 2004, Itec Environmental Group, Inc. announced their intention to open a PET and High Density Polyethelene (HDPE) recycling operation in Riverbank, CA (east of San Francisco). The news release states that the Company’s new and yet unproven technology lets it work with bottle streams that others have to reject as too dirty. This Company is familiar to our Management, and is not considered a significant factor in any of our markets.

Click here to view this full business plan

Continue Reading

Professional Services

Self-Storage Sample Business Plan

Before you start your self-storage facility you will require a business plan similar to this one.

Entrepreneur

Published

on

Click here to view this full business plan

Self-Storage Business Plan

Executive Summary

This storage business plan describes a proposed self-storage facility to be established in Westbury, New York involving the conversion of an existing building. Total project costs are estimated at $1,054,487 including purchase price, conversion costs, and pre-opening expenses (see section on Start-up Summary). Based on current and projected strong demand for self-storage units, rental revenue is projected to grow rapidly as units fill up from the first year’s target of $320,000 to $684,000 by year three.

Objectives

After achieving experience and success in their present self-storage facility in Plainview, New York the principals of this proposed project plan to take advantage of the strong demand in the self-storage industry to achieve a major presence in Westbury. The ownership connection with Stote Moving will assist in gaining full occupancy quickly. Goals have been set to rent 50% of the proposed 300 unit spaces within the first six months of Year 1. An additional 25% will be rented in the second half of Year 1, with the remainder to be filled in Year 2.

Mission

The mission of the principals is to serve the Long Island community’s local residential and commercial storage and moving needs.

Keys to Success

The keys to success in the self-storage business are:

  • To provide dry, secure, and clean facilities with convenient access.
  • To have good connections in the moving industry to direct customers needing temporary storage space.
  • To be able to adapt as storage and market needs change.

Company Summary

Westbury Storage is a start-up project to be located in Westbury. The owners are experienced in the moving and storage field, owning a well-established moving company (Stote Movers) and a successful self-storage facility in nearby Plainview (Plainview Storage). The building to be purchased for this project is a large brick building originally constructed as a bleachers around 1910. This building as well as surrounding buildings, were connected with the now dying leather industry which flourished a few decades ago. A large building of similar size located next door and connected by a walk bridge has already been converted successfully and is operating well. The Westbury Storage building contains three floors of heavy-duty wood and steel beam construction ideally suited to the planned purpose of self-storage units. The building is heated by oil. One of the two elevator shafts will be the home for a new over-sized passenger elevator suitable for transporting storage contents from the ground level to the units on the second and third floors. A large separate parking lot area comes with the building but will not be needed for this project. This lot could be sold or could be the site of additional future storage units to be set up using one of several one-story steel storage systems.

It is estimated that, with purchase of the building taking place in June of this year, the conversion into storage units could be completed and ready for occupancy by the end of the year. Demand for the units is strong, as evidenced by the market survey of existing self-storage facilities. Bank financing for 70% of the project costs is expected with the remainder supplied by shareholder equity.
Company Ownership

The company will be incorporated as an S Corporation, and will be owned by three individuals: Roger Black, Sebastian Stote and Daley Thompson. Each will own 1/3 of the stock. Roger Black and Sebastian Stote are 50-50 owners of Plainview Storage which is a 110 unit self-storage facility converted in 1993 from a former piano factory. All units are fully rented. Sebastian Stote is owner of Stote Movers, which is a family business providing residential and commercial moving since 1917. In addition to being the source of many of the rentals at Plainview Storage, Stote Movers has 52 filled 45-foot trailers located in Roslyn-by-the-Sea. These trailers contain customers’ stored goods pending delivery at a new location.

Company Locations and Facilities

Westbury Storage will be located in Westbury, in a central location about 1/2 mile from the monument in the center of Westbury. The owners’ present self-storage facilities are located at in Plainview with further storage capacity in 52 trailers in Roslyn.

Start-up Summary

Advertising and promotion will rely heavily ads in the Yellow Pages, as well as initial local newspaper ads at the time of opening. We are assuming three directories for Yellow Pages ads with 1/8th page ads costing $165/month each. The ads in the local papers (Springfield News and community newspapers) are estimated to cost $300 monthly for the first year only. They will be reduced in the second year to half this amount and eliminated in the third year.

Property taxes ($11,946) are projected at the actual rate of the last tax year. Significant increases are not expected.

Building maintenance is normally a very substantial item on a building of this size built in 1910. However, the roof has been completely redone fairly recently and the basic structure of the building is very robust. The start-up costs reflect adequate amounts to ready the building for opening in good order. Also, it should be noted that expenditures for building maintenance would need to be larger if the building were being used for offices rather than storage. We assume an annual amount for maintenance equal to 5% of the purchase price which works out to $27,500.

Services

Westbury Storage will provide short- and long-term self-storage services in the North Shore community. The company owners have extensive experience in the storage business as well as the good connections in the moving business. The later will help utilize the storage space at the maximum capacity. Westbury Storage will provide about 45,000 square feet of well maintained self-storage units that will be offered for both residential and small business renters.

Market Analysis Summary

In a similar split experienced by management’s existing storage facilities, Westbury Storage is expecting to rent 70% of its available units to non-commercial renters and the remaining 30% to the commercial sector of the market. A total of 300 self-storage units of various sizes will be created and offered for rent by Westbury Storage in a central location in downtown Westbury. The present supply of these units is insufficient to meet the demand as evidenced by a survey of all self-storage facilities within easy reach of Westbury residents. The price realized by these existing units is more than double the national average.

Market Segmentation

Self-storage units are needed by residential customers for storage of personal items as well as by commercial customers for storage of stock. It is envisaged that 70% of the planned self-storage units will be taken up by the residential segment of the market and the remaining 30% will be directed toward the commercial segment. This split is expected based on the existing customers of management’s present self-storage facilities in Plainview. The commercial segment are small businesses, many of which are run out of people’s homes such as an interior designer who needs space to store hundreds of expensive sample fabric books, or a retail shop with inadequate on premises storage.

The market research shows that the annual market potential for the commercial self-storage service in the Westbury area is about 10,000 customers. As stated above, these are mostly small businesses. The residential segment potential is substantially higher at 150,000 customers per year and is based on the Self Storage Association’s assumption that 40% to 55% of population has used self-storage facilities.  This estimate includes individuals who need storage facilities due to moving arrangements or to store excess household property. Both of the market segments are expected to grow at a 5% annual rate.

Target Market Segment Strategy

Since the demand for local self-storage services substantially exceeds the local supply, Westbury Storage will simultaneously market its services to the two major customer segments–residential customers and small business customers. The company will not pursue large business segment due to the limited service scope it can provide to such customers at the existing facilities.

The market analysis shows that local self-storage rates are substantially higher than the national averages. Westbury Storage will position itself to the both customer segments as a conveniently located and affordable quality self-storage facility. Both customer segments will be effectively reached via the local Yellow Pages ads and through the referrals of Stote Movers owned by one of the Westbury Storage’s co-owners.

Market Needs

Customer needs in the self-storage industry have certain similarity across different market segments. The underlying need is for a reliable, safe, dry and accessible self-storage facility. Due to the overwhelming demand, customers are less price sensitive and consider convenient location as the major buying decision criterion.

Residential customers use self-storage facilities to temporarily store their property while moving to a new location. This need originates in the mobility of the American population and the affordability of rental accommodations. Such customers usually rent 25 to 100 square feet depending on the size of their household and they rent on a weekly or monthly basis. The other cluster of residential customers rents self-storage facilities for longer periods to keep their oversize property like boats or other equipment that either does not fit in their garages or is not used on a constant basis.

Small business customer segment requires self-storage facilities to temporarily store their stock or merchandise. These customers may use the storage facilities more often than residential customers and they benefit from convenient loading areas, extended operating hours and better equiped storage units of bigger size.

Service Business Analysis

According to an article in the November 15th issue of Inside Self-storage the national industry average rental income generated by self-storage units is $6.00 per square foot per year, or $.50/sq. ft. per month. In the market to be served by Westbury Storage the average storage rate (see section on Competitive Comparison) is more than double this amount. Washington Storage in Westbury is a typical example. They charge $50/month for an 8X6 ft unit which works out to $12.50 per sq. ft. per year. A 9X9 unit on the second floor also rents for this same amount only because there is no elevator. All of their units are fully rented! All units within the area were surveyed. The average rate is $1.20/sq. ft. per month ($14.40 per year) and the mean was closer to $1.40/sq. ft. per month ($16.80 per year). The story concerning availability was uniform. Either the facility was full or only had one or two available units to chose from. E-Z Mini Storage in S. Centreport said, “There’s some turn-over at the end of every month. Leave your name and we will call you when one becomes vacant.” Extra Space Storage in Springfield said, “We need one week advanced notice.” North Shore Self-Storage said, “We have nothing available on the ground floor.” U-Haul reported, “We have one small unit available, otherwise we are all full.”

The self-storage industry really only started in the late 1960’s when a few far-sighted people recognized the growing need for residential and commercial storage. The industry has doubled in size each decade. Returns on investment have been very impressive–often twice that of other forms of real estate investment. The reasons for this have been the mobile society, the tendency to live in rental apartments, and the general increase in the accumulation of property, especially leisure articles such as skis, wind-surfers, exercise equipment, etc.

The industry lends itself relatively easily to financial modelling. The magazine article mentioned earlier explains the economics of an average self-storage project which is of similar size to the proposed Westbury Storage project. The total building square footage in the model is 41,000 (Westbury Storage is approximately 45,000 after deducting the office space portion of 9,600 sq. ft.). The model shows total gross income based on $6.00/sq. ft. or $240,000 annually. (Westbury Storage’s gross revenues will be more than double that.) Total project costs for the model come to over $1,150,000 versus $1,054,500 for Westbury Storage. The loan amounts are virtually the same as well as the interest rates used (8.5%). Normal operating costs generally come to about $2.00 per sq. ft. Westbury Storage’s operating costs are projected at nearly twice this amount due to generous provisions for maintenance and payroll. However, the model’s net operating income is slightly less than $4/sq. ft. versus Westbury Storage’s $11.40/sq. ft.

It could be argued that the higher than national average rates enjoyed by local self-storage facilities may not continue indefinitely, but there is no indication of any downward pressure at this time. It should also be pointed out that during an economic down-turn the self-storage industry does not suffer to the extent that other industries suffer.

Should the supply of self-storage units begin to outstrip demand, Westbury Storage should be well positioned to deal with the competition due to its ability to offer heated units (nearly all competing units are unheated) and its ability to supply electric outlets to individual units (for hobby/workshop purposes).

Business Participants

Although there are a few nation-wide players in the self-storage market, the industry is still fairly dispersed in which many small companies take part. (See the section on Competitive Analysis for a complete listing.)

Competition and Buying Patterns

Convenience is probably the single most import factor in the decision of where to rent a self-storage unit. For example, Hicksville and Huntington have no self-storage facilities. Residents choose to rent one in a nearby town probably based on proximity to the route taken by the renter to and from work. If no units are available nearby, then renters will travel further afield. Units on the ground floor are favored, especially if no elevator is available.

Main Competitors

See the section on Competitive Comparison for names of competitors. In the present market situation, competition plays a very weak role.

Click here to view this full business plan

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending