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Sample IT Business Plan

IT ADVISERS
BUSINESS PLAN

 


Executive summary

IT-Advisers will be formed as a consulting company specializing in marketing of information technology and hi-tech products in international markets. Its founders are former marketers of consulting services, cloud-based software and market research, all in international markets.

IT Advisers (ITA) offers high-tech manufacturers and IT-companies a reliable, high quality alternative to in-house resources for business development, market research and channel development on an international scale. 

Product Mix and Revenue

Product mix and revenue

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 ITA is a more professional, less risky way to develop new areas even than working completely in house with their own people.

Keys to Success

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

 

Main financial measures
 201720182019
Cash189,633327,738269,216
Sales revenue1,800,0002,200,0002,600,000
Net profit for financial year154,106175,235293,034
Operating margin8.56%7.97%11.3%
Owners' equity214,106389,341662,374
Return on equity (per year)72.0%45.0%44.2%

 

Current year profit (USD)

 

Return on equity (%)

 

Cash balance (USD)

Company overview

IT Advisers (ITA) 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:
  1. Providing United States clients with development for European and Latin American markets.
  2. Providing United Kingdom and European clients with development for the US 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 and the Far East, also similar markets. As it grows it will look for additional leverage by taking brokerage positions and representation positions to create percentage holdings in product results.

ITA will be created as a California C corporation based in San Jose, 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. The initial office will be established in a quality office space in the "Silicon Valley" area of California, the heart of the U.S. high tech and software industry.

ITA offers expertise in channel distribution, channel development, software and market development, sold and packaged in various ways that allow clients to choose their preferred relationship: these include small business consulting relationships, project based consulting, relationship and alliance brokering, sales representation and market representation, project-based market research, published market research and information forum events.

 

Pic 1. HTA Headquarters

Pic 1. HTA Headquarters

Products and services

ITA offers the expertise a IT-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, software applications and/or project-based consulting.

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, business plan, 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.

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 write business plans, develop specific information, software.

Market research - group studies available to selected clients at $5,000 per unit. A group study is packaged and published, a complete study of a specific market, channel, or topic. Examples might be studies of developing consumer channels in Brazil or Mexico, or implications of changing margins in software.

In the future ITA 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, web-based software and technology integration). We are also studying the possibility of newsletter or electronic newsletter services, or perhaps special on- topic reports.

Pricing and sales

ITA (IT-Advisers) will be priced at the upper edge of what the market will bear, competing with the name brand consultants.

Consulting should be based on $5,000 per day for project consulting, $2,000 per day for market research, and $10,000 per month and up for retainer consulting. Market research reports should be priced at $5,000 per report, which will of course require that reports be very well planned, focused on very important topics very well presented.

The annual sales projections, gross margins and cost of sales are included here in the following tables.

 

Sales revenue (USD)
Products and services201720182019
Retainer Consulting650,000750,000900,000
Project Consulting750,000900,0001,000,000
Market Research300,000400,000500,000
Strategic Reports and Software100,000150,000200,000
 1,800,0002,200,0002,600,000

 

Gross margin (%)
Products and services201720182019
Retainer Consulting858585
Project Consulting858585
Market Research303030
Strategic Reports and Software606060

 

Cost of sales (USD)
Products and services201720182019
Retainer Consulting97,500112,500135,000
Project Consulting112,500135,000150,000
Market Research210,000280,000350,000
Strategic Reports and Software40,00060,00080,000
 460,000587,500715,000

 

Break-even analysis (USD)
 201720182019
Sales revenue1,800,0002,200,0002,600,000
Cost of sales460,000587,500715,000
Variable expenses, total460,000587,500715,000
Labour cost805,920953,580996,360
Other operating expenses352,500455,000550,000
Depreciation of fixed assets5,0005,00011,000
Financial expenses5,3514,2152,047
Fixed expenses, total1,168,7711,417,7951,559,407
Gross margin74.4%73.3%72.5%
Break-even sales revenue1,569,9921,934,3542,150,906
Sales revenue above break-even230,008265,646449,094

 

Sales revenue (USD)

Marketing strategy

ITA will be focusing on information technology manufacturers of computer hardware and software, services, networking, who want to sell into markets in the United States, United Kingdom, 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.

The consulting industry is pulverized and disorganized, thousands of smaller consulting organizations and individual consultants for every one of the few dozen well-known companies.Consulting is a disorganized industry, with participants ranging from major international name brand consultants to tens of thousands of individuals. One of ITA's challenges will be establishing itself as a "real" consulting company, positioned as a relatively risk free corporate purchase.

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 and some from management consulting. 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 or channel development firms.

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. These companies will be calling on ITA for development functions that are better spun off than managed in-house, and for market research, and for market forums.
  • Medium sized growth companies: particularly in software, multimedia, and some related high growth fields, ITA will be able to offer an attractive development alternative to the company that is management constrained and unable to address opportunities in new markets and new market segments.

Competition

The competition comes in several forms:
  1. The most significant competition is no consulting at all, companies choosing to do business development, planning and 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, ITA can approach alliances, vendors, and channels on a confidential basis, gathering information and making initial contacts in ways that the corporate managers can't.
  2. The high-level prestige management consulting: McKinsey, 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.
  3. The third general kind of competitor is the international market research company: 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 ITA will provide.
  4. The fourth kind of competition is the market-specific smaller house. For example: Nomura Research in Japan.
  5. 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.

Management and staffing

The initial management team depends on the founders themselves, with little back-up. As we grow we will take on additional consulting help, plus graphic/editorial, sales, and marketing. ITA should be mainly managed by working partners. In the beginning we assume 3-5 partners. We will invite one international partner from Europe. The organization has to be very flat in the beginning, with each of the founders responsible for his or her own work and management.

The ITA business requires a very high level of international experience and expertise, which means that it will not be easily leveraged in the common consulting company mode in which partners run the business and make sales, while associates fulfill. Partners will necessarily be involved in the fulfillment of the core business proposition, providing the expertise to the clients.

The initial personnel plan is still tentative. It should involve 3-5 partners, 1-3 consultants, 1 strong marketing person, an office manager. Later we add more partners, consultants and and sales staff.

The annual personal estimates are included in the tables presented below.

 

Headcount
Personnel201720182019
Partners555
Consultants444
Marketing manager011
Sales reps222
Office manager111
 121313

 

Average monthly salary (USD)
Personnel201720182019
Partners5,0006,0006,500
Consultants5,3005,4005,500
Marketing manager4,5004,7004,700
Sales reps4,6004,8004,900
Office manager3,0003,2003,200

 

Labour cost (USD)
 201720182019
Wages and salaries700,800829,200866,400
Social security costs105,120124,380129,960
Labour cost805,920953,580996,360
REVENUES1,800,0002,200,0002,600,000
Labour cost to revenues44.8%43.3%38.3%

 

Labour cost (USD)

Implementation

Total start-up expense (including legal costs, branding, stationery, other one time expenses) come to $30,000. The annual overhead expense estimates are presented in the table below.
Start-up assets required include $50,000 in fixed assets like office furniture, computers, software and other equipment and tools.

 

Other operating expenses (USD)
Other operating expenses201720182019
Startup expenses30,00000
Marketing60,00070,00080,000
Travel150,000250,000300,000
Office expenses and software costs100,000120,000150,000
Insurance5,0005,0005,000
Other fixed expenses7,50010,00015,000
 352,500455,000550,000

 

Assets purchase value (USD)
Fixed assets201720182019
Startup fixed assets (equipment)50,00000
New office00300,000
 50,0000300,000

Financials

The paid-in capital from partners and other investors will be $135,000.
An annuity loan will be taken from a bank in amount of $500,000 for 60 months.
The performance measures, business plan financial projections and break-even analysis are presented below.

 

Performance measures (USD)
 201720182019
Sales revenue1,800,0002,200,0002,600,000
Cost of sales460,000587,500715,000
Gross profit1,340,0001,612,5001,885,000
Other operating expenses352,500455,000550,000
Labour cost805,920953,580996,360
Depreciation of fixed assets5,0005,00011,000
Operating profit176,580198,920327,640
EBITDA181,580203,920338,640
Financial income and expenses-5,351-4,215-2,047
Profit before income tax171,229194,705325,593
Income tax expense17,12319,47132,559
Profit154,106175,235293,034
    
Operating margin8.56%7.97%11.3%
Gross margin74.4%73.3%72.5%
Sales per employee150,000169,231200,000
Value added987,5001,157,5001,335,000
Value added per employee82,29289,038102,692
    
Return on equity (per year)72.0%45.0%44.2%
Quick ratio5.307.5310.5
Current ratio5.307.5310.5
ISCR33.948.4165
DSCR20.25.8310.2
Debt to equity ratio0.360.120.02
Debt to capital ratio26.3%10.5%2.13%
    
Receivables collection period, days15.015.015.0
Payable period, days15.015.015.0

 

Income statements (USD)
 201720182019
Sales revenue1,800,0002,200,0002,600,000
Cost of sales460,000587,500715,000
Other operating expenses352,500455,000550,000
Labour cost   
Wages and salaries700,800829,200866,400
Social security costs105,120124,380129,960
Total labour cost805,920953,580996,360
Depreciation of fixed assets5,0005,00011,000
Operating profit176,580198,920327,640
Financial expenses   
Interest expense5,3514,2152,047
Total financial expenses5,3514,2152,047
Profit before income tax171,229194,705325,593
Income tax expense17,12319,47132,559
Net profit for financial year154,106175,235293,034

 

Balance sheets (USD)
 201720182019
ASSETS   
Current assets   
Cash189,633327,738269,216
Receivables and prepayments   
Trade receivables75,00691,669108,343
Inventories   
Inventories000
Total current assets264,639419,406377,558
Fixed assets   
Tangible assets   
Machinery and equipment50,00050,000350,000
Less: Accumulated depreciation-5,000-10,000-21,000
Total45,00040,000329,000
Total fixed assets45,00040,000329,000
Total assets309,639459,406706,558
LIABILITIES and OWNERS' EQUITY   
Liabilities   
Current liabilities   
Loan liabilities   
Short-term loans and notes000
Current portion of long-term loan liabilities30,78031,1976,197
Total30,78031,1976,197
Debts and prepayments   
Trade creditors, goods19,16824,48029,796
Trade creditors, other000
Employee-related liabilities000
Total19,16824,48029,796
Total current liabilities49,94855,67835,993
Long-term liabilities   
Long-term loan liabilities   
Loans, notes and financial lease payables45,58514,3888,190
Total long-term liabilities45,58514,3888,190
Total liabilities95,53370,06644,184
Owners' equity   
Share capital in nominal value60,00060,00060,000
Share premium000
Retained profit/loss0154,106309,341
Current year profit154,106175,235293,034
Total owners' equity214,106389,341662,374
Total liabilities and owners' equity309,639459,406706,558

 

Cash flow statement (1-6 month) (USD)
 Jan-2017Feb-2017Mar-2017Apr-2017May-2017Jun-2017
CASH FLOWS FROM OPERATING ACTIVITIES      
Inflows      
Payments from customers75,000149,999149,999149,999149,999149,999
Total75,000149,999149,999149,999149,999149,999
Outflows      
Payments to vendors (goods)19,16738,33338,33338,33338,33338,333
Payment of salaries and wages58,40058,40058,40058,40058,40058,400
Social security costs8,7608,7608,7608,7608,7608,760
Payments to vendors (operating expenses)31,87431,87431,87431,87431,87431,874
Total118,201137,367137,367137,367137,367137,367
Net cash flow from operating activities-43,20112,63212,63212,63212,63212,632
       
CASH FLOWS FROM INVESTING ACTIVITIES      
Inflows      
Outflows      
Payments to vendors (assets)50,00000000
Total50,00000000
Net cash flow from investing activities-50,00000000
       
CASH FLOWS FROM FINANCING ACTIVITIES      
Inflows      
Payments from shareholders60,00000000
Loan amounts received80,00000000
Total140,00000000
Outflows      
Principal repayments0000445448
Interest expense292467467467467464
Dividends (net to shareholders)000000
Payment of corporate income tax1,4271,4271,4271,4271,4271,427
Corporate income tax on dividends000000
Total1,7191,8941,8941,8942,3392,339
Net cash flow from financing activities138,281-1,894-1,894-1,894-2,339-2,339
       
Net change in cash45,08010,73810,73810,73810,29310,293
Cash at the beginning045,08055,81966,55777,29587,589
Cash at the end45,08055,81966,55777,29587,58997,882

 

Cash flow statement (3-6 quarter) (USD)
 Q3-2017Q4-2017Q1-2018Q2-2018
CASH FLOWS FROM OPERATING ACTIVITIES    
Inflows    
Payments from customers449,997450,003533,338549,999
Total449,997450,003533,338549,999
Outflows    
Payments to vendors (goods)114,999115,001141,563146,874
Payment of salaries and wages175,200175,200207,300207,300
Social security costs26,28026,28031,09531,095
Payments to vendors (operating expenses)80,62280,634113,745113,745
Total397,101397,115493,703499,014
Net cash flow from operating activities52,89652,88839,63550,985
     
CASH FLOWS FROM INVESTING ACTIVITIES    
Inflows    
Outflows    
Payments to vendors (assets)0000
Total0000
Net cash flow from investing activities0000
     
CASH FLOWS FROM FINANCING ACTIVITIES    
Inflows    
Payments from shareholders0000
Loan amounts received0000
Total0000
Outflows    
Principal repayments1,3591,3837,6567,681
Interest expense1,3761,3531,2551,121
Dividends (net to shareholders)0000
Payment of corporate income tax4,2814,2814,8684,868
Corporate income tax on dividends0000
Total7,0167,01613,77913,670
Net cash flow from financing activities-7,016-7,016-13,779-13,670
     
Net change in cash45,87945,87225,85637,315
Cash at the beginning97,882143,761189,633215,489
Cash at the end143,761189,633215,489252,804

 

Cash flow statement (1-4 year) (USD)
 201720182019
CASH FLOWS FROM OPERATING ACTIVITIES   
Inflows   
Payments from customers1,724,9952,183,3372,583,326
Total1,724,9952,183,3372,583,326
Outflows   
Payments to vendors (goods)440,832582,188709,684
Payment of salaries and wages700,800829,200866,400
Social security costs105,120124,380129,960
Payments to vendors (operating expenses)352,500455,000550,000
Total1,599,2521,990,7682,256,044
Net cash flow from operating activities125,742192,570327,282
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Inflows   
Outflows   
Payments to vendors (assets)50,0000300,000
Total50,0000300,000
Net cash flow from investing activities-50,0000-300,000
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Inflows   
Payments from shareholders60,00000
Loan amounts received80,00000
Total140,00000
Outflows   
Principal repayments3,63530,78031,197
Interest expense5,3514,2152,047
Dividends (net to shareholders)0020,000
Payment of corporate income tax17,12319,47132,559
Corporate income tax on dividends000
Total26,10954,46585,804
Net cash flow from financing activities113,891-54,465-85,804
    
Net change in cash189,633138,105-58,522
Cash at the beginning0189,633327,738
Cash at the end189,633327,738269,216

 

Capital structure (USD)
 201720182019
Current assets264,639419,406377,558
Fixed assets45,00040,000329,000
Current liabilities49,94855,67835,993
Long-term liabilities45,58514,3888,190
Owners' equity214,106389,341662,374

 

Funding needs analysis (USD)
 201720182019
CASH FLOWS FROM OPERATING ACTIVITIES   
Inflows   
Payments from customers1,724,9952,183,3372,583,326
Total1,724,9952,183,3372,583,326
Outflows   
Payments to vendors (goods)440,832582,188709,684
Payment of salaries and wages700,800829,200866,400
Social security costs105,120124,380129,960
Payments to vendors (operating expenses)352,500455,000550,000
Total1,599,2521,990,7682,256,044
Net cash flow from operating activities125,742192,570327,282
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Inflows   
Outflows   
Payments to vendors (assets)50,0000300,000
Total50,0000300,000
Net cash flow from investing activities-50,0000-300,000
    
Net change in cash75,742192,57027,282
Cash at the beginning075,742268,312
Cash at the end75,742268,312295,593
Amount of funding needed (max)0  

 

Business value (USD)
 201720182019
Net profit154,106175,235293,034
Working capital (adjusted)64,83878,18891,547
Change in working capital64,83813,35113,358
Assets purchase value50,0000300,000
Depreciation of fixed assets5,0005,00011,000
Loan amounts received80,00000
Principal repayments3,63530,78031,197
Free cash flow to equity (FCFE)120,633136,105-40,522
Present value of FCFE100,52894,517-23,450
Total present value of FCFE171,594  
Terminal value001,465,169
Present value of terminal value847,899  
Business value1,019,49300


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Document version: 30/03/2017 04:44:27 (UTC)



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