Vending Services Business Plan
Chef Vending, LLC is a family start-up business that specializes in importing vending machines and commercial food & beverage equipment from Spain. We will penetrate the vending industry with innovative, first to market, high quality vending machines. We will establish our own vending routes in the Southern and Central Florida region. We also plan to participate in the $321 billion food & beverage industry by supplying high-quality innovative equipment. With the establishment of one strategic alliance with a national brand name in either of our vending lines, we expect to easily exceed our financial forecasts.
Chef Vending’s mission is to be the leader in introducing innovative, quality vending machines and restaurant equipment to the market. Through close customer contact and excellent relationships, we will meet the needs of our customers wherever we can.
Chef Vending, LLC, is a privately-held Florida corporation and maintains an office and a small warehouse in a mixed-use area of North Miami Beach, Florida.
Three of the four investors in the company have full operational responsibility. Mauricio Ordonez and Javier Palmera, the co-founders, have both entrepreneurial and industry experience. Charles Mulligan brings operational management and financial skills to the operation.
Chef Vending will have two product lines, each for the various markets it serves. Our vending products line will include our unique Sandwich Express machine, our Fresh Orange Juice machine and our Multi-line Dispenser. Our restaurant equipment products will be toasters, espresso makers, and fresh juice squeezers.
Most of our products, such as Sandwich Express are innovative machines that have functions and advantages not found in today’s common vending machines, thus providing Chef Vending a competitive advantage over more established competitors.
We plan to aggressively enhance our existing line in the future. Our immediate plans are to include a larger model of Sandwich Express that will offer a greater variety of sandwiches, and a more diverse product line, such as pizza. Other products are in the exploratory phase.
We are also pursuing supplier relationships with large nationally-branded juice and sandwich manufacturers, to customize our machines to their products. This would enable Chef Vending to supply machines to national companies and allow them to brand the machines with their product lines.
Revenue from U.S. vending consumable merchandise was $24.5 billion last year, an increase of 4.9% over the previous year, according to the Automatic Merchandiser magazine’s latest State of the Vending Industry Report. Small companies, with sales of less than $1 million, accounted for 5.8% of the market and had projected sales of $1.35 billion. Three quarters of all vending operators are classified in the small category.
Within the industry, snacks and cold beverages are the largest product segments and these two categories are the driving force of the industry. The food category grew at a rate of 7% last year, according to the Automatic Merchandiser. Cold storage machines grew at an even more impressive 42% last ylear, with this growth coming at the expense of shelf-stable products.
According to the National Restaurant Association, revenues from restaurants are expected to reach $321 billion. This is a large and healthy industry in our economy, and suppliers to this industry are expected to benefit from this growth.
All of this indicates that a fast moving, innovative company that can introduce enhanced products to vending machine/restaurant equipment customers stand to gain significant market share in a relatively short time span.
Chef Vending will market its machines to three distinct market segments including; distributors, branded sandwich and juice manufacturers, and end users. For our restaurant equipment business we will focus on restaurants and hotels and equipment supply companies.
Chef Vending’s objectives in our first year of operation are:
- Sell 400 vending machines.
- Directly place 10 vending machines, that we will operate, in the South Florida area.
- Achieve $500,000 in sales in our restaurant equipment line.
For the following two years our growth objectives are:
- Grow our vending machine and equipment business by 20% each year.
- Grow revenues by 25% in our directly operated vending machines.
Chef Vending’s mission is to be the leader in introducing innovative, quality vending machines and restaurant equipment to the market. Through close customer contact and excellent relationships, we will meet the needs of our customers wherever we can. Chef Vending will secure sufficient profits from free cash flow from operations, to sustain its stability and finance future growth. We will add value to our community by maintaining a friendly, familial work environment.
1.3 Keys to Success
As a start-up company, new to the industry, and introducing new products, we must be focused and work hard to create acceptance for ourselves and our products within the marketplace. The keys to our success are:
- Quality support and service, recognizing that Chef Vending’s success depends most critically on the relationships it’s able to create.
- Innovative, quality products that are able to both expand existing markets and create new ones for our customers.
- Steady, disciplined pattern of growth.
- Our customers and keeping them happy.
Chef Vending, LLC, is a family-owned and operated import company that focuses on importing innovative vending machines and restaurant equipment from Spain. By serving a niche segment of the $24.5 billion dollar vending industry, we will position Chef Vending as a high-quality, innovative company, that creates value for its customers.
Located in North Miami Beach, Florida, three of the four investors have full operational responsibility. Mauricio Ordonez and Javier Palmera, the co-founders, have both entrepreneurial and industry experience. Charles Mulligan brings operational management and financial skills to the operation.
2.1 Company Ownership
Chef Vending, LLC, is a privately-held Florida corporation. Chef Vending is owned by three of its key employees, and one financial investor. The ownership breakdown is as follows:
Mauricio Ordonez- 40%
Javier Palmera- 20%
Charles Mulligan- 20%
Pedro Herrera- 20%
2.2 Company Locations and Facilities
Chef Vending maintains an office and a small warehouse in a mixed-use area of North Miami Beach, Florida. We maintain a showroom, where we provide customers with product demonstrations, a warehouse, where we keep an inventory of machines and supplies, and an administrative area to handle the business functions.
Chef Vending imports a variety of innovative products that serve the needs of special segments of the market. These machines all aim to expand existing sales and open new lines of sales for our customers.
3.1 Product Description
Chef Vending has three vending machines and three lines of restaurant equipment.
Our vending products are:
- Sandwich Express- This machine stores, in a refrigerated unit, up to 140 pre-packaged sandwiches. When an order is placed, the machine sends a sandwich from the refrigerator to the toaster, toasts the sandwich for a pre-determined time, and at a predetermined temperature. In approximately 60 seconds, a fresh, delicious, hot sandwich is served.
- Fresh Orange Juice (OJ) Machine- This machine, as its name implies, delivers a chilled 7 oz. cup of fresh squeezed orange juice. In a refrigerated unit, the machine stores up to 140 lbs. of juice oranges. This will yield approximately 110, 7 oz. cups. When an order is placed, the machine will dispense, from its refrigerated container, whole oranges that will be sliced in half, and then each half is pulverized for its juice. The juice will run through a filtering system to keep out the seeds and most of the pulp, to finally provide the customer with a 100% all natural cup of OJ in approximately 30 seconds.
- Multi-line- These versatile, low-cost, easy-to-maintain machines provide the end user with a variety of vending options, from phone cards to disposable cameras. Chef Vending is able to provide customers with machines that have either two, three, or four product lines; this will provide flexibility to maximize unit revenue.
Our restaurant equipment products are:
- Toasters- Coming with either a single or double toaster, these panini-type toasters provide the commercial establishment with an automatic machine that frees up service personnel for other customer service tasks. These machines will toast sandwiches, pastries, and a variety of other menu items, in a predetermined time and temperature, automatically dispensing the food item when done.
- Espresso Maker- This high-quality espresso maker makes single-serve cups of delicious gourmet coffee from pre-packaged coffee pods. These pods provide great benefit to the owner by reducing the cost of measuring for each new order, and eliminating the waste associated with the traditional methods.
- Fresh Juice Squeezer- This commercial grade machine will squeeze fresh, whole-juice oranges to allow the owner to sell a cup of fresh-squeezed orange juice.
3.2 Competitive Comparison
Both our Sandwich Express and Fresh OJ machines will be first to market. Currently, the market only provides a sandwich, or other hot meals, that must then be microwaved. We will be the first to market a vending machine that both toasts the sandwich, and then delivers it hot to the customer. Our machine’s products will enjoy a qualitative advantage over microwaved products as well.
For juice drinks, the market only offers bottled or canned juices for a customer to purchase. Our OJ machine will literally squeeze a fresh cup each and every vend. A qualitative advantage over other machines is the fact that the product is free of additives and refined sugars.
There are a number of similar multi-line machines on the market today. We will offer the customer a quality product at prices below the prevailing market rates. Our machines also enjoy distinctive packaging that will compete favorably with the products currently in the market.
We will also be first to market a fully automated line of toasters. Currently, the toasters on the market require the food service worker to manually monitor the cooking process, where ours automatically toast and dispense, freeing the service worker to engage in other customer service tasks.
Our espresso coffee makers will compete with the existing espresso makers on the market today. Our machines will offer the pre-packaged coffee pod which will be a cost savings to the end user. We will also compete with an aggressive pricing strategy.
Our fresh juice machines will be priced aggressively as well, in order to better compete in the market.
3.3 Sales Literature
Sales brochures have been developed as part of our start-up expenses.
Chef Vending imports its machines from Spain. For oranges and sandwiches, we contract with local suppliers.
Chef Vending’s mission is to be the company that introduces innovative products to the market. To achieve this, we will search out the latest in food preparation technology in the vending and equipment business. As first to market, we currently enjoy a technological advantage over the competition.
3.6 Future Products
To enhance our existing line, we are looking at a larger model of Sandwich Express that will offer a greater variety of sandwiches, and a more diverse product line, such as pizza.
We are also pursuing supplier relationships with large nationally-branded juice and sandwich manufacturers, to customize our machines to their products. This would enable Chef Vending to supply machines to national companies and allow them to brand the machines with their product lines.
As we increase our presence in the equipment business, we will continuously search out products to expand our existing line. A key component of this will be the feedback from our customer base.
Market Analysis Summary
Revenue from U.S. vending consumable merchandise was $24.5 billion in 1999, an increase of 4.9% over 1998, according to the Automatic Merchandiser magazine’s State of the Vending Industry Report in August 2000. This figure includes both machines and products. Small companies, with sales of less than $1 million, accounted for 5.8% of the market and had projected sales for 1999 of $1.35 billion. Three quarters of all vending operators are classified in the small category.
Within the industry, snacks and cold beverages are the largest product segments, representing 29% and 25% of the industry, respectively. These two segments are the driving force of the industry. The food category grew at a rate of 7% last year, according to the Automatic Merchandiser. Cold storage machines grew at an even more impressive 42% in 1999, with this growth coming at the expense of shelf-stable products.
Broader economic and cultural trends are also positively impacting the industry. Food sales away from home have become a larger part of total food sales in the U.S. since the 50’s, according to the Department of Agriculture. Technomic, a Chicago-based research firm, reports an increase in demand for takeout meals as the percentage of two-parent households declines, along with the decline of the three regular sit down meals per day.
Consumer preferences about taste, price, nutrition, convenience, and technology are changing. These changes favor the vending industry, which now has the opportunity to spot these trends and develop their markets.
According to the National Restaurant Association, revenues from restaurants are expected to reach $321 billion in 1999. This is a large and healthy industry in our economy, and suppliers to this industry are expected to benefit from this growth.
4.1 Market Segmentation
Chef Vending will market its machines to three distinct market segments:
- End Users- Operators that have their own vending routes who wish to expand their product selections. Included in this category are large institutional food service companies that engage in vending operations as part of their overall food service business.
- Distributors- Companies that supply operators with machines and supplies for their operations.
- Branded Sandwich Manufacturers and Branded Juice Companies- By working closely with these companies, we will customize our machines to meet their specifications and to allow them to “brand” our machines with their products. They will either supply the machines or sell them to their customers who will buy product supply for the machines from these companies.
We have two markets for our equipment business:
- Restaurants and Hotels – End users who benefit from the equipment purchased.
- Equipment Supply Companies- These are large supply houses that offer a variety of equipment to the food & beverage industry.
4.2 Industry Analysis
The U.S vending industry is divided into three main segments:
- Operators- Companies that buy and place vending machines on their routes, sell the product and service the machine, and range from small family businesses to large national companies.
- Manufacturers- Companies that manufacture machines for sale to operators.
- Distributors- The link between the manufacturer and the operator. Supplies the market with both machines and products for operators.
The food & beverage industry is divided into similar segments:
- Food & Beverage Establishments- This segment covers the entire spectrum of bars and restaurants.
- Suppliers- Companies that supply the establishments with all of their food, paper, and equipment needs.
- Supply Houses- Acting as a distributor, these firms supply an area with their required supply needs.
4.2.1 Competition and Buying Patterns
Both the food & beverage and vending industries are highly competitive. Price, Return On Investment (ROI), reliability, and customer service are the factors most effecting a buying decision.
There are many large name brand companies with vending machines in the market. We will focus on creating a niche market for our innovative machines, to compete with larger more recognizable names. By being first to market, we have a unique opportunity to brand ourselves and our machines.
Buying patterns are fairly consistent across the year.
4.2.2 Distribution Patterns
Distribution in the vending industry typically runs through a distributor. These distributors will carry a brand of machine for sale in a defined geographic region. In some instances, manufacturers sell direct to operators or end users. Another form of distribution is to be a supplier to a nationally branded company. Similar distribution patterns are established in the food & beverage industry.
4.3 Target Market Segment Strategy
Chef Vending’s initial strategy is to offer all of our products to all segments of the market. We will focus on both the end user and the distributor initially, as the strategy to secure accounts with the nationally branded companies will take some time to realize. We will reach our target market in one of three ways. First, we have begun a small advertising scheme in industry trade publications highlighting the many features and benefits of our products. Secondly, we have joined the National Automatic Merchandiser Association (NAMA) and have introduced ourselves and our products to distributors and end users at the NAMA annual convention in October, 2000; we will also participate in their Southeast regional show in South Carolina and in their national show next year. Finally, we will pursue personalized relationships with contacts developed at these shows and with regional companies in the South and Central Florida area.
For equipment sales, we will focus on end users and distributors in the South and Central Florida regions. As we gain market share in these markets we will expand geographically.
4.3.1 Market Needs
The principle market need we will be addressing will be revenue. Each of our machines will act to expand existing sales for operators, and in many cases will create new markets entirely. For the operator that is already vending snacks, a high end sandwich will enable this operator to expand his or her sales without cannibalizing existing sales. For the coffee vendor, a perfect compliment to a gourmet cup of vended coffee will be a fresh cup of orange juice. By creating a new untapped market, the operator will be able to expand revenue streams beyond their existing accounts. Another important need we will fill with our multi-line machines and our equipment, will be price. As we will be competing with existing supplies already in the market, we will price our products to be highly competitive in order to attract clients.
4.3.2 Market Trends
Growth rates in both the vending industry and the restaurant industry remain strong. This growth is fueled by the changes in the workplace and workforce that are causing workers to consume more of their meals away from home. Away from home food sales are expected to increase by 53%, according to NAMA.
As more and more consumers eat away from home, the demand for higher quality is also growing. Vendors are now offering a full line of packaged frozen meals in their machines. Margins will increase as premium prices are being placed on branded, high-quality products.
Demographic trends are affecting the industry. A large group of young adults, who mainly grew up on fast food, have emerged as an economic force. This group’s perceptions on fast food, technology, and vending, will have a positive impact in the vending business. Furthermore, overall population growth rates, and immigration trends particularly, will also have a tremendous economic impact on the vending industry. Much of the growth in both of these areas will be in the Southeast, where Chef Vending is poised to capitalize on these trends.
4.3.3 Market Growth
Studies by Automatic Merchandiser reflect an industry growth rate of approximately 4.8% over the last five years, matching the overall growth of the U.S. economy.
Security Guard Business Plan Sample
Protect your community by starting a security business using a security guard business plan similar to this one.
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.
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.
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
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
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
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.
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.
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.
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.
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:
- Security audits and recommendations for security plans
- 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.
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.
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
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.
These businesses require steady security needs and serving them is simpler than serving special events.
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.
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.
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.
Recycling Waste Materials Conservation Sample Business Plan
If your business will specialize in recycling waste materials then this sample business plan is the ideal example.
Waste Management Conservation Business Plan
Mid-Atlantic Recycling, LLC’s area of business will be to collect, recycle/compost, and market waste from municipality waste processing plants for use use as a consumer good. This recycled product will meet two critical needs:
- It will give municipalities a feasible and cost effective alternative to landfilling the waste, and
- It will help meet the growing demand for organic soil enhancers and fertilizers. The material that will be recycled is human waste sludge.
Our recycled waste will be targeted toward fertilizer manufacturers, nurseries, landscapers, farmers, government agencies, golf courses, and others. All of these potential customers will benefit from the compost’s numerous soil enhancing characteristics.
Additionally, we will offer a service to waste processing plants owned by municipalities. Currently these plants face several issues regarding the disposal of human waste sludge. Landfills are filling up and costs of disposal are rising. Also, due to recent legislation, as of 2008 many landfills will no longer be able to accept human waste sludge. Mid-Atlantic Recycling will solve this problem by accepting this waste at a nominal charge and recycling it into a useful product.
Mid-Atlantic Recycling is entering a niche market in that human waste sludge has not been recycled on any sizeable scale in West Virginia or the Mid-Atlantic region. This is a unique and viable concept that addresses the needs of various customers and reaches an untapped market with tremendous growth potential.
One of the most attractive aspects is that the business is projected to attain a strong cash position and achieve profitability in the first year of operation. Due to a large need for these products and services, and a lack of direct competition, our projection of quick profitability is attainable.
Our in-depth research pertaining to human waste’s positive soil enhancement characteristics and its many potential uses is well advanced. The concept has been tested on a small scale and the results, upon analysis, were found to be a high quality compost. Research will be an ongoing process for the company; one particular area of interest is the possibility of qualifying the product as a fertilizer. In this case, the profitability of the product would nearly double. Mid-Atlantic Recycling is working with the West Virginia University Cooperative Extension Service to investigate the feasibility of selling the material as fertilizer.
We already have an advance order for 500 tons, and one fertilizer manufacturer and a large landscaper have committed to purchasing 600 tons of our product annually. Additionally, various municipalities have expressed keen interest in paying us to accept their waste.
- Flush sales for the first twelve months of operations and growing each year thereafter.
- Establish the recycling facility in Monroe County, WV; to include six composting units in Year 1.
- Open additional facilities in Year 2 and Year 3 to serve other areas of the state and the Mid-Atlantic region.
- Continue to market Mid-Atlantic Recycling by contacting and soliciting business from additional municipalities and compost using customers.
Mid-Atlantic Recycling’s mission is threefold. Our first responsibility is to ensure the financial well being of the business. Second, is to provide municipalities with an economical, alternative for the disposal of human waste sludge. Third, is to provide a top quality, recycled material to the consumer so that they may benefit from compost’s many good properties and organic elements. In addition, we hope to build in the consumer a positive feeling about the feasibility of using recycled human sludge as a fertilizer.
Human waste sludge has long been a waste problem for municipalities which operate waste processing plants. In metropolitan areas that handle large amounts of waste, human sludge is generally disposed in volume at municipal landfills. Driven by state and federal mandates, recycling and composting of municipal solid waste has increased dramatically during the past decade. There are nearly ten thousand curbside recycling programs in America, and nearly 15,000 drop-off centers for recyclable material.
Mid-Atlantic Recycling’s business model presents an opportunity to recycle a landfill bound waste, save the landfill space, and give the consumer the opportunity to benefit from the many positive properties of the composted material.
Human waste sludge contains a high nutrient value which can be composted to produce a quality plant food and soil enhancer at far lower prices than chemical fertilizers currently on the market.
1.3 Keys to Success
The keys to success in our business are:
- Overcome perception issues that may exist with using compost made from human waste sludge.
- Establish and build relationships and trust with customers to help shield from future competition.
- Expand rapidly to control the market.
- Offer reasonable prices.
- Get investment.
The legal name of the company will be Mid-Atlantic Recycling, LLC. Mid-Atlantic Recycling will be formed as a Limited Liability Company in West Virginia. Due to its tax benefits, a LLC will be advantageous.
2.1 Company Ownership
Mid-Atlantic Recycling is owned by its founder and president, Oliver Pyne. Mr. Pyne will be an active participant in management decisions.
2.3 Company Locations and Facilities
Mid-Atlantic Recycling will operate in Monroe County, WV, near the community of Lindside, WV. The Lindside location is approximately 10 miles from Peterstown, WV. The recycling facilities will be located on a 58+ acre property owned by company president, Oliver Pyne; 5 acres will be set aside for the recycling facility set up and operation. This site is ideal as it provides access to local municipalities and to Interstates 77 and 81. Also there is room for expansion as the business grows.
Additionally, Mid-Atlantic Recycling’s business location is located in a federally designated “historically underutilized business zone” or HUBZone. As discussed under the Competitive Comparison section below, this designation gives Mid-Atlantic Recycling certain advantages in selling to the government.
As the business expands to additional counties in subsequent years, we will need to lease property on which to site our facilities.
2.3.1 Government Regulation
Because Mid-Atlantic Recycling recycles a waste product and incorporates it into an environmental product, the company is under the potential jurisdiction of the Environmental Protection Agency. The recycling and sale of human waste may be regulated by federal or state authorities. Mid-Atlantic Recycling will obtain all required federal and state permits and licenses to operate its facilities.
Products and Services
Our products and services offer needed solutions to municipalities and the market for organic soil enhancement products. Mid-Atlantic Recycling will be the market leader as the first company in the region to collect, compost, and recycle human waste sludge for use as a fertilizer and a soil enhancer. Mid-Atlantic Recycling realizes that consumers today are more conscious of recycling and of their environment. Because of this trend, there is a growing trend among consumers to move away from traditional chemical based fertilizers more natural organic materials.
We will offer one major service and major product. Our major service will be to offer municipalities an alternative means for disposing of human waste sludges generated in waste treatment plants. Our major product will be recycled (composted) human waste sludge for use as a fertilizer.
A sample of our compost has been analyzed by the West Virginia University Agricultural Service Laboratory. A copy of their analysis is attached to this business plan; this analysis verifies the very high quality of the material we will produce. According to West Virginia University, this material may qualify as a fertilizer in which case the material’s value is much higher than if it is considered a compost.
3.1 Product and Service Description
Nationwide, many landfills are closing or exhausting their remaining capacity. However, due to environmental restrictions, zoning laws, and other regulatory and bureaucratic delays, very few new landfills are opening to offset the looming space crisis. Meanwhile municipal waste, including human waste sludge, continues to flow in greater volume. Handling their waste streams has become a major problem for most municipalities. With more waste created daily, landfills nationwide are rapidly facing a capacity crisis.
In West Virginia this situation has been made even more critical due to recent passage of legislation requiring that by 2008 only landfills lined with a very heavy duty liner will be able to accept human waste sludge. Thus, in the not too distant future, most landfills now accepting the sludge will no longer be able to accept it. Additionally, it will be very impractical, and cost prohibitive, to install the required liner in working landfills. Therefore, options for disposing of human waste sludge are about to become very, very limited, which means disposal will become much, much more costly.
Considering this environment, we will offer municipalities an extremely valuable service — an alternative means for disposal of their human waste sludge. Municipalities currently pay landfills a “tipping” fee to dispose of their waste. The tipping fee is typically $15 to $50 per ton; the average tipping fee in West Virginia is $32 per ton. As noted above, in the near future many landfills will stop receiving human waste sludge and prices are expected to increase dramatically due to simple supply and demand. Not only will tipping fees increase, but as municipalities have to go farther and farther afield to find accommodating landfills, transportation costs for the waste will also increase. We will help them solve this problem, and ultimately save them, and their tax payers, money. We will place skid boxes at their waste treatment plants and remove the sludge for them. The tipping fee, a fee for skid box rental, and a fee for picking up and returning the skid boxes will be paid to Mid-Atlantic Recycling by the municipalities. This will be done at a price competitive with or lower than what they are now paying.
Mid-Atlantic Recycling will receive the sludge and recycle it using an organic composter. This will be a 3-day recycling process. At the end of the three days, the human waste sludge will be converted to a compost material safe for use in agricultural applications. Potential customers include turf farms, fertilizer manufacturers, golf courses, nurseries, landscapers, Government agencies, and homeowners.
3.2 Competitive Comparison
The Mid-Atlantic Recycling business model adds great value through both our service and our product.
Our service, accepting human waste sludge from municipalities, partially relieves the burden on rapidly filling landfills, and provides an alternative disposal channel to municipalities facing a legislative deadline which threatens to cut off their traditional means of disposing of the waste.
As noted earlier, there is a trend in the market away from chemical fertilizers toward more natural organic soil enhancements. Our product, composted human sludge, responds to this market trend. Compost has many advantages over traditional fertilizer. Traditional chemical fertilizer sells for approximately $250 per ton while our compost will be priced at around $50-$100 per ton. Our compost is similar to fertilizers; however, it reacts differently from most fertilizers. Compost releases nutrients over a long period of time, on average two to three months. The chemical reaction in present fertilizers takes place immediately and usually lasts no longer than three to four weeks. After three to four weeks, the customer may have to buy more fertilizer, costing both time and money. On golf courses, when chemical fertilizer is applied, golf must cease for the day; however, when compost is applied, golf can continue uninterrupted. As demonstrated, compost has many advantages over traditional fertilizers.
Our human sludge compost also has distinct advantages over other types of composts as well. To be a viable, lucrative, growing business, we must be a reliable source of compost supply to our customers. To serve the market and grow in it availability of our product cannot be intermittent or “hit and miss.” We must be able to meet the demand every time within a reasonable delivery time. By the inherent nature of the business, human waste sludge will always be available for composting in large, dependable quantities, at one or a few locations, at a constant/stable quality and at a stable cost. Other composts cannot compete with this in that similar quantities are not available from so few locations which increases their labor and transportation costs related to collection. Additionally, if collection is from farms, they may use horse manure, poultry manure, cow manure, hog manure, etc. in varying quantities over time. This inherently will result in a product that constantly changes in content and quality. In fact customers view other composts as being of unpredictable availability and unpredictable quality. Mid-Atlantic Recycling’s compost will not have these deficiencies and will be viewed as the superior compost product.
In addition to the above, the following paragraphs describe federal small business programs that Mid-Atlantic Recycling intends to take advantage of. These programs are available to us due to our location and the status of our owner as a Native American (minority). Mid-Atlantic Recycling will leverage these programs to ensure entry to the federal market. This information was taken from federal government Internet sites.
The Historically Underutilized Business Zone (HUBZone) program: Firms in this program have the opportunity to negotiate sole source contracts and participate in restricted competition limited to HUBZone firms. Also, HUBZone firms are allowed a ten percent price evaluation preference in full and open competition. In such cases, the price offered by a HUBZone firm will be determined lower than the price offered by a non-HUBZone firm as long as the HUBZone firm’s price is not more than 10% higher than the price offered by the otherwise lowest, responsive offeror. Companies can apply on-line at SBA’s website for expedited HUBZone program admission. According to research done by the Iowa Department of Natural Resources, government entities are the largest single buyer of compost products.
Small Disadvantaged Business (SDB) program: This program offers several important incentives:
- Price evaluation adjustment: qualified SDBs receive a price evaluation adjustment of up to 10 percent on procurements where mandated by regulation. The price evaluation adjustment for SDBs bidding as primes became effective October 1, 1998. Regulations mandate this approach in competitive acquisitions over the simplified acquisition threshold (usually $100,000) where the SIC Code for the prime contract is authorized by U.S. Department of Commerce benchmarks. The price evaluation adjustment does not apply to 8(a) acquisitions and small business set-asides.
- Evaluation factor: qualified prime contractors can receive a credit when using SDBs as subcontractors. This evaluation factor for SDB participation became effective January 1, 1999. The incentive applies only to competitive negotiated acquisitions over $500,000, or $1,000,000 in construction. Firms certified by the SBA as SDBs remain on the list of SDB-certified firms for a period of three years.
The 8(a) Program: SBA’s 8(a) program, named for a section of the Small Business Act, is a business development initiative that helps socially and economically disadvantaged Americans gain access to economic opportunity.
Participants can receive sole-source contracts, up to a ceiling of $3 million for services. While SBA helps 8(a) firms build their competitive and institutional know-how, the agency also encourages them to participate in competitive acquisitions.
Federal acquisition policies encourage federal agencies to award a certain percentage of their contracts to SDBs. To speed up the award process, the SBA has signed Memoranda of Understanding (MOUs) with 25 federal agencies allowing them to contract directly with certified 8(a) firms.
Recent changes permit 8(a) firms to form joint ventures and teams to bid on contracts. This enhances the ability of 8(a) firms to perform larger prime contracts and overcome the effects of contract bundling, the combining of two or more contracts together into one large contract.
Mid-Atlantic’s owner is a Native American which will qualify him to participate in the SDB and 8(a) programs.
The federal market is particularly appealing because the need for compost and fertilizer materials in highway and other federal construction projects is extremely large.
3.3 Sales Literature
We will prepare a general brochure with information and maps about Mid-Atlantic Recycling’s products and services for dissemination to potential customers, including both municipalities and compost users. Sales personnel will visit each potential customer with pricing, maps, and reminders of the facility. Sales literature will be very important, with the need to establish a high-quality look and feel in order to create a trusting sense of professionalism.
Composting is biological decomposition of organic materials. Bacteria, fungi, protozoans, insects, worms and other organisms typically play a part in the decomposition process. Composting is nature’s means of recycling. It will turn grass clipping, leaves, vegetables, fruit and other organic materials into a very beneficial soil amendment. Composting is also an effective means of reducing the amount of solid wastes going into our nation’s landfills. Mid-Atlantic Recycling’s process will greatly speed up the natural composting process.
As briefly described above, the human waste sludge used in Mid-Atlantic Recycling’s process will be picked up from municipalities in skid boxes provided by Mid-Atlantic Recycling. Accepting the waste, rental of the boxes, and transportation will all be sold as a service to the municipalities.
Upon arrival at our recycling facility, the sludge will be placed into one of six organic in-vessel digesters. These vessels are proven for composting various types of animal manure. In addition, Mid-Atlantic Recycling’s president, Oliver Pyne, has tested the unit’ ability to successfully compost human waste. The material compost produced was tested by the equipment manufacturer (CV Organics, Inc. of White Springs, TN) and found to be a high quality compost. Additionally, the compost material was recently tested by West Virginia University Agricultural Service Laboratory and found to be an exceptional soil amendment.
These recycling/composting units work as follows. The unit is 50 feet long. The sludge is placed into one end of the unit. To make compost, additional dry fibrous material such as sawdust, wood chips, or bark must be added. We will acquire a steady supply of these from International Paper Company.
The unit turns slowly, making four revolutions per hour, to ensure that adequate oxygen gets to all of the composting material. Also, the unit is set on a very slight, 2 degree, angle so that as the unit turns, the material slowly migrates toward the opposite end of the unit. During the composting process, the material heats up (due to the natural reaction) to temperatures of approximately 140 degrees Farenheit; this kills any harmful bacteria in the composting material. Temperature can be controlled to ensure optimum composting environment. Also, the moisture levels can be controlled to ensure optimum composting. After three days, the material has reached the opposite end of the unit where it is removed.
Advantages of this recycling/composting method are as follows:
- Recycling is completed rapidly in three days. Other methods take 90 plus days.
- Waste materials in the unit are isolated from the environment.
- The manager has precise control of moisture, temperature, and aeration during the process to ensure the most efficient composting possible.
- In-vessel composting can maintain a rapid decomposition process year-round regardless of external ambient conditions. The material can be used for improvement of organic matter content and fertility of soil.
3.5 Future Products and Services
In the future, Mid-Atlantic Recycling plans to expand by opening additional recycling facilities throughout West Virginia and beyond. We ultimately intend to become the method of choice for disposal of human sludges.
Market Analysis Summary
There are customers at both ends of our supply chain that will benefit from our services and products. Municipalities will benefit from our service by having an alternative means of waste disposal. Other potential customers who will benefit from our compost product include turf farms, fertilizer manufacturers, nurseries, landscapers, golf courses, homeowners, and even the federal government for use in highway construction reseeding. Therefore, we have two basic market segments; those waste treatment facilities which will benefit from our services and consumers who will benefit from our product.
The Worldwatch Institute reports that landfills are overflowing and the costs of disposing of sewage and garbage is rising. City leaders can relieve over extended municipal budgets, prevent the contamination of drinking water, and help farmers build healthier soils by recycling garbage and human waste back to farms. At least 13 U.S. states have 6 years or less before all of their landfills are completely full. (Paper 135: Recycling Organic Waste: From Urban Pollutant to Farm Resource.) We offer a service by which municipalities can dispose of their waste without it having to be land filled anywhere. This is of great value to this customer.
At the other end of our process are the users of our compost. According to Cornell University (www.cals.cornell.edu/dept/compost.feas.study.html) composting is experiencing a resurgence of activity which is driven by increased understanding of the agronomic benefits of compost utilization, and rising disposal costs for municipal wastes. Also, according to Purdue University (www.ctic.purdue.edu/Core4/Nutrient/ManureMgt/Paper35.html) consumption of compost in the commercial market is growing due to people looking for a more organic or natural substitute for traditional chemical fertilizers. Recycling is at the forefront of responding to this growth trend in the Mid-Atlantic USA. We will initially focus on selling compost to fertilizer manufacturers, nurseries, and landscapers. We already have commitments from a fertilizer manufacturer and a landscaper to purchase 600 tons per year or more of our compost material.
Five major market segments for compost have been identified:
- Agriculture (for food and nonfood crops and sod farms).
- Landscapers (for industrial and commercial properties; golf courses, cemeteries, and athletic fields; landfill covers; and damaged soils).
- Nurseries (for plant and forest seedling crops and reforestation projects).
- Public agencies (for highway median strips, parks, recreational areas, and other public property).
- Residents (for home landscaping and gardening).
4.1 Market Segmentation
The following table shows information regarding the number of potential customers in our target markets. This data is based on information taken from superpages.com.
4.2 Target Market Segment Strategy
To target our customers, we examined the market trends. Mid-Atlantic Recycling’s products target buyers of organic fertilizers and soil enhancers. This market has grown significantly in recent years and we expect to capture a quarter of this multi billion-dollar market.
This market growth is fueled by a more health conscious consumer. People are better informed about the potential side effects associated with chemical fertilizer products both to their health and to the environment.
The growth of a more organic approach to gardening comes at a time when chemical options are diminishing. In 2000, the federal Environmental Protection Agency reached agreement with the makers of two widely used pesticides — Diazinon and Chlorpyrifos — to phase them out because of health problems associated with overexposure. Popular brands of Diazinon include Ortho and Spectracide; Chlorpyrifos is marketed under the trade name Dursban and is included in numerous familiar products, including Ortho Lawn Insect Spray (Washington Post, Thursday, May 10, 2001).
According to an executive with the Scotts Co. in Marysville, Ohio, the pace of research into organic products continues feverishly, and their use is bound to increase.
Sales of organic foods have risen sharply. Organic food sales at the retail level totaled $10.4 billion, according to Katherine DiMatteo, executive director of the Organic Trade Association. This year, retail sales of organic foods are expected to exceed $15 billion — with more than $32 billion projected by 2009 (CNBC, Dec. 3, 2004).
Findings from a 15-year study at the Kamlath Institute, Newton, Pa., might lead to a solution that could help reduce emissions of greenhouse gases. The researchers suggest that regenerative agricultural management systems based on organic fertilizer can preserve carbon and nitrogen in the soil, thus reducing emissions. Moreover, they maintain that organic methods can produce the same yields as conventional systems that use synthetic fertilizer. If the major corn/soybean growing region of the U.S. were to adopt these organic practices, they say, the percentage of estimated annual carbon dioxide released into the atmosphere from fossil fuel combustion in the nation could be reduced by one to two percent (USA Today, June 1999).
Mid-Atlantic’s products will help fill the growing need for organic fertilizers, and soil amendments, while helping to solve the problem of dwindling landfill space.
4.2.1 Market Needs
Several companies compete in the fertilizer market. Their major selling points are performance and price. However, health conscious consumers have created growing competition between chemical and organic products. Mid-Atlantic Recycling’s competition can be divided into two forms: direct and indirect.
Our direct competitors would include other compost producers capable of producing sufficient product to supply the growing compost demand. There is no other compost producer in West Virginia that meets this need. Therefore, we have no direct competition in the state. Additionally, there are only a handful in the entire Mid-Atlantic USA; therefore, our direct competition on a regional basis is extremely limited.
Our indirect competitors are fertilizer manufacturers (who also are a part of our target market). As noted elsewhere in this business plan, the trend is away from chemical fertilizers, toward natural organic soil enhancers. Thus the market for chemical fertilizer is decreasing while our market is increasing.
4.2.2 Market Trends
Current trends in the market greatly favor the start-up of our recycling business.
Laws have been passed in West Virginia placing greater restrictions of the types of landfills which can receive human waste sludge. These laws take effect in 2008. Municipalities are already seeking alternative means of disposal as disposal prices are expected to skyrocket as landfill space decreases dramatically. Our recycling service solves this problem for municipalities.
The organic industry now boasts sales in excess of $9 billion at retail, with growth forecast to continue at 25% per year (http://lists.ibiblio.org/pipermail/marketfarming/2002-October/000063.html). The demand for compost to use in organic farming and other applications is growing rapidly.
4.2.3 Market Growth
The possibility of growth in this market is realistically huge. Consider the following simple facts:
- Municipalities must have an alternative means for disposing of human waste; we offer a great alternative to meet that need.
- Market trends are skewing more and more toward organic soil enhancements and away from chemical fertilizers; we meet this need as well.
- We have no direct competition in West Virginia and very little in the Mid-Atlantic region.
All of this means that Mid-Atlantic Recycling is poised to see tremendous growth.
4.3 Service Business Analysis
Our service offers a feasible, even desirable, alternative to traditional means of disposing of human waste. Our product is a value added, soil enhancer that appeals to the growing environmental conscientiousness among consumers. Direct competition is almost nonexistent. We intend to position ourselves as the logical, economical choice for human waste disposal and compost production in West Virginia and the Mid-Atlantic region.
4.3.1 Distributing a Service
Indirect competitors are those companies that offer only chemical soil enhancers and plant foods. Mid-Atlantic Recycling feels that these companies are an indirect form of competition because though the products they promote attempt to give the same results as our direct competition, they fall far short of current market expectations, and it will only be a matter of time until these companies’ products will be out-dated. Even so, Mid-Atlantic Recycling does acknowledge that as these companies’ products become outdated, many companies will be certain to phase-in their own organic substitutes in place of the chemicals. This, in itself, presents a potential market for our compost.
4.3.2 Competition and Buying Patterns
To be a player in the organic fertilizer and soil produce market, Mid-Atlantic Recycling identified market needs to gain an overall competitive advantage. The following explains our product’s competitive advantages. Our product is:
- Organic: Our organic product allows us to be responsive to the dominant market trend. We offer all of the advantages that organic products have over chemical competitors.
- Comparable application times: Based on the West Virginia University laboratory analysis, our product is comparable in potency to chemical fertilizer. Thus the application time is also comparable, which saves money and labor since there is no need to purchase and apply additional products.
- Recycled: This part of our product has to do with marketing. We are a company that cares about the consumer and the environment. We offer a valuable product, at low cost, that saves landfill space.
4.3.3 Main Competitors
As noted earlier, direct competitors are essentially non-existent in the Mid-Atlantic region. Our major indirect competitors are chemical fertilizer manufacturers. However, their products are more costly and do not address the market’s trend toward organic, natural soil enhancers.
Some municipalities have begun composting operations in an attempt to deal with waste disposal issues. They typically use a method in which sludge is placed on the ground in windrows which are turned periodically for aeration. This is an inefficient method of composting primarily because it is slow, taking 90 or more days, which means that availability is uncertain for consumers. Also, in this composting method high enough temperatures are not achieved to kill harmful bacteria and seeds that may sprout into weeds. Additionally, municipalities are not businesses, which means their marketing capabilities are limited. Their market primarily consists of local homeowners and businesses, which ignores the greater market. Also, this composting method requires a lot of ground space which restricts the operation. Finally, odor can be a problem for municipalities due to nearness of local residents or businesses. For these reasons, municipality composting efforts are not considered a competitive threat.
4.3.4 Business Participants
Mid-Atlantic Recycling’s direct competition includes companies that produce an organic soil enhancement product. Organic soil enhancers are no longer a niche market. They have grown into a strong sub-market in the fertilizer and soil enhancement industry, and they now present significant competition for chemical fertilizer competitors. Major direct competition includes FSH, makers of Holy Cow Compost, and Scott’s, makers of Iron Bull. Other examples of competing products are Monkey-Doo, Roots Organic, and Milorganite, the original (75 years) sewage sludge based organic fertilizer.
Telecommunications Sample Business Plan
Any telecommunications company needs a proper business plan at the start.
Telecommunications Business Plan
The telecommunications revolution has arrived: Personal communications and unified messaging systems are at the vanguard of this technological phenomenon. Dating from the 1984 deregulation of local and long distance telephone service, competition has accelerated and sought out every nook and cranny of telecom products and services for both consumers and businesses. From that day only 15 years ago, when consumers were tied to a fixed phone with its fixed phone number, mobile and cellular phones have proliferated to meet the demand for communication anytime, anywhere in the world. Companies that have not foreseen change–or kept up–are quickly consigned to the technological and financial graveyard, Iridium being just the latest example. Financial muscle has been displaced by quality and depth of management and speed of execution as the final arbiter in the marketplace. AT&T finally realized this and brought in a technology-savvy CEO who could pull the trigger on needed change; Iridium did not and paid the price.
TeleSpace is well positioned to become the market leader in personal communications and unified messaging. Now that business and the consumer have telecommunications mobility with numerous phone and fax numbers, pagers, and email, they are demanding simplicity and speed: One identifier for their complex business and personal lives that will find them anytime, anywhere, and deliver their communications. They want and need MyLine.
MyLine has been an operating system for over five years and has a loyal, though small, core of customers. The technology is clean, elegant and maintainable. The system has a complex array of features, some critical, most not. MyLine has had limited success because it was engineered and marketed like the pocket knife of the early TV ads: Rather than the sleek cutting tool the consumer wanted, the early knife had a corkscrew, screwdrivers, awl, key chain, etc. It weighed twice as much as it had to, and came with instructions, instructions for a pocket knife! Consumers knew they were in trouble before they even used the product.
Internal market research has shown what the consumer wants, and MyLine has it! There are five primary target markets, three of which will be discussed below, starting with the businessman and consumer who just wants to get phone calls no matter where: In the office, in a car, in a plane, playing golf, wherever. If the customer is on earth, MyLine will find him/her. Then there’s the Soccer/Sports Mom, totally mobile and often just as totally unreachable-except with our toll-free, 800 MyLine. And the military market, for both professional and personal use, is inviting. They demand mobile, reliable, and confidential communications–MyLine is ready and able to enlist.
The overall telecommunications market is huge, well over $200 billion. The personal communications and unified messaging sub-industry, with its hundreds of millions of actual/potential users, is difficult to quantify at this stage. Management estimates that projected sales of about $40 million in the third year, with sales running at the rate of $5 million per month by the end of that year, would still be only approximately a one percent market share. To become the market leader, a five to ten percent market share would probably be needed. Management plans to achieve this within five years.
TeleSpace’s primary corporate objectives are:
- To become the market leader in personal communications and unified messaging products and services within five years.
- To become the lowest cost provider and drive an aggressive pricing model through the industry.
- To have the best and most responsive customer service by year-end Year 1.
MyLine is already the most technologically-superior personal communications system in the world. TeleSpace management will build on MyLine’s brand and technical reputation to become the market leader in personal and business communications, and unified messaging systems within five years.
1.3 Keys to Success
There are three keys to success for TeleSpace:
- Marketing must generate sufficient sales volume to drive an aggressive pricing model while still achieving planned profitability projections.
- Strategic partners must be found to private label MyLine and promote it through their distribution channels.
- Equity capital must be secured at a reasonable valuation.
TeleSpace, Inc. develops and markets programmable personal communications and unified messaging services for individuals and businesses. The company was incorporated in early Year 1, and operates as a wholly-owned subsidiary of AmericomUSA, Inc., a public reporting company. In response to overtures from AmericomUSA senior management, TeleSpace management has proposed a leveraged buyout of the company from Americom and has incorporated this proposal in a Letter of Intent (LOI) sent to Americom. A copy of this LOI is included in the plan appendix. Briefly, the proposal calls for TeleSpace management to purchase 81% of TeleSpace common stock from Americom, with an option to acquire an additional 10% within two years. Americom will deliver all rights and ownership of the MyLine technology and customer base and cease active association with the company. They will not be represented on the Board of Directors. Management expects this negotiation to be completed by the end of October, Year 1, when management will actively pursue equity capital to finalize the acquisition and fund corporate operations.
*Attachments are not included in this sample plan.
2.1 Company Ownership
TeleSpace, Inc. is a wholly-owned subsidiary of AmericomUSA, Inc., a public reporting company. Mr. Robert Cezar, Chief Executive Officer of AmericomUSA, Inc., owns approximately 58% of the common stock of AmericomUSA.
2.2 Start-up Summary
Start-up costs, shown below (exclusive of salaries), are comprised mostly of legal fees, marketing collateral, advertising, and consulting fees. Start-up costs are being financed by the parent company, AmericomUSA.
2.3 Company Locations and Facilities
TeleSpace corporate offices are located in Arroyo Grande, CA. Existing space of 900 square feet is adequate for existing staff, but new facilities have to be leased when sales representatives are hired.
Products and Services
TeleSpace, Inc. develops and markets programmable personal communications and unified messaging services for individuals and businesses. The MyLine system can best be described as a personal communications platform, a remotely programmable “telocation” service which allows the user to access MyLine services from any telephone device or personal computer anywhere in the world.
3.1 Product and Service Description
The MyLine system can best be described as a personal communications platform, a remotely programmable “telocation” service which allows the user to access MyLine services from any telephone device or personal computer anywhere in the world. MyLine is a virtual telephone number which allows the user to control inbound telephone, fax, and data calls and receive them anywhere, but only on demand. MyLine is the only telephone number users will ever need. They receive every telephone call, fax, or email sent to their MyLine number in real time or stored for later use. Or they can screen and elect not to receive any particular communication, delete or divert for later handling. MyLine includes a proprietary security system to prevent unauthorized access and has real-time billing and accounting capabilities. The latter can generate, using a telephone or personal computer, comprehensive billing records by project and/or general ledger account.
3.2 Sales Literature
Initial radio and Internet ads and sales collateral will be developed by the company’s marketing, advertising, and public relations agency in Silicon Valley. This is a well-known firm specializing in high-tech clients.
3.3 Competitive Comparison
In 1992, AT&T launched their Easy Reach service which, although simplistic in design and use, signified the need for a universal telocation virtual number and thus found immediate acceptance. MCI reacted by introducing its Personal 800 Follow Me Service. These services today require users to subscribe to their networks, lack a broad range of integrated services, and offer limited remote control capability.
There is one striking difference between MyLine and competing technologies: The competition has not integrated all means of communication. Some offer voice mail and follow me technology, others offer this, and other features, on a piece meal basis, not totally integrated. MyLine is the only totally integrated voice, fax, data, and email system on the market.
The company now maintains its servers locally for supporting MyLine. As volume grows, management plans to co-locate at Above.Net’s facilities in San Jose, CA. A strategic marketing partner will also be sought, especially for the toll-free, 800 number.
The MyLine hardware platform is a state-of-the-art digital industry standard, and its design provides unique redundancy and flexibility. The MyLine system places the user on an electronic highway of digital call processing, operating on a Novell Local Area Network (LAN), integrating computer and telephone information into computer telephony technology. The LAN is connected to the Public Switch Network with the capability of using the ISDN/DSL features provided by the long distance carriers.
MyLine users have a personal communications exchange as a zero-blocking private global network providing voice, fax, and data transfer between themselves and any other MyLine or non-MyLine user. MyLine overlays and utilizes the Public Switched Telephone Network (PSTN) or the Public Switched Data Network, providing access to anyone with a MyLine number. The network routes all incoming and outgoing requests and data to a central hub for distribution to external routers, the Internet if needed, or delivers the request directly to local destinations.
The MyLine switching center provides the telephonic connection to the PSTN, which the network utilizes as its gateway. The MyLine system utilizes a Novell Netware Global Messaging Service which operates on Novell Netware file servers, providing a standardized platform and format for global message distribution to other Novell Netware servers, compatible applications and Internet addresses. Thus, access to the MyLine system is virtually unlimited. All communications within the network are encrypted, either with public/private key algorithms or with the proprietary MyLine rotational encryption algorithms.
3.6 Future Products and Services
MyLine features can be summarized in the following categories. A comprehensive feature set is available upon request by potential investors.
- Call forwarding.
- Selective call screening.
- Automatic callback.
- Wake-up services.
- Conference calling.
- Call waiting.
- Call wonferencing (integrating call waiting and conferencing).
- Voice messaging.
- Real time billing/accounting.
- Information on demand.
- Number referral.
- Fax store and forward.
Market Analysis Summary
Dun and Bradstreet estimates that 1999 sales of the U.S. telecommunications market will be over $150 billion, of which the personal communications and unified messaging market is three percent, or $4 billion. If the company can achieve a one percent market share within three years, its sales would be $40 million in a market growing eight percent per year. These estimates are conservative, given the accelerating growth rate of telecommunications and unified messaging in particular. There is ample space for the company, and many competitors, in this huge and fast-growing marketplace.
4.1 Market Segmentation
TeleSpace has targeted five primary market segments:
- General consumer and business market.
- Sports Mom toll-free.
- Domestic Traveler/Calling Card.
- International Traveler.
4.2 Target Market Segment Strategy
The company will market its products to customer segments that require the basic mobile telecommunication services (such as voice messaging, fax, and email) in a single solution. Other features will be specific to each customer segment. The company will spend substantial marketing efforts in determining which set of features are the most attractive to each customer segment. Offering customized quality product to each customer segment at a competitive price level will be one of the marketing goals of TeleSpace.
4.2.1 Market Needs
All customer segments that we target seek reliable communications that are easy to use. However, feature preferences vary in between the segments. ‘Soccer moms’ that spend so much time driving their kids around are in need of an ‘always on’ accessibility. A permanent 800 number is what they covet. Business travelers, on the other hand, have a strong need for a universal communications portal that will take care of all their communication needs. In this respect, TeleSpace will specifically tailor its market offering to each customer segment.
4.3 Service Business Analysis
TeleSpace is part of the telecommunications industry, including the following sub-industries:
- National and international carriers (AT&T) which dominate the long distance market and offer unified messaging system (UMS) to their customers.
- Regional operating companies (Pacific Bell, GTE) which provide local service and switch long distance traffic to the carriers and CLECs. They also offer UMS to their customers.
- Competitive local exchange carriers (CLECs) provide both local and long distance service and market UMS to their customers.
- Resellers aggregate traffic and provide discount long distance service and UMS to their customers.
- Unified messaging and personal communications service providers with in-house switching capability, such as TeleSpace, that offer MyLine and similar services to all consumers and businesses.
4.3.1 Business Participants
The personal telecommunications and unified messaging system sub-industry of the overall telecommunications market is a new, technology-driven, and immature industry characterized by a high growth rate, low barriers to entry, several large, and many small, competitors. The industry evolved during the last ten years as a spin-off the the telecommunications de-regulation, and subsequent explosion in competition and technological innovation. Overall industry sales should continue to accelerate for at least the next three years as consumers learn they can have their own unique local and 800 phone numbers for anyone to find them anytime, anywhere. Several industry leaders have emerged including:
- AT&T: The overall industry leader is expanding both vertically and horizontally into new markets and technologies and will probably have an impressive UMS.
- Excel Communications, Inc. is a wholly-owned subsidiary of Teleglobe, Inc., a large public telecommunications company. Excel is aggressively marketing its UMS.
- Linx Communications, Inc.is a leading national communications service provider which recently received venture capital financing. See Competitors, Section 4.3.3.
- Nextel Communications, Inc. is a large public company providing digital and analog wireless communications services throughout the U. S. See Competitors, Section 4.3.3.
- Sprint PCS offers a wide variety of UMS services marketed primarily to its long distance customers.
- Voice Mobility, Inc. is a public company offering UMS for CLECs, wireless and other communication providers. They offer a MyLine clone to providers who re-market to their consumers.
There are numerous small competitors, the primary of which are described in the competitor section.
4.3.2 Competition and Buying Patterns
The primary buying factors in personal telecommunication systems are price, accessibility, and ease of use. There is significant brand loyalty based on the company’s experience with its current customer base. Once an individual has acclimated to the MyLine system and memorized the access routine, he tends to be reluctant to switch to another service. Very much the same attitude prevails in consumer long distance, where demonstrable savings fail to sway a large segment of the population to switch carriers. AT&T still has over 60% of the market even though they are the highest cost carrier in a commodity business. Powerful branding and advertising, even with premium pricing, will create a significant barrier to competitors taking our customers. Being the market leader, like AT&T, will strengthen the company’s branding position and also make it more difficult for the competition.
Management feels the primary competition will be other well-branded companies like Nextel and Linx Communications, which have deep advertising pockets, feature-rich and competitive services, and an established brand. All the major telecommunications companies, including the Baby Bells, are moving into UMS because they have the infrastructure to support it and the brand to promote it. They will have the initial advantage in branding and marketing muscle, but their services to date are inferior. The marketplace is big enough to support all this competition and then some.
4.3.3 Main Competitors
Our main competitors include both telecommunications and unified messaging companies, most of whom have deep financial pockets, and all of whom appear to be competent at packaging and marketing their products. They are shown below with brief descriptions of the company and product(s):
- Webley Systems offers a UMS called the personal assistant, which Small Business Computing and Communications Magazine has rated the most sophisticated product they have rated. The personal assistant provides subscribers with a phone number where you can leave faxes and voice messages. Messages may be accessed either through a password-protected website or by phone, where you can listen to voice mail or have email or fax headers read. It also supports fax forwarding and broadcasting and offers an effective voice recognition engine to navigate through menu choices. The assistant will notify you by pager when new messages arrive and can also screen and selectively forward calls to any phone number you designate. You can also load your contact list into the assistant and have it place calls for you while on the road, including conference calls. However, the assistant only supports one email account at a time.
- StarTouch International, Ltd. entered the UMS arena in July, 1996 with its Electronic Secretarial Administrator (ESA). ESA offers a switch-based service including call answering, forwarding, voice mail, fax, broadcasting, and conference calling. The company claims to be debt-free and to own their own switch. Overall, ESA is impressive and competitive, though sign-up is difficult and rates confusing.
- Nextel Communications, Inc. is a large public company offering a digital, nationwide service competing with other cellular service providers such as GTE, Cellular One and AT&T. Nextel operates on radio taxi frequencies, and their system is based on radio “walkie talkie” style communications for short-range communications. The service is thus tied to the range of their wireless transmission system. Within that range they do offer many features including caller ID, paging, voice mail, call waiting and forwarding, and conference calling. Nextel offers a national system within their transmission range with unlimited long distance. For example, a national account with 1,000 minutes costs $135/month with an additional $.10 per minute for call forwarding.
- Linx Communications, Inc. offers a Web-based unified communications platform called LinxWeb, a personal Web portal that manages personal daily communications including phone calls from any landline or mobile phone, messages, pages, and faxes. LinxWeb is very similar to MyLine. Linx has teamed with Focal Communications to co-locate their switches in Focal facilities across the U.S.
- JFAX.COM unified messaging provides a single phone number in one of 60 cities world-wide allowing faxes, emails, and phone calls to be managed via your email account. The system is accessible via phone but best accessed through computer.
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